Wsfs Financial Corporation · NASDAQ:WSFS
Wsfs Financial — Q2 2020 Earnings Presentation
47 slides from Wsfs Financial's earnings presentation, Sep 22, 2020
Slide 1: WSFS Financial Corporation 2Q 2020 Investor Update
WSFS Financial Corporation 2Q 2020 Investor Update1 September 22, 2020 1 Page 9 updated as of September 15, 2020
Slide 2: Forward Looking Statements and Non-GAAP Financial Measures
Forward Looking Statements and Non-GAAP Financial Measures Forward Looking Statements This presentation contains estimates, predictions, opinions, projections and other "forward-looking statements" as that phrase is defined in the Private Securities Litigation Reform Act of 1995. Such statements inc
Slide 3: Table of Contents
Table of Contents 2Q 2020 Earnings Supplement Page 4 WSFS Franchise and Markets Page 19 Lines of Business and Technology Page 25 Selected Financial Information Page 33 Appendix: Non-GAAP Financial Information Page 41 3
Slide 4: 2Q 2020 Earnings Release Supplement
2Q 2020 Earnings Release Supplement
Slide 5: 2Q 2020 Earnings Supplement - Table of Contents
2Q 2020 Earnings Supplement - Table of Contents 2Q 2020 Financial Highlights Page 6 PPP Loans Page 7 CECL Page 8 Credit Risk Management Page 9 Balance Sheet and Commercial Loan Composition Page 10 Hotel Portfolio Page 12 Food Services Portfolio Page 13 Retail Portfolio Page 14 2H 2020 Outlook Net In
Slide 6: 2Q 2020 Financial Highlights
2Q 2020 Financial Highlights Solid Core operating performance with pre-provision net revenue (PPNR)1 at 1.96% of average assets Significant ACL reserve build, excess capital levels, and a $0.12 dividend approved in the quarter 2Q 2020 • Core results include $94.8 million of provision expense reducin
Slide 7: PPP Loans
PPP Loans Nearly $1 billion of loans processed in 2Q 2020 supporting an estimated 100,000 jobs in our region PPP Loans as of June 30, 2020 PPP Loans by Size as of June 30, 2020 # of % of % of $ # of Loans $ Loan Size Loans total $ total # ($ in '000s) Construction $ 195,075 552 > $1M $358,764 175 39
Slide 8: CECL
CECL Economic Forecast Full Year GDP of -6.1% in 2020 and 6.3% in 2021 Economic Forecast Impact Year-end Unemployment of 9.3% in 2020 and 7.6% in 2021 Coverage*: 1.60% 2.73% ACL by Segment ACL Considerations • 2Q 2020 ACL increase of $93 million driven by: • Slower forecasted recovery in unemploymen
Slide 9: Credit Risk Management – 9/15/2020 Update
Credit Risk Management – 9/15/2020 Update Loan Modifications (Excludes PPP) As of June 30, 2020 As of September 15, 2020 Positive Payment Deferral Trends ($ in '000s) Loan Balances1 % of Portfolio Loan Balances2 % of Portfolio3 CRE 700,889 32% 143,287 7% • 73% of total COVID-19 related modifications
Slide 10: Balance Sheet Composition at June 30, 2020
Balance Sheet Composition at June 30, 2020 Asset Composition Funding Composition Assets: $12.61 Billion; Net Loans: $8.31 Billion Customer Deposits: $10.8 Billion Time CRE, 25% 11% Non-interest Net Loans (ex PPP) Consumer, DDA 30% Customer Deposits 80% 65% 13% C&I, 39% Money Market & Residential Sav
Slide 11: Commercial Loan Portfolio (ex PPP) at June 30, 2020
Commercial Loan Portfolio (ex PPP) at June 30, 2020 C&I and Owner Occupied - $3.4 billion4 CRE Investor and Construction - $2.8 billion Real Estate Rental Special Use & Mixed Use, Flex, Warehouse, Well Diversified and Granular and Leasing, 10% Other, 8% 2% Self-Storage, Other, 20% General Industrial
Slide 12: Hotel Portfolio at June 30, 2020
