Business Overview and History
WSFS Financial Corporation (NASDAQ: WSFS) is a savings and loan holding company headquartered in Wilmington, Delaware, with a history dating back to 1832. The company's primary subsidiary, Wilmington Savings Fund Society, FSB (WSFS Bank), is one of the ten oldest continuously operating bank and trust companies in the United States. With $20.8 billion in assets and $89.4 billion in assets under management (AUM) and assets under administration (AUA) as of December 31, 2024, WSFS Bank is the largest locally-managed bank and trust company in the Greater Philadelphia and Delaware region.
WSFS has established itself as a relationship-focused, locally-managed community banking institution, offering a wide range of financial products and services to commercial and consumer clients. The company's mission, "We Stand for Service," is the foundation of its strategy, which focuses on exceeding client expectations, delivering stellar experiences, and building client advocacy through highly-trained, relationship-oriented, and empowered associates.
Founded in 1832 as a mutual savings bank in Wilmington, Delaware, WSFS has grown significantly over the years through both organic growth and strategic acquisitions. A pivotal moment in the company's history came in 1994 when WSFS converted from a mutual to a stock-owned savings bank and became a publicly traded company. This transition allowed WSFS to access capital markets and pursue further growth opportunities.
Throughout the 2000s and 2010s, WSFS expanded its product offerings and geographic footprint. The company enhanced its commercial lending, wealth management, and cash logistics businesses while also strengthening its retail banking capabilities. Notable acquisitions during this period included Beneficial Bank in 2019, which significantly increased WSFS' presence in the region.
WSFS has demonstrated remarkable resilience in the face of industry challenges, successfully navigating the 2008 financial crisis and the COVID-19 pandemic. The company's ability to adapt to changing market conditions, maintain prudent risk management practices, and uphold its commitment to serving clients and communities has been crucial to its longevity and success.
WSFS operates through three main business segments: WSFS Bank, Cash Connect, and Wealth Management. The WSFS Bank segment provides loans, leases, and other financial products to commercial and consumer clients, with a focus on building strong relationships. The Cash Connect segment is a premier provider of ATM vault cash, smart safe, and other cash logistics services to non-bank and WSFS-branded ATMs nationwide. The Wealth Management segment offers a broad array of planning and advisory services, investment management, trust services, and credit and deposit products to individual, corporate, and institutional clients.
Financial Performance and Ratios
For the full year 2024, WSFS reported revenue of $1.04 billion and net income attributable to WSFS of $263.7 million, or $4.41 per diluted common share. The company's core return on assets (ROA) for the year was 1.26%, and its core return on tangible common equity (ROTCE) was 17.83%. Operating cash flow for 2024 was $219.9 million, with free cash flow of $205.6 million.
In the fourth quarter of 2024, WSFS reported revenue of $261.5 million and net income of $64.2 million. The company experienced a year-over-year revenue decrease of 1.4% in Q4, primarily due to a one-time charge related to the termination of a long-standing Cash Connect client relationship.
WSFS's financial ratios demonstrate its strong performance and financial stability. As of December 31, 2024, the company's common equity Tier 1 capital ratio was 13.81%, its Tier 1 capital ratio was 13.81%, and its total risk-based capital ratio was 15.77%, all well above the regulatory well-capitalized thresholds. The company's tangible common equity to tangible assets ratio was 8.08%, indicating a healthy balance sheet.
Liquidity
In terms of liquidity, WSFS had $1.15 billion in cash, cash equivalents, and restricted cash as of December 31, 2024. The company has $5.7 billion in readily available, secured borrowing capacity from the Federal Home Loan Bank and $2.4 billion from the Federal Reserve Discount Window. Additionally, WSFS has $1.1 billion in unpledged securities. The company's loan-to-deposit ratio was 77%, providing ample balance sheet flexibility and capacity to fund future growth.
WSFS's debt-to-equity ratio stands at 0.1481, reflecting a conservative approach to leverage and financial stability.
