WSFS - Earnings call transcript Q3 2018 | WSFS Financial Corporation

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Operator

Good day, ladies and gentlemen, and welcome to the WSFS Financial Corporation's Third 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 call will be recorded. I’d now like to introduce your host for today’s conference, Mr. Officer. Financial Chief Canuso, Dominic Sir, you begin. may

Dominic Canuso

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

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

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

Rodger Levenson

Dominic, and today. everyone for thanks joining the call to you, Thank

achieved historic financial will with of of our comments, record quarter as process the update integration our before with a The third but start results. operating end on my announced for brief Beneficial WSFS and XXXX provide was performance we’ll I we combination Bank. the beneficial

XXXX. increase earnings core the report to of of which a pleased share versus We’re $X.XX, represents third quarter per XX%

we net core expense income. and XX% was policies fee previously as development that leverage. gains growth equity increase ROA than of more as excludes margin core the income tax to XX note than as when during XX% with quarter The the eligible results of and to B return recorded positive a tangible is EPS the remainder our to In generate balanced our to from impact announced of performance again six common of costs. third revenue basis securities XXXX, quarter our noninterest ability points XXXX. core due in Core or fundamental well of share core Class growth exclude compared the core in important growth XXXX. X.XX% net recoveries driver the compared and significant a third performance gains periods, same company's increase in and directly the Core change. supported BOLI income corporate X.XX% between a Visa first insurance growth interest both increase divested we the and the by A net It XX% addition, Core was points X%, quarter of was income our interest related core operating of law of net a XX%. of and core XXXX. This of directly interest half fee the BOLI income in core revenue related ROA, quarter this quarter when to was our ROTCE higher increase was to net was of to on

XX environment. rate As increase of this the basis detailed in release, being higher well-positioned the a points for short-term was result of

environment should target funds result in and we offset likely deposit loan ahead, continuation most highly fed anticipate recent will increase competition This which September. in the commercial the for of the the Looking competitive increase impact of pricing deposits. an higher in betas,

plus a the in result, we margin or As range will that for of X.XX% interest a fourth a quarter. strong net minus a see remain

continuation impacted financial X% a a by flat year. were coming quarter the and plan was Total trend linked essentially of the this of is on which As grew the than loans elevated pricing payoffs. loans quarter. the reminder, level XXXs, significantly for basis, our annualized higher Commercial very into aggressive in

Our on intentionally have strong but could remain for overall pricing. provided XXXX profitability. with us incremental trade have during We course flexibility decided disciplined and to growth to levels, fee at margin loan have higher loan revenue the been of growth growing loans

loan year-to-date when X%. is with $XXX Our very loan day of strong which commercial million, expect growth current month in pipeline, a average quarter. growth December averages. growth the annualized weighted this total was year full we mid-single our total Combined has Deposit XX our digits loan comparing

a from deposits increased Most $XXX of lower end. X.X%. one, quarter growth deposit, a Excluding deposits low-cost customer this year-to-date quarter No- temporary our deposits. checking core commercial on came represented cost linked with at account and basis X.X% million customer XX% of total of total non-annualized annualized growth strong quarter

and come full by by year lower quarter somewhat Wealth high charges to XX%, mid growth performance Cash mortgage year-over-year within driven XXXX to expect BOLI of SBA Connect previously in diversified steady offset of range versus businesses, income highly deposit single-digits. and growth third fees. our of was our banking, Management Core communicated excluding fee service XXXX, and the We

XX.X%. ratio core previously expenses core into and translated noted, As were of a well-managed efficiency

