WSFS Financial Signals Strong Earnings and Confident 2026

Wsfs Financial ((WSFS)) has held its Q4 earnings call. Read on for the main highlights of the call.

WSFS Financial Balances Robust Earnings Momentum With Prudent Risk Management in Latest Call

WSFS Financial’s latest earnings call struck a distinctly positive tone, underscoring strong core earnings, resilient margins, and healthy balance sheet trends, even as management acknowledged near-term pressures from interest rate cuts and some lumpiness in credit. Executives emphasized double-digit core EPS growth, high-teens returns on tangible equity, and improving asset quality, while framing current NIM compression, rising delinquencies, and Cash Connect headwinds as manageable and well-mitigated within a constructive outlook through 2026.

Strong Core Earnings and Returns

WSFS reported a standout quarter and year for profitability, highlighting the strength of its core franchise. Q4 core EPS came in at $1.43, up 29% year over year, while full-year 2025 core EPS reached $5.21, a 19% annual increase. Core return metrics were equally compelling: Q4 core ROA was 1.42%, with the full year at 1.39%, and core return on tangible common equity stood at 18% for both the quarter and the year. These figures place WSFS firmly in the top tier of regional banks on profitability, reinforcing the bank’s ability to generate strong earnings even amid a volatile rate environment.

Net Interest Margin Resilience Amid Rate Cuts

Net interest margin performance was a key theme, with management stressing resilience despite rate headwinds. Q4 NIM was 3.83%, down 8 basis points from the prior quarter, but 4 of those basis points were tied to a one-time interest recovery in the previous period. Importantly, NIM was still up 3 basis points year over year, even after absorbing roughly 75 basis points of rate cuts since Q4 2024. Management’s baseline for 2026 calls for a full-year NIM of about 3.80%, suggesting only modest compression from current levels as the bank leans on deposit repricing, securities reinvestment, and hedging to offset further cuts.

Growing Fee Revenue and Wealth & Trust Strength

Noninterest income continues to be a strategic pillar for WSFS, providing diversification and earnings stability. Core fee revenue increased 2% sequentially and 8% year over year, with particular momentum in the Wealth & Trust businesses. Wealth & Trust grew 13% versus a year ago, driven by standout performances from WSFS Institutional Services, up 29%, and BMT of Delaware, up 24%. Fee businesses now account for roughly one-third of total revenue. Excluding Cash Connect, management expects fee revenue to grow at a mid-single-digit pace, with Wealth & Trust specifically targeted for double-digit growth in 2026, underscoring the bank’s focus on higher-value, recurring revenue streams.

Loan Growth and Commercial Momentum

Lending activity accelerated in the quarter, signaling healthy demand and successful business development efforts. Total gross loans climbed 2% from the prior quarter, or about 9% on an annualized basis. Commercial C&I lending was a standout, rising 4% linked quarter, equivalent to a robust 15% annualized pace. On the consumer side, residential mortgage and WSFS-originated consumer loans also grew 5% in the quarter, with management noting it was the largest level of fundings in more than two years. This broad-based loan growth points to solid underlying economic activity in the bank’s footprint and a growing commercial franchise.

Deposit Growth and Low-Cost Funding Advantage

WSFS also delivered solid deposit growth while preserving a strong low-cost funding mix, a key advantage in a lower-rate environment. Total client deposits increased 2% sequentially, or about 10% annualized. Notably, noninterest-bearing deposits rose 6% quarter over quarter and now comprise 32% of total client deposits. Management reported an exit deposit beta of 43% in December, illustrating disciplined pricing and relatively moderate pass-through of prior rate hikes to customers. This funding profile supports margin stability and positions the bank well as the rate cycle turns downward.

Improving Asset Quality and Controlled Credit Outlook

Despite some quarterly noise, the underlying credit story was one of improvement and control. Problem assets showed meaningful progress, with nonperforming assets ending the year at their lowest level in more than two years and down roughly 40% compared with year-end 2024. Full-year 2025 net charge-offs were 40 basis points of average loans (excluding Upstart-related items), consistent with a manageable risk profile. For 2026, management is guiding to net charge-offs in the 35–45 basis point range, reflecting a conservative stance but still indicative of a contained credit cost environment.

Capital Return and Aggressive Buyback Strategy

Capital deployment remains a central part of the WSFS story, with management leaning into buybacks as a lever to enhance shareholder returns. In Q4, the company returned $119 million of capital, including $109 million of share repurchases, equivalent to 3.7% of shares outstanding in a single quarter. For full-year 2025, buybacks totaled $288 million, retiring more than 9% of outstanding shares. Looking ahead, management intends to keep buyback activity elevated as it works toward a roughly 12% capital target, while retaining flexibility to adjust based on market and economic conditions. This stance underscores management’s confidence in the franchise and the sustainability of earnings.

