WSFS Financial Corporation

Hello and thank you for standing by. My name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the WSFS Financial Corporation third quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star then the number one on your telephone keypad. To withdraw your question, press star 1 again. I'd now like to turn the conference over to your host for today, Mr. Art Bacci, Chief Wealth Officer, Interim Chief Financial Officer. Sir, you may begin.

Thank you, Regina. Good afternoon, and thank you again for joining our third quarter 2023 earnings call. Our earnings release and earnings release supplement, which we will refer to on today's call, can be found in the investor relations section of our company website. With me on this call are Roger Levinson, Chairman, President and CEO, and Steve Clark, Chief Commercial Banking Officer. Before I turn over the call to Roger for his remarks on the quarter, I would like to read our Safe Harbor Statement. Our discussion today will include information about our management's view of our future operations, plans, and prospects that constitute forward-looking statements. Actual results may differ materially from historical results or those indicated by these forward-looking statements due to risk and uncertainties, including but not limited to the risk factors included in our annual report on Form 10-K and our most recent quarterly reports on Form 10-Q, as well as other documents we may periodically file with the Securities and Exchange Commission. All comments made during today's call are subject to this safe harbor statement. I will now turn the call over to Roger.

Thank you, Art, and everyone else for joining us on the call today. WSFIS performed very well in the third quarter as we continue to demonstrate the strength and diversity of our business model. Core EPS of $1.23 and Core ROA of 1.46% represented growth from the second quarter of 6% and 4% respectively. Our performance was driven by loan growth across all our commercial and consumer segments. Deposits were essentially flat when compared to the second quarter, excluding the anticipated runoff of short-term transaction-related deposits in our corporate trust business. The net interest margin remained very solid at 4.08%, reflecting the impact of the Fed hike in short-term rates in July, expected increase in deposit betas, and very modest deposit attrition. Through the cycle, interest-bearing deposit betas ended the quarter at 39% as the pace of growth continued to moderate. NIM was favorably impacted by about five basis points due to higher purchase loan accretion and maturity events in a few reverse mortgages. Core fee revenue grew 9% linked quarter and was a record quarterly high. Growth came from each of our major business lines, including wealth and trust, cash connect, mortgage banking, capital markets, and the core banking business. The core fee revenue ratio increased to 28.60%. Consistent with the slowing economy and corresponding credit normalization, We did see a negative uptick in our asset quality metrics. Most of this variance was driven by two unrelated C&I credits that moved to non-performing status due to operating challenges specific to those businesses. Problem asset migration reflected downgrades in the commercial sectors, including office. Inclusive of these downgrades, the office loan portfolio has 6% problem loans zero delinquency, and less than $1 million in NPAs. Total classified loans to Tier 1 Capital plus ACL stood at 16.11% or just under 3% of total loans. Credit losses were relatively flat to Q2 at 45 basis points or 19 basis points, excluding new lane leasing and upstart portfolios. Our balance sheet remains strong, including significant liquidity capacity and regulatory capital levels that continue to exceed well-capitalized. On slide 14 of the earnings release supplement, we have provided an update to our mid-year 2023 outlook, incorporating Q3 results and commentary on Q4 ranges on NIM, PPNR, and ROA percentages. Overall, we remain on track to achieve the four-year outlook, which assumes no additional short-term rate hikes and modest GDP growth in Q4. Consistent with our historical practice, we will provide a 2024 outlook when we announce Q4 earnings in late January. Thank you, and I will now turn it back to Art to facilitate the Q&A.