WSFS Financial : 1st Quarter Earnings Call

Published: 2026-05-18 11:36:09 ET WSFS

Published on 05/18/2026 at 11:36 am EDT

Rodger Levenson; Chairman, President and Chief Executive Officer David Burg; Executive Vice President, Chief Financial Officer

Manuel Navas; Piper Sandler & Co. Russell Gunther; Stephens Inc.

Janet Lee; TD Cowen

Charles Driscoll; Keefe, Bruyette, & Woods, Inc. Christopher Marinac; Brean Capital, LLC

Operator: Hello everyone, and thank you for joining us, and welcome to WSFS Financial Corporation First Quarter Earnings Call. [Operator Instructions] I'd now like to turn the call over to your host for today, Mr. David Burg, Chief Financial Officer. Sir, you may begin.

Prior to reviewing our financial results, I would like to read our Safe Harbor statement. Our discussion today will include information about our management's view of future expectations, plans, and prospects that constitute forward-looking statements. Actual results may differ materially from historical results or those indicated by these forward-looking statements due to risks and uncertainties, including, but not limited to, the risk factors included in the annual report on Form 10-K and our most recent quarterly reports on Form 10-Q, as well as other documents we periodically file with the SEC. All comments made during today's call are subject to the Safe Harbor statement.

I will now turn to our financial results. WSFS had a strong start to 2026, continuing to demonstrate the strength of our franchise and diverse business model. Our first quarter results included a core EPS of $1.68, core ROA of 1.65% and core return on tangible common equity of 20.7%, which are all up versus the prior quarter and prior year.

On a year-over-year basis, core net income increased 35% and core PPNR increased 10%, resulting in core EPS growth of 49% and tangible book value per share growth of 15%. These results include the previously disclosed loan recovery of $15.7 million. Excluding this recovery, core EPS was $1.45, which is up 28% year-over-year, and core ROA was 1.43%, which is up 14 basis points year-over-year.

Core results for the first quarter exclude two items related to the sales of real estate properties as we continue to optimize our office footprint and bring more associates together in fewer locations. These items resulted in a $2.2 million negative impact to net income and $0.04 impact to EPS.

Net interest margin of 3.83% was flat linked quarter while absorbing the interest rate cuts that occurred in the fourth quarter. We continue to successfully reprice our deposits, and this margin reflects a reduction of 12 basis points in total client deposit costs to 1.33%. Our interest-bearing deposit beta was 46% for the quarter, an increase relative to the prior quarter.

Core fee revenue, which represents nearly a third of total revenue, grew 11% year-over-year. This was driven by broad-based growth across our fee businesses and led by Wealth and Trust, which grew 25% year-over-year.

Within Institutional Services, Corporate Trust, which performs trustee and agency services for mortgage-backed and asset-backed securitizations, and Global Capital Markets, which performs trustee and agency services for distressed debt and bankruptcies were each up over 40% year-over-year as we continue to win new mandates and capture market share.

The Bryn Mawr Trust company of Delaware, our personal trust business, also delivered very strong year-over-year growth of 27%, driven by continued new account and client growth.

In addition to Wealth and Trust, we also had other businesses that delivered strong double-digit growth, including Capital Markets within our Commercial division and Mortgage Banking. Cash Connect® fees declined quarter-over-quarter due to the impact of interest rate cuts and lower volumes, but the business delivered a strong profit margin of 15%, more than doubling its profit margin year-over-year.

Client deposits increased 5% linked quarter, driven by growth in Commercial and Trust. While some deposits in both of these businesses are transactional and maybe short term, we continue to see solid momentum. On a year-over-year basis, our deposits are up over 9%, driven by growth across Trust, Commercial, and Private Wealth Management. Importantly, noninterest deposits grew 14% linked quarter and now represent 34% of our total deposits, up from 29% in the first quarter of last year.

Gross loans were up slightly linked quarter. In Commercial, strong momentum in C&I lending was partially offset by elevated payoffs in commercial mortgages. Annualized C&I growth was 7% linked quarter, driven by robust fundings. We also saw strong momentum in Small Business Banking, which had annualized growth of 11% linked quarter.

In Consumer, despite seasonal trends, we continue to see solid originations in Residential Mortgage, which were up over 70% year-over-year. Residential mortgage and WSFS originated consumer loans had annualized growth of 3% linked quarter and are up 14% year-over-year.

