Edited Transcript of WSFS earnings conference call or presentation 28-Apr-20 5:00pm GMT

Since March 16, we have had over 1,000 associates across the entire company working from home, supporting each other and serving our customers, including our national businesses of Institutional Trust, Cash Connect and NewLane Finance. At the same time, we have been providing drive-through access and appointments with appropriate preventative protocol in our retail banking offices. We have also seen increased usage and adoption of our digital products, including our myWSFS mobile communication tool. While we are still very early into this environment, it is highly likely that we will continue to see an acceleration of the recent trends towards these channels. This is additional confirmation of the strategic rationale of our delivery transformation initiative, which commenced last year.

Turning to our first quarter results. Our operating performance was solid. Obviously, the adoption of CECL and the impact of the current and forecasted economic environment led to elevated credit costs in the quarter. I will provide additional comments on credit and asset quality in a moment.

Core preprovision net revenue increased 7% on a linked-quarter basis and 32% versus the first quarter of 2019, reflecting the closing of Beneficial on March 1, 2019. This performance was driven by a 10% annualized loan growth in the quarter, excluding the impact of the allowance for credit losses and continued runoff from the nonrelationship portfolios. Approximately 39% of this growth was a result of increased line of credit usage. Total core deposits also grew nicely during the quarter at a 9% annualized rate. Excluding several nonrecurring items, core fee income decreased 3% on a linked-quarter basis, reflecting lower seasonal banking-related transaction volumes and lower bailment revenue in Cash Connect. The decline in bailment revenue was fully offset by reduced funding costs. Cash Connect continued its trend of improved performance, recording an accretive ROA of 1.84%. Expenses were well-managed and resulted in a core efficiency ratio of 54% as we continue to see the benefits from prior acquisitions and disciplined growth.

Turning to credit. We adopted CECL in the quarter consistent with our original plans. Asset quality improved modestly during the quarter, yet we purposely tried to get ahead of the oncoming deterioration in our CECL assumptions with a significant reserve build. The total reserves increased $92 million, reflecting both the day 1 increase and the quarterly provision. The corresponding ACL reserve to total loans ratio was 1.60% as compared to 0.56% at 12/31/19. Including the marks on the acquired loan book, our total coverage was 2.19% at 3/31/20. As outlined in the supplemental materials, our provision incorporated an economic outlook of a GDP decline of 15% and unemployment of 9% in the second quarter. Economic models for both the second quarter and the remainder of the year continue to fluctuate. Assuming deterioration from our assumptions from when we close the books, we would expect to continue to build reserves in the second quarter.

Our loan portfolio continues to be very well diversified and granular. It reflects our long-held philosophy of concentration management. As we learned during the Great Recession, even with high-quality underwriting, concentrations represent the highest potential risk to any loan portfolio. Since that time, our concentration risk management has been governed by 20 Board-approved concentration limits each of which remain in compliance.

In addition, over the past year, we continued to execute our strategy of repositioning the loan portfolio post Beneficial while continuing to improve asset quality. This included $343 million of intentional payoffs of nonrelationship loans as well as an 11% reduction in problem assets and a 23% reduction in NPAs. We have provided information on the overall loan portfolio along with additional details on our retail, hotel and food service portfolios in the supplement.

In addition to the strategic benefits of the beneficial combination, it also significantly improved our capital levels. Including the impact of CECL, our common equity Tier 1 capital stood at 13.41% at the end of the quarter. This provides us with significant capacity to absorb future potential credit losses. In our most recently completed stress testing, we utilized the Federal Reserve assumptions for a severely adverse scenario, which are generally consistent with the current environment. Under this scenario, WSFS can absorb almost $600 million of losses over 2 years while maintaining a Tier 1 common equity capital ratio of 11.20% at the end of that period. This capital cushion provides us with additional flexibility as we move through this environment.

During the quarter, we completed our previous share buyback authorization, repurchasing just over 1 million shares. Although our Board has approved a new buyback authorization of 15% of outstanding shares, we have decided to take a pause until at least the end of the second quarter for both routine and incremental share buybacks. We also maintained our cash dividend at $0.12 per share. A resumption of buybacks and potential future increases in the dividend will be evaluated based upon our updated economic outlook and corresponding modeling.

