• Core Earnings Per Share (EPS): $1.11 for Q4 2024; $4.39 for full-year 2024.
• Core Return on Assets: 1.24% for Q4 2024; 1.26% for full-year 2024.
• Return on Tangible Common Equity: 16.55% for Q4 2024; 17.83% for full-year 2024.
• Quarterly Revenue Growth: 7% year-over-year in Q4 2024.
• Wealth and Trust Business Revenue: $40 million for Q4 2024, with double-digit growth for the full year.
• Core Net Interest Margin: 3.80% for Q4 2024.
• Customer Deposits Growth: 4% in Q4 2024.
• Non-Interest Bearing Deposits: Grew 6% in Q4 2024, comprising 31% of average deposits.
• Loan Growth: Declined 1% in Q4 2024; grew 3% year-over-year.
• Total Net Credit Costs: $8.7 million, decreased by $11.4 million from the prior quarter.
• ACL Coverage: 1.48% at the end of 2024.
• Efficiency Ratio Outlook: 60% for full-year 2025.

• Warning! GuruFocus has detected 5 Warning Sign with WSFS.

Release Date: January 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• WSFS Financial Corp (NASDAQ:WSFS) reported strong financial performance with a core earnings per share of $1.11 and a return on tangible common equity of 16.55% for the fourth quarter.
• The Wealth and Trust business delivered a record quarter with $40 million in revenue, contributing to a 19% year-over-year growth.
• Customer deposits grew by 4% in the quarter, with non-interest bearing deposits increasing by 6%, indicating strong customer engagement.
• WSFS Financial Corp (NASDAQ:WSFS) achieved a core net interest margin of 3.80% for the quarter, despite interest rate cuts, showcasing effective deposit repricing strategies.
• The company expects continued broad-based deposit growth and mid-single-digit loan growth in the commercial portfolio for 2025, indicating a positive outlook for future growth.

Negative Points

• WSFS Financial Corp (NASDAQ:WSFS) faced a $4.7 million pre-tax impact due to the termination of a relationship with a longstanding Cash Connect client, affecting revenue and core non-interest expense.
• Loans declined by 1% quarter-over-quarter due to higher seasonal payoffs and business sales, although there was a 3% year-over-year growth.
• Non-performing assets increased due to the migration of one relationship with two loans, although these are believed to be well collateralized.
• The Cash Connect business is expected to see a decline in revenue due to interest rate reductions, although this is offset by lower funding costs.
• The company anticipates net charge-offs to be between 35 to 45 basis points of average loans for the year, reflecting ongoing normalization of credit.

Q & A Highlights

Q: Can you provide insights into the expense outlook and how you plan to manage expenses given the efficiency guide for the year? A: David Burg, CFO, explained that the fourth quarter was noisy due to a one-time $1.9 million Cash Connect expense and variable expenses related to interest rate increases. Normalizing these, expenses were up about 15% year-over-year, mainly due to salaries and benefits. Investments in headcount, particularly in Wealth, Commercial, and Technology, are expected to drive future growth. The efficiency ratio may fluctuate quarterly, but the goal is to keep it generally flat, balancing revenue and expense growth.

Q: What potential levers exist to improve Cash Connect's profitability, regardless of interest rate changes? A: David Burg noted that while interest rates impact the business, declining rates should improve profit margins. Beyond that, they focus on growth, optimizing cash logistics, and pricing leverage due to consolidated market share. The goal is to increase profit margins next year.

Q: How do you view capital levels and potential uses, including M&A interest? A: David Burg stated they aim to return about 35% of net income annually, balancing dividends and buybacks. They held more capital recently due to macro volatility but are considering buybacks. Rodger Levenson added that while they focus on optimizing their market position, they remain open to M&A if it strengthens the franchise.

Q: Can you discuss the risks associated with the Cash Connect business, beyond interest rate movements? A: Rodger Levenson explained that the primary risk is managing large cash amounts and ensuring proper controls. The recent client termination was due to elevated risk from the client's financial stress. Overall, their controls worked well, and they continue to manage risks effectively.

Q: What is the outlook for loan growth, and how will you offset the Upstart runoff? A: David Burg detailed that consumer loan growth will be flat due to the runoff of Upstart and Spring EQ portfolios, offset by growth in WSFS-originated loans, including residential mortgages and HELOCs. Commercial loans are expected to grow mid-single digits, driven by a solid origination pipeline.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.