WSFS Q1 Deep Dive: Deposit Growth, Expense Discipline, and Macro Uncertainty Shape Results

Regional banking company WSFS Financial (NASDAQ:WSFS) missed Wall Street’s revenue expectations in Q1 CY2025 as sales only rose 2% year on year to $256.1 million. Its non-GAAP profit of $1.13 per share was 8.7% above analysts’ consensus estimates.

Is now the time to buy WSFS? Find out in our full research report (it’s free).

StockStory’s Take

WSFS Financial’s first quarter performance was shaped by disciplined expense management and steady growth in deposit balances, set against a backdrop of ongoing macroeconomic uncertainty. Management cited improvements in net interest margin, reduced funding costs, and a 6% annual increase in non-interest-bearing deposits as key contributors. CEO Rodger Levenson noted that commercial loan growth was muted as clients postponed expansion projects, stating, “We’ve had a number of situations where we had approved deals, and the customer just called us and said, I'm just going to sit tight for at least sixty, ninety days.” The quarter also included a one-time charge-off on an acquired office-related loan, which impacted credit costs, but the core loan portfolio otherwise performed in line with expectations.

Looking ahead, WSFS is focused on navigating continued volatility in the economic environment, with management emphasizing flexibility in capital allocation and close monitoring of core credit quality. CFO David Burg explained that updated full-year guidance will be provided after the second quarter, reflecting the company’s cautious approach amid shifting market conditions. Levenson added, “Our customers are doing fine. They're just in a holding pattern until there's a little bit more certainty,” highlighting that future commercial loan activity will depend on greater clarity around policy and economic trends. The company aims to gradually lower its CET1 capital ratio while maintaining discretion in pacing share buybacks, balancing growth opportunities with prudent risk management.

Key Insights from Management’s Remarks

Management attributed the quarter’s margin improvement to lower deposit costs, active funding optimization, and resilient fee income, while commercial lending slowed as clients delayed investments.

• Deposit repricing actions: WSFS reduced total deposit costs through targeted repricing, helping expand net interest margin even as broader interest rates declined. Management reported achieving a deposit beta of 38%, reaching their year-end goal ahead of schedule, and expects further incremental gains.
• Fee income resilience: Fee revenue, especially from Wealth and Trust, grew 19% year-over-year, driven by higher deal flow in Institutional Services and Bryn Mawr Trust Company of Delaware. These segments benefited from winning market share in trustee and agent services for securitizations, debt issuances, and bankruptcy transactions.
• Cash Connect margin focus: The Cash Connect business experienced seasonally lower volumes and revenue due to rate changes, but management implemented pricing increases and expense controls to improve profit margins. Burg said, “Profitability came in a bit above 7%, which is an improvement year-over-year and quarter-over-quarter.”
• Credit cost dynamics: The quarter’s credit costs were elevated by a one-time charge-off on a previously identified non-performing office-related loan acquired with Bryn Mawr Trust. Excluding this event, net charge-offs and delinquencies remained in line with expectations, and portfolios previously experiencing losses showed improvement.
• Expense discipline and capital strategy: Expenses declined from the prior quarter due to lower incentive accruals and seasonal factors. WSFS also announced a 13% dividend increase and expanded its share repurchase authorization, while outlining a multi-year plan to gradually reduce its CET1 ratio to 12%.

Drivers of Future Performance

WSFS’s outlook centers on maintaining balance sheet flexibility and protecting margins amid uncertain loan demand and evolving macroeconomic conditions.

• Commercial lending uncertainty: Management noted that commercial clients remain cautious, with many delaying expansions due to macro volatility and uncertainty around tariffs and government policies. Levenson stated that lending pipelines are steady, but actual originations may lag until there is greater clarity in the business environment.
• Deposit and margin management: The company expects continued focus on deposit pricing and funding cost optimization to support net interest margin. Burg highlighted the use of hedging strategies and wholesale funding reductions as tools to mitigate the impact of potential rate cuts on margins.
• Capital allocation flexibility: WSFS plans a gradual reduction in its CET1 capital ratio over two to three years, retaining discretion to adjust the pace of share buybacks based on economic conditions, business performance, and investment opportunities. Management reinforced that capital planning will remain responsive to stress scenarios and regulatory requirements.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be watching (1) whether commercial lending activity rebounds as macro uncertainty subsides, (2) the trajectory of deposit growth and pricing as interest rates evolve, and (3) expense discipline as temporary items normalize. Additionally, we will track progress on capital deployment, including the pace of share repurchases and the gradual lowering of the CET1 ratio.

WSFS Financial currently trades at $51.68, in line with $52.12 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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