WSFS - Earnings call transcript Q2 2018 | WSFS Financial Corporation

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Operator

Good day, ladies and gentlemen, and welcome to the WSFS Financial Corporation Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I’d now like to turn the conference over to Chief Financial Officer, Dominic Canuso. begin. may you Sir,

Dominic Canuso

Officer; and to all today. participate call Chief join and Rick Commercial Chief is on call Shelby, Wealth taking With as us you Officer. on Retail Wright, CEO and travelling Officer; the this Operating President, he Levenson, our the Rodger time on are Turner, Bacci, thanks Chairman you, Banking Chief of internationally. is Officer; Clark, to for Chief me Art Thank our Banking Steve Mark unable to today call

Before Rodger remarks, I to like Harbor would Safe statement. begins with his read our

Our our or discussions factors prospects file of that discussion information indicated statements forward-looking Commission. those XX-Q, our read, materially reports may risks the over recent our risk quarterly and our statements. included the forward-looking I’ll Levenson. management’s – With other Actual to to, results by we Report as in and uncertainties, limited these today XX-K and turn view on not will Exchange to most including, the include but constitute Securities well documents Form Form on differ due plans that Annual results future and Rodger historical expectations, as material about with periodically from

Rodger Levenson

everyone Dominic, and thank your Thank you, attention you for and to today. time

second average or XX.XX%. represent the a return We million, to and share. per $X.XX equity grew tangible an a reported strong very when ROA common of to per compared earnings are Earnings XXXX. announce X.XX% pleased of of quarter for $XX.X on These of XX% with share quarter WSFS results

in fee deposit combined with spread was when reported quarters the of significant solid were total of total to stronger interest in excluding growth the of metrics. X.XX% a growth balanced Core net the gains margin both development income growth businesses, a deposits modestly good Our between to performance directly quarter first related was and X% costs organic same corporate loans revenue XX% quarter and a this for XXXX net compared growth, in securities results, the quarter both was credit annualized interest Core versus than and and loan which results. quarter and our reflection XXXX. customer

earnings of of reported points net environment. interest basis an XXXX. short-term As rate organic XX the points this XX increased to basis detailed being and release, the An for basis in the increase increased well-positioned higher the basis quarter second margin points a XX compared result was of on

as margin, points, expect already basis of betas While deposit we the additional XXXX hikes. as increase the Combined the are our we pressure, pricing environment in full June XX quarter target the offset competitive should to deposit commercial see intensify pleased rate in of with higher pricing with likely funds potential growth the quarters. ongoing loan Fed impact coming well

our was As XXXX. a in around in likely the be commercial X% for a loans, that quarter range growth of result, second-half Loan is a minus loan see we a C&I or largest for will the net X.XX% driven increase margin which annualized plus by interest portfolio.

as consumer equity home experienced also Philadelphia-based a a loans, an increase EQ, our digital primarily in Spring with lender. of We relationship result

points annualized to versus and Management performance major of and million core XXXX, balanced incentive demonstrates of into conjunction reflected our stable of translate for a strong, quarter which quality remained of expectation expectations below was positive million very XX% to X to core of previously accruals on and million, quarter with slightly with non-interest the in to annualized full-year driven Cash XXXX bearing of our for growth XX.X% growth largely with XX-day increase into increased weighted loan $XXX a consistent Total especially full-year in This with deposit full us annualized was growth Core pipeline single-digit $XX continues by million. in and efficiency levels credit XX% operating and businesses, were the keeps percentage our four slightly growth ratio purposeful with ability attributed again all customer-generated quarter be or translated deposits. communicated fund performance. loan commercial once non-interest grew average earn-out a This second of full-year key consistent quarter fee XXXX expenses should metrics. the accounts high XX% loan strong our X% of remained to for Our mid Credit income versus healthy leverage. Wealth via improved our our across track XX% Connect. the a across growth fee-based CDs. Core $X.X very XX% second all of strong $XX costs expectations. and operating

profile Delaware and achieving the we during to of continuing forward area. acquisitions in with activity, tax Reform again. bank ROA core Greater to gain effective the tracking be advantage and exceeding full-year. we answer sustainable would the you, your momentum range the market we Valley the continue our the outlook rate of more questions. our expect in we of thought Thank X.XX% our be earlier we and share, income. locally-managed XXXX for happy While strategic on second look of time, XX%. given Tax We where summary, XX% Act the second-half of this the of for XXXX and we year-over-year being to quarter exercise the our optimize helped and to stock as WSFS, a to reflect versus price be investments XX% largest momentum At comparisons, results this would the XXXX goal has and some now In Delaware are above or volatility and And prior of planned pre-tax continued increase

Operator

from Thank And Catherine you. first comes Mealor KBW. [Operator from question Instructions] our

Your line open. is now

Catherine Mealor

a on also role. quarter morning on Rodger new job Good and your Thanks. great

Rodger Levenson

Thank you, Catherine.

