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WSFS Financial Corporation (WSFS)

Q1 2012 Earnings Call

April 27, 2012, 1:00 p.m. ET


Stephen A. Fowle – EVP and CFO

Mark A. Turner – President and CEO

Rodger Levenson – EVP and Director of Commercial Banking


David Peppard – Janney Capital Markets

Michael Sarcone – Sandler O'Neill



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I will now turn the call over to your host, Mr. Steve Fowle, Chief Financial Officer. You may begin.

Steve Fowle

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» WSFS Financial CEO Discusses Q1 2011 Results - Earnings Call Transcript

Thank you Mimi, and thanks to all of you for taking time to participate on this call. With me at WSFS are Mark Turner, President and CEO, Roger Levenson, Executive Vice President and Director of Commercial Banking, Paul Geraghty, Executive Vice President and Chief Wealth Officer, and myself. Before Mark begins with his opening remarks, I would like to read our Safe Harbor statement.

This call will contain 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 market 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 the statute and potential expenses associated therewith, and the cost 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 statements speak only as 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 read, I will turn the call over to Mark Turner for his opening comments.

Mark Turner

Thanks, Steve, and thanks again everyone for your time and attention. We were pleased to report earnings of $.74 per share in the quarter. Adjusting for items like securities gains and small non-routine costs, our more normalized or core earnings were $.61 per share. Calculating quarter earnings similarly in prior periods, this was a 53% improvement over the same quarter last year, and a 69% improvement annualized over the link quarter.

Generally speaking, the bottom line improvement has been driven by both growth in revenues and/or flat to decreased non-provision expenses, both expected outcomes of the shift in our strategic phase. From the significant investment of the last few years during a period of heavy local market disruption, to the current strategic phase of optimizing our investments, we are growing at above peer rates, and that growth is coming from maturing recent franchise investments, with fewer new investments coming online to impact expenses. As a result, operating leverage and efficiency are kicking in, leading to a nice improvement in bottom line results. In addition, statistical and anecdotal data indicates the local economy is in slow recovery, and we are seeing a similar trend line in the decline in total credit costs, which is also helping performance. However, we are still vigilant. The economy and credit quality are still not where they should be, so we expect a bumpy road and can still see occasional surprises. With that big picture background, let me summarize some of the quarter’s highlights and add some color on the business and the future, as best as we can tell at this time.

Revenues were up 12% from this time last year, driven by both increased net income on volume and growth in fee income, which represents about one-third of total revenues. Even excluding securities gains in each period, revenues were up over 8%, reflecting fundamental growth in all of our businesses, including traditional banking, wealth management and Cash Connect’s ATM services. Revenues were relatively flat over the link quarter, reflecting some margin percentage pressure, as the net interest margin was down four basis points and some expected first quarter seasonality in our fee-based businesses, especially Cash Connect and trust services. We expect very modest margin pressure to continue, and some of it we are doing to ourselves.

While over the last year, the loan-to-deposit spread has been stable to improving, to manage risk we have been selling higher-yielding securities and therefore quicker pre-paying securities, before they pay off at par. Hence, the outside securities gains we have taken over the past several quarters, which were not core earnings per se, are still cash earnings and capital in the bank.

Deposits were up 6%, annualized over the fourth quarter, and up 13% when factoring out a temporary trust deposit we had over year-end. Moreover, core deposits grew 9% link quarter, and grew 20% when factoring out the same temporary account. Our goals for the year are still mid- to high single digit deposit growth, since we believe as the economy improves some money will move out of savings to spending and risk assets.

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