WSFS Financial Corporation (WSFS) Earnings Call Transcript & Summary

Good day, and welcome to the WSFS Financial Corporation Annual Meeting of Stockholders. At this time, I would like to turn the call over to Mr. Dominic Canuso. Please proceed.

Thank you. Good afternoon, everyone. Welcome to the 2020 Annual Meeting of the stockholders of WSFS Financial Corporation. My name is Dominic Canuso. I am Executive Vice President, Chief Financial Officer and Corporate Secretary of WSFS Financial Corporation, and I am acting as Chair of the 2020 Annual Meeting. On behalf of our executive management team and the Board of Directors, we hope that you and your families are doing well during this challenging time. The time is 4:02 p.m., and the annual meeting is now called to order. We are grateful to have the opportunity to meet with you given the restrictions on social contact and travel and look forward to engaging with our stockholders virtually during this meeting. At this time, I would like to introduce to you the directors and executive officers who are present on this webcast today: Eleuthère I. du Pont, Lead Director and Chair of the Corporate Governance and Nominating Committee; Christopher T. Gheysens, Chair of the Audit and Trust Audit Committees; David G. Turner, Chair of the Personnel and Compensation Committee; Francis Ben Brake, Chair of the Trust Committee, Corporate Governance Committee and Integration and Delivery Transformation Subcommittee; Mark A. Turner; Marvin "Skip" Schoenhals; Anat Bird, Karen Dougherty Buchholz; Jennifer "J.J." Davis; Michael J. Donahue; Gerard P. Cuddy; Patrick J. Ward; and Rodger Levenson, Chairman of the Board, President and Chief Executive Officer. Also joining us are the executive team members: Arthur Bacci, Lisa Brubaker, Steve Clark, Peggy Eddens, Paul Greenplate and Richard Wright. Rodger will make some comments later in the meeting. Also in attendance is [ Sharon Craft ], our Assistant Secretary, who will be taking minutes of this meeting as well as Chuck Mosher, our Chief Accounting Officer, who will be monitoring for and reading questions submitted through the meeting portal. We'd like to acknowledge representatives from our independent registered public accounting firm, KPMG, who are participating in this webcast. They are Elias Lambros, Lead Audit Partner; Charlie O'Brien, Quality Control Reviewing Partner; Daniel Jones, Senior Manager; and Mary Pluck, Audit Manager. Rusty Conner and Charlotte May from our principal law firm, Covington & Burling, are participating in this webcast as well. Stockholders received a proxy statement in the mail that described the agenda for today's meeting. In that mailing, stockholders also received a copy of the company's annual report, Form 10-K and a letter from Rodger Levenson. These materials, along with our supplemental notice announcing the change to our virtual-only format that was previously made available to our stockholders, are also available on the company's website and on the web portal, the website used to access this meeting. We understand that some of our stockholders may not have received their proxy materials. We apologize for this inconvenience, which was due to circumstances outside of our control. Should stockholders have any comments they would like to make following the meeting, please e-mail us through the Investor Relations section of our company website. If you are a stockholder who has already voted, you need not vote again. However, if any stockholder present chooses to vote at today's meeting, you have the ability to do so via the web portal by clicking on the voting button on the web portal and following the instructions there. Stockholders can also follow instructions provided on the web portal to submit any questions. During today's meeting, we will discuss the proposals that have been presented to the stockholders for vote. Following each proposal, we will open the floor for questions. We will also have a general question-and-answer session at the end of the meeting. Our first quarter earnings will be released next week on April 27, so we cannot comment on our first quarter results or the potential impact that COVID-19 may have on our 2020 performance on this webcast. To that extent, if you have any questions pertaining to these topics, we invite you to listen to our earnings call scheduled for next week, April 28 at 1:00 p.m. Information regarding this call is available on our company website. The company's record show that on March 2, 2020, the voting record date, there were outstanding, entitled to notice of and entitled to vote at this meeting, 50,958,845 shares of the company's common stock. A list of the stockholders of this company entitled to vote at this annual meeting, and the number of shares held by each as of the close of business on March 2, 2020, the voting record date, has been made available for inspection at our offices and currently is available for inspection by any stockholder on the web portal for any purpose pertaining to this annual meeting. Also, the Assistant Secretary has an affidavit that the notice of the annual meeting, a proxy statement and a form of proxy were mailed on March 26, 2020, to each stockholder who owned WSFS Financial Corporation common stock as of the voting record date. A supplemental notice of the annual meeting was made available to stockholders by press release and via filing with the SEC on April 10, 2020. I, therefore, declare that this annual meeting has been duly called. Louis Larsen, a representative of Broadridge; and James Lucianetti, Deputy Chief Risk Officer for WSFS Bank have been appointed to act as Inspectors of Election at this annual meeting and any adjournments. The Inspectors have taken an oath to perform their duties fairly and impartially. The company bylaws provide that a majority of the outstanding shares entitled to vote represented in person or by proxy shall constitute a quorum at a meeting of the stockholders. The Assistant Secretary reports that substantially more than a majority of the shares of WSFS common stock outstanding as of the voting record date are represented at this annual meeting either in person via remote communication or by proxy. The Inspectors are making an exact count and will submit a formal report on the number of shares present or represented by proxy during the course of this annual meeting. Based on this preliminary count, a quorum is declared present, and this annual meeting is declared lawfully convened. Each stockholder is entitled to one vote for each share of common stock held on the voting record date, except in the election of directors, for which stockholders may cumulate their votes. As stated in the notice, this annual meeting has been called for the purposes of: one, the election of directors for terms ending at the 2022 and 2023 annual meeting of stockholders; two, the ratification of the appointment of KPMG LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2020; and three, a nonbinding advisory vote on the compensation of the company's named executive officers. The Assistant Secretary reports that no notice of any other business was delivered to or received by the company. Proposal 1, election of directors. The first item on which we will be voting is the proposal to elect directors. In accordance with the amended and restated Certificate of Incorporation and the bylaws, these individuals have been nominated for election by the Board of Directors to serve 2 or 3 years terms as applicable or under their successors -- or until their successors are duly elected and qualified. I would like to introduce the Board of Directors nominees. Each of Mr. Eleuthère I. du Pont and Mr. David G. Turner have been nominated for a 3-year term expiring at the 2023 Annual Meeting of Stockholders. Mr. Mark A. Turner has been nominated for a 2-year term expiring at the 2022 Annual Meeting of Stockholders. Are there any questions or comments on this proposal?

