WSFS Financial Corporation (WSFS) Q4 2020 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Bryn Mawr Bank Corporation's Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. On the call today, we have Frank Leto, President and Chief Executive Officer; Mike Harrington, Chief Financial Officer; and Liam Brickley, Chief Credit Officer. Before we begin, please be advised that during this conference call, management may make forward-looking statements. Please refer to the disclaimer labeled forward-looking statements and Safe Harbor in the earnings release and presentation for more information regarding what constitutes a forward-looking statement. All forward-looking statements discussed during this call are based on management's current beliefs and assumptions and speak only as of the date and time they are made; the corporation does not undertake to update forward-looking statements. For a more complete discussion of the assumptions, risks, and uncertainties related to the business, you're encouraged to review the corporation's filings with the Securities and Exchange Commission located on their website at www.bmt.com. I would now like to turn the call over to Frank. Please go ahead.

Thanks, Melissa. And I'd like to thank all of you for joining our call today. While 2020 was a year full of unimaginable challenges, it confirmed what we've always believed at Bryn Mawr Trust: we can survive and thrive in the most difficult circumstances. We all went through very difficult times in 2020 but I'm hopeful we're headed towards recovery, and that all of us will come together as a nation united in a common purpose to deal with all of the challenges of the current environment. At Bryn Mawr we focused our attention on our core strengths, providing exceptional service to our clients. Our past successes are indicative of our perseverance and the perseverance of our employees who not only met but have exceeded expectations time and time again. We look forward to better days ahead but acknowledge that these days may be preceded by more challenges, and therefore we continue to be prepared for such. We ended the year on a positive note reporting fourth quarter net income of $15.5 million or $0.78 cents of diluted earnings per share. For the full year of 2020, we reported net income of $32.6 million or $1.63 diluted earnings per share. In a year in which we experienced unparalleled uncertainty around credit, liquidity, interest rates, the economy and our personal well-being, we're very pleased with our performance. While the loan portfolio shrunk modestly year-over-year due to lower demand in the marketplace coupled with a more conservative approach in light of economic uncertainty; our diversified business model proved it's efficacy. Specifically our wealth group set a new record high. At the end of 2020 assets under management grew to $19 billion under Jen Fox's leadership; this represents growth of 10% from the third quarter and 15% from the end of 2019. Nearly all of our wealth business lines grew quarter-over-quarter and year-over-year. Our Bryn Mawr Trust, a Company of Delaware Group, has done particularly well increasing assets under management by over 26% from last year. This again speaks to the importance of our diversified businesses in times such as we're experiencing. Other core fundamentals at Bryn Mawr remained strong; capital and liquidity have grown throughout 2020, credit quality continues to improve, and we completed several initiatives as discussed earlier this year. As Liam will discuss in more detail momentarily, loan deferrals were just above 2% at the end of the year from a peak of over 20% in June, and I'm proud of our credit team's work in helping our clients through this pandemic. One initiative I'd like to highlight includes the ongoing investments in technology; investments in periods past allowed the majority of our employees to quickly and effectively transition to a remote working environment. Because of the success of our remote working environment, we've made the decision to make working from home permanent, and subsequently exited a substantial portion of our office space in Bryn Mawr. Further ongoing reviews of our branch locations and customer behavior led to the announcement of the additional planned branch closures expected in April. We remain committed to the ongoing review of our branch networks, but have elected to take a measured approach to ensure we align our physical distribution in a way that is consistent with our customer's needs post-pandemic. That said, the likely outcome of this alignment will be fewer branches over the next few years. Heading into 2021 we're cautiously optimistic as it pertains to the general economy and our ability to grow organically. Another example of our focus towards organic growth is the announced hiring of George Robostello, who will serve as our Managing Director of Commercial Banking in the Southern New Jersey market. South Jersey is a natural extension of our current markets and George will work to accelerate our commercial client acquisition in this region. While we believe uncertainties will persist, we have positioned ourselves accordingly and identified opportunities within our market in order to drive shareholder returns. Our markets remain competitive from high levels of liquidity within the industry, however, we're confident in our team's ability to capture our market share with our one BMT approach. Finally, I'm proud to announce the Board of Directors approved 27% share dividend, this marks our 10th consecutive year of a full year dividends with an increase. I'd like to now turn over the call to Mike to discuss the fourth quarter results. Mike?

