WSFS Financial (US:WSFS)2022-10-25 20:21Financial Data and Key Metrics Changes - The reported ROA for Q3 2022 was 1.44% with an EPS of $1.16, which included $2.6 million in corporate development and restructuring costs and a $2.3 million nonrecurring valuation adjustment [8] - Excluding these items, the core ROA was 1.52%, an increase of 25 basis points from Q2, and the EPS was $1.23, up $0.21 from Q2 [8] - The net interest margin increased by 59 basis points to 3.99%, driven by a higher interest rate environment [14] Business Line Data and Key Metrics Changes - Loan growth, excluding the acquired HFI residential mortgage portfolio, was 9% annualized, with 40% annualized growth in both construction and consumer loans, and 17% annualized growth in commercial leases [9] - Core fee revenue decreased to 26.8% from 30.0% in Q2, primarily due to a 15% growth in net interest income [16] Market Data and Key Metrics Changes - Deposits decreased by 3% or 13% annualized, with a significant portion attributed to transactional trust deposits [10] - Municipal and public funded accounts increased by $182 million, indicating strong deposit diversity [13] Company Strategy and Development Direction - The company aims to deliver a full-year core ROA of between 1.30% and 1.40%, with a Q4 ROA expectation of 1.60% to 1.70% [7] - The company continues to evaluate its investment portfolio mix and balance sheet hedging strategies to prepare for anticipated interest rate volatility [21] Management's Comments on Operating Environment and Future Outlook - Management noted that the current economic environment has led to a decrease in fee income growth expectations, primarily driven by market conditions [27] - The company is monitoring deposit competition and believes it is well-positioned to manage funding costs and maintain deposit levels [47] Other Important Information - Capital ratios remain strong, with CET1 and Tier 1 capital at 12.38% and total risk-based capital at 13.34% [19] - The company returned $90.5 million of capital to shareholders, including $9.5 million in dividends and $81 million in share repurchases [19] Q&A Session Summary Question: Could you talk about the adjustment to guide regarding fee income growth? - Management indicated that the lower fee growth expectation is market-driven, influenced by the higher interest rate environment affecting capital market activities [27] Question: Can you discuss the inflows and outflows in terms of AUM? - Most of the decline in AUM was market-driven, with net client cash flow being almost flat for the quarter [28] Question: Can you break down consumer growth, particularly in unsecured lending? - The company reported a $34 million increase from the Upstart product and $90 million from the spring product, with an internal limit on unsecured lending approaching [29][30] Question: What is the appetite for further buybacks given the current stock price? - Management stated that capital return philosophy remains unchanged, evaluating capital ratios and opportunities for deploying excess capital [31][33] Question: Can you provide more color on options for the securities portfolio? - The company is evaluating the categorization between available for sale and held to maturity, with a focus on monitoring the investment portfolio [40][41]