Thank you, Dominic. There are no questions related to the first proposal.

Thank you, Chuck. As there are no questions, to put the names into nomination for the slate of directors listed in the proxy statement, I recognize Christopher T. Gheysens, Chair of the Audit and Trust Audit committees.

Mr. Secretary, I hereby nominate Eleuthère I. du Pont and David G. Turner for election as directors of the company to serve for the term expiring on the date of the annual meeting of the company in 2023 or until their respective successors are duly elected and qualified.

Thanks, Mr. Gheysens. Is there a second?

Mr. Secretary, I second the nomination.

Thank you, Ms. Davis.

Mr. Secretary, I hereby nominate Mark A. Turner for election as a director of the company to serve for the term expiring on the date of the annual meeting of the company in 2022 or until his respective successor is duly elected and qualified.

Thank you, Mr. Gheysens. Is there a second?

Mr. Secretary, I second the nomination.

Thank you, Ms. Davis. The nominations are duly made and seconded. As a reminder, our directors are elected by a plurality of the votes present, meaning that the nominees who receive the greatest number of votes are elected. Each stockholder may vote for a nominee or may withhold his or her vote for a nominee. Proposal 2, ratification of KPMG as auditor. The second proposal is for the ratification of appointment of KPMG as the company's independent registered public accounting firm for the fiscal year ending December 31, 2020. The Audit Committee of the Board of Directors and the Board of Directors has recommended the reappointment of KPMG as its independent auditors. As a reminder, the reappointment of KPMG must receive a majority of the votes cast in order to be ratified. Are there any questions or comments on this proposal?

Thanks again, Dominic. There are no questions related to the second proposal.

Thank you, Chuck. As there are no questions, for the ratification of the appointment of KPMG as the company's independent registered public accountants, I recognize Christopher T. Gheysens, Chair of the Audit and Trust Audit Committees.

Mr. Secretary, I move for the ratification of the appointment of KPMG LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2020.

Thank you, Mr. Gheysens. Is there a second?

Mr. Secretary, I second the motion.

Thank you, Mr. Turner. The motion is duly made and seconded. Approval of the compensation of named executive officers, Proposal #3. The third and final proposal is the advisory nonbinding vote on the compensation of the company's named executive officers. As a reminder, the advisory vote on the compensation must receive a majority of votes cast on the proposal to be ratified. Are there any questions or comments on this proposal?

Thanks, Dominic. There are no questions related to the third proposal.

Thank you, Chuck. Since there are no questions, for the proposal to approve the advisory nonbinding vote on the compensation of the company's named executive officers, I recognize Mr. David G. Turner, Chair of the Personnel and Compensation Committee.

