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WSFS Financial Corporation (



Q3 2011 Earnings Conference Call

October 28, 2011 1:00 PM ET


Steve Fowle – Executive Vice President and Chief Financial Officer

Mark Turner – President and Chief Executive Officer

Rodger Levenson – Executive Vice President and Director of Commercial Banking

Rick Wright – Executive Vice President and Director of Retail Banking


Michael Sarcone – Sandler O'Neill

Andy Stapp – B. Riley

Matthew Clark – KBW

Ronald Smith – WSFS


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Good day, ladies and gentlemen, and welcome to the WSFS Financial Corporation Third Quarter 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 be given at that time. (Operator instructions) As a reminder, today's conference call is being recorded.

I would now like to introduce the speakers, Mark Turner, President and CEO; Steve Fowle, Chief Financial Officer; Rodger Levenson, Director of Commercial Banking; and Rick Wright, Director of Marketing and Retail Banking.

I would now like to introduce your host for today's conference, Mr. Steve Fowle, Chief Financial Officer. Sir, you may begin.

Steve Fowle

Thank you, Davon [ph], and thanks to all of you for taking the time to participate in this call. Before Mark begins his comments, I would like to read our Safe Harbor statement.

This report contains estimates, predictions, opinions, projections and other statements that may be interpreted as forward-looking statements as that phrase is defined in the Private Securities Litigation Reform Act of 1995. Such statements include, without limitation, references to our financial goals, management's plans and objectives for future operations, financial and business trends, business prospects, and our outlook or expectations for earnings, revenues, expenses, capital levels, liquidity levels, asset quality or other future financial or business performance, strategies or expectations.

Such forward-looking statements are based on various assumptions, some of which may be beyond the Company's control, and are subject to risks and uncertainties, which change over time, and other factors which could cause actual results to differ materially from those currently anticipated.

Such risks and uncertainties include, but are not limited to, those related to the economic environment, particularly in the market areas in which the Company operates; the volatility of the financial and securities markets, including changes with respect to the market value of our financial assets; changes in market interest rates, changes in government regulation affecting financial institutions, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules being issued in accordance with this statute and potential expenses associated therewith; changes resulting from our participation in the CPP, including additional conditions that may be imposed in the future on participating companies; and the costs associated with resolving any problem loans and other risks and uncertainties, discussed in documents filed by WSFS Financial Corporation with the Securities and Exchange Commission from time to time.

Forward-looking statements speak only as of the date they are made, and the Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

With that said, I will turn the call over to Mark Turner for his opening comments.

Mark Turner

Thanks, Steve. And thank you all for your time and attention. We are pleased to report net income of $6.8 million or $0.70 of earnings per share. Excluding notable items mentioned in the release, which were a net positive in each of the three quarters presented, results in the third quarter were $0.59 earnings per share, a marked improvement over similarly adjusted results of $0.41 per share last quarter and $0.40 per share in the same quarter last year.

Driving the improvement in our results during the quarter and highlights for the quarter were both strong revenue growth which was up 16% annualized over the second quarter of 2011 and 10% over the third quarter of 2010, and many stable to modestly improved credit metrics leading to improved total credit costs.

Our revenue growth was driven by both improvements in net interest margin, which increased 2 basis points and $1 million or 13% annualized and improvements in fee income, which increased $900,000 or 22% annualized over the second quarter of 2011.

Our ability to improve margin in a difficult environment was the result of strong C&I loan growth at a 20% annualized improvement over last quarter, coming primarily from market share gains, fundamental deposit growth despite the expected outflow on two accounts, and prudent management of funding costs.

While funding costs will be increasingly challenging – reducing funding costs will be increasingly challenging, given our trends we expect that we will be able to hold our net interest margin percentage at about the same level for the balance of the year, plus or minus a few basis points.

Fee income was also up 20% annualized over last quarter after excluding notable items like securities gains in each quarter and was driven by franchise growth in many areas of the Bank.

While revenue growth was certainly a highlight, the continued improvement in many credit metrics and credit costs also contributed to bottom line results. Non-accrual loans declined over $10 million or 12%, total non-performing assets declined $4 million or 4%, and total delinquencies improved slightly.

More qualitatively, loans disposed of during the quarter were generally adequately reserved for and loan migration was in loans that were also generally well secured. As a result, our provision declined $2 million from last quarter to $6.6 million this quarter, and total credit costs declined a similar amount to $8.4 million in the third quarter of 2011.

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