Hotel Portfolio at June 30, 2020 • Risk-rating reviews completed for entire portfolio in 2Q 2020 Hotels (ex PPP)1 • 48% of balances Criticized at June 30, 2020 Loan Type Loan Average ($ in millions) Balances Loan Size • Approximately 60% of balances with original modification C&I/Owner-Occupied $422
Slide 13: Food Services Portfolio at June 30, 2020
Food Services Portfolio at June 30, 2020 • Approximately 50% of total portfolio, including majority of loans over $1 million, were reviewed in 2Q 2020 Food Services (ex PPP)1 • 13% of balances Criticized at June 30, 2020 Loan Type Loan Average • Approximately two-thirds of balances with original mod
Slide 14: Retail Portfolio at June 30, 2020
Retail Portfolio at June 30, 2020 Retail CRE (ex PPP) Retail Trade (ex PPP) Loan Type Loan Average Loan Type Loan Average ($ in millions) Balances Loan Size ($ in millions) Balances Loan Size C&I $116.0 $0.2 Total $741.3 $1.3 Owner Occupied $150.1 $0.6 • All large loans over $8 million and nearly ha
Slide 15: Net Interest Margin Outlook
Net Interest Margin Outlook • 2Q 2020 included full quarter impact of the March 150 4.75% 4.38% 3.93% 3.73% - 4.08% - bps Fed Fund rate decrease and negative 8 bps from 3.83% 15 4.18% 4.50% PPP; 1Q and 2Q 2020 included elevated purchase 0 accounting accretion (PAA) due to payoffs, which are Negative
Slide 16: Core PPNR Outlook
Core PPNR1 Outlook $ in million’s 120.0 2.36% 2.50% • Outlook assumes no Fed rate changes and continued 1.93% - gradual reopening of the economy 100.0 1.98% 1.77% - 2.15% 2.00% 1.98% • Excluding PPP, core PPNR as a percentage of average 1.96% 1.66%- 80.0 1.70%- 1.83% assets1 is expected to decline i
Slide 17: Capital Position
Capital Position Common Equity Tier-1 (CET1) Capital Ratio Scenario1 ACL Capacity 1 Six Quarter PPNR Run-Rate and ACL Capacity to Remain “Well” Capitalized (Six Quarters Ending 4Q 2021) $ in millions 1 Common Equity Tier 1 Capital - 2Q20 $ 1,292 PPNR Run-Rate (after-tax)1 263 Dividend Run-Rate (36)
Slide 18: 2Q 2020 Loan and Deposit Growth
2Q 2020 Loan and Deposit Growth Loans - 2Q'20 vs 1Q'20 and 2Q'19 Mar Jun 2Q'20 $ Annualized YOY $ YOY % ($ in millions) Jun 2020 2020 2019 Growth % Growth Growth Growth • We continue to execute our strategy to optimize our C & I Loans $ 3,354 $ 3,412 $ 3,421 $ (58) -7% (67) -2% PPP Loans 945 0 0 945
Slide 19: WSFS Franchise and Markets
| WSFS Franchise and Markets WSES bank WSFS22::.. We Stand For Service®
Slide 20: The WSFS Franchise - Overview
The WSFS Franchise - Overview • Largest independent bank and trust co. HQ in Delaware and greater Philadelphia region(1) • $13.6 billion in assets • $20.8 billion in fiduciary assets, including $2.6 billion in assets under management • 115 offices • Founded in 1832, WSFS is one of the ten oldest ban
Slide 21: The WSFS Franchise - Our Markets
The WSFS Franchise - Our Markets Philadelphia-Camden-Wilmington MSA Regional Employment Composition(1) Regional Statistics Diversity of industries drives stable and favorable employment and economic growth in our markets • Population: ~6.1 million • Number of Households: ~2.3 million • Unemployment
Slide 22: The WSFS Franchise - Strategic Growth Opportunity
The WSFS Franchise - Strategic Growth Opportunity At $13.6 billion in assets at 06/30/2020, WSFS fills a long-standing service gap in our market between larger regional/national banks and smaller community banks MSA: Philadelphia-Camden-Wilmington (PA/NJ/DE/MD) Total Deposits • 4th largest metro in
Slide 23: The WSFS Franchise - Delivering Growth and High Performance
The WSFS Franchise - Delivering Growth and High Performance 23