Mr. Secretary, I move for the approval of the advisory nonbinding vote on the compensation of the company's named executive officers.

Thank you, Mr. Turner. Is there a second?

Mr. Secretary, I second the motion.

Thank you, Ms. Davis. The motion is duly made and seconded. It is now 4:15 p.m., and the polls are now open. The vote will now be taken on each of the company's proposals. Please remember that if you have already voted by proxy, it is not necessary to vote again. If you are a stockholder entitled to vote and have not yet voted or if you want to change a previously cast vote, please do so by clicking on the voting buttons on the web portal and following the instructions there. [Voting]

Before we close the polls, I would like to introduce our President, Chief Executive Officer and Chairman of the Board, Rodger Levenson.

Thank you, Dominic, and thanks again to our stockholders, associates, Board members and everyone else who is joining us today for our 2020 Annual Meeting of Stockholders. Although other publicly traded companies have been holding stockholders meetings virtually over the past several years, this is the first time in WSFS' history that we are not able to be together in person for this meeting. I suspect this is just one of many firsts that we are all experiencing as a result of the COVID-19 pandemic and something we will evaluate for future annual meetings. When I originally started to outline my thoughts for today, the primary focus was going to be a recap of 2019 and comments on our operating and financial plan for 2020. Obviously, the dramatic changes that have occurred over the past few months dictate additional commentary on the impact to our near-term operating performance, our preparedness for managing through this current environment as well as the longer-term opportunities for WSFS. Looking back, 2019 was an excellent year for WSFS. We reported core earnings per share of $3.74, which was an increase of 5% over 2018. This performance translated into a core return on assets of 1.61% and a core return on tangible common equity of 16.61%. Consistent with our historical practice, these core metrics exclude nonrecurring costs or benefits to operating results and are detailed in our 2019 10-K. Our performance in 2019, once again solidly positioned WSFS in the top quintile or 20% of our peer group, which we define as banks between $10 billion to $50 billion in assets. In addition, during 2019, we closed on the beneficial combination and successfully completed the largest systems conversion and branding project in our history. During the year, we also laid the foundation for a significant multiyear technology investment, which we have named our Delivery Transformation. This initiative will ensure that WSFS will continue to provide products and services to meet the rapidly evolving customer expectations across our entire franchise. Our merger with Beneficial and Delivery Transformation positions WSFS with significant long-term growth prospects. WSFS now stands as the largest locally headquartered bank and trust company in the Greater Philadelphia and Delaware region, one of the most demographically rich and vibrant economies in the United States. Turning to 2020, our original financial plan was informed by the relatively healthy economic forecast that existed as we entered the year. It included solid growth across all our business lines, the impact of the declining interest rates that occurred during the second half of 2019 and increased investment in our delivery transformation. It also included relatively modest credit costs consistent with the past several years. Historically, like most banks, WSFS' operating performance has reflected the health of the economy and, in turn, our customers. While we are still in the early stages of the COVID-19 situation, it is clear that the economic impact will be very significant and will, therefore, impact our results for the year. This will be most likely evident in elevated credit costs, along with the effect of lower interest rates. We will be providing additional information on our response to COVID-19 as well as our financial performance in the first quarter of 2020, when we release earnings on April 27 and hold our earnings conference call the next day. We invite you to listen to that call and to read our earnings release and supplemental materials, which will be posted on our website. As we manage through this environment, our top priorities will remain the health and well-being of our associates, serving our customers and supporting our communities. In addition, as has been our practice in recent history, we will continue to prioritize investments that will enhance our long-term franchise value, such as Delivery Transformation. Although we did not envision the exact circumstances of the COVID-19 pandemic, WSFS is well prepared to operate effectively through this health crisis from multiple perspectives. First, recent technology investments combined with previously established business continuity contingency plans have provided us with the ability to operate the company and serve our customers while adhering to federal, state and local health guidelines. Second, our business model and operating performance have been significantly enhanced over the past decade with increased scale, deepened in new business lines, an expanded operating footprint, loan portfolio diversification and, most importantly, an overall increase in the talent levels across the company. Third, our capital levels are significantly higher than our internal targets and regulatory guidelines. At 12/31/2019, our bank Common Equity Tier 1 equity ratio was 13.52%, which is just over $700 million above the 6.5% regulatory level defined as well capitalized. While we cannot predict our financial performance with certainty over the coming months, we stand in a position of strength to serve our customers, invest in the future and ultimately deliver sustainable long-term high performance for all of our constituents. I want to take this opportunity to extend my thanks to the WSFS Board of Directors for their support and guidance in my first year as CEO. A special thank you to Mark Turner, who served as Executive Chairman and provided invaluable counsel to me and leadership in the boardroom. I am honored to have been appointed Chairman effective January 1 of this year and look forward to Mark's continued service on the WSFS Board. In addition, I would like to recognize and thank Gerry Cuddy and Pat Ward, who are not standing for reelection, for their service to the WSFS Board. As the CEO of Beneficial, Gerry has been very helpful in assisting with the merger integration and our introduction to the Philadelphia community. As the founder and former CEO of Penn Liberty Bank, Pat has served on the WSFS Board since 2016. During this time, he has also been an integral member of our executive management team as Pennsylvania market President. We are very fortunate that Pat has agreed to continue in that role going forward. Last, but certainly not least, I also extend my gratitude and thanks to our over 1,800 highly engaged and dedicated associates, along with our executive management team for your hard work and commitment to WSFS this past year. For 188 years, WSFS has served this community by staying true to our values and managing for the long term. Ultimately, the true measure of the value of any company is how it responds during periods of adversity. WSFS has always been a very resilient organization. As we have done throughout our history, we will steadfastly continue to serve and emerge from this current situation stronger and better positioned to serve for many years to come. Thank you all, and please stay safe.