Thank you, Frank, and good morning, everyone. As Frank noted for the fourth quarter 2020, we posted a GAAP income of $15.5 million or $0.78 per diluted share. The fourth quarter included several non-recurring items that nearly offset one another, this non-recurring items related to the downsizing of our real estate portfolio that you may recall included the sale of one back office building, the early lease termination of two back office buildings [Technical Difficulty]. The savings related to the closures will begin to be realized in the first quarter of 2021. For the fourth quarter, net interest income was flat. A lack of loan growth coupled with a stable net interest margin contributed to this outcome. While we continue to see pressure on loan yields we were able to offset these lower yields by reducing rates paid on deposits. Related to the provision for credit losses, improvements to the current and forward-looking economic conditions, specifically Pennsylvania unemployment, led to the release of the allowance for credit losses during the quarter of $1.2 million. Non-interest income was up 4% quarter-over-quarter, this was primarily a result of the sale of the building as discussed a moment ago. Nonetheless, during the fourth quarter and throughout 2020, our fee income held up extremely well with wealth of particular note, as overall revenue was up almost 8% relative to the same quarter last year. Non-interest expenses increased 10% during the quarter. The increase was primarily a result of expenses related to the downsizing of the bank's facilities portfolio, incentives related to sales activity in the wealth division, and an increase in our deferred compensation liability; a function of the strong gains in the stock market during the quarter. Expenses would have been essentially flat quarter-over-quarter if not for these three items. Further, a portion of the incentives paid during the fourth quarter relates to revenue that will be recognized in 2021. Turning to the full year results, net interest income for the full year 2020 decreased 3% due to the significant drop in yields that impacted both our loan portfolio and deposit pricing. This can be seen in our tax equivalent net interest margin which decreased 39 basis points during the year. Revision for credit losses nearly increased fourfold from 2019, the primary driver of the increase was the adoption of CECL coupled with deterioration in the economy related to the pandemic following our day one adjustment. Non-interest income year-over-year was nearly flat and held up very well in light of the pandemic. As Frank discussed, the wealth division had a great year in terms of assets under management growth and year-over-year revenue growth which was over 5% when adjusted to exclude the mitigation payment related to the unwinding of the mutual fund. A particular note, is that our Trust business which grew assets 26% and revenue by 29% year-over-year. Non-interest expenses decreased 3% from 2019. As some of you may recall, last year we mentioned we were taking a more diligent and proactive approach towards expense control even prior to the pandemic. When the pandemic hit, we accelerated several of our expense savings initiatives; the result of these initiatives help support our ongoing investment in technology while allowing us to keep expenses essentially flat versus the same quarter last year when adjusted for the cost of downsizing our facilities portfolio in this quarter. At the end of 2020 our balance sheet was positioned to handle the challenges and opportunities headed into 2021; we have ample liquidity and a strong capital position. As depicted on Slide 7, asset quality has improved after the deterioration earlier in the pandemic. We have seen the vast majority of our asset quality indicators improve and stabilize from the high points, and as we sit here today, we are confident with the level of our allowance for credit losses. Looking ahead, we anticipate continued uncertainty and the potential for ongoing volatility as it pertains to the overall economy and markets. As for the net interest margin, we believe it could come under renewed pressure if the overabundance of liquidity in the marketplace causes additional compression of launch spreads. As a potential counter to the net interest margin pressure, if the yield curve can hold on to it's recent steepening, we could see modest improvement in the margin. Regarding loan growth, there are still great uncertainty as it relates to the direction of the economy; areas like the speed of the vaccine rollout, government stimulus, and the resumption of pre-pandemic economic activity or variables that will influence demand for credit. Given these unknowns loan growth is likely to be muted in the first half of the year and rebound thereafter. Similar to the past year, we remain committed to thoughtful expense control. We will continue to execute our technology plan and hire talent to expand our business. That said, given the actions we took in 2020, we expect expense growth to be minimal in 2021. With that, I'll turn it over to Liam to discuss credit.

