WSFS Financial Corporation (WSFS) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial performance with strategic capital management through buybacks and a focus on CET1 ratio. Despite challenges from rate cuts, the company is optimizing margins and expenses effectively. The optimistic guidance on EPS growth and strong noninterest-bearing deposit growth are positive indicators. The Q&A session indicates a proactive approach to risk management and organic growth, with management showing openness to M&A. Overall, the sentiment is positive, with a focus on strategic growth and financial stability, suggesting a likely positive stock price movement in the near term.
Key Financial Performance
Core Earnings Per Share (EPS) for Q4 2025 $1.43, up 29% year-over-year. The increase is attributed to strong business performance and momentum.
Core Return on Assets (ROA) for Q4 2025 1.42%, up year-over-year. This reflects improved operational efficiency and profitability.
Core Return on Tangible Common Equity for Q4 2025 18%, up year-over-year. This indicates enhanced shareholder value and strong financial performance.
Full Year Core EPS for 2025 $5.21, up 19% year-over-year. The growth is due to consistent business performance throughout the year.
Net Interest Margin (NIM) for Q4 2025 3.83%, up 3 basis points year-over-year but down 8 basis points from the previous quarter. The decline from the previous quarter is due to rate cuts and a one-time interest recovery in the prior quarter.
Core Fee Revenue for Q4 2025 Increased 8% year-over-year, driven by double-digit growth in Wealth & Trust, capital markets, and home lending.
Wealth & Trust Business Growth for 2025 13% year-over-year, with 29% growth in WSFS Institutional Services and 24% growth in BMT of Delaware. This reflects strong performance in asset-backed and mortgage-backed securities trustee services.
Total Gross Loans Growth for Q4 2025 2% quarter-over-quarter or 9% annualized, driven by broad-based growth across businesses, particularly in commercial and residential mortgage sectors.
Total Client Deposits Growth for Q4 2025 2% quarter-over-quarter or 10% annualized, with significant growth in noninterest-bearing deposits (6% quarter-over-quarter). This indicates strong deposit growth across trust, private banking, and consumer sectors.
Nonperforming Assets for Q4 2025 Down approximately 40% year-over-year, reflecting improved asset quality due to favorable net migration and payoffs.
Delinquencies for Q4 2025 Increased 46 basis points quarter-over-quarter, primarily due to previously identified non-performing and problem assets moving to delinquent status.
Net Charge-Offs for Q4 2025 Increased 16 basis points quarter-over-quarter to 46 basis points of average loans, mainly due to a partial charge-off of a nonperforming land development loan.
Capital Returned in Q4 2025 $119 million, including $109 million in buybacks (3.7% of outstanding shares). Total buybacks for 2025 amounted to $288 million (over 9% of outstanding shares).
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Operating Highlights
Wealth & Trust business: Grew 13% year-over-year with 29% growth in WSFS Institutional Services and 24% growth in BMT of Delaware. WSFS Institutional Services became the fourth most active U.S. asset-backed and mortgage-backed securities trustee with nearly 12% market share, moving up 2 spots compared to 2024.
Deposit growth: Total client deposits increased 2% linked quarter or 10% annualized, with growth across trust, private banking, and consumer. Noninterest-bearing deposits grew 6% linked quarter and now represent 32% of total client deposits.
Net interest margin (NIM): NIM was 3.83% for the quarter, down 8 basis points linked quarter but up 3 basis points year-over-year despite absorbing 75 basis points of interest rate cuts since Q4 2024.
Loan growth: Total gross loans grew 2% linked quarter or 9% annualized, with commercial loans (C&I) growing 4% linked quarter or 15% annualized. Residential mortgage and WSFS originated consumer loans grew 5% linked quarter.
Asset quality: Nonperforming assets were flat compared to the prior quarter but down approximately 40% compared to year-end 2024. Delinquencies increased 46 basis points linked quarter, primarily due to a few identified problem loans.
Capital return: WSFS returned $119 million of capital in Q4, including $109 million in buybacks, representing 3.7% of outstanding shares. Total buybacks for 2025 amounted to $288 million, over 9% of outstanding shares.
2026 Outlook: WSFS expects mid-single-digit loan growth, mid-single-digit deposit growth, and double-digit growth in core EPS. Wealth & Trust is expected to grow double digits, while Cash Connect revenue is expected to decline but offset by expense reductions.
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Risk or Challenges
Delinquencies: Delinquencies increased 46 basis points linked quarter due to several previously identified non-performing and problem assets moving to delinquent status in the quarter. This includes two office loans and one multifamily condo loan, which could impact asset quality.
