WSFS Financial Corporation

Hello everyone. Thank you for joining us and welcome to WSFS Financial Corporation Second Quarter Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, press star 1 to raise your hand. To withdraw your question, press star 1 again. I'd now like to turn the call over to your host for today, Mr. David Burg, Chief Financial Officer. Sir, please go ahead.

Thank you very much and good afternoon, everyone. Thank you for joining our second quarter 2026 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 of our company website. With me on this call is Rodger Levenson, 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 of our management's view over 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 an annual report of Form 10-K and our most recent quarterly reports of Form 10-Q. as well as other documents we made periodically filed 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, WSFS's performance continued to demonstrate the strength of our franchise and diverse business model. Results included a core earnings per share of $1.66, core ROA of 1.55% and core return on tangible common equity of 20.2% which are all above the first quarter levels when you exclude the previously disclosed loan recovery. On a year-over-year basis, core net income increased 19% and core PPNR increased 10% resulting in core earnings per share growth of 31% and tangible book value per share growth of 13%. Core results for the quarter exclude a 1.8 million decreased net income and a 3 cent reduction to EPS primarily related to the write-down of an equity investment, as well as the previously disclosed gain from the sale of our credit card portfolio. Net interest margin expanded four basis points link quarter to 3.87%, driven by a four basis point reduction in our client deposit costs, as well as higher investment securities and yields. Our interest bearing deposit beta remained at 46%. Core fee revenue, which represents nearly a third of total revenue, grew 2% link quarter and 5% year-over-year. The growth across our few businesses was led by wealth and trust, which grew 17% year-over-year. Within institutional services, corporate trust and global capital markets were up 28% and 58% year-over-year respectively, as we continue to win new mandates and capture market share. For the first half of 26, WSFS was ranked as the third most active ABS and MBS trustee based on deal count, increasing our market share to 14% from 11.7% in 2025. Our personal trust business, the Bryn Mawr Trust Company of Delaware, also delivered strong year-over-year growth of 20%, driven by continued new account growth. Outside of wealth, our capital markets business within the commercial division also delivered strong double-digit growth, both link quarter and year-over-year. Cash Connect fees declined year-over-year due to the impact of interest rate cuts and lower volumes, but the business delivered a higher profit margin of 15% for the second quarter in a row. Client deposits increased 3% link quarter, driven by growth in institutional services and commercial. On a year-over-year basis, our client deposits were up 11%. Importantly, non-interest deposits were up 10% link quarter and now represent 37% of total client deposits up from 31% a year ago. While we continue to see some elevated quarter-end activity by clients, we are seeing strong deposit growth momentum as evidenced by increases in both end-of-period and average deposits, which also grew 3% link quarter and 8% year-over-year. Gross loans were up 1% link quarter or 5% annualized. In commercial, we continue to see strong momentum in CNI, which grew 2% link quarter or 8% annualized. and in consumer, home lending generated strong growth with residential mortgage and WSFIS home equity loans up 10% link quarter and 23% year over year. Turning to asset quality, we continued the recent trend of improvements across our key metrics, key metrics including leading indicators. Problem assets decreased 6% link quarter due to several commercial payoffs and are now down 31% year over year. Delinquencies are down 5% link quarter and nearly 40% year-over-year, with accruing delinquencies of $26 million as of quarter end. Non-performing assets are down 8% link quarter and nearly 25% year-over-year. In addition, net charge-offs were $7.1 million, or 21 basis points of average loans for the quarter. When you exclude the impact of the prior quarter loan recovery, net charge-offs decreased $5.1 million quarter-over-quarter driven by lower commercial charges. During the quarter, we continued to execute on our capital return framework, returning 77 million of capital, including 66 million of buybacks. Year-to-date, we repurchased over 4% of our outstanding shares and returned approximately 100% of net income to shareholders. On the last page of the earnings supplement, we provided our updated 2026 outlook, which now assumes no Fed funds rate changes for the rest of the year. Our updated full-year outlook reflects improvements across most metrics. Notably, we're increasing ROA outlook for the year to 1.50% with potential upside from there as we continue to drive high performance and growth. We also raised our deposit growth rate from mid to high single digits. While our results reflect some elevated quarter-end transactional activity, we continue to see strong deposit growth momentum across institutional services and commercials. Our NIM outlook has improved to approximately 3.85% reflecting the updated rate forecast and momentum across deposits and loans. We continue to see elevated deposit competition which may impact deposit pricing going forward. We raised our outlook for fee revenue excluding Cash Connect from mid to high single digits as we continue to see strong momentum and future growth opportunities in our fee businesses and particularly wealth and trusts where we continue to capture market share within institutional services and BMT of Delaware. Net charge-offs are now expected to be between 15 to 25 basis points of average loans for the year, a decrease from our previous outlook, which reflects the strong asset quality results we saw in the quarter and recent momentum across key leading indicators. Consistent with our first quarter update, this outlook includes the previously disclosed recovery in 1Q. Our commercial portfolio continues to perform well, but losses may be uneven. Our outlook for efficiency remains unchanged. We plan to maintain strong expense discipline, but we'll continue to leverage opportunities to invest in the franchise, which coupled with normal seasonality may result in some variances quarter to quarter. We're pleased with these results and remain committed to delivering high performance. And we'll now open the line for questions.

We will now begin the 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. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are 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 with Stevens. Your line is open. Please go ahead.