In addition to focusing on adjusting our business to adapt to the current situation, we continue to serve our customers and communities. In terms of customers, through April 17, we have provided over $770 million in PPP loans throughout our footprint to help sustain businesses, and we are in the process of another — we are in the process of filing another 1,500 applications in the second phase of funding that commenced yesterday.

We have also provided cash relief via $1.6 billion of loan modifications in both our commercial and consumer portfolios through April 17. Almost 60% of these modifications came from our C&I businesses, which include owner-occupied real estate and NewLane, and reflect the full or partial closure of these customers in late March and early April. We know many of these customers well and remain in contact with them so that we can collectively assess the best path forward at the end of the 90-day or, in some cases, less, deferral period. We also recognize the significant need to support in our communities, particularly the not-for-profit organizations who serve those most in need.

To enhance our impact, we made a $3 million grant to the WSFS Community Foundation.

As we look ahead to our future performance, we will benefit from the significant investments we have made over the past decade. In addition to becoming the largest locally headquartered bank in the demographically rich Philadelphia and Delaware region, we added significant capacity to our mortgage and Wealth Management businesses, established our national leasing company and, most importantly, have very strong talent throughout our organization. These and other investments have provided a much greater, healthier and diverse preprovision net revenue stream. Our core preprovision net revenue of $71.5 million for the quarter included $3.6 million in accelerated loan accretion as a result of a restructuring of the largest loan acquired from Beneficial. We expect that our second quarter core preprovision net revenue will be in the range of $50 million to $55 million, primarily as a result of the 150 basis point decline in the fed funds rate during the first quarter.

Our core preprovision net revenue estimate also assumes that our region would remain in the current stay-at-home protocol through the end of the quarter and does not include the impact of PPP loans.

Finally, some additional context. WSFS has served this community for 188 years. We are a very resilient company. And when faced with periods of adversity, we stay true to our values and manage the company for the long term. We are prepared and ready to do so once again.

Thank you. And please stay safe. I will now turn it over to Dominic to facilitate Q&A with our team.

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [4]

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Thank you, Rodger. I will be facilitating the Q&A session. So if you could, Towanda, please let the questions come through.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Frank Schiraldi with Piper Sandler.

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Frank Joseph Schiraldi, Piper Sandler & Co., Research Division – MD & Senior Research Analyst [2]

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I wanted to ask about the deferral or forbearance levels or modifications, whatever we’re going to call them, in terms of percentage of some of the sensitive loan concentration. So you guys break out your — plenty of — which I think you do every quarter, plenty of loan concentrations in the CRE and C&I books. I’m just wondering, obviously, I would assume hotel and restaurants, there’s a heavy level of deferrals. But where else are you seeing those deferral requests come from? And have requests overall begun to moderate here?

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [3]

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Sure. Thanks, Frank. Steve, would you like to address that question?

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Stephen P. Clark, WSFS Financial Corporation – Chief Commercial Banking Officer & Executive VP [4]

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Sure, Dominic. So I would say the other 2 segments that we received deferral request is retail CRE and then a little bit in the health care, social assistance segments. There are the other 2 besides the, kind of, the 2 obvious hotel and food service. And I would also say, Frank, the request really have kind of leveled off and are kind of trickling in at this point. We’ve received, we believe, the majority, the vast bulk of deferral request at this point.

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Frank Joseph Schiraldi, Piper Sandler & Co., Research Division – MD & Senior Research Analyst [5]

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Okay. And are you providing or able to provide specific levels within some of these concentrations in terms of this percentage of hotel loans are in deferral?

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Stephen P. Clark, WSFS Financial Corporation – Chief Commercial Banking Officer & Executive VP [6]

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Yes. I think in the supplement on Page 5, you can see percentages for each portfolio. So hotel was clearly the biggest. 65% of that portfolio, we have approved a 90-day deferral, a couple, 120-day deferrals. And the next biggest segment is really the restaurant food service, which is 48% of that portfolio we’ve approved deferrals for.

