WSFS Financial Corporation (NASDAQ:WSFS) showcased robust performance in its Q3 earnings call for 2023, driven primarily by significant loan growth. The company reported a core EPS of $1.23 and a core ROA of 1.46%, while deposits remained stable, excluding short-term transaction-related deposits. Despite challenges with two unrelated credits, overall asset quality metrics remained strong. WSFS also updated its mid-year 2023 outlook and confirmed its full-year outlook is on track.
Key takeaways from the earnings call include:
- WSFS reported a solid net interest margin (NIM) of 4.08%, a result of the Fed's rate hike in July.
- Core fee revenue reached a record high, with a 9% growth from the preceding quarter.
- The company is focusing on loan growth opportunities and talent acquisition in commercial lending.
- WSFS expects the margin to bottom out in Q2 2024, with consumer charge-off trends normalizing.
- The company plans to allow its investment portfolio to run off, which may lead to flat or shrinking total assets in the near term.
- Fee income may see a slight decrease in Q4 2023.
During the call, WSFS CEO, Rodger Levenson, and CFO, Stephen Clark, discussed future expectations. Levenson anticipates stability in the NIM in Q2 2024, with a potential increase in the latter half of the year as the portfolio shifts from mortgage-backed securities (MBS) to loans. This shift could result in a yield improvement of 450 to 500 basis points over time. Clark, however, mentioned that significant yield increases would be contingent on the Fed raising interest rates.
Levenson also noted that loan yields, currently around 6.80%, could potentially increase depending on the mix of loans brought in. He further added that the company has room for deposit rate adjustments, which would be considered on a case-by-case basis to protect relationships. However, he clarified that the company is not seeking additional liquidity.
The call concluded with Levenson inviting further inquiries and announcing upcoming investor meetings and conferences. The company's cash balances are currently within their long-term goals and are expected to remain so. Loan growth continues to be driven by market share gains, with construction loans contributing significantly. The company also expects a moderate growth rate in the mid-single digits for fee income in the coming quarters.
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