WSFS Financial (WSFS)2023-01-27 22:37Financial Data and Key Metrics Changes - The core net interest margin for Q4 2022 was 4.49%, an increase of 50 basis points or 13% compared to Q3 2022 [6] - Core EPS, core ROA, and core PPNR increased by 12%, 13%, and 14% respectively from the previous quarter [8] - Total customer deposits declined approximately 2% linked quarter or 6% annualized, primarily due to lower institutional trust deposits and seasonal runoff [7] Business Line Data and Key Metrics Changes - Loan growth was solid, with expectations for mid-single-digit growth across all lending portfolios in 2023 [8][9] - Core fee revenue growth is anticipated in the mid- to high single digits, driven by Cash Connect's variable rate fee pricing and franchise growth [12] - The investment portfolio has grown to be in the high 20% of total assets, generating over $40 million of pretax income in 2022 [10] Market Data and Key Metrics Changes - The company expects deposits to remain relatively flat by year-end, with a loan-to-deposit ratio of 73% [9] - The company has a well-diversified deposit base, with over 50% of deposits coming from outside the consumer and branch network [23] Company Strategy and Development Direction - The company aims to optimize franchise investments made over the past several years following the successful integration of BMT Bank [8] - The strategy includes deploying excess liquidity into the investment portfolio while maintaining a focus on loan growth [10] - The company plans to continue investing in technology and talent to enhance customer experiences and internal efficiencies [13] Management's Comments on Operating Environment and Future Outlook - Management expects muted economic growth in the near term but is optimistic about the company's position to capitalize on growth opportunities [8] - The outlook for 2023 includes expectations for a flat yield environment and mild recessionary growth rates in the second half of the year [9] - Management highlighted the importance of maintaining a competitive deposit pricing strategy to retain and grow the customer base [9][23] Other Important Information - The company anticipates a core efficiency ratio in the mid-50s, reflecting ongoing investments in the franchise [13] - Provision costs are expected to be between 40 to 50 basis points of average loans for the year, driven by loan growth and economic forecasts [12] Q&A Session Summary Question: Clarification on loan growth and cash flow from securities - Management confirmed that loan growth and cash flow from the investment portfolio are expected to offset each other, with funding potentially coming from wholesale borrowings [16] Question: Loan growth weighting throughout the year - Management indicated that the loan pipeline has been consistent, with no significant front-loading expected [21] Question: Deposit strategy and costs - Management discussed their deposit strategy, emphasizing a competitive approach to retain existing customers and attract new ones [22][23] Question: Impact of economic conditions on guidance - Management acknowledged that a mild recession could impact fee income, particularly in mortgage banking and wealth management [27] Question: Share buyback strategy - Management outlined a waterfall approach to capital allocation, balancing share repurchases with organic growth and capital needs [31] Question: Deposit beta and pricing strategies - Management confirmed that deposit betas have been increasing, with a focus on competitive pricing for CDs and variable rate products [34][36]