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WSFS FINANCIAL CORP (WSFS)·Q4 2024 Earnings Summary

Executive Summary

  • Solid quarter on core profitability despite idiosyncratic Cash Connect event: Core EPS $1.11 and core ROA 1.24% (GAAP EPS $1.09, ROA 1.21%). Net interest margin held at 3.80% as deposit repricing and mix offset lower loan yields after 2H rate cuts .
  • Broad-based deposit strength (+$603mm QoQ, +4%) with 31% average noninterest DDA and 77% loan-to-deposit ratio; record Wealth & Trust fees ($40.3mm) drove fee diversity (32% of revenue) .
  • Credit normalized favorably: total net credit costs fell to $8.7mm (from $20.1mm); NCOs 0.31% (from 0.58%); ACL steady at 1.48%; NPAs rose to 0.61% on migration of one relationship (well-collateralized) .
  • 2025 outlook: Core ROA ~±1.25%, NIM ~±3.80%, mid-single-digit Commercial loan growth, low-single-digit deposit growth, NCOs 0.35%-0.45%, efficiency ~±60%, tax ~24% (assumes one 25 bp cut in June) .
  • Cash Connect termination created a one-time $4.7mm pretax drag; management expects partial insurance recovery and sees margin expansion in 2025 as lower rates reduce funding costs and pricing optimization continues .

What Went Well and What Went Wrong

  • What Went Well
    • Deposits grew $602.8mm QoQ (4% not annualized), with 31% average noninterest DDA and diversified sources (Commercial/SMB/Wealth & Trust 51% of balances), supporting a 77% L/D ratio .
    • Wealth & Trust posted a record quarter: fee revenue $40.3mm (+12% YoY), pre-tax income $33.1mm; AUM/AUA $89.4bn; growth across Institutional Services, BMT of DE, and PWM .
    • Credit metrics improved: total net credit costs fell to $8.7mm; NCOs decreased to 0.31% (annualized); delinquencies declined QoQ; ACL coverage steady at 1.48% .
  • What Went Wrong
    • Cash Connect reported a $3.4mm pretax loss on a client termination (one-time $4.7mm impact including $2.8mm uncollectible fees and $1.9mm expense), reducing consolidated fee revenue QoQ .
    • Efficiency ratio rose to 64.6% (from 61.1% and 55.6% in Q3 and prior year) on higher core expenses and Cash Connect noise; core noninterest expense up $3.3mm QoQ .
    • NPAs increased to 0.61% of assets on migration of one relationship (land and multifamily construction) to nonaccruals, partly offsetting broader asset quality improvements; management cites collateral strength .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Total Net Revenue ($mm)265.3 267.7 261.5
Diluted EPS ($)1.05 1.08 1.09
Core EPS ($)1.15 1.08 1.11
ROA (%)1.25 1.22 1.21
Net Interest Margin (%)3.99 3.78 3.80
Fee Revenue ($mm)87.2 90.2 83.3
Provision for Credit Losses ($mm)24.8 18.4 8.0
Noninterest Expense ($mm)147.6 163.7 169.1
Net Income Attrib. WSFS ($mm)63.9 64.4 64.2
Efficiency Ratio (%)55.6 61.1 64.6

Segment performance and KPIs:

  • Segment Breakdown
    • Wealth & Trust
      • Fee Revenue ($mm): 36.0 | 37.2 | 40.3
      • Pre-tax Income ($mm): 27.5 | 30.4 | 33.1
      • AUM/AUA ($mm): 78,087 | 87,217 | 89,425
    • Cash Connect
      • Net Revenue ($mm): 19.0 | 27.7 | 21.8
      • Noninterest Expense ($mm): 17.4 | 26.1 | 25.2
      • Pre-tax Income ($mm): 1.6 | 1.6 | (3.4)
      • Adjusted Q4 ex-termination: Net Revenue $24.6mm; Pre-tax $1.4mm .
KPIQ4 2023Q3 2024Q4 2024
Total Customer Deposits ($mm)16,422 16,427 17,030
Core Deposits ($mm)14,638 14,284 14,899
Noninterest Demand ($mm)4,917 4,686 4,988
Loan-to-Deposit Ratio (%)——77
Total Customer Deposit Cost (%)1.83 1.95 1.83
Interest-Bearing Deposit Cost (%)2.38 2.79 2.65
Total Loan Yield (%)7.02 7.07 6.80
Net Charge-offs / Avg Gross Loans (%)0.46 0.58 0.31
ACL / Loans (%)1.46 1.48 1.48
NPAs / Total Assets (%)0.37 0.44 0.61
Total Net Credit Costs ($mm)25.4 20.1 8.7
CET1 / Tier 1 Leverage / Total RBC (%)13.72 / 10.92 / 14.96 13.46 / 10.68 / 14.71 13.88 / 11.03 / 15.13

