WSFS Financial (US:WSFS)2021-04-23 18:44Financial Data and Key Metrics Changes - The reported net income for Q1 2021 was $65.1 million, with earnings per share of $1.36 and $1.39 on a core basis, excluding corporate development costs related to the Bryn Mawr Trust transaction [6][15] - Return on assets (ROA) was 1.85% and 1.89% on a core basis, while net interest margin was 3.59%, impacted by excess liquidity [6][11] - Customer deposits increased by $580 million or 5% in the quarter, totaling a year-over-year increase of $2.8 billion or 30% [7] Business Line Data and Key Metrics Changes - Net loans decreased by $84 million or 1%, excluding PPP forgiveness and runoff portfolio performance, with line utilization dropping from over 45% to just under 36% since Q1 2020 [9] - Core fee revenue grew by 20% or $8 million year-over-year, driven by strength in mortgage banking and wealth fees, with a core fee revenue percentage of just over 29% [13] - The allowance for credit losses (ACL) at quarter-end was approximately $205 million, with a coverage ratio of 2.51% excluding PPP, down from $229 million and a coverage ratio of 2.73% at year-end [14][15] Market Data and Key Metrics Changes - The company noted an increase in customer liquidity due to PPP funding and stimulus checks, contributing to a conservative spending environment [6][5] - The economic recovery and reopening of local economies are beginning to show positive signs, reflected in improved credit quality metrics [5][14] Company Strategy and Development Direction - The company is focused on the integration efforts for the pending combination with Bryn Mawr Trust, expected to close in early Q4 2021 [4] - The strategy includes disciplined expense management and investments in franchise growth, with a core efficiency ratio of 57.9% [14] - The company anticipates continued loan growth in the mid-single digits, contingent on economic recovery and customer liquidity utilization [17][38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about near-term and long-term prospects, although performance will be influenced by the pace of economic recovery and excess liquidity in the markets [17] - The company expects to continue leveraging excess liquidity to optimize its balance sheet strategy, despite the drag on net interest margin [20][21] Other Important Information - The company repurchased 267,000 shares at an average price of $44.97, totaling $12 million in capital return, with no further repurchases anticipated until the Bryn Mawr transaction closes [16] - A quarterly cash dividend of $0.13 per share was approved, representing an 8% increase from the previous year [15] Q&A Session Summary Question: Thoughts on liquidity deployment - Management anticipates excess liquidity to remain for a couple of quarters and plans to evaluate its deployment to generate net interest income [20] Question: Update on cash connect and mortgage outlook - Cash connect fees decreased due to seasonality, but top-line growth is expected to continue. Mortgage refinancing remains strong with a 70% refi mix [22][24] Question: Deferral numbers and provision costs - Approximately 1% of the total book remains in modification, with no uptick in deferrals noted [27] Question: Fee income sustainability - Management aims to maintain a core fee revenue percentage above 30% through growth in cash connect and wealth services [35] Question: Growth guidance and loan origination yields - The company remains comfortable with mid-single digit growth expectations, with a strong pipeline and favorable loan origination yields of 3.67% [38][39]