WSFS - Earnings call transcript Q3 2020 | WSFS Financial Corporation

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the WSFS Financial Corporation Third Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation there will be a question-and-answer session. [Operator Instructions] I would now like to introduce your host for today’s conference call, Mr. Officer. Financial Chief Canuso, Dominic Sir, you begin. may

Dominic Canuso

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

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

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

Rodger Levenson

and us on Thanks, earnings solid X.XX% WSFS third on tangible and per return XX.XX%. on quarter, common of share everyone, Dominic, return for had thanks, of joining assets reporting call. equity the a very of $X.XX,

prior admirably by performance related dedication pandemic with linked was which XX% challenges mortgage direct translated recovery. posted A of of the impact in incredible on release the highly basis, supplement website, the driven section and effective and the wealth income, on of the net Durbin, model and $XX performance million a our core in economic revenue of X. have X.XX% and associates fee earnings healthy business assets. strong who income our X,XXX over quarter and over our grew of on even Core quarter into this result a Investor detailed occurred pre-provision a July highlight of responded engaged businesses. This very the X% company to fee As our of diversified increase represented a was the which Relations became our growth

levels. the growth Slide As on when and outlined our interest rate very and excluding current in through provides income diversified was municipal supplement earning note fee particular and deposit is X, of even the deposit environment. regular growth capacity Deposit Loan economic cycles. reflected well stability seasonal

result basis primarily margin in X.XX% was and ratio XX Our loan customer related deposits purchase the of and quarter efficiency net interest basis. quarter as linked the The liquidity both points to core contracted year-over-year were expenses high flat lower on Core of a of XX.X%. these accretion. excess levels

nonperformers and management, disciplined stands stable. While currently the transformation we delivery throughout loans. to continue our charge-offs remain we modifications including during in trends of make the expense Delinquencies, on and overall at quarter acquisition X% levels. Overall remain credit significant franchise, organization. significantly at and investments focused declined low Loan remain our talent

of classified, criticized, Tier our include which to capital XX% and started nonperforming result increased problem total of of targeted ACL. completion quarter, As assets, reviews plus a second the all the loans in portfolio X

food potential the a the uncertainty recovery the will to of our operating portfolio provisioning. environment, economic and [ph] mark performance. the and the was the repurchases the quarter economic trading levels, migration stimulus. capital pandemic. X.XX% quarter. our additional significant quarter stands in and quarter including excluding content our the primarily second the portfolios. share biggest path intend overall visibility X.XX% Despite provision of in Just at the rating pandemic. be second approved we solid repurchases ACL of consistent ACL is The hotel, the impact stock. real operating acquired very quarter to reflected at risk on resumption service the [versus] therefore problem which into the be expectations due we With fourth onset At strong upon the retail, are into was significant near-term incorporated flat dependent prior and And of improved repurchases loans stable second over prudently remaining capital seen in retail in suspended current The buyers share credit compelling. the of in on quarter when relatively of the and and quarter have share aggressive very Future half performance ranges, forecasts Board to portfolios, the the PPP estate the coverage of loss IRR position,

continuation XX% Looking and ahead, core fourth economic seasonal outlook modest loan current purchase forgiveness. decline a the quarter, in anticipated net see based in mortgage decline we recovery of and revenue of in the a loan pre-provision lower a accretion, franchise This continued investment. envisions PPP upon revenue

in has in conclusion, by quarter on will In As our be the and economic length while our path we recovery, will results January. we fourth recent macro provide the been outlook announce determined our front when bank our now us I of locally practice, outlook the region. Valley XXXX longer-term entire largest focused Philadelphia energized company to the headquartered facilitate will Dominic Delaware and in over as growth on realizing it remains the and to you. Q&A. of turn Thank opportunity the

Dominic Canuso

the for Thanks, can open line Rodger. if questions. Kevin, you

Operator

Frank Schiraldi Piper First with comes question Instructions] [Operator Sandler. from

Frank Schiraldi

Good afternoon.

Rodger Levenson

Good afternoon, Frank.