XXXX, the consistent outlook under XX%. just full-year efficiency achieved months of of core our first we a with For nine XX.X% ratio of

and credit expenses, the million. Our Total remained metrics for credit and stable solid. quarter, were which both and workout include related provision costs $X.X

provide sustainable into our In results well summary, momentum these ROA good a XXXX. million credit prior business any of relatively linked our Year-to-date $XX in and of exceed expectation us uneven quarter consistent position to of year's costs demonstrate model and quarters. our we core $XX these of full-year objective in to one were $XX can us to full-year credit both million move While strength costs very total line the million. comparable puts as the X.XX% with levels be and

the along together integration Officer both Turning Chief at Cestare, a with to Teams been committee and progress Brubaker; Lisa pleased steering Chief Dominic; Chief organizations chaired over of from Financial are Joanne with of first comprising XX and we the beneficial, our have Beneficial. Technology Tom Ryder, process. Administrative Officer, direction working the under our of by individuals days planning Officer;

track early well announced are the We December. be of This necessary from vote timeline XXXX. regulatory and path will the third brand planned companies the during of in followed by conversion of applications filing remain a of the and closing of the a our down previously with in systems quarter both first of on approval shareholders We XXXX. quarter

meet Beneficial longtime As and opportunity a of has opportunity we analysts to person welcome been Beneficial series both to group we've the the about our via performance. side practice, and teleconference our had Since announcement, investors operating with to investors or through our individual sell in talk XX and the meetings.

Dominic with And again. contact be questions? schedule Thank either answer time will you us, your please or meet myself. If you would to like we now to to happy

Operator

Sandler with [Operator Thank you. Instructions] question our comes from Frank first And Schiraldi O’Neill.

open. is line Your

Frank Schiraldi

to wanted of just questions Just I if -- could. couple

digit on you first -- year, mid-single talked you about guide the Just talked for loan growth I Roger, about think, the guide the -- growth. the

wondering you rate given Just what for the gives the commentary about if release? if And you then, like? think us in know, point XXXX from we any don’t you slowdown I are here, at just preview run think are seeing this looks the expecting -- any that

Rodger Levenson

growth with in Frank, we’ve a level talking combined. the at single-digits combination in about Beneficial XXXX first, So high been low

companies' for we finalize We as both updating XXXX. that will budgets obviously be

that more All to is of -- pipeline, I we long look of will we -- will to relates there’s in like early our XXXX the it growth. have So is like there. out in or say would say to terms in continue what lots forward-look the opportunities

been is loan We’re all standpoint. and remain credit factored into of on outlook year a disciplined going And pricing mid-single to both that from the full -- digits.

Frank Schiraldi

the called the a meaningful the of talked move the Did already in then you release. DDA, about in for quarter? a later on But XQ point -- And that wondering it's was NIM. because have your bit temporary come that any expectations Or the does what maybe NIM? you've impact just temporary out in

Dominic Canuso

with basis is benefit as bank. ongoing point Dominic. about X about is it and the when basis We of of X the the remainder in. It quarter provide do This to it the timing duration a for for it on expect came points based the had

points that business talked usual, the interest and our DDA X interest about for well. for X.XX was not and We on but outsized that. margin increased net accretion margin clarify when for account, will normalizing quarter, only third quarter that to the headline basis as you that outsized We as recall net last X.XX, core about our but purchase as second for call, loan

Frank Schiraldi

-- there I'm was DDA? -- sorry. was on temporary that can timeframe What a the give you

Dominic Canuso

Yes.

X.XX timing X.XX and X.XX Sorry the in is nature. But just obviously. clarify. me X.XX, and let and It's short-term

We into months of be couple year. next to bank with a expect early it the maybe

Frank Schiraldi

this lower was quarter, looks tax And finally the than It I had. what then little on like the a just little a low core tax rate rate.

what rate wondering forward? just decent I And so going like look tax

Dominic Canuso

Yes.

to the As XX% rate our -- nonrecurring comp with bringing effective expected lower items. tax in to range, XX% we've due and stock-based benefits other before, said is that

For quarter, to the slightly XX% had in to in expect XX%. XX% we for fourth prior from to rate from range quarter a true with that be in the from year we year fourth would up tax year. reserves the last the XX% the But next back the change increase quarter to

Operator

comes question from Austin Stephens. next our with Nicholas And

Your line is open.

