WSFS Financial Corporation Stock

Hello, everyone. Thank you for joining us, and welcome to WSFS Financial Corporation Second 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, 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 an 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 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 may 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, 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 decrease to net income and a $0.03 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 4 basis points linked-quarter to 3.87%, driven by a 4 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 1/3 of total revenue, grew 2% linked-quarter and 5% year-over-year. The growth across our fee 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 continued 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 linked-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% linked-quarter driven by growth in Institutional Services and Commercial. On a year-over-year basis, our client deposits are up 11%.

Importantly, noninterest deposits were up 10% linked-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% linked-quarter and 8% year-over-year.

Gross loans were up 1% linked-quarter or 5% annualized. In Commercial, we continue to see strong momentum in C&I which grew 2% linked-quarter or 8% annualized. And in Consumer, home lending generated strong growth, with residential mortgage and WSFS home equity loans up 10% linked-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% linked-quarter due to several commercial payoffs and are now down 31% year-over-year. Delinquencies are down 5% linked-quarter and nearly 40% year-over-year, with accruing delinquencies of $26 million as of quarter-end. Nonperforming assets are down 8% linked-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 charge-offs.

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 our 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 Commercial. 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 Trust 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.

[Operator Instructions] Your first question comes from the line of Russell Gunther with Stephens.

I wanted to begin on the revised margin guide. So it looks like it implies relative stability in the back half of the year. We're getting towards the end of earnings this week and a lot of the commentary so far has focused on margin headwinds for the industry, tighter spreads, higher deposit costs. But when I look at your guys' liquidity profile in terms of the below peer loan-to-deposit ratio, a lot of securities cash flow you can get reinvested, better-than-peer noninterest-bearing mix that's growing, I think you guys would be better able to defend against competitive pressures, at least on the liability side.

But David, how are you guys thinking about the trajectory of deposit costs from here as what's reflected in the margin guide and as we think about '27?

Yes, happy to address that. So I think you're right, I think we've obviously had success in bringing down our deposit costs so far. We have a good liquidity profile. And in fact, we've let some of our higher-cost deposits run off in the first half of the year, as you can see in some of our CD runoffs. So because of our liquidity position, we were able to do that.

At the same time, I think there are 2 factors to consider. One is we are, and we've been seeing it really throughout the first half of the year, there's definitely more deposit competition out in the market. And we've seen that really build up over the last 6 months. To give you one example, our largest CD product was a 6-month 3% CD. And we found ourselves to be really on the low end of market pricing. And if you go out, it's very easy to get over 4% for 12 months.

And so we want to make sure that we remain competitive, even though we don't necessarily need the liquidity today. We obviously want to continue to grow our clients. We want to defend our market share and capture more share. We want to remain competitive. So I think we will -- we do have to -- we may need to increase in order to grow in some areas and be competitive. And so that does put some pressure on our deposit costs going out. But expect the NIM to be stable and we expect to be able to manage that, but there could be some upward pressure on deposit costs.

Got it. Okay. And then switching gears to expenses. I appreciate the reiterated high 50s efficiency guide, as it relates to just kind of dollar noninterest expense, you referenced seasonal dynamics. So could you level-set us in terms of how 2Q may compare to where 3Q is headed? And then within that kind of high 50s target, I mean, what does that mean to you? Is there a plus or minus to that? You guys were at like 59.3%, I think, last year. Is that some -- is that a result you might be able to outperform?

Yes. So in terms of expenses, this quarter, when you look at our expenses year-over-year, are up about 4%. So I think it's a reasonable growth rate. When you look at this particular quarter, the majority of our quarter-over-quarter expense was really driven by variable and revenue driven expenses. So it's really a direct result of the outperformance on the top line. Although we did have some items, some nonrecurring items hit that we've outlined in our press release.

Generally, I think our expenses could be at this level, around this level, maybe a little bit lower going forward. But the important thing is a big part of that is revenue driven. And so to the extent that we continue to outperform on the fee side, on the top line side, that will drive additional expenses. So we do think of it, as a result, you can't disassociate the revenue from the expenses, and so we do think of it in terms of efficiency.