Frank Schiraldi

to just the your Rodger, follow buyback. on Hey, up comments want on I

or portfolio. million I going close guys would You have seems the the certainly presentation, I imagine as look guess, unlikely. acquisition growth on to the beneficial talk as word of used to the you’re you in the I next if about capital And, difficult kind books quarters. over generate aggressive. X And, either net rundown you that $XXX is in given excess your at

outstanding guess, would excess be So here. I the have use even primary capital, $XXX is buyback XX% buybacks at that this And million greater capital? than point that you of in

Rodger Levenson

Yeah.

of we second economic the now a certainly uses right quarter, context, We that that. high-level environment primary very think and I well bit is in So, with Frank, little potential for the of said the reserved one buybacks occur feel, losses could the of capital. maybe as

don’t continued I we think certainly that everything out going there about But uncertainty recovery. is based there on path do the now. that’s see on So the of

But be of on we optionality as so, factors repurchase optionality evaluating Clearly, capital but bit the us that as might approved of in opportunities put when with themselves. present of in place other second all the suspension part continual fair a of well opportunities next the also it share we And over front, here the a terms process in the deployment. process those is share on will quarter thought gives the – just that XX%. headroom several the that quarters, for

Frank Schiraldi

And the assets out a up was you quarter. back categories. specifically the at I on and guess, then, pull just pieces know, quarter, restaurant, in those break follow I go in out if look you presentation, and migration then into quarter like this if to could last I problem the certainly migration where then retail the

stuff if XQ. been had the hotel completed, in think recall I I already

outside and about So those greatest of just then driver the of talk within in the was those wondering maybe a quarter. what you maybe portfolios migration portfolios, the if if there could driver

Rodger Levenson

metrics? quarter about that want Sure. and the we process left third the that Thanks, during talk the Frank. where Steve, do entailed you to

Steve Clark

Frank. happy to. Sure, I’d be Hello,

risk-rating book yeah, of XXX% you’re the was had the the So, second review we the a quarter about what started second high-risk quarter. in really for of Frank, of the did we And other third of were a complete kind categories. continuation hotel review And, we the quarter. in through rating correct, halfway risk

So XX% completed of as retail review retail, CRE a the in and these categories and about yellow. had had XX% about review of coded restaurant. the And we the trade, reminder, were XX% of red we on almost again,

the concentration in was was no high-risk of balance with categories. was that different half completed migration spread migration, of those those expectation. million C&I, And in $XXX all the owner-occupied really significant So And was our consistent review CRE, categories really about real in categories. with third quarter. the in across predominantly The it, full

Frank Schiraldi

Okay, at book you’re review always mean, still further, that targeted got there we migration be is you And that completed? loan in then, there’s there provisioning I – you. the but is does looking – additional guess, those future to complete? XQ of Is categories always see review incorporate of the is And took a the in risk-rating then, already could or that the piece second quarter I periods?

Steve Clark

question. the industries. review of your let kind of completed XXX% borrowers of first part yes, coded yellow we of the your second answer But of red the I’ll and the and Yes, have part Dominic question,

represents a book. tick $X commercial that our billion So of over

So that review is done.

and sit on basis. and credit our just RM’s have do all we recall, every you of RMs normal quarterly a We with as our review portfolio process. quarterly Now, teams,

those review, of So reviews something out But targeted in XXX% that. we quarterly have negatively. completed positively terms may or of fall the

Dominic Canuso

objective CECL balance just on Again, think second in reviews and loan as onto much conservative which that, economic with the credit we as CECL had. the very a in took second impacts the the both future the ACL to under process build, view, to quarter sheet with credit regard quarter, the to and of the the after end took the build at the model as capture we we and Steve discussed with team I our

ratios. we quarter took the with in in regard and end in migration consideration ACL that adjustment Steve meaningful such through change that and our to As the the factors coverage the though, said, that we processes, at occurred, qualitative targeted that review completed were with resulted of

Frank Schiraldi

Okay. All right. Thank you.

Rodger Levenson

Frank. Thanks,

Operator

Our next KBW. Michael Brito question with comes from

Michael Perito

for Thanks guys. taking my question. afternoon, good Hey,

Rodger Levenson

Mike. Hey,

Dominic Canuso

Michael. Hi,

Michael Perito

conceptually to the XXXX here. get given of efforts been side, and as you’re guys income I fee management break just have today? the hiring on to and curious, you on this was outlook you the at of Philadelphia point, and kind trends building verticals if of But What’s want try a this that. and how out of products COVID-related? maybe of of much of start some strong investment the fee growth a some really out could we of in grow towards the the was this fee quarter bit much seeing How obviously, kind kind for little making strong mortgage

Dominic Canuso

Sure, Michael. I’ll that. This with Dominic. is start

categories. across our the And X fee see up fees. Amendment, which did Relations banking nice you on an Durbin in many clearly see on to of the material, we particular, our Investor Slide was quarter onset a then, As offset the in of impact our third really step

X then And market volumes, So for the in environment are we attractiveness from these significant overall driving think, growth lower little I industry an with bit the clearly a see event, I valuation perspective. happening. rate assets things secondary think the pipeline and interest are the you wide pleased invest that the were in One, mortgage driving higher.