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Frank Joseph Schiraldi, Piper Sandler & Co., Research Division – MD & Senior Research Analyst [7]

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Okay. And Dan, just as a follow-up, I wondered if you could talk about the NIM guide for next quarter. So since the PP — and our guide doesn’t include PPP. I’m assuming that NIM guide doesn’t either. But maybe if you could just talk a little bit about the contraction quarter-over-quarter and what some of the assumptions are in that contraction in terms of deposit betas and so forth.

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [8]

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Sure, Frank. First, I’d point out, as Rodger mentioned, the first quarter elevated purchase loan accretion was primarily from one large customer that paid off and refinanced within WSFS. Excluding that, the PL, I would have been in the range that we had guided at the beginning of the year and consistent with, as we’ve laid out on Slide 11 of the supplement, what we expect in the second quarter of about 30 basis points of modeled accretion and then up to 10 basis points of additional, depending on payoffs. And again, obviously, all of that is a function of the pay down rate and which this environment could affect. Secondarily, the decrease from the first quarter NIM of $384 million, excluding PLA to the second quarter of $355 million is all interest rate-driven, and very consistent with not only our IRR assumptions, but what we expected this year, given the original plan of 2020, assuming one rate cut, but obviously, we’ve received 150 basis point reduction at the end of March. This assumes, in the second quarter, a 25% beta for our deposits as we are able to, given our significantly high loan-to-deposit ratio, affect our funding costs through lower CD rates as we’ve already put in place post the fed rate actions, managing our exception pricing and to continue to drive the appropriate mix within our portfolio.

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Operator [9]

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Our next question comes from the line of Michael Perito with KBW.

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Michael Perito, Keefe, Bruyette, & Woods, Inc., Research Division – Analyst [10]

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I wanted to double down on the credit conversation a little bit. I think the one book I’m struggling with a little bit is the hotel book, not just for you guys, just more broadly, because it seems to be an area where even if there’s some type of recovery as we move into the summer, that it might take a bit longer to kind of return to something close to full revenue or occupancy, however you want to measure it. And I’m just curious, have you guys think about that dynamic as we move forward here? I mean, obviously, initially, there was probably just trying to get the CECL and the COVID qualitative reserves up given the uncertainty. But as we kind of drill down specifically on that portfolio, how are you guys kind of thinking about those trends? And what do you think you’re looking to see that could drive either additional reserves or, hopefully, kind of a return to normal operation as this plays out?

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [11]

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Sure. Thanks for the question, Mike. And for reference, we do have some additional detail on the hotel segment of our portfolio on Slide 16 within the supplement. Steve, if you’d like to address that question?

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Stephen P. Clark, WSFS Financial Corporation – Chief Commercial Banking Officer & Executive VP [12]

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Yes. So I guess the first, as we mentioned, that is definitely the biggest percentage of portfolio that’s in deferral. So about 65%, as I had said. With the exception of a couple customers, these are all 90-day deferrals. So the plan really is, it really gives us an opportunity over the next 30 to 60 days to sit down with each of these customers and really work with them to develop a plan for the second half of the year. We’re very confident in the sponsorship and very confident in the original underwriting of these credits. So it’s unclear whether this will be a V or a U or a longer recovery in this space. But the fact that we kept deferrals to 90 days gives us the chance to really work with all of our customers for a longer-term plan.

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [13]

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And Mike, this is Dominic. Just to add on. Obviously, we’ve been in constant dialogue with all of our customers, particularly in this area, and we’ll continue to work with them to develop the go-forward plans over the next 30 to 60 days and for the remainder of the year.

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Michael Perito, Keefe, Bruyette, & Woods, Inc., Research Division – Analyst [14]

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Okay. Helpful additional color. And switching over the conversation to capital, obviously, it’s a pretty large. It’s kind of unique all the timing the way this came together, I guess, but a fairly large new authorization, although it’s kind of temporarily paused. But I guess as we think about your appetite, I know you said you’re on pause until at least the end of the quarter. But I guess, less respective of the time frame, more respective of like what are you guys kind of looking for that would bring you back to market? Is it just clarity on the recovery? Or is it other economic factors? Or how should we be thinking about that dynamic as we move forward?