Catherine Mealor

continue the home equity relationship maybe with in Spring kind the to about that about loan to the more just talk back-half of this a So partnership, would first And more growth with through Phili. we should bit Can a EQ purchase you pace starting or think loans year? of how in you expect of growth. little

Richard Wright

Wright. Catherine, this is Rick

Catherine Mealor

Hey, Rick.

Richard Wright

you? Spring Philadelphia-based country. equity are EQ the that How a company loans sources across digitally home is

XX-year them, have participate, one forward of principles have well we We also as a we to and as we them with relationship agreement a warehouse a that started. And there. with provide get the involved small agree wherewithal to line

we as in as them. underwriting much expect next now months XX our over standards XX the did we are for the that principally same to use So doing generated are the business continue core from as here. we to we’re would And – going the we’re about to take –

Catherine Mealor

And markets? credit, you concentrating purchasing Are more or Okay. of they your end buying what them? are you’re in from also what national you

Richard Wright

they’re much different from At pretty XX the national. come states. They moment,

them We’re the to that footprint. taking moment, a we’re more the our perhaps much bit in country. a little But looking in at revise across try and to pretty focus

Rodger Levenson

it’s Yes. And would to profile relationship with be worked in we’re start-up, pleased to And from And underwriting is and a Rodger. it’s loans out the of that’s the Catherine, would standards. Rick I stages how geographically be the this of original all really would expect down what you reiterate has our said, the just what plan. that consistent with early very its progressed. company

Catherine Mealor

thanks. Okay,

of So consumer the with this? – how much say growth and of tied would you the all to can

Rodger Levenson

A it. of lot

LendKey of $XX about grew doing sources million was, I We about us And that we I EQ, $X.X from was then $XX-ish million. called would core about grew for Spring what million ours the a thing footprint company footprint – sort we have of with we’re expanded $X.X quarter. that loans call, in another million growth. an student and think, that

Catherine Mealor

Okay. say it relationship, coming quarter a you this about million Spring $XX Do EQ correct? $XX million, is from

Richard Wright

I them month what growth. is a we’re million-ish – would from $XX about say, We’re getting

Catherine Mealor

Okay.

the growth still Sounds is outlook back-half commercial growth outlook then It year, the competitivepricing And the strong separately to seems to was the a and great. really side, the for this continue on CRE given downs origination more commercial your like headwind? in for pay be quarter? of what

Steve Clark

Steve Catherine, Hey, here. Clark

Catherine Mealor

Steve. Hey,

Steve Clark

How are you?

Catherine Mealor

Good.

Steve Clark

with we second-half kind communicated growth commercial expectations for of year remain single-digit to previously kind mid consistent in what loans. the the high Our of of

We’re feeling good about our pipeline. very

XX-day this it’s about highest and weighted of average the million since that’s indicated last and Rodger year. been time As $XXX

about second-half the of year. the So we’re optimistic

Catherine Mealor

Great.

And Okay. follow-up. just small one then

than we should that non-interest up increase? little I other was income there million. that about driving a more quarter, think, last that’s up bit The know in about Anything $X

Dominic Canuso

this Catherine, is portion that… Dominic. of A good

Catherine Mealor

Hey, Dominic.

Dominic Canuso

you? are How

Catherine Mealor

Good.

Dominic Canuso

Cash of portion good that income A is increase from non-bailment fee coming from Connect.

carrier logistics car total management services, and other offerings. and the which services, armored is their insurance So repackaged cash software

Catherine Mealor

it. Got

here So rate run that’s to then? a grow good from

Dominic Canuso

Correct.

Catherine Mealor

thanks Awesome appreciate it. or Okay, I great on that quarter. congrats – great. a forecast. But for

Dominic Canuso

Thanks, Catherine.

Rodger Levenson

Yes.

