Regional banking company WSFS Financial (NASDAQ: WSFS) missed Wall Street’s revenue expectations in Q3 CY2025, with sales falling 1.4% year on year to $263.9 million. Its non-GAAP profit of $1.40 per share was 11.8% above analysts’ consensus estimates.

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StockStory’s Take

WSFS Financial’s third quarter results were shaped by shifting loan portfolio dynamics and a mixed performance across business lines. While the company’s revenue declined compared to last year and missed Wall Street’s expectations, non-GAAP earnings per share surpassed analyst forecasts. Management pointed to strong performance in its core home lending and consumer loans, as well as improvements in asset quality driven by strategic exits from noncore portfolios. CEO Rodger Levenson stated that tangible book value per share increased 12%, and CFO David Burg highlighted, “We have good momentum and good progress across asset quality metrics.”

Looking ahead, WSFS Financial’s guidance is influenced by ongoing deposit growth, asset quality improvements, and plans to manage net interest margins through a combination of deposit repricing, hedging, and securities portfolio strategies. Management acknowledged uncertainty around future interest rate moves, with Burg noting that “the impact of additional rate cuts on our financial results will not be linear.” The company intends to maintain elevated share buybacks, supported by a strong capital position, while continuing to invest in business lines such as home lending and wealth management. The outlook for new business origination and margin performance will depend on macroeconomic factors and WSFS’s ability to execute its capital deployment strategy.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to focused loan portfolio management, asset quality gains, and targeted growth in fee-generating businesses, while also noting the impact of strategic portfolio exits and market conditions.

• Loan portfolio repositioning: WSFS completed the sale of its Upstart portfolio, reducing exposure to higher-risk assets and releasing reserves. Ongoing runoff in the Spring EQ partnership portfolio was largely offset by growth in WSFS-originated home lending and consumer loans.
• Asset quality improvements: The company reported a marked decline in problem assets, delinquencies, and nonperforming assets, with net credit costs and charge-offs both improving versus the prior quarter.
• Deposit growth and mix: Client deposits grew across consumer, commercial, wealth, and trust segments. Notably, noninterest-bearing deposits increased 12% year-over-year, now accounting for over 30% of total client deposits.
• Wealth and Trust momentum: The Wealth and Trust division achieved double-digit year-over-year growth, driven by new account activity and increased transaction revenue, especially within institutional services and the Bryn Mawr Trust of Delaware.
• Capital deployment strategy: Elevated share repurchases continued, with management stating intentions to maintain buybacks above net income levels over the next several years, while evaluating opportunities to reinvest capital in accretive business initiatives.

Drivers of Future Performance

WSFS Financial’s outlook reflects the interplay of interest rate changes, ongoing business line growth, and active capital management as key themes for the upcoming quarters.

• Interest rate sensitivity: Management expects further rate cuts to initially pressure net interest margin but plans to mitigate these effects through deposit repricing, hedging programs, and reinvestment of securities portfolio runoff. Burg explained that hedges could neutralize up to $1.5 billion in variable-rate loans if rate cuts continue.
• Continued investment in growth areas: The company is prioritizing expansion of its home lending, consumer loan, and wealth management businesses, leveraging talent recruitment and differentiated origination capabilities to offset runoff in legacy portfolios and drive future revenue.
• Elevated capital return plans: WSFS aims to maintain share buybacks at or above current levels, supported by strong common equity tier 1 capital. The pace of buybacks may be adjusted in response to macroeconomic shifts and investment opportunities, but capital deployment remains a top strategic focus.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be monitoring (1) the pace of loan growth and the extent to which new originations in home lending and commercial segments offset runoff in legacy portfolios, (2) continued improvements in asset quality and the sustainability of lower credit costs, and (3) the execution of capital return plans, including share buybacks relative to earnings and capital levels. The impact of evolving interest rates and management’s ability to adapt deposit pricing strategies will also be key indicators of business momentum.

WSFS Financial currently trades at $53.02, in line with $52.75 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free for active Edge members).

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