WSFS Financial (WSFS)2024-01-26 20:10Financial Data and Key Metrics Changes - WSFS Financial Corporation reported full year core earnings per share of $4.55, core return on tangible common equity of 22.48%, and core return on assets of 1.38%, all exceeding 2022 levels [5][6] - Customer deposit growth was 3% linked quarter or 13% annualized, with a full year customer deposit growth of 2% [6][7] - Loan growth was 1% linked quarter or 3% annualized, with a full year loan growth of 7% and a year-end loan-to-deposit ratio of 77% [7][8] - Core net interest margin for the quarter was 3.99%, with interest-bearing deposit beta at 44% [8] - Core fee revenue growth was 6% linked quarter and 10% for the full year, with a core fee revenue ratio of 30.4% in the fourth quarter [8][9] - The core efficiency ratio was 54.5% for the quarter, which would have been 56.2% excluding favorable one-time adjustments [9] Business Line Data and Key Metrics Changes - Growth in core fee revenue was driven by Wealth and Trust, Cash Connect, and Capital Markets businesses [8] - The Cash Connect business is expected to continue double-digit growth into 2024 due to market share gains from a competitor exiting the market [25][26] - The Wealth Management business is seeing strong pipelines and integration with commercial and consumer banking, contributing to growth in assets under management (AUM) [26] Market Data and Key Metrics Changes - The company expects a full year core return on assets of around 1.20% for 2024, assuming no interest rate cuts [12] - The loan-to-deposit ratio of 77% and consistent cash flows from the securities portfolio provide opportunities for relationship-based loans [14] Company Strategy and Development Direction - The company aims for top-quartile performance through a diverse business model and multiple strategies [13] - Continued investment in technology and hiring is planned to support long-term growth [39] - The company is looking at potential acquisitions in the fee business, although nothing is currently included in the guidance [53] Management's Comments on Operating Environment and Future Outlook - Management noted that recent economic data and comments from central banks have tempered expectations for lower interest rates [12] - The company anticipates net charge-offs to be between 50 and 60 basis points of average loans for the year, primarily driven by Upstart and NewLane [17] - Management expressed confidence in the stability of credit metrics and the ability to absorb unfavorable economic developments [19] Other Important Information - The balance sheet remains strong with an allowance for credit losses (ACL) coverage of 1.35% [10] - The company is focused on maintaining a strong capital position to capitalize on market opportunities and enhance shareholder returns [19] Q&A Session Summary Question: Clarification on NIM and rate cuts - Management agreed that each rate cut could lower the net interest margin by approximately 5 basis points, with the full impact not felt in 2024 if cuts occur in the second half [21][22] Question: Fee growth opportunities - Management highlighted strong growth opportunities in Wealth and Cash Connect, with confidence in double-digit growth for 2024 [24][26] Question: Consumer charge-offs and credit environment - Management noted stable charge-offs in unsecured consumer credit, with Upstart being the primary area of concern [27][28] Question: Buyback strategy - Management reiterated that their capital return philosophy remains unchanged, with routine buybacks supplementing dividends [31] Question: Loan growth expectations - Management expects mid-single digit loan growth across all segments for 2024, despite elevated payoffs in the C&I segment [54][55]