Net Charge-offs: Net charge-offs increased 16 basis points to 46 basis points of average loans, primarily due to the partial charge-off of a nonperforming land development loan. This indicates potential risks in loan recoverability.
Interest Rate Cuts: Net interest margin (NIM) declined 8 basis points linked quarter due to rate cuts, which could continue to pressure margins and profitability.
Cash Connect Revenue: Cash Connect revenue is expected to decline due to interest rates, which could impact overall fee revenue growth.
Commercial Loan Losses: While there has been improvement in problem loans and nonperforming assets, commercial loan losses may remain uneven, posing a risk to financial stability.
Spring EQ Partnership Portfolio: The continued runoff of the Spring EQ partnership portfolio is expected to offset growth in residential mortgage and other real estate secured consumer loans, potentially limiting overall loan growth.
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Guidance & Outlook
2026 Financial Performance: WSFS expects to deliver a full year core ROA of approximately 1.40% and double-digit growth in core EPS, assuming a stable economy and three 25 basis point rate cuts in March, July, and December.
Loan Growth: Mid-single-digit loan growth is anticipated overall, with low single-digit growth in the consumer portfolio. Residential mortgage and other real estate secured consumer loans are expected to show continued momentum, while the Spring EQ partnership portfolio will continue to run off.
Deposit Growth: Broad-based deposit growth is expected in 2026, with mid-single-digit growth from 4Q 2025 levels.
Net Interest Margin (NIM): The NIM is projected to be approximately 3.80% for 2026, incorporating the impact of three additional interest rate cuts. Interest-bearing deposit beta is expected to remain in the low to mid-40s.
Fee Revenue: Overall fee revenue is expected to grow mid-single digits, excluding Cash Connect. Wealth & Trust is projected to grow double digits in 2026, while Cash Connect revenue is expected to decline due to interest rates but will be offset by expense reductions.
Net Charge-Offs: Net charge-offs are projected to be 35 to 45 basis points of average loans for 2026, consistent with 2025 results. Commercial loan losses may remain uneven.
Efficiency Ratio: The efficiency ratio is expected to be in the high 50s for 2026. Strong expense discipline will be maintained, with investments in the franchise and normal seasonality potentially causing quarter-to-quarter variances.
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Shareholder Return Plan
Capital Return in Q4 2025: WSFS returned $119 million of capital, including $109 million in share buybacks, representing 3.7% of outstanding shares.
Total Buybacks in 2025: WSFS completed $288 million in share buybacks, representing over 9% of outstanding shares.
2026 Buyback Strategy: WSFS plans to maintain an elevated level of buybacks to reach a capital target of 12%, with flexibility to adjust based on macroeconomic conditions, business performance, and investment opportunities.
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Key Q&A
Q:Can you talk about the better commercial trends and what is driving strong originations and a good outlook?
A:David Burg explained that in the first half of last year, uncertainty in the economy caused small business owners to delay decisions. Over the year, the pipeline built up, reaching over $300 million in Q3. With the passage of the tax bill and more legislative clarity, strong originations and fundings occurred in Q4, and momentum is expected to continue.
Q:What are the parameters for capital return, especially regarding buybacks and CET1 ratio?
A:David Burg stated that the primary focus is on CET1 and TCE, incorporating AOCI volatility. The majority of capital returns (85%) are through buybacks, with a multiyear glide path to reach capital targets. They aim to return roughly 100% of net income annually but may adjust based on investment opportunities or economic stress.
Q:What type of revenue hit is anticipated for Cash Connect due to rate cuts, and what are the margin expectations?
A:David Burg noted a $2.5 million annual impact per 25 basis point rate cut, with three rate cuts expected for the year. Margin improvements are driven by pricing, expense optimization, and a shift to higher-margin Smart Safes, which increased from 25% to 33% of total units year-over-year. The goal is to drive margins into the mid-single digits or higher.
Q:Are there areas of outright expense reduction to support a lower run rate for the year?
A:David Burg mentioned optimizing the real estate portfolio, divesting non-strategic products or businesses, and maintaining strong discipline around headcount and expenses. The efficiency ratio target is in the high 50s, but they remain open to investing in talent and technology as opportunities arise.
Q:What is the anticipated mix of deposit growth, and how will the balance sheet trend over the year?
A:David Burg explained that deposit growth is focused on noninterest-bearing deposits, with aggressive pricing strategies. The securities portfolio has been reduced to 21% of assets and will remain flat, with reinvestments in low-risk securities like agency MBS.
Q:Are there any ongoing evaluations of niche businesses or deposit and loan verticals?