Operator

our from And Davidson. Gunther question next from comes Russell

line Your open. is now

Russell Gunther

guys. afternoon, Hey, good

Dominic Canuso

Russell. afternoon, Good

Russell Gunther

the this. of margin wanted circle that step-up purchase on out the to assumptions betas back-half are increases, Just kind fund some flush which to parts, a could would there, and help – deposit of assumptions some then your internally modeling if great? accounting just of just for guidance provided be to the was of the in Fed caught you back but lot moving accretion kind But for

Dominic Canuso

Dominic. I’ll second the first This performance. quarter And Sure. is set level

purchase As points accretion. included of margin Rodger mentioned, basis outsized the X.XX% loan about interest X net

XX% normalized date about would And NIM And the next over towards as anticipate historical we observed the few mentioned, a increases. of to through average quarter what to back we around deposit we’ve XX%. is a for of beta see So the again, the Rodger X.XX%. is rate that increase cycle

by actually rate accretion, reverse this likely rising of we see September, the offset one the from we that we rising purchase to see that more betas while potential that loan environment, mortgage portfolio year the anticipate. So and runoff in benefits primarily the X.XX% of increase is continued the maintain, runoff the

Russell Gunther

bit operating anything or things Thank Very But for $XX.X is that, on may the I it, and either appreciate nature side is expense not then million And what sub-XX% core leverage relative rate on a the efficiency. helpful. seasonal there to performance continued up the little that looking recommitment going forward? run in was of call to in you.

Dominic Canuso

we as the And run is second for a healthy the quarter rate This see business. Dominic. do actually

to are that. would We pleased expect the and with us through high-XX maintain

both mentioned comments, the we that associated portion was that release in expense comp and growth earn-out, and is good generated. revenues in with non-interest Rodger’s strong saw performance-based a of As we the the variable

continue both for guidance expect to deliver below full-year. of to we efficiency us XX ratio So the our and

Russell Gunther

one guide. is both in the for just side what’s Dominic. those But Thanks, and it’s that of me funding there? then deposit your in last remind the on sort great. on just assuming of CDs captured growth the brokerage trajectory the kind strategy and for Okay, CDs, of us buckets And margin

Dominic Canuso

Sure.

to very the grow the were deposits we quarter, CD able money with in helpfully, increase core and evidence portfolio. note pricing environment, have given The in of first our remain continuing foresee the with in thing deposit is, with both along rate strong to I with the market presence our customer pleased promotions we’re second market. CD the our rates look In and our We very our brand grow. bearing the would – non-interest We We purposeful competitive rising growth ensure competitive our deposits. were us. to our customers both to

And high would continue single-digit we deliver we growth that and to to that mid anticipate so the to offer.

Richard Wright

broker Connect. Russell, is – growth, used another vehicle fund Cash sheet And including on I would to add we that the just, balance just deposit

think see for remainder I the should is to there what what So year. of expect you you see the

Russell Gunther

Thanks all have. guys. helpful, very That’s That’s I much. so

Operator

O’Neill. from And Instructions] next our Sandler Schiraldi Frank from question [Operator comes

Your now line is open.

Frank Schiraldi

guys, Hi, afternoon. good

Rodger Levenson

Frank. Hi,

Frank Schiraldi

left. Just a had couple I of questions

if think you sponsorship. you loans to and about of about know relationships, what’s of it percentage Spring do EQ balances appetite growth for the – you’d the – a of as terms there? or in see those is LendKey, when this, think But where call potentially consumer? I don’t growing what near-term you the And those In credit this

Dominic Canuso

So let then Rick some off add kick color. it and I’ll I’ll

have relationship, with as we a – long-term of relationship First, on the principle principle Spring EQ the the mentioned, key this entity. Rick

things. equity opportunity about hopefully as we And things how discussed. equity relationship change that viewed as always offer Rick early would make and stage and access at learn we capital then growth, this as some so products warehouse lines they expect to their digitally traction, more and partner to with got the they an got to But point have an other home some investment, bigger of and them more as to at

future foreseeable next the to that year our be so, expectation. numbers Rick outlined certainly for would So continued you the or the through

would our a also they depending always we’re and bit that probably would of beyond where point partnership, kind a a for some success some learnings positioned and kind equity on been we’d and relationship. Some period LendKey expectation the rate of that, really we’ve It’s then lending go which little for move had down student and upon time investment been And them marketplace. started our we of in the help gain primary that then of monetize get point has from our their in number at hopefully years. a product. company was

it’s bit little it’s described, to last physical would over basically Rick expanded in that years. been As although from growing to footprint is. we continue the rate the our that at expect a where footprint, that’s couple of And grow

We’re pleased our at continue We expect look that that would student consumer an and to important with longer-term. of lending as partnership. offering lending part

