Wilmington Savings Fund Society Financial Corporation (WSFS) has announced a strong performance for the second quarter of 2024, with significant growth in core earnings and fee revenue. Core earnings per share reached $1.08, with a core return on assets of 1.25% and core return on tangible common equity at 18.83%.
The company’s Wealth Management and Cash Connect divisions were key contributors to the 13% quarterly and 28% annual increase in core fee revenue. Despite a decrease in the commercial loan pipeline, WSFS remains optimistic about achieving mid-single-digit loan growth for the full year.
Key takeaways from the report include:
– WSFS reported core earnings per share of $1.08, with a core return on assets of 1.25%.
– Core fee revenue saw a 13% increase from the previous quarter and a 28% year-over-year rise.
– Wealth Management fee revenue grew by 14% quarter-over-quarter and 16% year-over-year.
– The Cash Connect division expanded its ATM network, contributing to a higher return on assets.
– Loans and deposits grew annually by 6% and 3%, respectively, with a core net interest margin of 3.85%.
– WSFS returned $48.7 million to shareholders through dividends and buybacks.
Looking ahead, WSFS expects to deliver top quintile financial performance and a full-year core return on assets around 1.25%. The company anticipates a loan-to-deposit ratio of 83% for the full year.
However, there are some bearish highlights to note, including potential losses that may lead to net charge-offs in the second half of the year and the impact of a rate cut on net interest income. Executives also expect flat deposit growth for the year and increased reserves on investor commercial real estate loans.
On the bullish side, continued growth in major fee businesses, mid-single-digit loan growth targets, and favorable new loan origination yields are positive factors for WSFS.
Despite challenges such as a decrease in the commercial loan pipeline and slow stabilization of a hotel property in Ocean City, Maryland, WSFS remains committed to its strategic approach and delivering value to shareholders.
For investors interested in WSFS, the company’s strong track record of growth and value creation, along with key metrics and InvestingPro Tips, provide valuable insights into its financial health and stock potential. WSFS’s market capitalization, price-to-earnings ratio, revenue growth, and dividend history are key factors to consider. Additionally, analysts predict profitability for the company this year, indicating a positive outlook for investors.
For more in-depth analysis and insights, readers can access additional InvestingPro Tips and real-time data at https://www.investing.com/pro/WSFS, with a discount available using the coupon code PRONEWS24. As WSFS navigates through the remainder of the fiscal year, monitoring its performance and strategic decisions will be crucial for investors. During the second quarter, WSFS demonstrated the strength of its franchise and diverse business model. Core earnings per share were $1.08, core return on assets was 1.25%, and core return on tangible common equity was 18.83%. Core fee revenue increased by 13% linked quarter and 28% year-over-year, driven by growth in all major fee businesses. Wealth Management fee revenue grew by 14% linked quarter and 16% over the previous year. Cash Connect added nearly 8,000 service non-bank ATMs since the third quarter of 2023. Capital markets and mortgage businesses saw an increase in fee revenue by 13% and 35% respectively. Loans and deposits also increased by 6% and 3% annually. Asset quality remained stable with NPAs declining to 32 basis points of total assets and delinquencies dropping to 13 basis points. Net charge-offs for the quarter were 44 basis points. WSFS returned $48.7 million to shareholders in dividends and stock buybacks. The company remains well-positioned to execute its strategy and deliver top financial performance in 2024. The mid-year outlook shows a core ROA of 1.28% and EPS of $2.19. The company is tracking above its full-year outlook and is prepared for potential interest rate cuts. Deposit growth is projected to be flat, and net charge-offs are expected to be 30 basis points. WSFS remains committed to returning approximately 35% of net income to shareholders through dividends and stock buybacks. Thank you for the detailed explanation. Could you provide some insights on the step-up in salary benefits this quarter and what we can expect in the back half of the year? Also, how will the use of external funding for Cash Connect ATMs impact expenses in the next few quarters? Lastly, any expectations on net charge-offs in the second half of the year? Arthur Bacci reiterated that the company’s philosophy regarding dividends and stock buybacks remains unchanged, with a target of 35% for routine distributions. Any incremental buybacks will be based on financial results, economic conditions, and the historic framework of targeting a 16% IRR. The company has been disciplined in its approach and will continue to evaluate opportunities for buybacks based on these criteria. The recent increase in buybacks was driven by attractive opportunities in the market. Looking ahead, the company will assess whether adjustments to underlying assumptions are needed to achieve a 16% IRR for incremental buybacks. If we could offer deeper services with better profit margins without increasing the number of services, we would definitely prioritize those opportunities all day long.
Frank Schiraldi: Great. Regarding the three C&I downgrades that resulted in the increase in problem assets, was there any common thread among them?
Stephen Clark: Hey, Frank. This is Steve. There wasn’t a common thread among the three C&I customers. They were in different geographies and industries: a cultural institution in Center City Philly undergoing business repositioning, a logistics fulfillment trucking company in the Lehigh Valley area facing softness, and a newly built hotel property in Ocean City, Maryland slow to stabilize. They were all good customers with performing loans, and the causes were distinct geographically and industry-wise.
Frank Schiraldi: Okay, got it. Thanks for the insight.
Operator: Our next question is from Jake Civiello with Janney Montgomery Scott. Jake, please proceed.
Jacob Civiello: Is there any change in your willingness to consider recognizing a loss on the AFS securities portfolio to reach the 18% to 20% ratio of securities to assets target faster?
Arthur Bacci: Jake, we’re open to examining transactions, but currently, we don’t see any viable options. The portfolio continues to generate consistent cash flow, which we can reinvest in new opportunities with attractive yields. Unless there’s a significant shift in rates, we don’t have plans to restructure the portfolio.
Jacob Civiello: Understood. Thank you.
Operator: Our final question is from Manuel Navas with D.A. Davidson. Manuel, welcome back.
Manuel Navas: Are there any changes in the commercial loan pipeline, considering rate forecasts or borrower sentiment, in relation to your mid-single-digit loan growth rate?
Stephen Clark: Our pipeline has decreased to over $200 million, reflecting strong closings in the first half of the year. However, we remain optimistic about achieving mid-single-digit growth for the full year, as we have promising opportunities in the pipeline. The forecast remains consistent with our expectations.
Manuel Navas: Are the new loan origination yields in the 7.5% range as expected?
Stephen Clark: Yes, our loan origination yields have been in the mid- to high 7% range for commercial loans funded over $250,000. The securities portfolio’s cash flow is being reinvested at these attractive yields.
Manuel Navas: Thank you for the information.
Operator: That concludes today’s call. Thank you for joining, and feel free to disconnect. paragraph by changing the structure and wording:
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