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [15]

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Sure. Thanks, Mike. I would say our approach continues to be the same as we’ve laid out and consistent with how we’ve communicated our capital management. First and foremost, we look at our capital as a protection and for reserves in cases like this. And when we feel comfortable with that environment, then we look to invest that capital into the organic growth of the business or inorganic growth as we’ve done so in recent history. And then beyond those 2 uses, we would return that capital where appropriate to our stakeholders through our routine share buybacks and then incrementally based on the share price at the time relative to an IRR model, demonstrating positive accretion. What I would say is that is no different than how we are approaching it today. Clearly, that’s first tranche of recognizing. We want to evaluate and ensure that the bank continues to have the capital needed so that we can focus on our customers as that subsides or we get more certainty around that, and that will likely take 2 to 3 quarters. We will continue to evaluate. And quarter-by-quarter, as we observe the performance of our PPNR and the macroeconomic factors affecting our provision through CECL, we will make a determination.

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Michael Perito, Keefe, Bruyette, & Woods, Inc., Research Division – Analyst [16]

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Sounds good. So I mean, I don’t know if you’re willing to comment this far, but it sounds like it’s fair to think that over the next 2 quarters, there’s probably not much as you guys kind of sort out minimally, what’s going on, on the credit side and making sure that the bank is as strong as it can be positioned from a capital perspective?

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [17]

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Yes. I don’t think we can say for certain. But obviously, in this environment, there’s a lot of volatility in the macroeconomic environment, and therefore, its impact on our customers and potentially our credit position. And so we will continue to monitor and do what’s right for the long-term health of the bank and our shareholders.

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Michael Perito, Keefe, Bruyette, & Woods, Inc., Research Division – Analyst [18]

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Okay. And then just one more and then I’ll hop back. But on loan growth, any updated thoughts about how the current environment could impact maybe any of the planned runoff you had or just pipelines in general? Is there any kind of updated, maybe second quarter view you can give us on how you think kind of net growth could trend, just given there were already quite a few moving pieces kind of before the macro uncertainty?

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [19]

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Sure. I’ll first speak to the runoff portfolio, and that detail is in the supplemental material on Slide 17. When we purchased Beneficial a year ago now, about 19% of the total loan portfolio was considered in this runoff nonrelationship-based portfolio that is down to $1.3 billion or 15%. And we do expect that to continue. The largest portion of that book is residential mortgage of just under $1 billion. And obviously, that is clearly affected by the interest rate environment, and we had seen significant rundown in that portfolio along with some refinancing and participation and leverage loans throughout the year. It will obviously be interest rate dependent. We would expect it to continue, but the rate of pace will be a function of, particularly, the refinancing in the residential mortgage market. Steve, if you’d like to talk about the pipeline?

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Stephen P. Clark, WSFS Financial Corporation – Chief Commercial Banking Officer & Executive VP [20]

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Yes. So as Rodger had indicated in his opening comments, we were really pleased with the first quarter, 10% annualized growth, excluding the allowance and the runoff portfolios. Presently, as we ended March, our pipeline was fairly strong. We had a 90-day weighted average of just over $200 million of new opportunities, what we expect to fund as a weighted average probability over the next 90 days. But clearly, all the focus right now is on the PPP activity and on the loan deferral activity. And while our pipeline is good, we really would anticipate a lot of this opportunity moving to the latter half of the year. In the near term, it’s really hard to forecast any type of loan growth with any type of accuracy. But assuming some recovery in the latter part of the year, end of third quarter, early fourth quarter, we should see some activity pick up.

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Operator [21]

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Next question comes from the line of Russell Gunther with D.A. Davidson.

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Russell Elliott Teasdale Gunther, D.A. Davidson & Co., Research Division – VP & Senior Research Analyst [22]

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Dominic, I wanted to follow up on comments you just made with regard to some internal stress testing that you performed. I was wondering if you could share with us what some of your assumptions are within those more potentially adversely exposed sections like retail, food service, hotel, just the type of stress scenario you walked through there and potentially lost content assumes?

