WSFS Financial (WSFS) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported core earnings per share of $1.11 for Q4 2024, with a full-year core earnings per share of$ 4.39, reflecting a strong performance [6] - Core return on assets was 1.24% for the quarter and 1.26% for the full year, while core return on tangible common equity was 16.55% for the quarter and 17.83% for the year [6] - Core fee revenue grew by 7% year-over-year in Q4, with a full-year growth of 19% [8] Business Line Data and Key Metrics Changes - The Wealth & Trust business achieved a record fee quarter of $40 million, contributing significantly to core fee revenue growth [8] - Core net interest margin was 3.80% for the quarter, up 2 basis points from the previous quarter [9] - Loans declined by 1% linked quarter but grew by 3% year-over-year, with mid-single-digit growth in commercial and industrial (C&I) and commercial mortgage segments [10] Market Data and Key Metrics Changes - Customer deposits grew by 4% linked quarter, with noninterest-bearing deposits increasing by 6% and comprising 31% of average deposits in Q4 [10] - The company finished the year with a loyalty deposit ratio of 77%, indicating strong customer retention [11] Company Strategy and Development Direction - The company aims for mid-single-digit loan growth in the Commercial portfolio and flat growth in the Consumer portfolio, with expectations of continued broad-based deposit growth [14] - The strategic focus includes optimizing investments made in the franchise and capitalizing on growth opportunities in fee businesses, particularly in Wealth & Trust [16][104] - The company plans to maintain an efficiency ratio of around 60% while continuing to invest in talent and technology [19][74] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2025, expecting another year of high performance with a core return on assets of approximately 1.25% [13] - The company anticipates net charge-offs to be between 35 basis points to 45 basis points of average loans for the year, reflecting normalization in credit [17] - Management highlighted the importance of managing expenses while continuing to invest in growth areas [33][71] Other Important Information - The company experienced a negative$ 4.7 million pre-tax impact from the termination of a relationship with a Cash Connect client, which is considered an isolated incident [7] - Nonperforming assets increased due to the migration of one relationship, but management believes these loans are well collateralized [12] Q&A Session Summary Question: Expense outlook and efficiency guidance - Management indicated that expenses were up about 50% year-over-year, primarily due to incentive compensation true-ups and investments in headcount [28][30] Question: Cash Connect profitability levers - Management discussed opportunities for pricing leverage and optimizing cash logistics to improve profitability despite interest rate impacts [36][38] Question: Capital levels and M&A interest - The company plans to return about 35% of net income through dividends and buybacks, while remaining open to M&A opportunities that are accretive [46][49] Question: Loan growth outlook and mix - Management detailed that consumer loan growth would be flat due to runoff from partnerships, while commercial loans are expected to grow mid-single digits [92][93]