Balance Sheet Strategy and Hedging Support Earnings

WSFS outlined a practical, rate-aware balance sheet strategy designed to preserve earnings power through the cycle. The securities portfolio is expected to remain around 21% of total assets, with current portfolio yields of about 2.35% being reinvested at roughly 4.3–4.4%, creating an approximate 200 basis point uplift over time. The bank also highlighted a robust hedging program, with about $1.3 billion of hedges currently in the money—potentially rising to around $1.5 billion if there is another rate cut. Together, these actions provide a meaningful cushion against NIM pressure and support the bank’s ability to manage through the expected easing cycle.

Linked-Quarter NIM Pressure and Rate Sensitivity

While the NIM backdrop remains favorable relative to peers, WSFS did acknowledge near-term pressure from rate cuts. The 8 basis point linked-quarter decline in Q4 NIM—including 4 basis points tied to the prior quarter’s one-time interest recovery—highlights the franchise’s early sensitivity to falling rates. Management’s 2026 plan assumes three 25 basis point cuts, but they reiterated that repricing of deposits, proactive securities reinvestment, and the existing hedge book will help offset the impact. The message to investors was that while quarterly NIM moves may be choppy, the full-year margin profile should remain attractive.

Temporary Increase in Delinquencies

Credit metrics showed an uptick in delinquencies this quarter, but management framed the move as largely technical and tied to already-identified problem credits. Delinquencies rose 46 basis points sequentially as several prior nonperforming or problem loans migrated into delinquent status. About 14 basis points of the increase came from nonperforming loans, with the remainder concentrated in just a few credits—two office loans and one multifamily condo loan within the bank’s footprint. While these trends bear watching, they appear contained and consistent with a bank actively working through specific problem assets.

Higher Quarterly Net Charge-Offs From a Single Problem Loan

Net charge-offs ticked up in the quarter but were driven by a narrow set of issues rather than broad deterioration. Quarterly NCOs rose 16 basis points to 46 basis points of average loans, primarily due to a partial charge-off on a nonperforming land development loan. Management emphasized that, excluding this item, credit performance remains well within expectations and that full-year NCOs were 40 basis points excluding Upstart. This aligns with the bank’s forward guidance of 35–45 basis points for 2026, implying no structural shift in portfolio quality.

Cash Connect Faces Topline Headwinds From Rate Cuts

One segment facing clearer pressure is Cash Connect, where lower interest rates directly impact revenue. Management estimated that each 25 basis point rate cut reduces Cash Connect revenue by roughly $2.5 million annually. Even so, the company expects to protect and even improve profitability in this business by focusing on margin-enhancing actions, including pricing, mix optimization, and expense discipline. The broader message is that while topline revenue will be pressured, Cash Connect should remain an earnings contributor with improving efficiency.

Expectations for Uneven Commercial Losses

While the overall credit outlook is controlled, WSFS cautioned that commercial loan losses may remain uneven in 2026. Some nonperforming loans could migrate to loss status, creating quarter-to-quarter volatility in credit costs. Management has incorporated this uncertainty into its guidance, which calls for net charge-offs in the 35–45 basis point range. Investors should therefore expect some noise in individual quarters but within a band that management views as manageable for a growing, commercially focused bank.

Non-Core Items With Limited EPS Impact

The quarter also included several non-core items that modestly weighed on reported results. These items reduced net income by about $5 million and lowered EPS by $0.09 in Q4. Management treated these impacts as non-recurring and focused investor attention on core performance metrics, which remained strong across profitability, growth, and balance sheet quality. For shareholders, the takeaway is that headline figures slightly understate the strength of the underlying franchise this quarter.

Guidance and 2026 Outlook

Looking ahead, WSFS’s 2026 guidance reflects confidence in sustaining strong profitability under a scenario of a stable economy and three 25 basis point rate cuts. Management is targeting a full-year core ROA of roughly 1.40% and double-digit core EPS growth, with NIM around 3.80% and mid-single-digit growth in both loans and deposits from Q4 levels. Fee revenue, excluding Cash Connect, is expected to grow mid-single digits, with Wealth & Trust generating double-digit gains. Credit costs are guided to 35–45 basis points of average loans, and the efficiency ratio is expected in the high 50s, underscoring ongoing cost discipline. The bank anticipates an interest-bearing deposit beta in the low- to mid-40% range, plans to keep the securities portfolio around 21% of assets while reinvesting at significantly higher yields than the current book, and intends to maintain elevated share repurchases as it moves toward a 12% capital target. Cash Connect is expected to lose about $2.5 million of revenue for each 25 basis point cut, but profitability should be protected through pricing and expense actions, while in-the-money hedges of roughly $1.3 billion (growing with further cuts) provide additional earnings support.

In sum, WSFS Financial’s latest call painted a picture of a bank combining strong earnings growth and high returns with disciplined risk management and capital deployment. While investors must factor in near-term NIM pressure, isolated credit issues, and rate-driven headwinds in Cash Connect, the positives—robust core profitability, balanced growth in loans and deposits, rising fee income, and aggressive buybacks—clearly dominated the discussion. For shareholders and prospective investors, WSFS appears well-positioned to navigate the coming rate environment while continuing to deliver attractive returns.