Thanks, Mike. The overall loan portfolio saw a slight shift in composition during the third quarter. We experienced solid growth in the commercial real estate segment, specifically the non-owner occupied segment, offset by decreases in our residential, construction and commercial C&I business. Looking closer, as on Slide 10; some of the main real estate segments within the portfolios which we consider more susceptible in the current environment, we saw stabilized to improving conditions and outlooks from our clients. We worked very closely with our clients and there has been a growing positive sentiment around the future operating environment, and the ability to manage through the uncertainties going into the first half of 2021. While we believe it will still take some time to fully rebound from the difficulties of 2020, we are noticing improving client confidence since the last quarter. We recorded a modest reduction in hotel exposure at year-end, a substantial number of borrowers in this sector went into the crisis with modest leverage and have fared better than expected. Overall, our commercial real estate portfolio remains strong with strong underlying fundamentals, including stable loan to values. Moving to Slide 11, we're pleased to report deferrals declined to approximately 2% of the total portfolio at year-end; this is significantly lower than the approximately 21% high point at the end of the second quarter of 2020. Our largest loan segment which is our CRE non-owner occupied decreased from a high of 28% in June to 4% at year-end. We saw a significant decrease of deferrals in the CRE owner occupied portfolio from a high of 29% down to 2% at year-end. The hard work of the team working closely alongside our clients yields confidence in the interim. During the fourth quarter, overall criticized loans decreased. There has been substantial reduction in classified loans as we successfully reduced our exposure or exited several transactions. This was partially offset by net new downgrades to the special mentioned category for a number of clients whose business models such as commercial real estate operators in the retail space and outpatient surgical centers have been impacted by COVID. Despite the increase in special mentioned credits, the reduction in NPA and classified exposure is a positive sign. However, it remains too early to tell if this is the beginning of a trend. We will have a clearer view of the new normal trading conditions as the COVID vaccine rolls out over the next few quarters. If economic conditions continue to improve, along with an increase to our customer sentiment, we would expect that these portfolios could show further improvement. Slide 12 and 13 provide a more granular view of our deferral history and future expectations as of 12/31/20. As we see on Slide 12, a portion of the CRE Non-owner occupied concentrated in hospitality and restaurant borrowers continued deferments into this year. The vast majority approximately 87% of these commercial deferrals are currently on an interest only payment schedule. The deferred loans were expected to return to regular P&I schedules in the second quarter of 2021. We remain committed to working alongside COVID impacted clients to assist were prudent and necessary. Slide 13 details the breakout between first second and third terms deferrals. As seen in the slide the third deferrals are continuing into 2021 and are expected to reduce to near zero in the second half of the year. Slide 14 breaks out deferral information for our largest loan segment, the CRE-Non-owner occupied segment. As mentioned a moment ago. This segment represents the bulk of the third time deferrals. But we are confident that the majority of these borrowers will resume full payments later this year. As Frank and Mike touched on the 2021 outlook earlier, I wanted to add a few comments. After working with many of our customers during the pandemic over the last 10 months, we have managed through a wide range of unknowns and uncertainties, some of which persist to this day. We all have considered worst case scenarios at one point or another. But at the end of the day, we relied on our sound underwriting practice, experience and patience to overcome these obstacles. From where we were at the middle of 2014 to now I can say the customer sentiment has improved, and there is improving clarity and enhanced confidence with respect to the prospects of a continuing economic recovery. If we continue on the path of improving economic conditions, I believe our credit quality measures will improve and the prospect for loan growth will as well. With that, we'll turn the call back to Frank.

Thanks, Liam. And with that operator will open up the line to questions please.

[Operator Instructions] The first question today comes from Casey Whitman, Piper Sandler. Please go ahead.

Good morning. So congrats on the success in the wealth businesses last year. So just wondering, it's been a while since you did any acquisitions in the wealth space. So I was just curious as to what your guy's appetite was for wealth acquisitions this year?

Casey, I think, we're always looking at things and opportunities. Nothing's come across that has made sense for us. You know, just generally the RIA acquisitions, acquisitions that banks have done if you look around the country, they haven't all been that successful. I think probably our most successful acquisitions in the past have been of trust companies have similar structure and model to what we've had. So, you know, we don't need to stretch. We're not trying to take any unnecessary risk with these types of acquisitions because we've had such success with the organic loan growth. I think we'll continue to look at opportunities as they develop, and if there's something that makes sense and is strategic to what we're doing, we’ll obviously execute on it. But for the time being, we’ll continue our focus on organic growth.