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [23]

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Sure. Well, I can’t speak to the subsegment level around our stress testing assumption. We do flex all elements of the portfolio, including loan growth, net interest margin compression or, obviously, credit cost, which is the main driver of the stress, and then our cost base. I would say, as Rodger mentioned, the type of environment we’re seeing now is in the acute — impact to the macroeconomic conditions, particularly in the second quarter, are relatively consistent or somewhere between the adverse and severely as first portfolio as we know, not all economic environments are the same. So they affect the site portfolio segments differently. Owner occupied is different than investors, which is different than C&I and then consumer. But we have stressed all those appropriately, given the macroeconomic drivers. We look to our own performance, our distribution and segmentation. And as we’ve laid out in the material on Slide 9, you can see what our synthesized adverse stress will do based on a starting point of 4Q 2019.

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Russell Elliott Teasdale Gunther, D.A. Davidson & Co., Research Division – VP & Senior Research Analyst [24]

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Got it. That’s very helpful, Dominic. And then I found Slide 8 to be particularly helpful. The reserve levels by loan bucket. But from the outside looking in felt the CRE and both investor-owned or occupied looked a little bit lighter than I would have thought. But obviously, that doesn’t take into consideration the remaining credit marks. So I wonder if you could kind of speak to where those might shake out if you incorporate that? Or any just broader comments on reserve levels within CRE today?

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [25]

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Sure. And first, I would remind everybody as we saw in our quarter-end metrics within the portfolio, all of our credit metrics, both leading and lines are incredibly strong. So all of the provision or ACL in the first quarter was driven by the macroeconomic factors through CECL modeling. And for the most part, our portfolio being outside C&I, that’s going to be driven by the macro interest rate environment and unemployment. Most of the other segments are driven by unemployment and then CRE, in particular, with the forecast around the real estate pricing indexes, which have not yet moved as dramatically as what we’re seeing in unemployment and GDP. So to the extent those macroeconomic conditions or forecasts change as the severity and/or the duration of the economic forecast extends, then it’s likely that CRE and some of those subsegments would be more impacted. But at this point in time, we — again, we haven’t seen any indication within our portfolio and some of those macroeconomic drivers aren’t indicating that stress.

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Russell Elliott Teasdale Gunther, D.A. Davidson & Co., Research Division – VP & Senior Research Analyst [26]

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Okay. That’s very helpful. Last question for me, guys. I appreciate the ring-fence of PPNR for 2Q. Just wondering if you could, within that, touch on the expense outlook for the second quarter, maybe just discuss some of the puts and takes there relative to 1Q and in anticipation of guided lower fee income.

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [27]

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Sure. The first thing I would note is the first quarter of PPNR was particularly strong, one, by the outsized PLA that Rodger mentioned. But we also had some one-timers in our cost base that also improved that number for the quarter. Going forward, the lower PPNR is primarily — first of all, driven by the 150 basis point rate decreased by the fed, followed by the lagging trend of LIBOR, which was still over 100 basis points, but just recently in the last 30 to 40 days has dropped to being over 50 basis points. So that obviously will play into our rate resets, particularly for May and June. And then as we’ve discussed and Rodger mentioned that our assumption, when we laid this out, obviously, things move very quickly week to week. We wanted to take the conservative approach to say, what would impact to our fee businesses be if kind stay-at-home conditions in our region maintained. So most of the lower PPNR is driven by those 2 impacts. Our cost management continues to be disciplined, particularly in this environment where we’re working from home, and we’re actually seeing some cost saves that are naturally occurring. There will be some increase throughout the year as we continue to invest in the business, including delivery transformation and some marketing dollars associated with our marketing technology investment for future growth. But for the most part, they would be relatively consistent with our initial indications from a couple months ago and slightly above, what I would say, is the run rate from the first quarter, which is probably about $2.5 million higher than kind of the core noninterest expense that was (inaudible)

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Operator [28]

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(Operator Instructions) Our next question comes from the line of Brody Preston with Stephens.