Turning to asset quality. We saw meaningful improvement across delinquencies and problem assets. Delinquencies are down 32% year-over-year, and problem assets are down 26% year-over-year.

Nonperforming assets, which are down 25% year-over-year, increased linked quarter driven by two loans, a C&I loan and a multifamily loan, both of which are well secured.

Net recoveries for the quarter were $3.5 million as the previously disclosed $15.7 million recovery more than offset the charge-offs. Excluding the impact of this recovery, net charge-offs were $12.2 million, which is a 19% decrease from the prior quarter.

During the quarter, we continued to execute on our capital return framework and returned $94 million of capital, including $85 million in buybacks, which equates to 2.5% of our outstanding shares. Since the beginning of 2025, WSFS has repurchased approximately 12% of our outstanding shares.

In addition, the Board approved an 18% increase in the quarterly dividend to $0.20 per share, along with an additional share repurchase authorization of 15% of our outstanding shares as of quarter end. This brings our total authorization to 19% of outstanding shares, reflecting our intention to continue to execute on our capital return framework and maintain an elevated level of buybacks in line with our previously communicated targets and framework.

As shown on Slide 11 of the Supplement, we updated our annual Outlook for net charge-offs as a result of the recovery. Our new Outlook is now 25 to 35 basis points for the year, down from the previous Outlook of 35 to 45 basis points. As part of our typical process, we will provide an updated full year Outlook when we present our 2Q results in July. We're pleased with these results to start the year, and we remain committed to delivering high performance. We will now open the line for questions.

Having said that, we do feel like we continue to have momentum across these businesses and continue to have momentum in our deposit growth.

Certainly, would not take this quarter and extrapolate it out in terms of the growth rate for the year. We're very pleased with the results, but not something that we feel is sustainable even though we feel like we're strategically well positioned.

When you look at our -- for example, when you look at the Trust business -- and by the way, 2/3 of the growth was really driven in Trust, you can think about it 1/3 in Commercial of those deposits. And when you think about our Trust business, it is a combination of both strong growth in the market as well as our ability to take share and grow faster than the market.

So, we are benefiting from strong market growth there, but in addition, continue to take share on top of that. I would also add, Russell, that -- yes, I would just add one comment. We are -- I think it's worth calling out that we are seeing more deposit competition for sure, really across all the businesses. That's in Commercial and Consumer and so that pressure is going to continue to be there. But again, we feel like we're well positioned competitively.

Russell Gunther: Okay, excellent. And then my second question would just be to kind of parse your original 2026 guide where you have three rate cuts embedded in there, the environment looking more like probably none. So, could you just maybe sensitize to that and walk us through some of the puts and takes? Obviously, a bit of an asset-sensitive position on the margin, maybe Cash Connect® overall profitability diminishes a bit, but what impact does removing those three cuts have on that ROA target of 1.40% plus or minus?

We have a number of promotional products out there as we continue to try to grow clients and win market share. And so, putting that all together, we do have a bit of a tailwind because of not having the cuts, but there are also other puts and takes there. And so, putting that all together, I think the current rate where we're at is probably a good place to be. The other thing I would note is just as always in the first quarter, just because of the technical nature of the seasonality, just the NIM is always a bit higher.

Operator: Janet Lee, TD Cowen.

So, when you look across the two quarters, we had good momentum. We had increased line utilization in both quarters, which is a good indication of client activity and the pipeline is pretty healthy. We are contending with a higher rate of payoffs in commercial real estate. Some of that has also helped our decline in problem assets. Some of them had lower yields and so we were happy to see those run off. But it's something that we will have to contend with as we're dealing with -- we are dealing with a bit of an elevated maturity pipeline with respect to commercial real estate.

And what I would add also with commercial real estate is, we are -- as we said before, we are primarily a recourse lender, and so we're very selective in how we do commercial real estate and the type of clients that we do business with. And so, we're really focused on accretive growth and not just growth for growth's sake. So, I think this is a pattern. The pattern that you're seeing this quarter is we were pleased with our momentum. There're certainly pockets where we'd like to see a little bit more growth, but overall, we feel good about the momentum. And for example, Small Business, which had an uneven year last year, also had a very solid quarter, 11% annualized growth. And so, we feel good about that, where we are.

So, I think there's definitely more deposit competition in the market. We still have a little bit of a repricing tailwind from some of the maturing CDs that we have. But because our CDs have been shorter end -- shorter term, a lot of that repricing is already behind us. And so that's why, really, I said kind of the NIM environment - there are puts and takes, but the NIM environment -- our NIM should be more or less stable other than that some of that first quarter seasonality with day count.