Make sense. I guess while we're on the topic, any updated thoughts on just how you're looking at Bank M&A this year as well?

Pretty much ditto as wealth and RIA. I mean, just -- we haven't seen anything really that is strategic for us. And you know, that really is going to that wouldn't be franchised dilutive, for example, or that would be that will really be additive in our markets. So, again, we're just you know, we've been spending the last couple of years building up the infrastructure for growth, building up technology for growth, putting it really, I think, one of the best teams and community banking in place. And I think that'll be continued to be our focus as we go forward unless something pops up that that'll make sense for us to jump into. I mean, I think, you know, our market pretty well. There's a lot of opportunity here on the organic side. So we think we can keep that growth trajectory going. Once this pandemic settles down, we'll keep it going in the right direction.

Understood makes sense. Thanks. I'll just ask one more, maybe on the margin where we saw it, [indiscernible] appreciate the outlook you gave, just wondering if you could give us some details on where new production yields are coming on relative to the portfolio yield and just whether there's still any pressure there if the gap is kind of narrowed enough?

Yes, I'll take that Casey, good morning. I mean, new yields are coming on lower than I'd say on average than the actual yield. But it's, they're pretty close to one another. So that the overall yield in the book is about 390-389-390 and probably putting on new business just below that, at this point. What I alluded to in the prepared commentary is that there's so much liquidity out there, and then there's not as much demand for credit. So those two things are working against each other to potentially drive spreads lower. But the good news is the curve steepened a little bit. So that might offset some of that, that downside pressure on the new yields.

Thank you.

The next question today comes from Michael Perito of KBW. Please go ahead.

Hey, guys, good morning. Thanks for the color on the call and on the outlook for 2021. I had a question on expenses. I want to go a little bit more clarification on the Slide 8, you guys mentioned that expense growth is expected to be minimal versus prior year. If I'm looking at the prior year, I have a core number of about 141 million for 2020. I'm just curious, I guess is that how you're thinking about the number for 2020 when you talk about minimal growth or are there some of those items in the fourth quarter that you alluded to in your prepared remarks, Mike?

I tried to keep it simple and just use the GAAP numbers. Because, so I think it's we're just - we want to hold it flat relative to the actual reported number, not try to do all the ins and outs. It's too complicated to explain and dissect. So we're just, I think, and normalized the number for Q4 in particular, just because there was a lot of expense related to that. So to normalize the number for Q4 and use 35 that would have taken a number down to about 35 million. And then we just expect that number to kind of hold on a relative basis going forward. And that should be pretty close to...

Got it, okay. I mean, you guys are on the technology side - right. But you mean when you say minimal versus prior year, it sounds more so like, you know, that fourth quarter run rate, you guys are hoping that will hold and but there could be some upward pressure to it, depending on the pace of your investments and your growth.

Yes, I mean, so the occupancy expense coming down, will be lower year over year, that money's getting redeployed into technology and people basically. But again, we'd expect the expense growth number to be very minimal, so very low single digits of zero, if not zero.

That's helpful. Thanks. And then Mike or Frank, I was wondering if you guys could maybe walk us through a little bit, you know, the kind of updated technology roadmap for the next year or two as you guys see it. I mean, I know you guys are pretty advanced in your rollout of nCino across platform at this point, just curious if there's any other kind of specifics that you can share that that you guys are looking at that you think could be impactful and we should be mindful of is, as we move in 2021 here?

