WSFS Financial Corporation

the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I'd now like to turn the call over to David Burke, Chief Financial Officer. Sir, you may begin.

Thank you, Tina, and good afternoon, and thank you, everyone, for joining our second quarter 2025 earnings call. Our earnings release and earnings release supplement, which we'll refer to on today's call, can be found in the investor relations section or our company website. With me on this call are Roger Levinson, Chairman, President, and CO, and Art Bacci, Chief Operating Officer. 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 our 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 our 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 Securities and Exchange Commission. All comments made during today's call are subject to the safe harbor statement. I will now turn to our financial results. During the second quarter, WSFITs performed well as we continue to demonstrate the strength of our franchise and diverse business model. Results included a core earnings per share of $1.27, Core return on assets of 1.38% and core return on tangible common equity of 18.03%. All of these metrics are up versus the first quarter. Core net interest margin expanded one basis point to 3.89%. This reflects a reduction in total funding costs of nine basis points with a deposit beta of 43% for the quarter. These reductions were partially offset by lower loan yields primarily driven by the announced upstart sales. which accelerated the disposition of a non-strategic portfolio that has been in runoff. Core fee revenue grew 9% quarter-over-quarter, driven by broad-based growth across a number of businesses, including wealth, capital markets, and mortgage. Our wealth business grew 17% year-over-year, led by 39% growth in institutional services and 7% in the Bryn Mawr Trust Company of Delaware. Total client deposits increased 1% link quarter, driven by an increase in trust deposits. On a year-over-year basis, client deposits grew 5%, driven by growth across consumer, commercial, and trust. Importantly, non-interest deposits grew 11% year-over-year and now represent over 30% of our total client deposits. Gross loans were generally flat quarter-over-quarter, but we saw strong momentum in several areas. We saw the highest quarter of commercial fundings in over a year, and particularly strong fundings in CNI, where loan balances grew 2% one quarter. In our consumer business, we had strong growth in residential mortgage, which grew 2% one quarter, and in HELOCs, which grew 8% one quarter. These results reflect the momentum of our newly combined home lending business, as well as the learnings attained from our partnership with Spring EQ. Total net credit costs were $14.3 million, reflecting lower net charge-offs for the quarter. Net charge-offs were 30 basis points, with approximately half of that coming from the impact of the upstart sale. Excluding upstart, total net charge-offs were 14 basis points. Our problem asset levels were stable, and MTAs declined to 51 basis points of total assets as a result of payoffs. While delinquencies ticked up in the quarter, the relationship that drove the majority of the increase fully paid off in July. During the second quarter, Wisfits returned $87.3 million of capital, including 77.7 million in buybacks, which represented 2.7% of our outstanding shares. Year to date, we have returned approximately 150 million of capital, resulting in buybacks of 4.4% of our outstanding shares. On the last page of the supplement, we provided our midyear outlook and now assume two 25 basis point rate cuts for the remainder of the year, one in September and one in December. Overall, we're increasing our ROA outlook for the year to approximately 1.30% as we continue to drive high performance and growth. We expect low single-digit growth in our commercial portfolio and flat growth in our consumer portfolio, excluding upstart. We're generating great momentum in our home lending business, and we expect those originations to largely offset the continued runoff in our spring EQ partnership portfolio. For deposits, our outlook remains the same, and we expect to continue to generate broad-based growth across our business for the year. We're raising our NIM outlook to approximately 3.85%, and this outlook now includes the two additional rate cuts I mentioned earlier. We continue to be focused on deposit repricing opportunities and maintaining our beta through any interest rate cuts. We also continue to see strong momentum and growth opportunities in our fee businesses which contribute almost a third of our total revenue. Our wealth and trust business is performing very well, and the outlook for double-digit fee revenue growth this year remains unchanged. In the second quarter, WSFIS completed the sale of its powder mill business, which provided tax and other administrative services. In addition, we decided to unwind a wealth advisory partnership with Commonwealth Financial Network as a result of Commonwealth's announced sale to LPL Financial. While these transactions will result in some near-term revenue headwinds, they create important strategic opportunities to broaden our product offering and expand our wealth franchise. We expect our overall fee revenue will go low single digits as CashConnect revenues are expected to decline, primarily as a result of interest rate reductions and lower volume. As a reminder, the interest rate fee revenue decline is more than offsetting CashConnect's funding costs, resulting in a higher profit margin. Net charge-offs are expected to be between 35 to 45 basis points of average loans for the year, excluding the full impact of upstart, which has at this point largely been divested. Our commercial portfolio continues to perform well, but losses may remain uneven. Our outlook for efficiency remains unchanged at approximately 60%, and we will continue to leverage opportunities to invest in the franchise while prudently managing our expense base. Lastly, as seen on slide nine of the earnings supplement, we will continue to execute buybacks as part of a multi-year glide path to our CET1 capital target of 12%, while retaining discretion to adjust the pace based on the macro environment, business performance, or potential investment opportunities that we see. We are very excited about the future and remain committed to delivering high performance. Thank you, and we'll now open the line for questions.

As a reminder, to ask a question, simply press star followed by the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Russell Gunther with Stevens. Please go ahead.