Slide 24: Business Model and Total Shareholder Returns
Business Model and Total Shareholder Returns Total Shareholder Returns2 NASDAQ KBW SNL US Bank Bank Banks > S&P 500 WSFS Index Index $10B Index 1 year (30%) (24%) (21%) (28%) 7% 3 year (35%) (22%) (15%) (22%) 36% 5 year 10% 6% 10% (1%) 66% 10 year 163% 103% 101% 86% 270% (1) Completed by the Gallup
Slide 25: Lines of Business and Technology
Lines of Business and Technology
Slide 26: Commercial Banking
Commercial Banking Local, relationship-focused lending including cash management, wealth management, and private banking services Business Banking Middle Market Comm. Real Estate Small Business SBA Lending Revenues: Revenues: Revenues: Revenues: Profit: $3 million - $20 million+ $20 million-$150 mil
Slide 27: Retail Banking
Retail Banking Relationship-focused community banking model with 90 banking offices & 571 ATMS(1) Recently optimized retail footprint through reduction of branch locations Branch & ATM Online & Mobile Banking Borrowing Mortgage COVID-19 Network Response Our Associates health, Offering a full range o
Slide 28: Cash Connect: Leading National Provider of Cash Logistics
Cash Connect® Leading National Provider of Cash Logistics $9.2 million in net revenue (fee income less funding ATM costs) and $2.0 million in pre-tax income in 2Q 2020 Vault Cash “Bailment” • 5 year CAGR(2) for net revenue is 10.6% WSFS Manages 484(1) branded ATMs for WSFS Bank; one of Smart the lar
Slide 29: NewLane Finance
NewLane Finance Micro & Small Ticket Commercial Equipment Financing Background: • Co-founded in 2017 by industry veterans who built Marlin Business Services from a start-up to a publicly-traded company (Nasdaq: MRLN) • WSFS owns ~83% of the Company Market Size: • Micro & Small Ticket Equipment Leasi
Slide 30: WSFS Wealth
WSFS Wealth Full-Service, Relationship-based Wealth Management Financial Highlights 2Q 2020 Net Revenue: $13.8 million 2Q 2020 Pre-tax Income: $2.3 million $20.8 billion in fiduciary assets, including $2.6 billion in assets under management at 6/30/2020 Private Banking Services for Commercial Custom
Slide 31: Delivery Transformation
Delivery Transformation 2020 Program Focus and Outlook Full-Year Gross Investment of $15.2mm; $9.7mm Net Expense; $8.2mm Net of Revenue Lift Customer Acquisition Expected Benefits from 2020 Initiatives • Expand nCino capabilities • Grow Customer acquisitions at lower CTA • Initiate implementation of
Slide 32: Channel Strategy and Digital Adoption
Channel Strategy and Digital Adoption • Since COVID-19 pandemic, WSFS supported consistent volumes of total deposit transactions with a significant shift from physical to mobile • Increased digital and remote banking volume demonstrates versatile and adaptable channel strategy, while managing a sign
Slide 33: Selected Financial Information
Selected Financial Information
Slide 34: Diversified & Robust Fee Income
Diversified & Robust Fee Income $180 Trust & Wealth 27% (2) $160 Cash Connect • Fee income is well diversified with over Bank Segment (2) 20 discrete lines of business and products 35% $140 $44 within our three segments (2) 35% Total Core (1) Fee income $120 $41 34% (2) • Strong historical growth in
Slide 35: Interest Rate Risk
Interest Rate Risk1 As of 6/30/20 (WSJ Prime @ 3.25%) 12 month Balance Sheet Drivers PPP included PPP excluded • High % of variable/adjustable rate to BPs Change NII Impact - % NII Impact - $ NII Impact - % NII Impact - $ total loan portfolio: 50% ex PPP -100 (1.02%) ($4.3 million) (1.05%) ($4.3 mil
Slide 36: Credit Metrics (ex PPP)