Notes on drivers:

  • NIM up 2 bps QoQ to 3.80% as deposit repricing and higher noninterest deposits offset lower loan yields after 2H rate cuts; total customer deposit costs fell 12 bps QoQ to 1.83% .
  • Fee revenue down 8% QoQ on Cash Connect client termination and absence of prior quarter Spring EQ earnout; Wealth & Trust offset with a record quarter .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core ROAFY 2025N/A (first issuance) ~±1.25% (assumes one 25 bp cut in June) New
Net Interest MarginFY 2025N/A ~±3.80% New
Loan GrowthFY 2025N/A Mid-single-digit Commercial; Consumer flat (partnership runoff) New
Deposit GrowthFY 2025N/A Low-single-digit; broad-based New
Fee Revenue GrowthFY 2025N/A Mid-single-digit overall; double-digit Wealth & Trust New
Net Charge-offsFY 2025N/A 0.35%–0.45% of avg loans (~5 bps related to Upstart) New
Efficiency RatioFY 2025N/A ~±60% New
Tax RateFY 2025N/A ~24% New
DividendOngoingPrior $0.15/quarter $0.15/quarter approved for payout Feb 21, 2025 Maintained

Context: In Q3 WSFS said 2025 outlook would be provided with Q4; thus FY25 guidance is newly issued here .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
NIM and Deposit BetasNIM 3.85%; deposit costs rising; hedges in place; fee diversity supporting margin Full $1.5bn floor program complete; each 25 bp cut ~5 bps NIM near term; proactive CD repricing; down-cycle betas to be managed NIM 3.80% (+2 bps QoQ); IB deposit beta ~26% in Q4; exit beta ~35%; FY25 NIM ~±3.80% Stable-to-supportive as rates fall
Fee Businesses (Wealth & Cash Connect)Broad-based fee growth; Cash Connect market share gains; Wealth AUM/AUA +11% YoY Cash Connect optimizing idle cash; top line rate-sensitive but expense offsets; wealth system upgrades completed Wealth & Trust record quarter; Cash Connect one-time client termination but margin expected to improve in 2025 via pricing/logistics Wealth momentum; Cash Connect mix/policy reset
Credit & CRE (Office)Problem assets rose; stable NPAs, NCOs up on one office credit Problem assets driven by a few relationships; collateralized; downshifting 2024 NCO guide Net credit costs fell; NPAs up on one relationship migration (land & MF construction), well-collateralized; ACL 1.48% Normalizing with idiosyncratic moves
Capital & BuybacksStrong capital; buybacks and dividend continued Capital return ~50% in 2024; maintain discipline; M&A bar high CET1 13.88%, leverage 11.03%; repurchased 393k shares; $0.15 dividend; call of $70mm legacy BMT sub notes announced in Q1’25 Returning capital while optimizing liabilities
Expense Discipline & InvestmentsCore efficiency ~59.8%; investments in talent/tech Efficiency guide maintained; expense run-rate includes incentive true-ups and hiring in Wealth/Commercial/Tech Efficiency 64.6%; core NIE up $3.3mm QoQ with Cash Connect items and higher compliance/legal/benefits; 2025 efficiency ~±60% Investing with guardrails

Management Commentary

  • CEO: “WSFS delivered another strong quarter, with core EPS of $1.11 and a core ROA of 1.24%... highlighted by robust deposit growth, a strong NIM, lower credit costs and record performance in our Wealth and Trust franchise.”
  • CEO on Cash Connect: “An adverse event related to a Cash Connect Client led to our termination... actions minimized our exposure, a portion of which we expect to recover through insurance and other avenues.”
  • CFO: “Core NIM was 3.80%… we actively managed deposit repricing… interest-bearing deposit beta of 26% in Q4, with an exit beta in December of 35%.”
  • CFO on 2025: “We expect to deliver another year of high performance… full-year core ROA of approximately 1.25%… NIM approximately 3.80%… efficiency ratio of 60%.”
  • CFO on Cash Connect margin: “As interest rates decline, that should be accretive to our profit margins… focus on growth, logistics optimization, and pricing leverage.”