As you said, we were over 59% last year. We want to continue to tick that down. We've been 58% for the last 2 quarters. And we're comfortable in the range that we're at. And over time, our goal is to continue to tick that down. And we've got a number of expense initiatives that are ongoing. We think about it a lot.

Part of our strategy, by the way, around expenses is, as you know, we've been exiting some non -- businesses that are not central to our strategy, and that's been an important driver as well. And so overall, I think we'll continue to invest in the business. That's really the number one priority, while maintaining discipline. And so I think around this efficiency level is where we would expect to be.

Okay. No, that makes a ton of sense, David. And then I guess just last one for me. The 1.50% plus, that plus sign there in the ROA target, what are the biggest deltas to achieving that?

Yes. So I think we -- we put the plus there because we'd like to come in a little bit better than that, not materially better, but obviously, continued outperformance in fees if we continue to get some of the deposit growth. But again, it's a competitive environment. It's not -- the deposit growth we've seen, I think, is hard to continue at this level. And so that's where some of the pluses and minuses come in.

Your next question, from the line of Kelly Motta with KBW.

This is Meghan Lynch on for Kelly Motta. So loan growth was very solid this quarter and you're expecting this growth to sort of continue. So can you speak a bit to how pricing is coming in, especially with competition, and if this competition is pressuring your prices at all?

Sure. Happy to talk about that. And I'll maybe split the discussion between commercial and consumer. On the commercial side, as you know, really our core strategy is to grow our C&I business. That's the business that drives our relationship. It's a very important contributor to our deposits and our noninterest-bearing deposits. And so that's really kind of our flagship product.

C&I has always been very, very competitive, and continues to get very competitive as others try to penetrate the space. We're not the low-cost provider in the market. We really separate ourselves based on our service model. Obviously, we need to be competitive, but we separate ourselves based on service, based on our responsiveness and our relationships. And so we want to make sure we grow in a reasonable, accretive way, and that's what we've been doing. And so expect -- our goal is to continue to grow at kind of mid-single digits through the cycle.

On the consumer side, our loan strategy, what we've really done is try to focus on areas where we have a differentiated value proposition. And so you've seen us get out of -- we sold our Upstart portfolio last year, we sold our credit card portfolio this year, and really focused on residential lending.

In residential lending, we really have a differentiated product there with our service model and our ability to work with different types of clients. But the pricing there, because of the move in rates that we've seen, the pricing, obviously, on the residential real estate side, has gotten more challenging. So I think that's a market dynamic overall.

That was very helpful. And then just switching sort of to credit. You saw some improvement this quarter and the trends seem very solid. Is there any -- what are you seeing more broadly? And is there any place that you're watching in your portfolio?

Yes. As you mentioned, we've seen -- we had good credit performance. We take a very proactive approach to credit. We spent a lot of time on it where we try to get out early in front of any issues that may appear and work with our clients to resolve any potential issues.

As you look at the portfolio, there's nothing that -- there are always individual challenges with particular clients in particular situations, but there's not kind of a big red flag when we look across, or a theme or pattern. Office continues to be a challenging market and challenging prices, and we try to be very selective there. But generally, nothing new in terms of any red flags where we can connect the dots across different types of asset classes.

Your next question, from the line of Manuel Navas with Piper Sandler.

Could you add a little more color on the OpEx discussion? You said there could be some potential variability. And in the prior conversations, it sounded like there could be a downward trajectory. But what are some of the projects and things that you need to -- that add that kind of variability within OpEx? Or is it just variable comp supporting revenues?

So part of our cost base, Manuel, is variable. And so whenever we have revenue outperformance, we're going to see some additional expenses. Some of that is IC, and that was a meaningful part this quarter. We also have transaction expenses, for example, in Cash Connect, we have transaction expenses in our trust businesses. And so a portion of that revenue is definitely going to result in higher expenses.