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Broderick Dyer Preston, Stephens Inc., Research Division – VP & Analyst [29]

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I just wanted to circle back on the lease portfolio, the new land, could you run us through the collateral that’s back from those new loans, Dominic?

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [30]

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Sure. So primarily, it’s the products that the leases are providing fund. So the — whether it’s the equipment for — office equipment or big equipment or retail equipment. But there is only $1 residual at the end. So most of the product is paid for and recovered who just manage working with the customer and channel partner.

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Broderick Dyer Preston, Stephens Inc., Research Division – VP & Analyst [31]

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Okay. And so that’s — I was sort of looking at on Slide 8, the ACL by segment. The C&I portfolios up near 3, but the lease portfolio is only at 134 basis points. And so I just wanted to better understand what was driving some of the differences between, I guess, what your CECL model is spinning out for loss content between those 2 books? So on the hotel portfolio, you have a bullet there, this is the max LTV and debt service coverage ratio is 75% and 1.3x. I just wanted to clarify that that’s the max LTV and the lowest debt service coverage ratio that you’re underwriting to before this.

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [32]

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Sure. Steve, would you like to address that question?

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Stephen P. Clark, WSFS Financial Corporation – Chief Commercial Banking Officer & Executive VP [33]

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Yes. That is correct. That would be the max. So obviously, we have LTVs that are lower and coverages that were higher at the time of origination.

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Broderick Dyer Preston, Stephens Inc., Research Division – VP & Analyst [34]

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Okay. And then on the $0.5 million decrease in third-party funding costs that you had in Cash Connect. Just wanted to clarify, is there more to come here, Dominic? Like as the costs move lower. And what’s the average cost of the third-party funds?

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [35]

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Sure. So a couple of points. First, the first quarter impact to Cash Connect was primarily rate environment-driven. And we’ve positioned that business to be rate neutral. So the decrease in funding cost was commensurate with primarily the interest rate environment. We don’t disclose that third-party funding pricing, but it is commensurate with a slightly above our internal cost of funds.

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Broderick Dyer Preston, Stephens Inc., Research Division – VP & Analyst [36]

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Okay. Great. And then how much of the — I guess just in terms of your mobile usage, it’s up pretty dramatically. So I just want to better understand how are you thinking about potential brands rationalization and the aftermath of this?

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [37]

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Yes. So I think for certain, what we’ve observed over the last 1.5 months is that what we had believed and we’re planning and are investing in with regard to delivery transformation is that customer behaviors will shift. Clearly, this environment has accelerated that and reinforced kind of our position to do so. We are able — and as laid out in the supplement, service our customers in this environment through reduced branch count, increased use of our mobile product along with supplemental myWSFS mobile product along with the call center. So I think we’re all learning a lot on how to work in this environment. We are clearly seeing our customers able to adapt to this environment significantly. And we are actively evaluating all post-COVID realities and implications for our customers, foremost, which is our priority and how best to operationalize through the bank.

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Broderick Dyer Preston, Stephens Inc., Research Division – VP & Analyst [38]

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Okay. Great. And then one last one from me. It was nice to see the Wealth Management and trust assets up. It’s been down pretty much across the industry. And so I wanted to know what drove that, if it was maybe 1 big — 1 new big client coming in or if anything was tied to bankruptcy. And can you just remind us of the timing in terms of interquarter when those fees typically come in?

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [39]

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Sure. Art Bacci, would you like to handle that question as well?

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Arthur J. Bacci, WSFS Financial Corporation – Executive VP & Chief Wealth Officer [40]

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This is Art. And thanks for the question. I think we’ve continued through the first quarter to see pretty strong performance in both our corporate trust business. We had a very solid fourth quarter on the personal trust business. In terms of AUM, it’s not been any one customer. I think the referral program we’ve instituted and working with commercial bankers, we’ve seen an uptick in referrals from that. We’ve seen referrals coming in from existing clients as well as just good strong market performance to at least early March really contributed to the increase in AUM. And I think there was 1 more question?