Thank you, Rodger. It is now 4:25 p.m., and I declare the polls closed.

Thanks, Dominic. We have now come to the part of the meeting reserved for general questions and discussion. In the proxy statement, we invited stockholders to submit questions in advance either by mail or through a special e-mail address. We did not receive any questions in advance. However, should you like to ask a question now, please follow the instructions provided on the web portal to submit questions. In the interest of being respectful of everyone's time, I'd like to suggest that all questions be directed toward broad stockholder issues. As Mr. Canuso mentioned earlier, because we have not yet released our first quarter financial results, we cannot comment on our first quarter results or the potential impact that COVID-19 may have on our 2020 performance. However, as a reminder, we invite you to listen to our first quarter earnings call scheduled for April 28, at 1:00 p.m. Information on how to access the earnings call is available in the Investor Relations section of our website.

Thank you, Rodger. This is Chuck. We did have one question that was submitted. That question is, what is management's thought and what actions, if any, are they taking regarding the recent significant decline in stock price?

Thanks, Chuck, and thanks to that shareholder for that question. Obviously, since the onset of the pandemic, WSFS stock, like the entire banking industry, has been significantly impacted by things that are primarily outside of our control. So as we have always done in periods like this, as I said in my comments, we will stay true to our values, make decisions for the long term and believe that over time that will accrete to our stockholders' benefits.

Thank you, Rodger. There are no other questions in the queue at this time.

Thanks, Chuck. We will post many of the questions and this response on the company's website at www.wsfsbank.com. I understand that the preliminary vote tally is complete. Dominic Canuso will now report on the preliminary results of the vote as certified by the Inspector of Elections.

Mr. Chairman, a total of 44,314,103 shares of common stock, representing 86% of the outstanding shares as of the voting record date are present in person via remote communication or by proxy at the annual meeting. Proposal 1, election of directors. Regarding the election of directors, each nominee received a plurality of the common shares representing virtually or by proxy. All director candidates had more than 96% of the shares voted for reelection. Proposal 2, ratification of the appointment of independent registered public accounting firm. The proposal to ratify the appointment of KPMG LLP as the company's independent registered public accountants for the fiscal year ending December 31, 2020, received 95% of shares voted. On Proposal 3, the advisory nonbinding vote to approve the compensation of the company's named executive officers. The advisory nonbinding vote to approve the compensation of the company's named executive officers received 99% of shares voted.

The preliminary report of the inspectors of elections indicates that nominees, Eleuthère I. du Pont, David G. Turner and Mark A. Turner have been duly elected as directors of the company. Further, the preliminary report indicates that stockholders have ratified the appointment of KPMG LLP as the company's independent public accounting firm for the fiscal year ending December 31, 2020. Lastly, the preliminary report indicates that the stockholders have approved the advisory nonbinding vote on the compensation of the company's named executive officers. The preliminary report of the Inspectors of Elections is hereby accepted, and the Secretary will attach the final certificate and report as an exhibit to the minutes of this meeting.

Thank you, Rodger, and thank you all for joining and participating in the Annual Meeting of Stockholders with us today. At this time, there being no further business to address, I hereby declare this meeting adjourned. Take care and be safe, everyone.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.