Operator: Christopher Marinac, Brean Capital, LLC.

When we think about capital return in general, it's -- obviously our number one priority is to invest in the business, and we want to continue to grow the business. We feel good about our growth prospects, and we continue to invest in our businesses. And when we think about capital return, we look at both -- we look at a couple of different considerations there. One is the regulatory ratios, and the other ones are also rating agency ratios. So, for example, we look at -- in addition to CET1, we also look at TCE. We look at our AOCI volatility and rate volatility. And so, we want to manage all of those factors to ensure that we have the right view on excess capital and our glide path.

And so that's why those are really the drivers behind why we tend to stick around 100% because of those factors. We saw more interest rate volatility in the last quarter, and you saw a little bit of pressure on our TCE, and that's an example of the kind of things that we're carefully monitoring.

With respect to the capital changes, we've -- obviously, this is in comment period. And so, we'll see how the final rules shake out. But we feel like it will have some incremental capital to us on the regulatory side because of the risk weightings and changes to assets, based on our preliminary modeling maybe a 4% to 5% benefit to capital. But again, that's on the risk-weighted side. And we look at multiple capital ratios and multiple indicators including our total capital to assets and those types of metrics. So, we're going to weigh all of that, but that could potentially provide a little bit more capacity.

Operator: Manuel Navas, Piper Sandler.

In addition, our -- the strength of our balance sheet and our credit ratings, and as you know, we have three strong investment-grade ratings, those are also very important support factors for our ability to do these deals because clearly, this is about our ability to be there for the long term to be there as a trustee and a custodian of these assets. And the last point I would make is there have been strong market growth, particularly when you look at the asset-backed and mortgage-backed security market, the market growth there has been about 20% per year. And so, we have been able to ride that market. We've been able to actually win share and grow in excess of that growth rate, as you can see from the numbers, but we benefited from that market growth.

So certainly, we don't expect that market growth to continue at that rate. It may slow down to a more normalized growth rate, but we feel good about our ability to continue to win share.

And I'd say, generally, optimism is at a pretty reasonable level at this point. And I think you see that in not only the fundings, but some of the comments on our pipeline and other things. So, we feel good about that, supporting the overall C&I growth going forward.

Operator: Charles Driscoll, Keefe, Bruyette, & Woods.

And I understand you're already pretty aggressive on the buyback and with the premium valuation giving you optionality. Just wondering your updated thoughts on M&A here? If you're looking for a more traditional bank or something less traditional? Just anything there.

In terms of whole bank, we think we have a great opportunity to execute on our Strategic Plan with the footprint that we have today focusing on this Greater Philadelphia and Delaware region, and a lot of headroom to grow in a very distracted large bank competitive set. That being said, if something came along that we think would be additive to that, we would certainly consider it, but the bar would be, I think, very high because we do think there's so much opportunity right in front of us. But we always keep our eyes open for those kinds of situations, but I would also just reiterate, we feel we can execute on our Strategic Plan by focus -- in the banking business by focusing on the organic growth opportunity right in front of us to take market share.

And so, we saw no value in that, and we took a full write-off, but there's a lot of liquidity in the market. And one indication of that liquidity was that the sponsor in this case was able to get a full refinancing of that loan, and we were able to get a full recovery1. So, I think that's an indication of kind of the liquidity that we see in the market for some of these assets.

In terms of our overall portfolio, I think we feel good. As kind of I had outlined in our comments, there's always -- there're always potentially uneven deals in Commercial, but generally, when you look at the trend over the last five quarters, we've been trending down pretty much in all of our indicators, and that makes us feel good about our portfolio.

We gave you some disclosure around our NDFI portfolio, which is very small, about 3% of our assets, also very granular and distributed. We see no credit issues in that portfolio. There are no very -- almost no problem assets, no NPAs, charge-offs, or delinquencies there. And so, we feel good about our portfolio overall. Again, there's always one or two credits that could be specific problems, but nothing systemic that we're seeing overall and something we continue to monitor closely.

Operator: This concludes today's conference call. Thank you for attending. You may now disconnect.

1 Recognized a recovery of $15.7 million (against the first quarter 2025 charge-off of $15.9 million) as well as the payoff of a $2.5 million nonperforming loan.

Disclaimer

WSFS Financial Corporation published this content on May 18, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 18, 2026 at 15:35 UTC.