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Broderick Dyer Preston, Stephens Inc., Research Division – VP & Analyst [41]

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Yes. And just the timing of when those fees come in, in the quarter.

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Arthur J. Bacci, WSFS Financial Corporation – Executive VP & Chief Wealth Officer [42]

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Yes. We — for the advisory businesses, we usually bill in advance at the beginning of the quarter. So March 31 would have been the billing for second quarter. And obviously, that will be slightly down given the market through the end of March was down.

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Operator [43]

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Our next question comes from the line of Erik Zwick with Boenning and Scattergood.

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Erik Edward Zwick, Boenning and Scattergood, Inc., Research Division – Director and Analyst of Northeast Banks [44]

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I apologize I had some connectivity issues there for a few minutes, so I apologize if some of my questions were already asked and answered. With regard to the PPP program, do you have a — can you give us any color regarding the dollar amount of kind of remaining applications you have? And how much of that you would expect to be funded during the second round of the program?

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [45]

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Steve, would you like to address that?

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Rodger Levenson, WSFS Financial Corporation – Chairman, President & CEO [46]

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So this is…

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Stephen P. Clark, WSFS Financial Corporation – Chief Commercial Banking Officer & Executive VP [47]

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I apologize. I was going to mute. I apologize.

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Rodger Levenson, WSFS Financial Corporation – Chairman, President & CEO [48]

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I was going to pinch it for you, Steve, but go ahead.

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Stephen P. Clark, WSFS Financial Corporation – Chief Commercial Banking Officer & Executive VP [49]

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The first round, as you saw in the information processed, around 2,400 applications for around $770 million, all that has been funded at this point, except for a couple of million dollars. We had teed up 1,800 applications for round 2. And through kind of late morning, midday today, we had processed and received approval for 868 of those 1,800 for an additional $86 million. I don’t have the total of round 2, what that 1,800 would have totaled, I can — we can circle back with you on that question unless someone else on the line or the team has that.

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Rodger Levenson, WSFS Financial Corporation – Chairman, President & CEO [50]

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So this is Rodger. So as Steve mentioned, in round 1, our average loan size was a little over $300,000. We believe based on the applications received that we’re in the middle of processing. The second round will be a little under $100,000, which I think demonstrates the fact and the need for the second round so they could get to the smaller customers.

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Erik Edward Zwick, Boenning and Scattergood, Inc., Research Division – Director and Analyst of Northeast Banks [51]

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Great. That’s helpful. And then just a last question from me. With regard to noninterest income and some of the line items that are potentially sensitive to the COVID environment, thinking about credit, debit card, fees and deposit service charges. Any kind of sense for — is there additional pressure on those line items in 2Q relative to 1Q, just given that we’ll likely to see a full quarter impact?

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [52]

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Sure. Good question. I would say, absolutely. If we think back that really 10 out of the 12 weeks in the first quarter was business as usual, and it really was until the end of March that I think most areas, particularly across the country, were in a stay-at-home situation for a period of time. So whether it’s at Cash Connect or our own customers in our local footprint, transaction and ATM transactions are down without a doubt. And then that would extend through March and then likely recover as we see the reopening of the economy in phases. But most likely, we’ll see it in that credit, debit card and ATM transaction line, potentially in mortgage banking to the extent either from an interest rate environment and/or an ability to do in-home appraisals, et cetera, would be impacted as well.

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Operator [53]

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And with no further questions in the queue, I would now like to turn the conference back over to Mr. Rodger Levenson.

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Rodger Levenson, WSFS Financial Corporation – Chairman, President & CEO [54]

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Thank you, operator. Dominic and I will be participating in an investor conference via teleconferencing next week. And as always, we are available for additional questions after the call. Thanks very much for your interest and support in WSFS. And we wish everybody to have a good day. Thank you.

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Operator [55]

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Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.

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Unidentified Company Representative, [56]

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Thank you.

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Dominic C. Canuso, WSFS Financial Corporation – Executive VP & CFO [57]

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Thank you, Towanda.