At the same time, we continue to, if you look at our core expense base and our base expense level, we continue to try to work that down and continue to try to have initiatives to offset general rising costs, inflation and medical expenses and those type of things. And we have a number of ongoing initiatives. Like I mentioned, some of that has been getting out of businesses that were not central to our strategy that had expenses associated with them, that were not highly profitable businesses.

We've really optimized our real estate portfolio. We have a successful initiative going on around vendor costs. So we've got a number of different initiatives that are offsetting some of the natural increases, which is how we get to a 4% year-over-year growth. But the revenue is going to drive some expense with it.

Yes, Manuel, I just would add to what David said. I think where the variability could come into play is, as David said, medical costs, healthcare costs, are a big topic and I think will continue to be a big topic, although we're doing, I think, a very good job of managing that. And like many others, we continue to periodically see fraud spike from different events.

So I think while we're in a good place, there's always some opportunity that we may see a little bit elevated costs in those 2 areas. And to me, that's really where some of the pressure on driving it down, that we can't point a finger on right now, could occur.

I appreciate that. Shifting over to loan growth, a little bit more that guide here in the back half of the year, mid-single digits. Can you just talk about the main drivers there and what you're seeing in the marketplace from your borrowers in terms of sentiment pipelines and things like that?

So I'll talk about sentiment. I've been out a fair bit over the last several weeks. And I would characterize client sentiment as very good. I think they're definitely dealing with some headwinds on the cost side. But all of that, what I would say, the uncertainty, geopolitical events, energy volatility, those kinds of things, I think they've kind of either come to accept there's going to be a certain amount of uncertainty or an ability to adjust their businesses based on what they dealt with last year if there's a sudden spike in one cost here or there.

So I think that's translating into businesses feeling pretty good and investing, which should be really good for us on the C&I side. And people are seeing the benefits of an overall stable economy. And so that's the environment where businesses like to grow and invest, and we should benefit from that. And so that's a big driver of our pipeline and where we're seeing opportunities.

And as you know very well, in our marketplace, particularly as you move up the curve in terms of medium-sized businesses, lower end of middle market, really competing against much larger competition. And we find that, as David has said, our service proposition plays very well into those kinds of clients. And so growing with our clients as well as taking market share are really the 2 drivers of where we see loan growth for the rest of the year.

And Manuel, I would just add that on the consumer side, a large part of our growth this quarter came from our home lending business. We had a -- we had really a strong pipeline at the end of the first quarter into the spring selling season, also some of the lower rates that happened earlier. But now we're reaching a little bit of a slower part of the season and rates have ticked up, so the pipeline has come down a bit. So wouldn't expect the kind of growth that we've seen in home lending necessarily to continue, but still expect to be able to do well there.

I appreciate that. Switching over to deposits. So really strong first half of the year. I think that's a big part of the higher guide. Is some of the discussion points around NIM and around competitive pressures on deposits, is it because some of the noninterest-bearing could flow out? Could you kind of talk about the noninterest-bearing growth, which is great, Institutional Services kicking butt. And I'm just wondering how much of that is sticky, how much of that are kind of preparing for it to flow out, if any. Just talk about the noninterest-bearing side a little bit and how it impacts your deposit costs in general.

Yes. Happy to do that, Manuel, so yes. I think when you think about our noninterest-bearing, really the important thing to understand is that those deposits are really spread across a few businesses. They're spread across Commercial, Consumer and Institutional Services.

And within Institutional Services, there are actually 2 businesses important contributors there: our Corporate Trust business where -- which focuses on the ABS and MBS markets; as well as our Global Capital Markets business, which focuses on bankruptcy, distressed debt, high-yield debt, corporate issuance. Both of those -- all 4 of those businesses are important drivers. And when you think about this quarter, probably about 80% of the NIB growth was within Institutional Services, split across both of those businesses, and 20% was in Commercial. So all of them are important drivers.

