Business context and reporting period
WSFS Financial Corporation is a Wilmington, Delaware-based savings and loan holding company with banking, Cash Connect and Wealth Management businesses. This Form 10-K covers the fiscal year ended December 31, 2023; results below are annual, not Q4-only. At year-end, WSFS reported $20.6 billion of assets and $84.3 billion of wealth assets under management and administration.
Key financial metrics
| Metric | 2023 | 2022 |
|---|---|---|
| Net income attributable to WSFS | $269.2 million | $222.4 million |
| Diluted EPS | $4.40 | $3.49 |
| Net interest income | $725.1 million | $662.9 million |
| Net interest margin | 4.11% | 3.71% |
| Noninterest income | $289.9 million | $260.1 million |
| Provision for credit losses | $88.1 million | $48.1 million |
| Noninterest expense | $561.6 million | $574.3 million |
| Total assets | $20.6 billion | $19.9 billion |
| Total deposits | $16.5 billion | $16.2 billion |
| Net loans and leases | $12.6 billion | $11.8 billion |
- Net cash provided by operating activities was $237.0 million; investing activities used $326.3 million and financing activities provided $344.9 million. Cash, cash equivalents and restricted cash ended the year at $1.09 billion.
- Year-end regulatory capital ratios were strong: Bank CET1 13.72% and total capital 14.96%; consolidated company CET1 13.17% and total capital 15.23%. The company’s common equity-to-assets ratio was 12.03%; tangible common equity to tangible assets was 7.52% (non-GAAP).
- Borrowings included $565.0 million from the Bank Term Funding Program (BTFP), $218.4 million of senior and subordinated debt, and $90.6 million of trust preferred borrowings. There were no FHLB advances at year-end.
- Estimated uninsured deposits were $6.3 billion, or 38% of customer deposits; estimated unprotected deposits were $4.8 billion, or 29%. Management reported $5.4 billion of FHLB borrowing capacity, $0.6 billion through the Federal Reserve Discount Window and $1.7 billion through the BTFP, plus $1.5 billion in unpledged securities.
Material changes versus 2022
- Net income attributable to WSFS increased 21%, supported by higher net interest income and noninterest income. Net interest margin rose 40 basis points, reflecting the rate environment and balance-sheet mix.
- Loan growth contributed to an $823.2 million increase in net loans and leases. Commercial mortgages grew $450.1 million; consumer loans grew $201.2 million, largely through lending partnerships.
- Credit costs rose: provision expense increased $40.0 million, net charge-offs increased to $53.8 million from $16.8 million, and the allowance for credit losses rose to $186.1 million from $151.9 million.
- Nonperforming assets increased to $75.8 million from $43.4 million; the ratio to total assets increased to 0.37% from 0.22%. Management attributed the increase primarily to newly transferred commercial and commercial-real-estate relationships.
- Deposits increased $270.5 million, although noninterest-bearing demand deposits fell $822.4 million. Interest expense on deposits increased substantially, to $209.8 million from $28.2 million.
- Noninterest income rose $29.7 million, led by Cash Connect, Wealth Management, capital markets and a realized Spring EQ investment gain. Noninterest expense declined $12.7 million, primarily because 2022 included higher acquisition and restructuring costs.
- Available-for-sale securities had $658.0 million of gross unrealized losses at year-end, mainly from higher market interest rates; the securities were largely agency-backed. Accumulated other comprehensive loss improved by $81.9 million during 2023.
Outlook, commentary, risks and unusual items
- Management expects to continue emphasizing commercial and relationship-based lending, deposit growth, and expansion of Wealth Management and Cash Connect. The filing gives no quantified earnings or margin guidance for 2024.
- Notable items included a $9.5 million realized gain on the sale of the Spring EQ investment; a $7.1 million income-tax charge after surrendering $65.5 million of bank-owned life insurance policies; a $5.1 million FDIC special assessment; and a one-time $2.0 million contribution to the WSFS CARES Foundation.
- WSFS repurchased 1.25 million shares for $51.8 million and paid $36.7 million in dividends during 2023. Management’s stated practice is to return at least 35% of annual net income through dividends and repurchases, subject to capital needs and other considerations.
- Principal risks include credit deterioration in commercial real estate, commercial and industrial, construction and consumer-partnership portfolios; deposit competition and funding costs; interest-rate and securities valuation exposure; regulatory and FDIC assessment costs; cybersecurity, third-party and Cash Connect operational risks; and execution of growth and acquisition strategies.
- The financial-statement auditor issued an unqualified opinion, and management and the auditor concluded internal control over financial reporting was effective as of December 31, 2023. The auditor identified the collective allowance for credit losses as a critical audit matter. WSFS reported no material cybersecurity incident known to have materially affected, or reasonably likely to materially affect, the company.
Important facts for investors to verify
- Whether the rise in nonperforming assets, charge-offs and credit provisions continues, particularly in commercial real estate, elder care, small-business leasing and Upstart-related consumer loans.
- How deposit pricing, deposit mix and reliance on wholesale funding affect net interest margin and liquidity; review the $565.0 million BTFP borrowing and uninsured-deposit exposure.
- The potential effect of the $658.0 million unrealized loss position in available-for-sale securities if liquidity needs require sales, and the sensitivity of earnings and economic value to interest-rate changes.
- Whether noninterest-income growth and lower reported expenses are sustainable after excluding one-time gains, assessments, contributions and prior-year acquisition and restructuring costs.
- Whether capital returns, growth plans and any future acquisitions remain consistent with regulatory requirements and the company’s capital and liquidity position.