WSFS Financial (WSFS) - 2024 Q4 - Annual Report

Loan Portfolio Composition - The loan portfolio composition as of December 31, 2024, includes commercial and industrial loans at $2.66 billion (20.4%), owner-occupied commercial loans at$ 1.97 billion (15.2%), and commercial mortgages at $4.03 billion (31.0%) [58] - The total gross loans and leases increased to$ 13.19 billion in 2024 from $12.77 billion in 2023, reflecting a growth of approximately 3.3% [58] - The allowance for credit losses was$ 195.28 million, representing 1.5% of total loans and leases for both years [58] - The commercial mortgage portfolio was $4.0 billion, with the largest property types being retail-related ($ 1.3 billion), residential multi-family ( $1.1 billion), and office ($ 0.6 billion) [66] - The commercial and industrial and owner-occupied commercial loan portfolios totaled $4.6 billion, accounting for 35% of the total loan and lease portfolio [68] - The commercial small business leases portfolio was$ 647.5 million, or 5% of total loans, with average deal sizes of approximately $29,000 [70] - At December 31, 2024,$ 1.5 billion was committed for construction loans, with $0.8 billion outstanding [67] - The residential loan portfolio included loans with loan-to-value ratios of up to 80%, with approximately$ 146.2 million in loans exceeding this ratio without private mortgage insurance [71] Consumer Loans - As of December 31, 2024, the total consumer loans amounted to $2.086 billion, an increase from$ 2.012 billion in 2023, representing a growth of approximately 3.7% [81] - Home equity lines of credit outstanding totaled $535 million, while installment loans reached$ 224.8 million, together accounting for about 37% of total consumer loans [80] - In 2024, the company originated $433.9 million in residential loans, up from$ 343.7 million in 2023, marking an increase of approximately 26.3% [83] - The company originated $2.0 billion in commercial and commercial mortgage loans in 2024, a decrease from$ 2.4 billion in 2023, reflecting a decline of about 16.7% [82] Financial Performance - For the year ended December 31, 2024, the net income attributable to the Company was $263.671 million, with a core ROA of 1.26% [104] - The tangible common equity to tangible assets ratio was 8.08% as of December 31, 2024, with tangible assets amounting to$ 19.826 billion [104] - Fee income from lending activities generated $7.9 million in 2024, compared to$ 8.8 million in 2023, showing a decrease of approximately 10.2% [87] Regulatory Environment - The Company is subject to extensive federal and state banking regulations, impacting its profitability and operational decisions [106] - The Federal Reserve conducts regular examinations of the Company, which influence its risk management and financial condition ratings [112] - The Company is a grandfathered unitary thrift holding company, allowing it to acquire non-banking companies without significant restrictions [117] - The Dodd-Frank Act requires the Company to act as a source of financial strength to the Bank during financial distress [119] - The Company relies on debt issuances and dividends from its Bank and other subsidiaries for cash flow, with federal regulations impacting dividend payments [121] - The Federal Reserve mandates that holding companies should only pay dividends from available earnings and maintain a strong capital position [121] - The regulatory capital requirements include a minimum common equity Tier 1 capital ratio of 4.5% of risk-weighted assets and a total capital ratio of at least 8% [130] - As of December 31, 2024, the Bank met all requirements for being classified as "well-capitalized" under regulatory standards [135] - The Company must file a notice with the Federal Reserve at least 30 days prior to any capital distribution, including dividends [136] - The OCC can prohibit capital distributions if deemed unsafe or unsound, ensuring the financial stability of the institution [137] Deposit Insurance and Risk Management - The maximum deposit insurance amount per depositor is $250,000, providing a safety net for customers [140] - The Bank is not currently in default on any FDIC assessment payments, allowing for continued capital distributions [138] - The capital ratios for the Bank and the Company indicate levels above the regulatory minimums, ensuring compliance and operational flexibility [133] - The FDIC's current risk-based premium system has initial assessment rates ranging from 3 to 30 basis points on insured deposits, with a designated reserve ratio of 2% for the Deposit Insurance Fund (DIF) [141] - The FDIC's restoration plan aims to restore the DIF reserve ratio to at least 1.35% by September 30, 2028, due to the DIF reserve ratio falling below the statutory minimum [141] - The Bank's deposit insurance costs have increased by 2 basis points as a result of the FDIC's final rule adopted on October 18, 2022 [142] - The Bank received a "satisfactory" rating in its most recent Community Reinvestment Act performance evaluation [160] Interest Rate Sensitivity - Total interest-rate sensitive assets amount to$ 19,311,916,000, with $9,391,543,000 maturing in less than one year [305] - Total interest-rate sensitive liabilities are$ 9,077,220,000, resulting in a positive interest-rate sensitive gap of $10,234,696,000 [305] - The one-year interest-rate sensitive assets to interest-rate sensitive liabilities ratio is 105.28% [305] - The one-year interest-rate sensitive gap represents 2.26% of total assets [305] - The allowance for credit losses (ACL) is established based on historical loss experience and current economic conditions, reflecting significant judgment [312] - The ACL may fluctuate due to changes in economic conditions, borrower circumstances, and macroeconomic variables [314] - Interest rates have a greater impact on the company's performance than inflation due to the monetary nature of its assets and liabilities [308] - The company estimates that 75% of money market deposits and 50% of savings and interest-bearing demand deposits are sensitive to interest rate changes [307] - The interest-sensitivity gap analysis is subject to variations as the company adjusts its interest sensitivity position throughout the year [306] Other Financial Activities - The Company issued$ 150.0 million of senior notes due 2030 with a fixed coupon rate of 2.75% until December 15, 2025, and a variable rate thereafter [100] - The Company assumed $70.0 million in subordinated notes due 2027, currently bearing interest at a variable rate of 6.67% [101] - The Company recorded investments in the RBC Trusts' common securities of$ 0.4 million each as investments in unconsolidated entities [99] - The Company repurchased three loans in 2024 for $0.7 million, one loan in 2023 for$ 0.8 million, and two loans in 2022 for $0.8 million [78]