Q&A Highlights

  • Expenses and efficiency: Q4 was “noisy” with Cash Connect one-timer and variable rate-linked costs; ongoing investments in Wealth/Commercial/Technology; 2025 efficiency goal ~60% with revenue and expense growth managed in parallel .
  • Cash Connect profitability: 2025 profit margin expected to rise via pricing, optimizing noninterest-earning cash, and growth; rate declines lower top-line but more than offset in expenses .
  • Securities/investments: Portfolio 22% of assets ($4.5bn) with ~$500mm annual principal/interest cash flows; target ~20% over time .
  • Capital returns and M&A: Philosophy ~35% return (dividends + buybacks); did ~50% in 2024; will continue to balance buybacks with organic investments; M&A bar high .
  • Deposits: Expect some seasonal giveback in Q1 after a strong Q4, but underlying growth trends remain healthy (avg customer deposits +6% YoY, avg noninterest DDA +7%) .
  • Credit: NPA uptick from one two-loan relationship (land, MF construction) to a large sponsor; well-collateralized; majority loans with recourse .
  • Loan outlook: Consumer flat as Upstart runs off (~$25mm/quarter; ~$140mm EoY base) and Spring EQ amortizes ($10–15mm/month), offset by WSFS-originated mortgages/HE products; Commercial mid-single-digit growth .

Estimates Context

  • S&P Global consensus (EPS/Revenue) for Q4 2024, Q3 2024, and Q2 2024 was unavailable at time of request due to API rate limits. We attempted to retrieve “Primary EPS Consensus Mean” and “Revenue Consensus Mean,” but were blocked by S&P Global daily quota. As a result, we cannot formally classify beat/miss versus consensus for Q4 2024 at this time (Values retrieved from S&P Global).
  • Given the absence of consensus figures, we anchor the analysis on reported GAAP and core results and management’s 2025 outlook .

Key Takeaways for Investors

  • Core profitability intact with diversified revenue: record Wealth & Trust fees offsetting Cash Connect noise; fee revenue ~32% of total provides resilience as rates shift .
  • Deposit engine strong and improving mix: QoQ deposit growth with higher noninterest balances and falling funding costs underpin NIM durability around 3.8% into 2025 .
  • Credit normalizing within manageable bounds: lower net credit costs QoQ, ACL steady at 1.48%; NPA uptick driven by a single well-collateralized relationship .
  • 2025 guide signals sustained high performance: core ROA ~±1.25%, efficiency ~±60%, controlled NCOs, and mid-single-digit Commercial growth, positioning for steady earnings power even with moderate rate cuts .
  • Cash Connect reset is idiosyncratic; underlying margin outlook improves in a down-rate scenario and with pricing/logistics levers, reducing risk to consolidated results .
  • Capital management remains shareholder-friendly with buybacks and dividend maintained; strong CET1 (13.88%) and leverage (11.03%) offer flexibility, including liability optimization (e.g., Q1’25 call of $70mm notes) .
  • Watch near-term: seasonal deposit giveback in Q1, execution on deposit repricing, Wealth growth trajectory, and CRE workout cadence; medium-term, track 2025 NIM/efficiency delivery versus guidance .

Additional Detail: Cash Connect One-time Impact

  • Q4 reported Cash Connect: Net revenue $21.8mm; pre-tax income $(3.4)mm due to $4.7mm one-time items (incl. $2.8mm uncollectible fees; $1.9mm noninterest expense) tied to client termination .
  • Adjusted ex-termination: Net revenue $24.6mm; pre-tax income $1.4mm; seasonality and rate effects explain the remaining sequential decline .

Cross-Checks and Non-GAAP Adjustments

  • Core EPS excludes realized/ unrealized equity gains, Visa derivative valuation, FDIC special assessment, corporate development/restructuring, lease remeasurement, and foundation contributions; Q4 core EPS $1.11 vs GAAP EPS $1.09 .
  • Core fee revenue excludes equity investment and Visa derivative impacts; Q4 core fee revenue $83.2mm (down 8% QoQ; up 7% YoY) .

Prior Quarters (for trend)

  • Q3 2024: Core EPS $1.08; Core ROA 1.22%; NIM 3.78%; core fee revenue $90.1mm; total net credit costs $20.1mm; commentary foreshadowed 2025 outlook delivery in January .
  • Q2 2024: ROA 1.34%; EPS $1.16; NIM 3.85%; strong fee growth and deposit/loan growth; Cash Connect ROA 1.72% on share gains .

Appendix: Selected Balance Sheet and Capital

  • EOP assets $20.81bn; EOP loans (net) $13.05bn; AFS+HTM securities $4.53bn (~22% assets); reported AOCI $(624.9)mm (effective AOCI $(733.8)mm) .
  • CET1 13.88%; Tier 1 leverage 11.03%; Total RBC 15.13%; TBV/share $27.30 (includes $(10.58) per share AOCI impact) .

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