WSFS Financial Corporation

Hello, everyone, and thank you for joining us. And welcome to WSFS Financial Corporation first quarter earnings call. After today's prepared remarks, we'll host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I'd now like to turn the call over to your host for today, Mr. David Berg, Chief Financial Officer. Sir, you may begin.

Thank you very much. Good afternoon and thank you everyone for joining our first quarter 2026 earnings call. Our earnings release and earnings release supplement, which we will refer to on today's call, can be found in the investor relations section of our company website. With me on this call is Roger Levinson, Chairman, President, and CEO. 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 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 follow 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. WisFIS 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 4 cent impact to EPS. Net interest margin of 3.83 was flat link order 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-by-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% link quarter driven by growth in commercial and trust. While some deposits in both of these businesses are transactional and may be 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, non-interest deposits grew 14% in the quarter and now represent 34% of our total deposits, up from 29% in the first quarter of last year. Gross loans were up slightly link quarter. In commercial, strong momentum in CNI lending was partially offset by elevated payoffs in commercial mortgages. Annualized CNI growth was 7% link quarter, driven by robust fundings. We also saw strong momentum in small business banking, which had annualized growth of 11% link quarter. In consumer, despite seasonal trends, we continue to see solid originations in residential mortgage which we up over 70% year over year. Residential mortgage and WSFIS originated consumer loans at annualized growth of 3% link quarter and are up 14% year over year. Turning to asset quality, we saw a meaningful improvement across delinquencies and problem assets. Delinquencies are down 32% year over year and problem assets are down 26% year over year. Non-performing assets, which are down 25% year over year increased linked quarter driven by two loans, a CNI 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, WSFIS 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 four-year outlook when we present our two Q 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.

We'll now begin the question and answer session. Please limit yourself to one question and follow up questions. If you would like to ask a question, please press star one to raise your hand. Withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Russell Gunther at Stevens. Your line is open. Please go ahead.