Sure. Well, nCino really is, I think the story for the first half of this year for sure. You know, we've launched three modules of nCino between the end of '19 through '20. And the commercial piece, which is the largest piece, and probably the most complicated of all, is we're in the throes of right now, we should be done, hopefully close to the end of the second quarter that that's the goal. So, I don't want to say we're not doing anything in the interim. But that is really prime focus for everybody to get that completed and try to get the efficient - start to get the efficiencies of system like that. You know, we're also in the throes of a technology transformation internally. And hopefully, maybe next quarter, we'll have Adam on the call, and he can give you a little bit more color, like he did it at our last Investor Day, but we're moving a lot of our technology into the cloud, getting out of it, management, managing hardware business, literally getting out of that. So that's a big focus going forward. Some of our subsidiaries are looking at platform changes, and some upgrades and additions to their platforms. And you know, as always, just like any I think, appropriate strategic planning, Adams done a really nice job of putting together a plan for us over the next two to three years. So there'll be a continued investment and upgrade in our technology, hopefully resulting in continued efficiencies. And I think part of what you're hearing from Mike, you know, is just keeping expenses flat, one of the reasons we're able to do that is because of what we've invested in over the last couple of years. And I think everything we do going forward is with an eye towards that kind of efficiency built.

That's helpful. Thanks, Frank. And that it does. Thank you. And then just lastly, you know, as we just a little bit of a two part question here, but just, it sounds like the credit environment is fairly stable, and the optimism of the client is improving, although you guys are still remaining a little cautious, and just making sure that it doesn't go the other way. And, we'll see what the stimulus and the vaccine looks like. But for the most but it seems like it's fair to think that, certainly provision expense in 2021 will be lower than what it was in 2020. But as I think about profitability overall, you know, obviously, the somewhat more normalized credit costs will help but how do you guys think about I mean, is there room with kind of that expense outlook that you laid out, to improve the pre provision earnings profile of the bank in 2021, or just a low rate environment, make that kind of a challenging endeavor, and likely, maybe more of a 2022 environments, we get some steepness at that point, or any kind of color, and how you guys are thinking about that over the next 12 months or so?

So, I'll take that. So Mike, I think that's the ladder. So I think the idea around holding expenses flat is a function of just the pressure on the earning side of the house and growing that year over year. As we mentioned, I think the loan growth probably loaded on the back end of the year. So you know, we're just so you end up with a modest increase in average balances year over year, and then you get the full effect of the decrease in the margin from the prior year. So we're going to bring endeavor to grow, we think we can grow our fee income business to offset some of that. So and that leaves you with the situation described, the second part of your second scenario, which is it's difficult until we should average gross bout average longer short to materialize on the balance sheet and that really throws you into 2022.

So what we're hearing with respect to the vaccine will come into thing. We're just trying to be cautious about how we look at the environment, really prior to getting back to some kind of a normalized life that we're going to lead.

Yes, makes sense. And I got one more follow up because you brought something up, Mike, I just want to clarify you know, if I look at the only asset base today, right, there's still probably like, you know, year on year up, maybe $300 million, $400 million bucks, right with some of the liquidity that came in from PPP. And just the environment itself, I mean, at this point, is it still safe to assume near term that a lot of that liquidity and that balance sheet size is probably going to stick around or do you see any updated you know, thoughts around kind of liquidity normalizing from some of your customer base?

Well, we haven't seen it normalized yet. So in fact, at the end of the year, we sort of saw a liquidity washing other bank, and some of that's calling back out. But we don't feel like there's going to be a big change in the liquidity profile. And again, it goes back to that's one of the constraints, we believe in terms of loan growth, especially in the first half as there's so much liquidity that is for when is the uptick going to be there to use that liquidity and then subsequent to that, and when will the credit demand return to where it was pre pandemic. But no real change. Mike, I think we're still going to see us sitting on a decent amount of excess liquidity. When I say that the balance sheet will be liquid from a deposit standpoint, we're trying to run that out where we can where it doesn't make sense to hold it and put it in overnights. And then we've also done some things in the investment portfolio to try to get some of those dollars invested with a little bit better yields and then overnight cash been successful there and consumer we've had, if you want to take a deeper look at the information, you'll see we've grown, put a credit book on of about $100 million of CLOs, and some sub debt and things like that to supplement the lack of loan growth.

Really helpful. Thank you, guys. Appreciate the update and stay well.

The next question comes from Erik Zwick of Boenning and Scattergood. Please go ahead.

Hey, good morning, guys. I just wanted to start on non-interest income and the capital markets revenue specifically that obviously, you know, varies from quarter to quarter based on certain activity. I guess, if I looked at it from a full year perspective, from the level about $9.5 million in 2020, any thoughts and how that trends going forward here in 2021?

