WSFS Financial (WSFS) 26 Jan 242023 Q4 Earnings call transcript

Hello, and welcome to the WSFS Financial Corporation Fourth Quarter Earnings Call. [Operator Instructions] I'd now like to turn the call over to your host for today, Mr. Art Bacci, Interim Chief Financial Officer. Sir, you may begin.

Thank you. you joining thank XXXX fourth and call. earnings afternoon, again our for quarter Good

and supplement, in earnings refer release website. earnings Our release today's section our can Relations to which call, be Investor found the of company on will we

call Officer. on Levenson, Rodger Clark, this CEO; Shari Kruzinski, Chairman, Officer; Commercial Banking With and and Chief Steve are me President Chief Consumer Banking

statement. quarter, out over turn Rodger for harbor the the our on read to call to I I like Before remarks would safe his

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

Rodger. I the turn call over will to now

XXXX successful assets tangible earnings core on year capped per $X.XX, full the Thank we core results the else joining of you, equity common on with our call the XX.XX% of core well X.XX%. business to for Art, strength of very today. These return a and demonstrate fourth us model. and of performed continue on return WSFS as share everyone in quarter and diversity a

year-end linked X% and across growth full of of average levels. quarter annualized. XXXX exceeded deposit a respectively, for driven X% deposit at of XX%, XX% noninterest and and net of accounts. quarter Trust, beta Wealth loan for Capital mix Connect in loan-to-deposit interest X% with year XX%. X% businesses. core linked Commercial and and X.XX% revenue year strong, our was Trust, Markets margin Consumer Wealth interest-bearing or with Full growth demand customer included fee customer deposit with and occurred Growth and of businesses. XX% by remained metrics growth ratio quarter. quarter Core deposits the growth annualized. Growth of X%, of Loan these quarter Cash of linked X% Deposit or Each Highlights the

million XX.X% and and Full of adjustments revenue XX% included XX.X% onetime year employee The fee incentive the quarter, favorable $X which quarter. of core accruals. fourth was estimated core ratio benefit growth for revenue several in for core efficiency fee the approximately of ratio

ratio Excluding the XX.X%. these efficiency adjustments, core would have been

Asset quality ticked stable. capital strong with X and well-capitalized ratios above flat remains NPA loans ACL QX X.XX% up problem Net and and The balance sheet to points. significantly essentially of levels. basis all remains were coverage charge-offs

by was to In XXXX We summary, position. strong optimization continued market continuing the on competitive to and to of momentum facilitated growth entered strategic with look our forward our unique and XXXX plan. investments franchise our execute highly XXXX

Q&A. facilitate back to turn XXXX now to Art on commentary outlook it our will for I and

you, will I Rodger. our XXXX. cover Thank now for outlook

year we forward full expect XXXX, to core assets Looking X.XX%. on around a of return

our outlook assumption approach periods, Our outlook this different from interest curve. XXXX, interest rate forward our we a in the no is whereby assumes prior to tied cuts rate

rate has curve demonstrates changes. indicator a forward been interest the analysis Our poor of actual

Additionally, expectations have officials Central Reserve market and recent from temper rates. combined Bank the European data, Federal along lower to interest comments economic for with

XXXX. margin cuts supplement. provided sensitivity on basis basis XX rate our assuming in X have Slide by is rate our outlook, all XX XXXX. Further The the the totaling XX potentially points We second in reduces of of points, interest also our half on interest impact information assessed approximately interest net

achieve goal our to WSFS's of multiple quartile diverse performance. top business model previously provides communicated strategies with management

market opportunistically flows cash in us relationship-based from favorable securities our our a loans ratio portfolio to Our enable consistent loan-to-deposit fund and XX% markets. of position,

our Our mix, multiple interest sources to funding of margin. net core deposits provide top-tier us costs deposit with contributing further favorable and