Diversified Revenue Streams and Recurring Fee Income
WSFS's business model is further strengthened by its diversified revenue streams and focus on recurring fee income. For the full year 2024, the company's noninterest income, which includes fee revenue from its various business lines, accounted for 32.5% of its total revenue. This diversification helps mitigate the impact of changes in interest rates and economic conditions on the company's overall financial performance.
The Wealth Management segment has been a significant contributor to WSFS's fee income, with fee revenue growing 12% year-over-year in 2024 to a record $148.1 million. The Cash Connect segment has also been a strong performer, providing ATM vault cash, smart safe, and other cash logistics services to a nationwide network of non-bank and WSFS-branded ATMs.
Business Segments
WSFS Bank segment has built a $9.9 billion commercial loan and lease portfolio by recruiting experienced commercial lenders, offering high-level service and flexibility, and through acquisitions. The commercial portfolio includes commercial and industrial loans, owner-occupied commercial loans, commercial mortgages, and construction loans. The bank also offers a variety of consumer loan products such as residential mortgages, home equity lines of credit, installment loans, and education loans. As of December 31, 2024, the total loan and lease portfolio for the WSFS Bank segment was $12.8 billion.
The Cash Connect segment managed approximately $1.6 billion in total cash and serviced approximately 28,600 non-bank ATMs and 10,000 smart safes nationwide as of December 31, 2024. Cash Connect also supports 567 owned or branded ATMs for WSFS Bank clients, which is one of the largest branded ATM networks in the company's market. For the year ended December 31, 2024, the Cash Connect segment generated $114.5 million in external client revenues.
The Wealth Management segment had $89.4 billion in assets under management and assets under administration as of December 31, 2024. For the year ended December 31, 2024, the Wealth Management segment generated $148.1 million in external client revenues, an increase of 12% compared to the prior year, driven by growth in the institutional trust business and Bryn Mawr Capital Management.
Outlook and Guidance
For the full year 2025, WSFS expects to deliver another year of high performance and growth, with a core ROA of approximately 1.25%. The company anticipates mid-single-digit loan growth in its commercial portfolio and flat growth in its consumer portfolio, offset by the runoff of its Upstart and Spring EQ partnership portfolios.
WSFS expects continued broad-based deposit growth across its business lines in 2025, building on its recent momentum, with an outlook for deposit growth in the low-single-digits. The company's net interest margin outlook for 2025 is approximately 3.80%, consistent with the level in the fourth quarter of 2024, and it expects to finish the year with an interest-bearing deposit beta of approximately 40%.
The company's fee businesses, which contribute almost a third of its total revenue, are expected to continue their strong performance, with the Wealth & Trust business anticipated to grow at a double-digit pace. WSFS's overall fee revenue is expected to grow at a mid-single-digit rate, as the decline in Cash Connect revenues due to interest rate reductions is more than offset by lower funding costs.
WSFS anticipates net charge-offs to be between 35 basis points to 45 basis points of average loans for 2025 as the industry continues to see the normalization of credit. The company's outlook for the full year 2025 efficiency ratio is 60%.
Risks and Challenges
As with any financial institution, WSFS faces various risks and challenges that could impact its future performance. These include, but are not limited to, market risk, credit risk, capital and liquidity risk, compliance risk, operational risk, strategic risk, reputation risk, and model risk.
The company's concentration of loans in its primary markets of Delaware, southeastern Pennsylvania, and southern New Jersey exposes it to downturns in those regional economies. Additionally, the company's commercial loan portfolio, which includes commercial mortgage, commercial and industrial, and construction loans, carries higher levels of risk than its residential lending portfolio.
WSFS also faces risks related to its technology-driven operations, including the potential for system failures, cybersecurity breaches, and the effective implementation of new technologies and digital solutions. Regulatory changes and the evolving regulatory environment also pose challenges for the company.
Conclusion
WSFS Financial Corporation has demonstrated its ability to navigate the complex financial services landscape through its community banking model, diversified revenue streams, and focus on relationship-based lending and wealth management services. The company's strong financial performance, healthy balance sheet, and strategic initiatives position it well for continued growth and success in the years ahead. As WSFS navigates the evolving market conditions and regulatory environment, investors will be closely watching the company's ability to maintain its competitive edge and deliver sustainable long-term value.