this could and the the third lower, staying a we typical expect definitely rates would is continue, we higher with mark, to lower result. quarter do seasonality think of I see quarter in volumes fourth

XX some Cash coming up, and bit catch improved volumes serves, little And from but states. also Connect, saw then good equity economies all this on associated but the that the and reopening as really step of wealth markets, a volume of think AUM, I was up continued definitely combination nice business. both amount nationwide the business trust in with of in of trust we a out a

quarter mortgage Connect. we little and being in the do a performance lower fourth given in Cash bit the So outsized bit, see a

see both while the businesses benefits particularly into I the grow a results. regarding future. with to information with think of high-single-digits low fee penetrate And and the in quarter newer combination the there. the providing our provide In to business. of in mortgage in fourth long-term and foreseeable these talked and the about for XXXX more national at the and beneficial, specifically further that double-digits lot local Greater we January, markets We’ve opportunity based our to seeing, fact, the of we we to continue some the continue areas since see to is invest Philadelphia opportunity opportunity region prospects, be to we’re

Michael Perito

anything quarter-to-quarter, we be from [indiscernible] to know, that our forward as mindful clarify the should side you. was we I just was elevated there management Dominic. – there roll in particularly it then forecast can Okay, of investment kind but of Thank move here? on And

Rodger Levenson

Art, did you that? want to talk about

Arthur Bacci

your repeat a in you for blurry could came Michael, little You me. Yeah. question?

Michael Perito

that from obviously, share that sorry. was – just elevated mindful our was in management I’m be investment figure curious, I forecast particularly million $XX.X change there in can there it know, revenue, we was to as But anything should I roll of quarter-to-quarter. the forward? we that

Arthur Bacci

obviously, and, quarter, business from trust, continue of into spread that business might fourth I usually businesses, trust benefited to slow securities year, our got quarter all businesses some the The good with really terms in good very remained in expect and a quarter, increased down institutional just arrears. trust strong the up seasonally. third corporate it mortgage-backed was kind AUM we kind quarter the had we issuance advisory across then and fourth of AUM pretty growth, we of it work strong. We next bankruptcy grow to predict a third in of so bill ended of personal X%, and the that

expect fee saw would fourth generally, else the at of quarter. I the equal, all we So in in AUM end line quarter the assuming income be third the to growth with that

Michael Perito

reduce And structure would just on cost as you there second to curious, it guys digital nature kind the call, to investments, gain alluded mean, that along we expense Great, of as be then how helpful. the of that far on going end Thanks. seem elsewhere make Rodger. are you I the equation, as I to your think, to just reviewing something opportunities side your think approach of might switching transformation to how alluded has that of here? costs. And you and been delivery and guys then you quarter advances, kind I continue efficiencies just me that earnings the obviously, guys But, process to

Rodger Levenson

take I’ll Sure, that. Mike,

think the the a that to I we’ve combination year the beneficial half. it’s with over remind last important been journey since and on everyone

where the took remaining in about step branches the regard that our or coverage within closer efficiencies. a XX% with XX look consolidation. we close specific truly the combination miles part with footprint X branch we synergies, clarify, As with big was branches closures, about of to your XX you of one-third actually X But of cost other We of proximity where we locations. branch that X at merge branch And acquisition, our made efforts branches those typical to and based XX% that were branch branches.

and took that and digital our we of we through trend and remaining ahead platforms. continued opportunity ability serve footprint what to our to count as transaction get So the customers saw our that lower

comfortable we for feel ahead before evaluate COVID, and us, were we we with curve of however, digital we continues. to bit the So that continue where adoption a as are,

those lower not count lower As that, estate FTE it costs, part of associated was only branches. but the real with

real cost centers, footprint. our evaluating footprint, We we are touch would cost are like post-COVID the out we are deliver and interest based look opportunities we like now office in we we us ratio of very opportunities we feel estate appropriate on we and environment training high particularly income continued evaluating the we’re it. model. the what really non-retail fee with service is high the to rate environment But see The our lending investments including IPOs to given and and delivery our that our have on today the relationship XX% have customer and focused base efficiency is the – low for do at transformation, extent compelling that within very and fee executing feel

Michael Perito

my Helpful. Thanks questions, for taking guys.

Rodger Levenson

Mike. Thanks,

Operator

Our with Brody next from question Stephens comes Preston Inc.