Mike, do you want to take that?

Yes. I think that numbers are good. That's a good way to think about it, Eric. So we're just going to have volatility. A lot of that revenue is dependent on when we close launch [ph], access to or length. So in some of what we might have expected in Q4, some of that activity rolled into Q1 of this year. But that $9.5 number, $10 million number we think is a good number, if you're thinking about it on a go forward basis, and that's where we'll at least land there in 2021.

Got it, and then switching gears to the newly authorized round of PPP. Just curious, you know, how much demand are you seeing? How active do you intend to be? And do you anticipate selling again, as you did the first time around?

Anecdotally, I mean, we're not seeing as nearly as much demand, as we saw the first time through, we'll have to say there isn't, and we've had some, some requests, we are not going to participate in round two. We sold the portfolio to a very large servicer of loans, we worked at an arrangement where, we're referring our customers to them. You know, at the end of the day, it's, there's so much operational risk for a bank, like Bryn Mawr who's not at an SBA shop and doesn't have, an extra 100 people in the loan operations group to manage the credits. As you know, if you look back, I mean, everybody thought everything was going to run off real quickly. And, forgiveness has taken a lot longer. So there is still a process, you have to go through with those loans. And I think it served us really well to exit the portfolio back in June, because we've been able to devote really 100% of our attention to the customers, which is what we wanted to do. I think that's how we got our deferrals down. And we want to be there going forward for the customers and for their needs, going into '21 and '22.

Got it. Thanks. And yes, I agree, you guys had a lot of good, inaccurate foresight to anticipate some of the difficulties in the extension and the whole process. So and then last.

Erik, just to add to Frank. So it's really the first, I think it's just the first week to it's been open. So we will be getting a report we actually get a later today to see what's coming into our partner, the company we've partnered with, that will be handling a second request will go to that, that partner company and we will share some of the revenue related to the second request as they come in. But we haven't gotten any data yet. At this point, we'll actually get that later today over your first report.

Yes, great. Look forward to that. And then last one for me pivoting off the expense discussion and Mike, you mentioned that, any of that the savings that you generate from the branch close will likely be reinvested in tech and talent, I guess on that that ladder front in terms of the talent you guys have previously talked about, wanting to add to the ranks of the commercial lenders. And it sounds like you have done so recently with the addition of the new director in southern New Jersey, how do you think about the rest of 2021? What is the market like out there? And I guess, are there specific individuals that you target or just look for opportunities to arise naturally over time?

I think it's, it's all of the above, Erik. I mean, I think, we obviously know, some key players in the marketplace, and always try to keep the channel communication open with them. And then opportunities, just pop up referrals come through; we get wind of somebody moving on and unhappy or wants to move on and be unhappy. And, you know, we'll try to take advantage of those. And it's not just on commercial lending. I mean, I know that, in our wealth group, always looking for lift out opportunities for you know, just talent anywhere, we can find it that makes sense and really fits with our culture at the bank. So, it's a branch of broad answer, but it's just really pretty broad question about how we get these people in there, but I think you can look at it across the entire enterprise, not just in commercial lending.

I appreciate the color there. Thanks for taking my questions this morning.

The next question comes from Matthew Breese of Stephens Inc. Please go ahead.

Good morning. Few questions. So sorry to go back to expenses. I just got a little bit confused there. On the one hand, like you said, hold the full year GAAP number, trying to target that flap. But then I also heard you talk about the core 4Q number $35 million. Can you just clarify for me what the base is?

Just use 2020 as your flat number. The GAAP number 142 [Technical Difficulty].

Okay, thank you. And then along growth, I know it's I know, it's been a challenge. I was hoping you could talk a little bit about the interplay between originations and payoffs. And what the pipeline looks like.

Well, the pipeline is building some of the activity, as I noted earlier, just related to my common around capital markets, some of that activity. We expected that we might have closed in Q4 moved in Q1. We just had a board meeting yesterday and approved a bunch of credit share on the construction side. So there's activity. And but again, I think just adding incremental growth, I think in the first half is going to be like we said, we think the growth will be muted in the first half and then potentially pick up in the second half.