A:David Burg and Rodger Levenson stated that they continuously evaluate the strategic fit of businesses through an initiative called 'relook.' While no specific actions are currently planned, they aim to redeploy capital and resources to higher-growth areas.
Q:What are the updated thoughts on M&A, particularly in banking?
A:Rodger Levenson indicated openness to M&A that strengthens their position in the greater Philly Delaware region. However, they are focused on organic growth and will consider inorganic opportunities if they align with strategic goals.
Q:How are risk-adjusted returns in the loan portfolio evolving, especially after divesting Upstart?
A:David Burg highlighted a focus on real estate-secured consumer loans and C&I relationship products, emphasizing competitive advantages in service and responsiveness. Commercial real estate growth will continue with trusted sponsors, and referrals across the platform are expected to enhance profitability.
Q:What is the expected tax rate going forward?
A:David Burg confirmed that the tax rate will remain in the 24%-25% range, with minimal impact from recent tax legislation.
Q:What is driving strong noninterest-bearing deposit growth, and will it normalize?
A:David Burg attributed growth to trust and private banking, with contributions from consumer and commercial segments. While 6% quarterly growth may not be sustainable, they aim to maintain or grow the noninterest-bearing deposit ratio.
Q:How does the favorable migration in problem assets impact net charge-off expectations?
A:David Burg stated that net charge-offs are expected to remain at 40 basis points, excluding Upstart. Problem assets have decreased, and high levels of recourse in commercial real estate provide additional security.
Q:Is the double-digit EPS growth guidance based on core or reported EPS?
A:David Burg clarified that the guidance is based on core EPS.
Q:Have there been any shifts in the hedging profile or other factors affecting NIM outlook?
A:David Burg reported no major shifts, with hedges and securities portfolio reinvestments mitigating rate cut impacts. The NIM outlook is 3.80%, supported by $1.3 billion in hedges currently in the money.
Q:What are the opportunities for deposit growth across businesses?
A:David Burg identified institutional services, referrals between commercial and wealth, and small business as key growth areas. Mid-single-digit deposit growth is expected, driven by these segments.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on ongoing evaluations of niche businesses or deposit and loan verticals, citing the strategic nature of such decisions. Additionally, they did not offer precise guidance on the mix of deposit growth or the size of the balance sheet, emphasizing flexibility and responsiveness to market conditions.
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Earnings Word Cloud
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WSFS Transcript
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The earnings call presents a mixed but generally positive outlook. Financial performance showed growth in online sales and reduced capital expenditures, and the company is addressing inflationary pressures. The Q&A section reveals effective management of past disruptions and plans for further share buybacks, indicating confidence. However, lack of specific guidance and competitive pressures are concerns. Considering the market cap, the stock is likely to react positively, with a potential increase of 2-8% over the next two weeks, driven by positive sales trends and strategic buybacks.
WSFS Financial Corporation (WSFS) Q4 2025 Earnings Call Transcript
Positive1-27
The earnings call reveals strong financial performance with strategic capital management through buybacks and a focus on CET1 ratio. Despite challenges from rate cuts, the company is optimizing margins and expenses effectively. The optimistic guidance on EPS growth and strong noninterest-bearing deposit growth are positive indicators. The Q&A session indicates a proactive approach to risk management and organic growth, with management showing openness to M&A. Overall, the sentiment is positive, with a focus on strategic growth and financial stability, suggesting a likely positive stock price movement in the near term.
WSFS Financial Corporation (WSFS) Q3 2025 Earnings Call Transcript
Positive10-24
The earnings call highlighted strong financial performance with a 3% portfolio growth, reduced net credit costs, and a significant decline in nonperforming assets and delinquencies. The company also maintained a robust CET1 ratio of 14.39% and returned $56.3 million to shareholders. Despite some uncertainties in macroeconomic conditions, the company demonstrated effective capital and risk management strategies. The optimistic guidance for the Wealth and Trust business and strategic capital management further contribute to a positive outlook, suggesting a stock price increase of 2% to 8%.
WSFS Financial Corporation (WSFS) Q2 2025 Earnings Call Transcript
Positive7-25
The earnings call highlights strong financial performance, with core fee revenue and wealth business revenue showing significant growth. Shareholder returns through buybacks and dividend increases are also positive. While there are some uncertainties, such as NIM softening and tariff impacts, management's optimism and strategic focus on C&I growth and buybacks are reassuring. The market cap suggests moderate volatility, leading to a positive stock price prediction over the next two weeks.
WSFS Slides
WSFS Report
Frequently Asked Questions
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