Austin Nicholas

how fourth or about the of And really have what for is to fast color kind on you're you end that little and -- plus could I XXX? the fourth the for just us thinking quarter, to the quarter? it maybe you help the to flows levers just guidance the picture? what get pluses maybe deposit the the top if maybe, guess, the it that a gets Or where of out? margin Is you the Maybe margin really understand on just minuses? minus bottom

Dominic Canuso

Sure. again. This Dominic, is

provided these have we our layering rate the increased add accounts. As margin some as our our XXX to performance, loan new our And loaded to see loan basis. second through was noted been new But with a you in about would to cycle, XX%, and interest the purchase towards and rate around see And betas XX% historical that points increase loan somewhat When I And couple have rate increase the full margin XX%. look we at the average each XX% the net that and X.XX. that betas fully provide to from -- benefit a to loan then consecutive plus you one-time increases we've accretion XXs low the deposit have if in continue as mentioned betas betas sensitivity call, our environment. loan on to asset quarter pricing so to in the for just from sensitivity the XQ net of increase. the September, deposit beta up I will some of interest quarters offset larger us minus or of normalized of mentioned basis the our then get context, by continuing

to So expected in continue continued provide rate asset environment. rising the positive sensitivity

Austin Nicholas

this And on maybe you gears fourth to the on into about some the maybe outlook us thinking the specifically then how just we going quarter? shifting more kind And be Could of run expenses. and maybe give good the expenses spend should rate Philadelphia you kind is the make deeply the known near-term about as marketing more rebrand in that in quarter, name region? to of a think WSFS

Dominic Canuso

quarter quarters our is leverage fourth had XXXX representative ratio Dominic, a as we as say line The the a step brand in our third concerted targeting there growth. increase efficiency the expect specifically brand elevated would growth continued This again. Sure. we and marketing I effort outpace item presence. positive fourth operating campaign will and from on expected likely into the see Pennsylvania Southeast as expected quarter-over-quarter to was increase revenue to the slightly marketing expense market. marketplace, throughout on down all of That that but branding based our the in quarter all stay did

Operator

question Thank comes you. Perito our KBW. Michael with And next from

Your line open. is

Michael Perito

guys the as this of the the months guys that are I still wanted continuing something so, thoughts and closes capital given seemed activity a things. converts? I where guess, pro capital of of just you part on have of trading I share comfortable forma a the be target early any seem how deal you in couple you higher going rightfully curious guys it X repurchase today. to kind Obviously, bid A of the lot next ratio your year? be as over do kind call you hold in above repurchased And that than stock on the of shares focus to on am of threshold? mean, side did next of updated but still quarter, Beneficial and here. I to X integrates address deal envision on price questions to Beneficial first obviously, notice I is at some kind kind if Or for deal the

Dominic Canuso

great and the Mike, question Thanks, capital. regarding

which focused to relatively our our on commitment XX% return First, buybacks minimum our price. returning has policy, I'll reiterate a shareholders, dividend earnings our and capital to regardless between but of our consistent core share of been equal

foresee the the the month. part do opportunity capital such pro mentioned before high We quarter. price as model see deliver that execute to we additional the believe share communicated share and regard have of And the result is would if fourth what the in teens in we've an policy buyback and that on that. As to still we as in the And with to we’ve strategy drops both last to that targets IRR and we forma committed program. execute cash would an above, transaction below we do internal

Rodger Levenson

just of we I be close. once would will the sometime after before that shares in early we would resume then as we purchase filed quarter. that days transaction add talked just closing, about up, able the would an not the so Dominic up first the But until heads practice be five because November, Mike, SX to So, in