All right. And then you know, turning to BMT Delaware, you know, a lot of growth there, it seems like it's doing quite well, it's hoping you can give us an update in terms of where AUM actually stands today. I was also curious in terms of business line efficiency and how the pipeline for new business looks, given the new administration?

I don't know that we're putting out mid quarter updates on a AUM but it continues to grow. I mean, I can say that and grow nicely. You know, we finished the year extraordinary. It was really an extraordinary year for BMT, Delaware. And that momentum has been carried into the, certainly the first part of this month, it appears to continue forward, I think we'll see as I guess, tax reform develops, we're going to see more, probably more opportunity, that usually what happens, that's usually what happens, we saw a lot of that build up at the end of last year. But you know, our business is so broad, and it's not just going to be driven by tax law changes. And just as it, this is driven in a large part by a lot of just fundamental estate planning that people execute on. So, I think there's a great still great opportunity, great growth opportunity in that business. We have a really, really, I think, an exceptional team down there. We hear it consistently and constantly from our clients. So I expect the momentum to continue really through most of this year.

The only thing I can answer your questions specifically that business was about $11 billion at the end of the year, just under that. And then, as Frank note, I mean the momentum in the business especially at the end of the year and just kind of goes back to my comment around when I was normalizing expenses, a lot of the incentives we're paying were related to new business that was being written, and Bryn Mawr Trust of Delaware all the way up till December 31; it's one of the things that sets us apart is, we keep -- we stay open and continue to do business right up till the end of the year in that area, and it really benefited us since customer service.

Actually Bob was -- Club Bob [ph] actually closed early on New Year's Eve about 8:30, New Year's Eve evening, literally. So that's -- that just speaks to the level of service and to why I think this becomes a choice for most of the time -- a lot of our referral sources.

I appreciate that. Next one is just in the deck, there is a mention of the share repurchase authorization. Can you just talk a little bit about willingness ability or what are the circumstances where you would repurchase?

Well, we had paused it, when we first went into this -- into the pandemic, I think that pauses off now. So we have a capacity, we have authorization from our boards, we've got a $700,000 of share authorization still remaining on the original authorization that we went to them with. And then we've got, as we noted, also in the same slide, we've got a lot of cash at the holding company, we're sitting on over $400 million of cash here; so we'll definitely be evaluating it and looking for opportunities, potentially to buy our stock back in the future.

Okay. Just the last one for me in regards to the new Regional President in South Jersey. Could you just frame for us what specific markets within South Jersey you're looking to target? And what business lines; CRE, C&I, a little bit of both; curious?

With George, I think his background is in C&I. So, I mean, I think that will obviously be his sweet spot. But as he builds his team, I mean, there are so many opportunities on the CRE front; it's really an extension of the Philadelphia market. I mean, I know that's in the South Jersey; so we get a lot of opportunities on the CRE front as a result. And it's a natural outgrowth of what Kevin [ph] has been doing for us, with his ties up in Princeton, and that Central New Jersey area, it's just a natural extension of what we've been doing there. So, I think you'll see a broad base of business coming out of George and his team.

That's all I had. Thank you so much for taking my question. Thanks a lot.

[Operator Instructions] The next question comes from Christopher Marinac of Janney Montgomery Scott. Please go ahead.

Hey, thanks. Good morning. I wanted to circle back on criticizing classified assets. We saw some movement in the retail area and just a little bit in hospitality; I just was curious kind of what the path to the further upgrades or downgrades if you see the next couple of quarters?

Liam?

Sure. We look at our crib-class [ph] book in detail, monthly, and our last review was actually yesterday. So I think the ultimate trajectory is tied to the pace of economic recovery and the rollout, which in turn is tied to the rollout of the vaccine. We're -- folks are stable right now, so we're not looking at a lot of people burning through cash but the triggers for upgrades are really going to be kind of a return to normalize trading activities. So all things being equal, it looks like a pretty reasonable upward trajectory if the economic conditions hold and continue to accelerate, and if the impact of public health initiatives take hold in a meaningful way in the Q2/Q3 kind of context.