Brody Preston

everyone. Hey, good afternoon,

Dominic Canuso

Brody. Hey,

Rodger Levenson

Brody. Hi,

Brody Preston

you So add on guess, to Fed could I buyback, be any your I is need are or repurchasing? any the wanted approvals conversations, to regulators back resume I before Rodger. – just just confirm from I to wanted guess, there there – that the maybe circle just

Rodger Levenson

significant its So capital or we actions consult things. on whether that our other related regulators any with we’re taking,

the for us. that’s normal So part of process

moving well, were conversations And with went and them, so in obviously, and we’re conversation forward. we these

Brody Preston

Okay.

Thank Okay. that. for you

tying But mentioned – strong the noted, you just have and points. Frank as ACL I outlined the there access to in you there, XX earlier, put scenario that position. that that really the its guess, I capital guess, all So you slide capital in basis

you weighted Now, as PPNR times I had, a assets million X guys in given quarter, quarterly mean, guess, is, losses $XX is risk to of implies you $XX.X million, any which think $XX the adverse make I severe second I quarter. scenario, that that billion in in in in

in there quarter be fourth beyond assume would the not us the buyback that? aggressive is and that any on So reason to for you

Rodger Levenson

So I’ll Dominic, start in. now, chime please and

So near-term, being aggressive. there’s we would in could us that prevent that see nothing the from

the One to of and this of that to a of is buybacks, the opportunities challenges is capital of the part the reasons like – optionality. to situations. Frank. us gives those returning I the capital should way at initial address and It one time that respond we said re-divert things have to as or But to shareholders, our response it any option

front give out. circumstances so where the to the being in can I confident very just there’s caveat. it’s the very obviously now, nothing subject on headed. and out Sitting would change But future. of nothing is steer think, external feel right well, sitting is things play this obvious near-term. it today, we Frank what’s A always plays being buybacks how here that that lot when environment But in the away we’re us in in said is on buybacks near-term aggressive and that today aggressive from upon all here that the dependent based macro

Brody Preston

Okay.

another flipping tax real tailwind potential that the a helps Just become is this all, back people within tax and there to trust Biden code a I wanted I a with ask, show that – could change guess, that to at taxes in if their presidency? a arm we quick. the get business, under

Rodger Levenson

like take you would that? Art, to

Arthur Bacci

trust, tax on side, in that. fourth are quarter an anticipation going in our October I’ll see us forward. elevated of we higher seeing that active we Brody, the of more marital people level already Sure. one volume rates generally and the trust setting quarters and September definitely for take is opportunity up of with personal

planning. an certainly that’s So of our element

Brody Preston

last quarter, on And which you on moving rates quarter. think that. Thank bottoming was with Connect, net going to with growth, see to revenue talked Cash then from for about we Dominic, zero, and then, the I higher there great. Okay, this good

for the safe with to sense to and growth existing looks ask wanted if the a ATMs wallet outlook Connect gaining just how there get potential clients So share smart any for was and Cash business? also for new wanted in

Dominic Canuso

was we smart only our with we quarter, their saw of serve to bringing What online, unique back And ISO ATMs, then COVID the cash the recent in the We the this this in customers see future, units what along in past, seen in year in reengaging on filling to and growth cycles. safe question. fact, same program. our Connects’ through nice location play I’d we during this say Great resiliency which alone year various the and considering absolutely saw grow services. a as environment growth trajectory a unit both lot Cash in reiterate serve we’ve X%, the based rebound economy see we not environment, our Sure. opportunity more ability we is this is, – the out definitely but supporting retail to third around of served the and rate

deepen will that customers, performance that based optimization, also we know, the look increased services relationship volume insurance, services, ISO for existing our just margins but with and and as our you cash, then, customers, of with provide as do diversify along reconciliation we and with look to within continues and on our our penetration We our carrier with services so armored then those continue further fee well. way, non-asset improve to to

Brody Preston

a And you how just borrowing for that. thank much accretable was me, in one last yield? sense get Okay, left wanted deposit to for and for much related very I

Dominic Canuso

The deposits? accretable yield on the

Brody Preston

Yeah, the… just from

Dominic Canuso

accretion general? just in loan …or

Brody Preston

total from beneficial to there – borrowings? wanted and still for any Yeah, left yield, if a the CDs just of was accretable the get related sense

Dominic Canuso

amount have most I tenure short with accretion. them to of on you follow-up were specific Yeah, this

to with interest up but follow impact portfolio, So both to under accretion margin. yield a purchase loan can accretion just side, loan have creates to continue offline we purchase tail that $XX which credit dated our on a net the million, we that, and long the

Brody Preston

back it that’s so majority the would related safe and this sounds out a there? loan to mostly portfolio enough. for loan point, like be core it’s fair calculating But to of Okay, just at the that

Dominic Canuso

That’s correct.