X/X our Fee almost total revenue. income of contributes

model increasingly Our because be with fee-based growth integrated relationships businesses with our and to nonbank our continue have overall potential M&A all and consolidation industry customers, commercial activity. consumer business joint of significant opportunities and

and mortgage that better our enhance rates I capital equity portfolio credit will market are driven than tangible trends. and investment performance, the book by continued gradual points potentially securitization XX of and also of as point be and fixed as of value, our normalization expected average as transactions demonstrated between higher positions fourth loans in NewLane results market quarter. charge-offs Upstart and increased out basis interest to and financial Net asset for income primarily XX valuations during the well declining year,

Overall, X.XX% our is total ratio portfolio stable quarter, our this of credit and metrics and coverage ACL were loans leases.

at stands leases. held-to-maturity loans of ACL is and the and on acquisition Excluding our marks, on information supplement. X.XX% the included Slide credit XX securities Further the ACL ratio of ratio including

Finally, capitalize our continue and the enabled market to to strong on to developments absorb in unfavorable opportunities invest take steps to earnings shareholder capital further position in us enhance to economy and returns. our franchise,

and Thank for now you, open will the we questions. line

KBW. from comes Michael Instructions] [Operator of Your line of question the first Perito

color deck, around great so Obviously, extra rates margin the a I in appreciate and that. lot of

around guardrails it. put some maybe to Just

the So bps Slide XX I the XX looking NII just here, guess, at $X.X impact. first, cut, million

so sheet like of bps, the there that? with you incorporating moves I down would agree to kind -- mean, to I correct? pure that math, kind bps, every by just kind X balance cut, Would if check to all guess, and NIM would just seem range, off-balance kind and anything that equal is of XXX is So strategy. bps change? XXX I you directionally Or forth. that it want like of else Or thinking here, sanity XXX bps guys benefit the sheet bps of Is so all of XXX generally we're static hedging

number. And an Mike, reiterate, directionally I correct. think that's I'll annualized that's just

get year, the of impact if in half the full to second are clearly reduced So we feel wouldn't going that XXXX. in rates

Correct. Yes.

hedges, mean, that floors, as it range -- that that neutralize to that does the is you Or for baked -- million would potentially additional -- approved And X is Okay. additional say? the has somewhat? would well, that of that into the $XXX I that kind XXX

No, that's would at we've baked X%. into is rates. that because be to million significantly in -- we have lower $XXX any hedges put a done would about in result Today, the would

so clearly, have hedges So so be a in material the for the to -- rate kick in. for -- drop there to

then the couple Connect more the With driving like switching maybe But Cash pretty just where it. Any Wealth of that great. give draw pure Got opportunity about then fee growth few strong can comments -- a attention. comment some Obviously, you in a it I'd deck, have obviously, layer my substantial growth deeper And in to a assumption? side. opportunities double-digit robust. on over a guys very love side. the expectations quarter. That's for from you and A specifics on And consolidation. which is 'XX, those fees about and coming are them.

Sure.

I of situation, quarter the we've then the is players confidence this have -- and Cash from to inflows second combination And some mean, the quarter and that one first one the high the continued fourth to degree us giving exited double-digit through which in things largest Cash side, Connect third continue the Art, in quarter been business late of a that XXXX So we our the up over to again, Wealth pipelines. able pick market. is that Connect see And are growth quarter, fourth the into seeing on And strong happened of in is pipeline our will businesses Mike. XXXX of have very of the XXXX. clientele,

referral well. our the banking business pipeline, $XXX including and and Trust as deposits opportunity we're potential we're business activity us to our nice a businesses really grow business to Wealth Going increasingly, Bank got commercial is the integrated normal almost consumer at, million being both AUM looking Management Institutional into great of seeing from and a then that giving with XXXX, continue our

That's helpful.