Credit Metrics (ex PPP) Criticized & Classified Loans / Tier-1 + ALLL Delinquencies (1) / Gross Loans 40% 2.00% 37.30% 1.80% 35% 1.60% 30% 1.40% 25.52% 1.20% 25% 1.00% 0.51% 20% 0.80% 0.60% 15% 0.40% 10% 0.20% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
Slide 37: Capital Management – Bank
Capital Management – Bank Disciplined capital management providing flexibility to grow & return profits to shareholders Tier 1 Capital ($000s) Common Equity Tier 1 Capital ($000s) Tier 1 Leverage Ratio ($000s) Total Risk Based Capital ($ 000s) 37
Slide 38: Share Buyback and Dividends – Recent History
Share Buyback and Dividends – Recent History $120,000 $0.50 $0.47 $0.45 $0.42 $100,000 Annual Dividends Paid per Share $0.40 Capital Returned ($ in 000s) $0.35 $80,000 $0.30 $0.30 $0.25 $0.24 $60,000 $0.25 $0.21 $0.20 $40,000 $0.15 $0.10 $20,000 $0.05 $- $- 2015 2016 2017 2018 2019 1H'20 Dividends R
Slide 39: Strong Alignment / Capital Management
Strong Alignment / Capital Management • Executive management bonuses and equity awards based on bottom-line performance ROA, ROTCE and EPS growth – equally weighted • Insider ownership1 is approximately 2% Board of Directors and Executive Management ownership guidelines in place and followed • WSFS
Slide 40: WSFS Mission, Vision, Strategy and Values
WSFS Mission, Vision, Strategy and Values 40
Slide 41: Appendix: Non-GAAP Financial Information
Appendix: Non-GAAP Financial Information
Slide 42: Appendix: 2Q 2020 Reported Financial Results
Appendix: 2Q 2020 Reported Financial Results 2Q 2020 • GAAP results for 2Q 2020 were significantly impacted by the continued $ in millions (expect per share amounts) impacts of COVID-19 and included $94.8 million (pre-tax), or $1.49 per share EPS ($0.14) (after-tax) of provision for credit losses du
Slide 43: Appendix: Non-GAAP Financial Information
Appendix: Non-GAAP Financial Information Three Months Ended Three Months Ended June 30, March 31, June 30, June 30, June 30 , March 31,2020 (dollars in thousands, except per share data) 2020 2020 2019 (dollars in thousands, except per share data) 2020 2019 Net interest income (GAAP) $ 113,756 $ 116,
Slide 44: Appendix: Non-GAAP Financial Information
Appendix: Non-GAAP Financial Information March 31, December 31, March 31, (dollars in thousands) 2020 2019 2019 GAAP net income attributable to WSFS $ 10,927 $ 45,704 $ 13,023 Plus: Tax-effected amortization of intangible assets 2,103 2,121 1,034 Net tangible income (non-GAAP) $ 13,030 $ 47,825 $ 14
Slide 45: Appendix: Non-GAAP Financial Information
Appendix: Non-GAAP Financial Information $ in 000's 1Q'19 2Q'19 3Q'19 4Q'19 TTM 4Q'19 1Q'20 2Q'20 Net Income $ 12,930 $ 35,969 $ 53,595 $ 45,424 $ 147,918 $ 10,567 $ (7,811) Plus: Income Tax Provision 6,260 10,091 15,902 14,199 46,452 1,288 (2,247) Plus: Provision for Credit Losses 7,654 12,195 4,12
Slide 46: Appendix: Non-GAAP Financial Information
Appendix: Non-GAAP Financial Information For the year ended December 31, 2019 2018 2017 2016 2015 2014 2013 2012 2011 Net Income (GAAP) $ 148,809 $ 134,743 $ 50,244 $ 64,080 $ 53,533 $ 53,757 $ 46,882 $ 31,311 $ 22,677 Core Net Income 185,104 114,307 82,841 68,403 60,090 49,220 42,664 19,111 20,013
Slide 47: Investor Relations contact information
Stockholders or others seeking information regarding the Company may call or write: WSFS Financial Corporation Investor Relations WSFS Bank Center 500 Delaware Avenue Wilmington, DE 19801 302-504-9857 stockholderrelations@wsfsbank.com www.wsfsbank.com Rodger Levenson Dominic C. Canuso Chairman, Pres