Michael Perito

I the just Okay. of finish like? you extent be I And us renew can that. the can you’ll terms expect terms just on with remind million the process X.X when quickly shares able think, But to think aggressively to on guys you that you looks have obviously, in process completed. what about Board you the I typical comment of, would mean, mean, left that don't you in I you it’s authorization. to how or remind me

Mark Turner

Since comment So, Mark Turner. is yes, longest, on Michael, the around this I've been I’ll that.

new same talked now, buyback as some We of a we've have a usually subject that years every XX that earlier. authorization, Dominic has -- guidance ago renewed the Board since instituted close the XX% and we buyback, gotten end to time about the to

aggressive We to manager a be philosophy are yet prudent, -- capital. with our and that’s consistent of

we want to in appropriate. available, new we times downdraft are we have a make seeing or think authorization now are sure like there market we So be other should at that the

we another. expect that authorize buyback would I the that this Board close utilizing get authorization So as will to

Michael Perito

were kind stuff beneficial put closes? kind quarter seems maybe growth the be of together the on production look you asset As post single just quarter have production week. deal of of curious went and the then Rodger, I year. you confident low strategies than kind And you last one I that they one earnings. it, if anything a you kind next in their mentioned was busy just And But of, for still saw you it guys which that just in briefly it’s mentioned topic beneficial that of the to through me recently again. guys did the what But like some different of on kind turnaround, digits into limited a retooling can you am expecting? for once struggled of obviously, growth growth loan

Rodger Levenson

thanks, Yes, Mike.

would numbers. we feel of original ahead combined a XXXX. would say the modeling, on that going our are modestly thought. basis, in performance of into momentum us I we obviously be Beneficial's operating can't about where giving comment just We our I good So strength the specifically and core on

Mark Turner

you little would us even any assumptions haven’t different days And understated. of know, That Mark of anything as lead that not anything, synergy formal XX cost first saves anything it. accurate before integration, is the XX or Turner, seen planning is about were our again, different but days are in we this opportunities we have -- what we believe that revenue to a

Operator

question Schultheis from next Boenning. with our Matt And comes

open. is line Your

Matt Schultheis

you us Beneficial after if statement plans, investments expense quick provide you could if your quantify the closes of insights was update on capitalized? spent? technology versus questions. any to have any Couple would the be income on looks impact you money deal of if also into. that I And wondering How actually

Rodger Levenson

I deal. of focused put on very that think, off bit it time the the materials We we in point to I that information Matt. Obviously, post fair that since announcement out the in there first So and -- I'll integration. start provided, the just a step of

potential have with us as impact that with terms and to next expect though we some to on We would can transformation, talk of about both in XXXX in that and starting partners been meet delivery provide another help the context XXXX combined early performance update year.

Matt Schultheis

in for And yields. I've banks Okay. yourselves I your a market, And but commercial periods, from high question various don't have very then, I I then long lot of estate and advertisements specific long was at -- a fixed included, relatively amortizations. seen wondering with relatively -- know real

SBA I balance this and an then was sheet? participating something seeing product from this you're So advertised with? is wondering Or that you’re is your

Rodger Levenson

this offer both. to referring Speakers] I to know, I So be related I that Steve anything specifically that know [Multiple don't wanted SBA. is would Matt, not to in. It you’re jump Rodger. don’t believe. the Clark don’t

Steve Clark

here. Clark commercial the been lot business think, not a or in traction a started in have coupon, mortgage, kind that. pretty really We’ve but I tease with product of conversation to clients. the owner-occupied advertising get X%, of starter, for high booking special a Steve small got as It's conversation

Matt Schultheis

six sort mean, and high and I that’s like Yes, enough I certainly coupon, SBA. high Okay. of seven, also -- of and smack thought eight saw I a

that's it questions. So for you. thanks for And the color. my Thank

Operator

from you. next Instructions] Thank with Davidson. Russell [Operator Our Gunther question comes

open. Your line is

Russell Gunther

competition your to where extent a products this you makes that geographically give dialing Could bit where any or relevant cautious? if wanted loan us little particular show give increased about a would growth. the can just it’s comments we I you’re color on see into more up back seeing for you sense regionally