It guys the communicated. Just -- like the seems I stable think, in ones, unsecured have remain consumer consumer X quick and range, I were charge-offs you more could. pretty if

for thoughts more get We'll stable. so the uptick unsecured it Like, we charge-offs got have next points book, an in been Just been unsecured updated think the who's credit week. saw around any a right? few consumer relates have environment, others a prime delinquencies, particularly as any data broader about But more commentary and there, Discover portfolio data points as example, 'XX. mixed, your to

think Yes, if -- you again. Art I I is this mean,

in was tied that out higher cohorts area charge-offs we have The its thing. and for same would point decisions. portfolio. also the and which experience, at first, charge-off to concentration that so is materially evaluate lead some on benign that the where Upstart we're of the of start system, has we've hit second other quarter, to on really strip working could booked just the the you this seen way decline. will unsecured. If Upstart and basically we that and seen some been that is not We've that limits of and hope believe really to the continue we levels unsecured to making adding stable been the one -- Upstart, the we we've our replacing We've us runoff earlier to time. charge-offs this through And

to that guys guide is would thinking are I time. very lastly, we just in just consistent your just board that approach or commentary the are model and one out any as just know the think the that year. then And you about incremental all it color thing of happening updated And moving it. was the helpful Got forward? pretty conversations buybacks. The be how around obviously, your helpful is absent about are kind about just But buyback laying

or buybacks plan Michael, only there been in Rodger. philosophy. Nothing's with to use we our And supplement changed practice dividend. put return it's capital outlook that the forward-looking routine our for from the our it's a historic to

upon look periodically model our continue is as dependent because We the to as price of and forward XX% levels. the of as know, well potentially assessment But a have you a IRR. targets economy where share sheet at that the that's higher we evaluate least balance buyback

continue to evaluate philosophy. we'll play So our factors different ongoing those from out, but that as nothing

Your with the Strickland Montgomery of Feddie next comes line from Janney question Scott.

what within upside that Just little a there some think fact going to given of to some grow be about level Just on a just clearly trying rate the sensitivity analysts margin more second. and detail a sheet that, you're assume of there for through start if cuts? static loans to assumes level in wanted balance Could of kind do guide? analysis happens as with the back your the we

has levers certainly to loan-to-deposit of have upside. The in a rates could out that has it today ratios interest opportunities, lot long start a of sensitivity Sure, better be pull, we have liquidity up. multiple there's benefited Feddie. put we even kind of to have our were when top position of in lot is consistent through concerns. I do and cycles, we a of some us now, But over quintile of been think And gone rates because banks consistently betas than our asset decline, we a there The if net One, time. out margin. a view there period is areas. to high some exist rate couple our But right some still have anticipate. with

those market rates position so the maybe than will keeping have we and -- would, ability our after we And and we basically to go they're defend competitors. higher

deposit I type a our think in of -- a lot debt, to that and environment nice increase asset-backed noninterest-bearing is deposit. of kick declining tends terms very mortgage of Secondly, could corporate Trust and trigger growth, other which give refinancing securitizations Institutional business further the well that be and of would rate

those levers couple really XXXX are could benefit So to that our progresses. as a just of work

noninterest-bearing of guess, think into a lines, today. makes lot those remind XXs? your I you same average assumptions end Understood. the over And what next the that glide a the deposits up Does down high over [indiscernible] Or I you of about deposits where can That us along on XX% DDAs time? quarters? of of could level feel like are of sense. couple

Yes.

the I average, deposits. the think have the probably when target about we've and of that's pretty is quarter-to-quarter It got of Trust been at might reflective average, because XX% on of been volatility kind consistent. from -- XX% us. level. some And But you has normalization it's of look it the kind for pre-pandemic

feel a pretty that activity market area. we good comfortable picks that actually. if And could again, So decline XX% securitization up, rates increase is and

So...

can in the that expenses technology year? in I expenses. some just guide give could initiatives it. up detail hiring continued mentions on on those me more anything or of there either Are particular one question you those the or And lines, driving along initiatives franchise. Got any for And later expenses? in know what's then any versus last move investment your any earlier

Rodger. I anything. the in One thing invest is to this don't Feddie, there's continuing big of think franchise. we're note,

hiring. Most there hire like well potential that that XXXX. to investment So tied additive us years. investments that has yes, the hire. we technology have And of that plans we to several revenue. if have of small continue, see it's to RIA have already could folks a opportunity we we been we And to process think as some And in fair that been as number more the for going made looking something businesses on has we're for which

is invest others share to looking time the invest NIE that's really business. And this retrench. and combination think broad-based of grow across reflected all to move to a categories. we're market We as -- it's those of a So things, the and

Understood.

