WSFS Financial Corporation

Thank you for standing by and welcome to the WSFS Financial Corporation third quarter earnings 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 would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. I'd now like to turn the call over to Roger Levinson, Chairman, President and Chief Executive Officer. Sir, you may begin.

Thank you, Ron, and thanks to everyone for joining us on the call today. Before we get started, I wanted to officially introduce the newest member of our executive leadership team, Executive Vice President and CFO David Berg. As many of you know, David joined WSFIS in mid-August following a 17-year career at Citigroup. During his short tenure with WSFIS, he has demonstrated the leadership and skills to accelerate our growth and deliver shareholder value. We're thrilled to have him on the team. David?

Thank you, Roger, and thank you, everyone, for joining our third quarter 2024 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. In addition to Roger Levinson, our chairman, president, and CEO, I'm joined by Art Bocci, chief operating officer, Steve Clark, chief commercial banking officer, and Sherry Krasinski, chief consumer banking officer. Prior to reviewing our financial results, I would like to read our safe harbor statement. Our discussion today will include information about management's view of our future expectations, 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 risks and uncertainties including, but not limited to, the risk factors included in an annual report on Form 10-K, our most recent quarterly reports on Form 10-Q, as well as other documents were periodically filed with the Securities and Exchange Commission. All comments made during today's call are subject to the safe harbor statement. I will now turn to our financial results. Wisfits continued to demonstrate the strength of our franchise and diverse business model during the third quarter. Results included a core EPS of $1.08 per share, core ROA of 1.22%, and core return on tangible common equity of 16.96%. Loans and deposits increased 5% and 3% respectively on an annualized basis. Growth in loans was broad-based, and our deposits remained well diversified. Our loan-to-deposit ratio was 80% on September 30th, providing ample balance sheet flexibility and capacity to fund future growth. Core fee revenue of $90.1 million was up 5% link quarter and 23% year-over-year. Wealth management fee revenue declined 3% link quarter but increased 12% over the third quarter of 23. The third quarter was driven by strong results in institutional services, offset by seasonally lower fees in private wealth, and the Bryn Mawr Trust Company of Delaware. Notably, this quarter also marks the successful completion of our trust accounting system conversion, as well as the rollout of upgraded client account portal in accordance with our Bryn Mawr Trust Integration Plan, which positions us well for future growth. Cash Connect increased 3% in the quarter and 50% over the third quarter of 23, driven by increased bailment revenues as we captured market share over the past year. This, combined with the continued optimization of its units and funding mix, drove an ROA of 1.29% in the third quarter. Core Banking increased 25% over the prior quarter, primarily due to an annual earn-out payment from the previously announced sale of Spring EQ and an increase in bank-owned life insurance revenue. As noted in our earnings release, we have achieved our 2024 origination goal with Spring EQ and do not expect new originations in the fourth quarter. We're currently evaluating 2025 volumes with the company. Coordinated interest expense of $163.7 million was up 5% in the quarter, driven by unfunded loan commitment reserves, higher loan workout costs, and compensation-related expenses to support future franchise growth. Net interest income grew 2% in the quarter, and the net interest margin was 3.78%, down 7 basis points from 2Q24. Our net interest margin was impacted by growth in higher-priced deposits, as we took advantage of market opportunities to grow share, as well as the impact of market value increases in our available-for-sale investment portfolio. Total net credit costs of $20.1 million increased modestly compared to the prior quarter, with a decrease in the provision for credit losses, offset by an increase in reserves for unfunded commitments and loan workout costs. Non-performing assets increased 12 basis points quarter over quarter to 44 basis points, primarily driven by the migration of two previously identified and unrelated problem loans. Net charge-offs increased 14 basis points quarter over quarter to 58 basis points, primarily driven by the write-down of one of the previously mentioned non-performing loans. and year-to-date charge-off levels are in line with our expectations. Total stockholders' equity increased 8% link quarter, driven by market value increases in available for sale investment securities and quarterly earnings. As a result, our book value per share increased 8% link quarter to $45.37, and our tangible book value per share increased 13% link quarter to $28.56. On the last page of the supplement, we provided an update to a full yield outlook to reflect the 50 basis points rate cut that occurred in September. As a reminder, our previous mid-year outlook did not reflect any rate cuts for 2024. Our outlook for loans, deposits, few revenue growth and efficiency ratio remains unchanged from the prior outlook. We updated our outlook for net interest margin and now expect our full year NIM to be approximately 3.80, which is at the lower end of the range from a previous outlook that did not include any rate cuts. In addition, we updated our estimate for 4Q NIM to be 370 to 375%. With respect to net charge-offs, we have reduced the outlook for the year to approximately 50 basis points, which corresponds to the low end of a previous range. And lastly, we updated our outlook for ROA to a range of 1.20 to 1.25%. This change is consistent with the sensitivity that we provided previously that each 25 basis points reduction in the Fed funds rate would reduce ROA by approximately three basis points on an annualized basis. While the path of future rates remains uncertain, it's important to note that the impact of additional rate cuts on our financial results will not be linear and will be affected by the pace of future rate cuts, deposit pricing, the impact of our hedge program and the behavior of our securities portfolio. As we have done in the past, we will provide a full year outlook for 2025 in January with the release of our fourth quarter 2024 financial results. In summary, despite the economic uncertainty, WSFIS continues to grow and deliver strong results in the third quarter. We remain well positioned to execute on our strategy and produce top tier performance for the full year. Equally important, Our liquidity and capital position provides a cushion to absorb any unexpected challenges that we might face. Thank you. We will now open the line for questions.