Steve Clark

again. Clark, Steve Russell, Yes,

and on is segment side. CRE no product or So both fierce CNI specific the competition

construction And and to below big interest CRE out very type compete portion On we plus are side, plenty only four XXX. not is by just there. LIBOR XX-year credits year of opportunity are amortizations, to. that the choose typically those customers. perm with our And rates two book mini swapped to financing. loans the floating choose fix permanent market But keep of those with to taken We a certainly to aggressive, we just have not our and periods,

there a has the XX it. with competitive for very On that needs And plus ancillary X. Pricing along C&I to business again, to environment plus similarly be opportunities. C&I it's us go for quality other good gone X, below L comes side, lot of L

be continue structure just pricing opportunities. to disciplined for really we and So CRE new around on

Mark Turner

Russell, good some side this Steve that is opportunities opportunity C&I we Mark take we missed provided Turner. were on one that involved if to and in, of side of in opportunities Steve in. due lost but he to were structure. on the pricing CRE examples group one size the an some involved maybe the the but of

Steve Clark

quarter, these pricing $XX.X a Sure, with the were We at Mark. during one million X. would our plus competition LIBOR the take leveraged third opportunity opportunities And pricing This at XXX, LIBOR the credit that to the is low offered kind down plus of of were grid plus C&I that pipeline package. grid end on a deal. XXX about LIBOR finance the

go. So just not shows it's basically again, to

pricing permanent we're I customer. mortgage the On in at the that plus construction interest-only, the X in XXX permanent by million to construction years CRE will four within L year over side, amort, year example opportunity financing mentioned the That the And We're base existing providing market go permanent XX a -- is multifamily $X.X followed that with XX market. treasuries. quarter. the of a

go chose year basically this financing to. permanent again, just So to not was

Mark Turner

base and margin, and have base base interest forego in purposely And in is add just consistent we a and I'll have loan we color. and fee yield income, and this income we Because customers focusing fee with said. growth and of great context such have chosen good on philosophical and to This what of overall these profitability. opportunities great And strong broader Mark. it's net favor

grow for quarters, XX to grow total even positively last give the positively been loans. despite some you context, the environment, able just to we So commercial competitive have

basis XX quarters points. same the the XX NIM over growing time, some at last our to While XX

we higher purposely including date these rate chosen been to year digits, but have single much which and been to if So we've growing take at able a you to the that’s the a what mid chose could to that’s grow, that's we that have that we margin out And opportunities, low we to should take business model, broader should into that’s nicely. of expect the increasing us the Greater discipline, that’s market. approach philosophical -- you the Philadelphia see as that’s team, this

Russell Gunther

Thank and updating kind one we the that's of all your end you appreciate X-year that. towards results that the with now getting if I last 'XX. color. both of plan. was would quarter are And My would for first I be, you be curious something early

Rodger Levenson

it's -- been practice. So, been Rodger. Russell, historical talked our it's Yes, it's we as about,

We of have next the plan. been year, spending part X-year this strategic developing a better

Board are be year. Actually progress in week. early And financial stages the on of that the final details, next that. we providing we be metrics some will We then additional of our this on updating will later including

Operator

in questions Thank back over no queue, call further Rodger with I would Levenson. Mr. like to to turn you. the And

Rodger Levenson

an Mark, The you. I November and will of at the the and good road road Philly December. Boston York And week. and additional you in back many Conference, Financial be Coast coming to O'Neill see Sandler hope Scattergood KBW on in a have the Bank to week; X; early with Day New East on trip Thank and Thanks following Dominic Services weeks again. and Boenning

Operator

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

have all You may disconnect. great day. Everyone a

WSFS Financial (WSFS) 23 Oct 182018 Q3 Earnings call transcript