So rather like growth that? of more initiative or support line than new of or anything product long-term particular any

accurate said, an assessment. That's

with Your of Stephens. from Russell next question the comes line Gunther

the margin. appreciate Rodger, discussion cuts. particularly the to the sensitizing -- all the and I Maybe X appreciate NIM. Art, I around

guys that X made, into comments but do in curious assume sounds It deposit sensitivity. you So being baked that I'm there, way you what's scenario, down? conservative does from like beta on broader cut the what your

low. rates Again, kind think we because would down, obviously, of we opportunities. beta if have fairly environment, on do our beta. start -- initially be Well, the competitive go we would We recalibrate of the early to

products index. market are money product, have to that We tied an

a declines, the public obviously, on index side, could consumer down. some market. if be will continues in exception there done money commercial money So competition of our repriced go with some amount down. rates that to pricing We've and the be primarily fair the But

that's a we going decline. to so believe probably be And slower

lower protect assumption our Now But market if continue were that to will to some our our on rates. we to us change, premium require competitive could the that's provide clearly, to deposits franchise. as

appreciate just follow-up, deposits that. of the I Okay. index amount And if could, a us you you as then have. remind

indexed of that Russell? you said, Is amount deposits? what The

you If it. have

to have may get we Yes, you. to back

No problem.

In the money market ]. [ account

to back on get Russell, that. us Let you,

well. I Any 'XX to X guide appreciate And stable to that. risk to No gain The last sounds the X it fee again is opportunity. just just out? Cash one for you playing double-digit a mean Connect really through me, the if that the But problem. do that I market in thinking rates. outlook, then share like target sensitize were guys. How see with the cut cuts? scenario as you

have X% potentially upside in cuts and a value market, and building think the AUM rate the which we're certainly fixed would would growth. of X our like increase I potentially an market-based increase AUM income AUM, in

markets So up. were that increase could potentially the if to go

Trust benefit enhance As I lead decreases our refinancings, the previously, would debt Institutional which and could securitization corporate further business. rate to some mentioned market

line Your with Frank Sandler. Piper of next question Schiraldi comes from the

Just are see here But there the has starting think double-digit enough could levels and to given about in is Cash in growth you when a the -- fourth of I for growth quarter current in XXXX. from -- low-hanging you point. potentially sense, growth guess, How the of Cash about it I on where levels, off business off a fruit into growth pickup Connect year, obviously, I XQ just get is got here, mean, double-digit XQ Connect? off Trying thinking good pretty business. year-over-year jumping the

quarter. in low potential that's from competitor, providers I some for that moving ATM double-digit the there's from of growth think given are the the other pipeline the that fourth from volume services

pick other pricing could Rodger. some Frank, the as I -- is, a business With comes also it's this with Cash for which Frank, Connect the we of think, some tailwind consolidation be thing some power us, up well. as

know And Okay. the bottom see line Yes, ROA? accretive I boost. in again returns could sustainable. ROA pretty pickup that about to to was RNA had if that's you could looked good going further ROA ask be a like that where don't I business -- even The XXXX, in business. if

Yes.

accretive we've levels. and combined and this accretive to of be business, And product Connect continue of As to -- maturation the have for overall of think and power, you you corporate know, the to we're significant to that with near back Cash time, every to and We traditional overall in term. investment opportunity opportunity scale bailment the through getting went in us ROA. ROA hit some it, it in the some we're pricing kind over we been there's those period some a has on historically, getting and some technology

