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WSFS Financial Corporation (WSFS)

Q4 2010 Earnings Conference Call

February 4, 2011 1:00 PM ET


Steve Fowle – EVP and CFO

Mark Turner – President and CEO

Rodger Levenson – Director, Commercial Banking

Rick Wright – Director, Marketing, Retail Banking


Michael Sarcone – Sandler O’Neill

Andy Stapp – B. Riley & Company

Matt Schultheis – Boenning & Scattergood

Steve Moss – Janney Montgomery Scott

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Zack Bowen – CL King

Austin Reeve – North Oak Capital

Andy Stapp – B. Riley & Co

Nancy Frohna – 1492 Capital Management



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Good day, ladies and gentlemen and welcome to the WSFS Financial Corporation’s fourth quarter 2010 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) And as a reminder, this conference call is being recorded.

I would now like to introduce your host for today’s conference Steve Fowle, Executive Vice President and Chief Financial Officer. You may begin.

Steve Fowle

Thank you Jerome (ph) and thank you to everyone participating on the call. I would like to introduce the people here with me they will be participating on the call. Mark Turner, President and CEO of WSFS; Rodger Levenson, Director of Commercial Banking; Rick Wright, Director of Marketing and Retail Banking and myself.

Before Mark begins with his opening remarks, I’d like to read our Safe Harbor statement. The following discussion may contain statements which are not historical facts and are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements, which are based on various assumptions, some of which may be beyond the company’s control, are subject to risks and uncertainties 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 government laws and regulations affecting financial institutions, including 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; costs and expense that may be incurred in benefits achieved from acquisitions and the cost associated with resolving any problem loans in other risks and uncertainties discussed in documents filed by WSFS Financial Corporation with the Securities and Exchange Commission from time to time. The Corporation does not undertake to update any forward-looking statements whether written or oral that may be made from time to time by, or on behalf of the corporation. With that, I will turn the discussion over to Mark Turner, WSFS President and Chief Executive Officer.

Mark Turner

Thank you, Steve. And thanks to all for your time and attention. In 2010, we earned $14.1 million or $1.46 a share including 2.1 million or $0.16 in the fourth quarter. The fourth quarter’s results included the impact of the CB&T acquisition integration. The rest of the earnings release was full in detail and hopefully was also clear to you. Therefore, I’d like to use my 10 minutes of introductory comments on management’s overview of 2010 and more importantly, how that relates to prospects for 2011 and after.

2010 was an important year for WSFS. In 2010, we rebounded from the depreciationed (ph) profitability. We expect that rebounding to continue and to strengthen even if the path maybe uneven in the short-term due to the choppy economy and our longer-term investments.

In 2010 we significantly reduced risk in our balance sheet. Non-performing assets were contained within a narrow range and are still down from their peak in late 2009. And more importantly for the future, delinquencies and total problem loans, both early indicators of future credit quality and costs should mark improvements from earlier in the cycle. Problem loans for example, are down 20% from their peak. And residential construction loans are now less than 3% of total loans and have been well scrutinized in reserve


The loan loss provision was also down modestly from 48 million in 2009 to 42 million in 2010, consistent with our previous guidance and is showing improvement in each of the last five quarters.

Our previous guidance on the 2010 provision, which proved accurate, was based on thorough re-underwriting and stress testing of our portfolios in late 2009 and then continual reevaluation. Through 2010 we increased that vigilance in understanding our portfolio and taking appropriate action.

Now, with apparently better economic background, residential construction loans addressed in at a low level and early stage quality indicators improving, we feel comfortable saying but with all necessary caveats, a credit quality will likely, meaningfully improve in 2011. As a result, we are projecting about $30 million in provision in 2011 plus or minus a couple of million. That number also assumes significant loan growth as well, discussed more latter.

We are also hopeful that if the economy improves modestly, the provision will be better than that. As a parenthetical, we would point out that while provision cost maybe going down, as an industry cost resolved problem situations in people, professional fees, foreclosure costs et cetera will remain elevated through 2011.

In 2010, our investment portfolio also proved to be a very high quality, which we were confident in from our frequent independent stress tests as discussed in our previous presentations. As a result, in 2010, we were able to earn good rates of return on the portfolio and also exit through run-off and sale almost all of our downgraded securities and any net realized gain for the year.

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