WSFS Financial Corporation (WSFS)

Q2 2010 Earnings Call Transcript

July 27, 2010 10:00 am ET

Executives

Stephen Fowle – CFO

Mark Turner – President and CEO

Rodger Levenson – EVP and Director of Commercial Banking

Richard Wright – EVP and Director of Retail Banking and Marketing

Analysts

Andy Stapp – B Riley and Company

Matt Schultheis – Boenning and Scattergood

Steve Moss – Janney Montgomery Scott

Austin Rooke [ph] – North Oak Capital [ph]

Presentation

Operator

Good day, ladies and gentlemen, and welcome to WSFS Financial Corporation second quarter 2010 earnings release conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions following at that time. (Operator instructions) As a reminder, this conference is being recorded.

Now, your hosts for today’s conference are Mark Turner, President and Chief Executive Officer; Stephen Fowle, EVP and Chief Financial Officer; Rodger Levenson, EVP and Director of Commercial Banking; Richard Wright, EVP and Director of Marketing and Retail Banking.

Now, I would like to turn the call over to your host, Stephen Fowle. Please begin sir.

Stephen Fowle

Thank you, Tai Ron, and thank you to everyone participating on this call. Before turning this over to Mark, I would like to read our Safe Harbor statement.

The following discussions may contain statements, which are not historical facts and are forward-looking statements as the 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 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 CPPT, including additional conditions that may be imposed in the future on participating companies; 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.

The Corporation does not undertake to update any forward-looking statements whether written or oral that maybe made from time to time by or on behalf of the Corporation. With that I will turn it over to Mark Turner for the opening comments.

Mark Turner

Thank you Steve. Good morning everyone, and thank you for your time. I have about ten minutes of comments before opening the call to your questions.

At WSFS this quarter, we reported net income of $3.3 million and earnings per share of $0.36. After three quarters in a row of essentially breakeven results, this quarter we are pleased to show a breakout to the upside. This was driven by diligent work over many months as demonstrated in the continued stabilization of our overall asset quality metrics allowing positive revenue trends, and our core efficiency initiatives to finally overtake moderating credit costs.

Net revenues at $43.1 million in the quarter were up $2.7 million or 7%. This reflected continued growth in our net interest income, which was up $1.4 million or a strong 5% in the quarter, driven by 9 basis points increase in the margin to 3.66%. Also, fee income was up $1.3 million or 12% from the first quarter, driven by growth in accounts and seasonal activity. As a result of this quarter’s earnings and improvement in securities valuations, capital grew nicely to a 6.6% tangible common equity ratio, up 27 basis points, and tangible book value per share was up $1.15 to $35.02 at June 30.

Importantly, asset quality metrics taken as a whole showed continued stabilization. Nonperforming assets were up less than $4 million or under 5% to $86 million at June 30 or 2.26% of assets. Delinquencies at $71 million or 2.82% of loans were essentially flat in the first quarter, and a component of that early stage delinquencies declined significantly from $42 million to $25 million, or an improvement from 1.65% to only 0.98% of loans at June 30.

Net charge-offs declined significantly to only $5.4 million or 86 basis points annualized from $7.8 million or 124 basis points in the first quarter. This allowed the loan loss provision of $10.6 million to decline $0.8 million or modestly from the first quarter and the provision showed its third consecutive quarterly decline.

In summary, we showed continued stabilization in many credit quality metrics and positive earnings in the quarter despite the fact that we continue to provide well in excess of charge-offs reflecting prudent concerns about an uncertain economy, and as a result our allowance for loan losses steadily increased to a healthy 2.48% of total loans from 1.63% this time last year.

As mentioned in the past but worth repeating, we ended this recession with less exposure than many others problem areas in loans, investments and other assets, but particularly in construction loans. For over a year now, we have been aggressively adding resources to credit administration, loan review, work out and asset disposition functions demonstrating a capacity over the last few quarters now, slow problem asset inflows, and/or increased problem asset resolutions.

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