Yes, Frank, XXX%. first increased year. and in quarter of fourth we pretty first between has the this ROA the ROA bottoming And the a much saw the quarter,

So with would added that expect additional volume up. to the move of first ROA next we to continue year, half being in

then a AUM growth And obviously, net noted, the over a lot couple that was customer you seen standpoint from linked AUM have Great. you've Okay. flows in wondering just of Art, last if the But just quarters? market-driven. on quarter, of the

we Yes, change so from lot still big a of the was integrating in years first Mawr outflow a fourth was the adviser because saw we're quarter, there a little quarters, and prior and much client we Trust, breakeven X some Bryn pretty were through improvement which more bit -- departures. the

little a So we more saw departure. bit fourth quarter

inflation they're instead And some in of maintain given higher and buying rate cash. seeing assets higher all whereby and is of customers just using more spend, just we're houses and lifestyle tied order to rates, to paying that financing where the

-- was if just missed but NPA low off then obviously primarily? in uptick base. And is sorry pretty what lastly, drove it, what the Okay. I that But a

the declared leased operator specific a multifamily this speaking. Clark really co-living who was Steve was bankruptcy. particular the to is multifamily loans, sector, this in X That one Frank, master

working more that multifamily. traditional sponsor to is So property reposition of that into a

frankly, was from other in Elder just The not health legacy our the book, care recover facility care, COVID. did

X in one one in multifamily, loans, were legacy they the So specific Eldercare.

Okay. still due those current? And NPAs? these then are additions days are past and of either Or XX

NPAs. They're both

of comes Your next D.A. Manuel the Davidson. from question Navas line with

would include fee fee there, the any acquisitions? -- additive, interest any correct? guidance any I have acquisitions would be Does some -- so side would on be And you think all

Any Yes, Manuel, additive. this would is be M&A Art.

baked not anything M&A. our have guidance for We in into

appetite on And what's your fee side? the

did we're we XXXX, definitive businesses, just couple We other across in now. it, we're look the But at. looking namely we things our looking continue to at of opportunities, have at transaction and fee a do right and nothing

of Okay. bit And Do just a view growth on activity how commercial. talk about can across And there little have was elevated loan you the year? paydown you in that any continues?

Yes, Clark Manuel, again. Steve

revolved C&I really X year-end and out C&I. segment line million third activity sheet. year-over-year, residential decision reduction last preparation both $XX with for attainable, that balances significant in hold of still strategic resulted year, Spring in their was rest all that clearing bank some reductions XXXX our X%. their certainly space, mortgage, Focus in at the assets So for we segments, in sponsors as and across loans that unplanned quarter digit our mid-single our the believe small all and we balance across again, credit The in more of grew and is with CRE, the a We year-end. companies almost totaled around segments, X C&I, EQ the sold commercial transactions refinanced, about made bank. consumer fourth payoffs partnership business on in C&I, of hospitality the is to line in Elevated

Your with Janney Scott. follow-up Feddie next Montgomery question is Strickland from a

quick Just, I had one sorry, follow-up.

to assets about and the ask of earning the sheet wanted balance growth Just to loans. relative

down we math the to quarters. right, of low grow it's of continuing relatively the I little last the if overall to a I does to some think is start even it's growth? relatively bit should bit Or a stay see sheet been mean, been flat? that balance couple my loan -- with

loan fund Remember, probably cash flow investment would remain which a about Art. have portfolio. sheet of the the would is mortgage-backed this flat, the in that year about roughly generally portfolio, Feddie, growth securities X.X% coming we flat. I balance $XXX a would million off say and

So would grow order balance in the significantly for really grow to have loans to to start sheet. the us

And to in the to questions back with conference further Bacci. no I Art turn over queue, would like

call Thank the you for today. joining

meetings or If be you free Also, and and myself. throughout you. we meeting follow-up please weekend. have quarter, to feel a any forward with the will Rodger reach out many Andrew Have to look attending specific I and to questions, of conferences investor nice

you This concludes We conference today's for call. thank joining.

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