Release Date: January 28, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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.
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