Okay, great. That's helpful. And then just to follow-up on the utilization data that you that you've shared the last couple of quarters. How does this decline we've seen utilization kind of compare back 10-12 years ago; the last crisis? And is it normal to see this or is it somewhat unusual what we've seen this past year?

Well, I think the last crisis was fundamentally different than this one, and that it was driven by an imbalance of speculative real estate, both on the residential and the commercial side that came crashing down. This recession is clearly driven by the COVID impact and business managers are not making unnecessary investments in inventory or expansion and have been frankly, holding a little bit of cash to weather the storm. And I think that's what's driving the utilization, for the most part it's good prudent balance sheet management by our counterparties. And that extends into the HELOC world in the consumer lands; HELOC usage is very typically a confidence issue. So -- and folks have not been gone crazy there but also a lot of that's been refinancing away into long-term, 30-year paper was a two handle because the market has provided that opportunity for folks. But the thing that's comparing this recession with 10 years ago is apples and oranges; I don't think the comparisons really tell us anything.

Got it. Well, I don't disagree; I just appreciate the background and comparison. So thanks very much, guys.

The next question comes from Bernard Horn of Polaris Capital Market. Please go ahead.

Good morning. I just had a forward-looking question with respect to the commercial real estate. And I know you've given some good color on that earlier but I guess my question is more focused on what could happen as the post-COVID world changes, especially, you know, you hear a lot of companies talking about reducing space by 25%, and so forth. And I know, there may be situations where people are going to need more space but you don't hear people saying, we need 25% more space because we're going to distance people, you only hear them saying, on a net basis, we need 25% less space. So, if you -- do you have any kind of early signals or anecdotal evidence from -- it sounds like you've been very active with your customers, both on the hotel side, as well as the real estate side that might suggest people are beginning to prepare for lower real estate. If you take vacancy rates up on your portfolio, what happens and -- to the -- and obviously, the LTVs could be low but that doesn't help if rentals get ratcheted down and so forth. I know it's a long-winded question but I think you get the point.

Frank, do you want to take that.

Let Liam start and I'll add to it.

Sure. Well, first and foremost, all real estate is local and we have the benefit of sitting in a -- not an overfilled, not a frothy kind of commercial real estate market in Southeastern Pennsylvania, South Jersey; so the supply and demand dynamics were pretty well matched up going into the crisis. We have not heard anything about rent space reductions in our office -- with our office customers, but it's early days and those leases roll off on long-term schedules; so it's not like there is an imminent issue, at least in our book. And longer term, I think there are puts and takes, social distancing requires more space for same number of FTE than probably is a long-term trend, the number of FTE in a building will probably reduce. Where that settles out is a great question but I think it's too early to tell. In the hospitality space, our folks anticipate and I kind of concur with their assessment that leisure-oriented travel, going to your kids soccer tournament or whatever, that's going to bounce back relatively strongly with the medical condition getting under control, right; and that's vaccine stuff. Those hospitality properties, which are more dependent on business travel, probably have a longer road to recovery; just as corporate treasurers are learning to operate within budgets, a certain amount of that business will probably take years to bounce back. So it's very different property by properties, sponsor by sponsor, but we're -- we're cautiously optimistic in trading conditions, just bouncing modestly off the bottom leave us with a pretty good portfolio.

Right. Thanks. I don't know if anybody else was with you or I don't think somebody else going to comment but that's fine; that certainly covers it. I guess the only follow-up to it…

It's Frank, I'll just make one quick comment because you asked about anecdotal, and I've heard anything anecdotally and just very anecdotally, and I'm not saying this is even occurring in our portfolio but I have spoken to some operators who are looking to repurpose space. And I say it's no different than what you heard at a much broader level with Amazon jumping into retail space and malls; I mean people are looking at can they do something different with office space, whether it be residential or something else. So, I know those conversations are going on, I know people are looking at things but we don't have any particular evidence in our portfolio.

Okay, thanks very much.

This concludes our question-and-answer session. I would like to turn the conference back over to Frank Leto for any closing remarks.

Well, after a very difficult year, I think we're happy to have that one behind us, we're looking forward to 2021. And again, we thank you for -- thank our central shareholders for your confidence in us, and thank everybody else on the call for your interest in Bryn Mawr Trust. Talk to you soon.

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