Richard Wright

the as This things do in is are digital like sure LendKey that – Spring that we we and need add is and to want to from, make are try I hard because I changes would Rick the we really marketplace, happening what again. to Wright, color are Zenbanx enough do. we just agile only to the much SoFi learn

of important almost think I is the so And us learning the sheet to this activity. as balance part probably equally

Frank Schiraldi

Sorry. as missed It – returning was Connect. it. ROA, on there is – think of about of on there kind maybe we where think guys But other that – ability we pass some sounds been have some might business you with us return then this there may cash higher new the legacy like business? retooling Cash to that should just that might either legacy just to levels, just a costs question and out before, it at you I has funding Is of on And the about the of you running to build covered be a business way, I so business, customers heavy the now about expense if kind that is more that degree? as that share income from or the to dissipate away that can pre-tax guess, – or start-up level in really through might point certain legacy

Dominic Canuso

is Dominic. This thanks. Sure,

to another Connect Cash start growth successfully the But year-over-year a years source, and ourselves a bailment a off has shifted. I’ll from is in quarter history business. market customers by revenue the there’s which you believe We First, year. we time, that evolved pressure the has points as XX% our base, customer already or the in growth along versus will our is most revenue of safe. and position our some result really XX by in passed was and With at we through XX% on of the on some safe structure rate growth penetration year-over-year second on growth, upside That concessions of that services, resulted in in of by bailment, mentioned, fee with healthy our various product penetration the the our with the saying believe bailment customers. along focused primary future. we in growth net customers, rising we XX% pricing through smart insurance growing that smart the bailment reduction quarter result environment. improvement XX% armored driven What quarter second of pricing this carrier still are income revenues very its diversifying optimization as in TCM last for as And strong the pricing with was saw existing of primarily TCM still reconciliation as software and with the and that bundling along a

number the smart of over market grown XX%. we’ve year-to-date, fact, In the in safes by

back the X.XX% are the in as you. average we to off in return X.XX% And diversification expect ROA. next the business. of year midst Thank pay to the we historical reinvesting the So that margins towards we of that over within

Frank Schiraldi

great. you. Okay, Thank

Operator

Nicholas comes from Austin from question And Stephens. our next

Your is open. now line

Austin Nicholas

morning. guys, Hey, good

Dominic Canuso

Austin. Hey,

Rodger Levenson

Good morning.

Austin Nicholas

questions the you for the maybe in of answered. expectations have been my there? Most year? included just corporate are us development on costs, can costs But those remind of the back-half what any in And

Rodger Levenson

it’s Rodger. Austin, So

the we process So as doing XXXX of would year of we’ve previously, prospecting. begin said investments prior and and acquisition a was in more XXXX optimizing

see said some our we potential side, prospecting Southeastern on development those that supplement of we fee-based the the have amount looking be a primarily continued are the – on activities. bank investment that’s you reminder, costs in cost continues of where to on acquisitions, And focus there for traditional So as side smaller a think we opportunity. And bolt-on also we’re in PA. with the wealth to corporate businesses tremendous space

So see potential to the in normal parties. kind would that and prospecting cost you cost there be of talking that would of a interested

Austin Nicholas

efficiency the guess, does And then I development them? or that exclude Understood, include thanks. that costs, the does is guidance, corporate

Rodger Levenson

is that XX% ratio below efficiency basis. offer that So on core a we

corporate development gains So costs. and securities it excludes

Austin Nicholas

Understood.

relationship just the Could think, on management And us I seen helpful? maybe last end some that color performed or great. the that’s really that then developments at be year, any And impact of color Okay, far? the last of give one on so you’ve was SoFi. you kind how would cash on beyond one with financial the any account announced,

Richard Wright

is anything There – on been significantly this really hasn’t Rick again. new Wright, really There that.

them to to We beta. product. still They’re later launch it are help trying It in their still is money this expecting year. launch market

this We a have with expense reimbursement a really amount us. this SoFi point. we that to there’s at that for that’s with of material receive or nothing agreement happening situation an with But them small them

Austin Nicholas

Understood. that’s questions I the hope I all Thanks, have. guys.

Rodger Levenson

Thanks, Austin.

Operator

any would now like to back turn I Thank further to call remarks. Rodger you. the Levenson for

Rodger Levenson

in us you of to and Thank Thank I months, forward that on road the Mark, many coming time. day. you, be look good again, will we Dominic joining for everybody, and seeing today and the at you

Operator

Ladies today’s and concludes conference. program. participating in you today’s gentlemen, This for thank

day. a all may You disconnect. have Everyone, great

WSFS Financial (WSFS) 24 Jul 182018 Q2 Earnings call transcript