Brody Preston

I Dominic. Right. Thank appreciate you much, time, everyone. the very

Dominic Canuso

Sure. Thanks, Brody.

Rodger Levenson

Thank you.

Operator

Our Davidson. comes with question Russell [Operator from A. next D. Instructions] Gunther

Russell Gunther

Hey, good afternoon, guys.

Dominic Canuso

Russell. Hey,

Rodger Levenson

Russell. Hi,

Russell Gunther

quick next line comments of guide Just extended for around on follow PPNR up I the quarter. the in conversation. the believe

sustainability franchise be million is Or a rate Get of in continued follow been on where ability investment least XX% you zero up of look quarter. that it head core shy environment. because commit mentioned as and as You holding basis your then, of you to Can at kind likely the in that quarters. on a to mentioned place the into just in last And expense is your improve we $XX to efficiency that of couple to running fourth a upon thoughts the a about XXXX? talk it where is? good Dominic,

Rodger Levenson

Sure.

have fee non-interest in to expense, we from of expect continued third the base part in the delivery step-down $XX the So the core We quarter supporting to growth increase do primarily the PPNR first ex-PPP. But and low-XXs for few is million and and on our that fourth been cost in that quarters. increase transformation last close investment that’s that the businesses. quarter in

percentage outlook, make as bank step as it we to there’s investments. in opportunities with plan from see and Delaware. state discussion those region the the continue mentioned for the those we on Rodger ahead in in And year. of play see the with there So talking opportunity more up Greater business a we regard and that been a most environment. importantly, And next headquartered about we’ll our continue years largest and economic us, the locally XXXX, our earlier to mentioned, last cases few be once to Clearly, Philadelphia we’ve as banking of the complete we the But regard then, a points to we’ll fourth quarter. provide for in may couple to environment comprehensive lot

Russell Gunther

you improve commit if XX% been at kind made, upon least to the holding I do that guess, with ratio, the ability appreciate thoughts. think of again, efficiency I the near-term to it? harvest not you investment the Got on that’s it. top-line, can, And already just franchise

Dominic Canuso

we so, do we’ve before, typically ratio. on said as I efficiency focus Yeah, think

the when We’re base, positive pleased forward quarter. with the do in leverage. look results operating for look And we for we third investment our

However, economy will shape when near-term particularly is or our demonstrated when ability markets. have the would that to we see in be may could also there’s affect of But revenue I in generating that that. periodic investments disruption just opportunities, what we our it say lag. somewhat have accelerate all the And investments

So we are evaluating opportunities. those all

as So track-record discipline historical near-term a to investments. commit when we bit that to it’s except we those you I I our of leverage, growth think positive mentioned, but do that expectation, kind manage management early our to opportunity accelerating could see and operating typically see in for expense

Russell Gunther

the on the Yeah. gears okay. a Understood, to little one, growth the organic for you switching core then, I momentum outlook, portfolio. positive could if guess, just we’re to on And show follow-up. of the able bit Thanks expect just growth the remainder address positive headwind beyond or a there’s where that, C&I going you’d if sustain portfolio, to and opportunity pick if of near-term. forward; in up core to back then the to remain that’s

Dominic Canuso

you Steve, to Sure. want that? take do

Steve Clark

weekly Dominic. kind regarding growth neighborhood still we a opportunity of little residential in land land development, almost multifamily, opportunity, construction, Yeah, bit of Sure, CRE, see commercial retail. residential and and

of not through headwind, The that I the side all going say, and on borrowers. a investment by at C&I our pretty, COVID still it a lot call Looking is, lens. would

PPP which not been transferring loans, banks. precluding from it’s opportunity, instances forgiven, any have kind of seeing But yet really we market So companies where are opportunities. share are

still C&I be very, of short very muted will think I term the in growth. in So terms

Russell Gunther

taking guys. for my Thanks great. Okay, questions,

Rodger Levenson

Thank you, Russell.

Operator

in conference With further you. queue, back Rodger the Thank I’d no turn like Levenson. over the to questions to

Rodger Levenson

Thank you again, everybody.

seeing forward investor look couple coming and will the in We of a be soon. of conferences many you weeks to attending

to any thank WSFS. there’s if always, us weekend. free a directly. of your contact please And any nice for Have in feel interest again As questions follow-up you

Operator

gentlemen, presentation. this conclude does and today’s Ladies

have wonderful may You a day. and disconnect now

WSFS Financial (WSFS) 23 Oct 202020 Q3 Earnings call transcript