The competition that we're seeing is there are different drivers for each of those businesses in terms of deposit expectations. The competition that we talked about that we're seeing is really on the -- in the consumer space and in the commercial space, we're definitely seeing more deposit competition in the market. And that may impact both NIB growth as well as pricing going forward.

And on the trust side, we benefited from a very strong market and we've been able to capture share. But again, those are transactional activities and would not expect the kind of growth that we've seen to necessarily continue.

I appreciate that. Let me just add one more on kind of capital return. Really strong buyback activity. Is there a point where you become more price sensitive or you still have so much capital return? And where does buyback stack up with other opportunities you have to deploy across organic growth, M&A? Just kind of some updated thoughts here.

Yes. So generally, as you've heard us say before, our first priority is always to invest in the business. And we think that that's the best return for shareholders. And so investing at the right return level in the business is our first priority. We've obviously given you a capital target. We think we have excess capital at the moment. We look at a couple -- a number of different metrics there. And since we've rolled out the enhanced capital return framework kind of at the beginning of last year, we've been returning about 100% net income. And we've bought back about 14% of our shares going back to the beginning of last year.

So I generally expect that trend to continue. In any given quarter, we may deviate from that depending on what the opportunities are that we have internally, depending on the environment we look at, interest rate volatility, we look at our securities portfolio. So we look at it from multiple different perspectives. And that's why in any given quarter, we may deviate from that. But when you think about it over a multi-quarter period, we'd like to be in that 100% capital return.

So I'm not necessarily going to throw out a price target at which we stop or go. I think it depends on all of those factors and what else we have as opportunities internally.

And outside opportunities?

So you're referring to like M&A and those kinds of things, Manuel?

Yes. Yes.

Yes. So I think as we've said, I think if anything that we find could be additive and accretive to our current strategic plan, we would absolutely look at those opportunities across the franchise. So whether it's in the fee businesses, particularly the wealth side, we'd absolutely look at those kinds of opportunities. And I'd say the same thing on the banking side.

I think the challenge on the banking side, as we look at our footprint and our region, we feel like there's a lot of opportunity here. And so the bar would be pretty high for us to take some portion of our organizational bandwidth and pivot away from the organic opportunity that's right in front of us. If it's there, we will absolutely go for it. And as David said, we always want to take the opportunity to accretively invest in the business. It's important that it's accretive to what we've already got going from an organic standpoint.

Your next question, from the line of Christopher Marinac with Brean Capital, LLC.

I wanted to ask about the percentage of fee income to the overall business. Would you see this rising further into '27 and '28? And then does that give you even more flexibility on loan growth in terms of being even more selective than you have been?

So generally, we've been able to grow both. And that's why that ratio has been generally consistent, because we've been able to grow both. Our Wealth and Trust business, as you know, has been a fast grower, but that's been offset a bit by our Cash Connect business because of the interest rate impact on the top line there.

In a steady-state environment, generally would expect that our fees will probably go slightly faster, all else being equal. But we don't necessarily manage a particular number there. We're trying to grow both. And so we have a positive growth on the top line altogether.

Got it. And then I guess back to the concept of being selective in terms of who you're doing business with, and particularly not having to grow extremely fast on loans. Is that helping you on deposits? And is the deposit gathering that you are seeing that success kind of a function of just really being focused on the best customers who have funding?

Yes. I think certainly when we look at lending opportunities, we -- the relationship is really important to us, and the deposits that those clients bring in are really important to us. So we try to invest our management bandwidth into those types of opportunities. So it's not the only thing we do, and as you know, for example, the commercial real estate business tends to be a bit more transactional and we have great clients there. And we continue to invest and continue to grow that business.

But ideally, we have those opportunities to bring a broader relationship, which is not just deposits, but also across wealth, across treasury services. And that's what we think one of our big value propositions is, to bring the full firm.

Yes, Chris, I don't think we look at it as sort of managing to find where there's the highest level of deposits in a C&I relationship. We take a relationship return view on all commercial relationships. So we look at all the business we can get. As David said, typically in the C&I business, you're getting all the operating accounts, which could bring significant deposits and the other business that we do. And as long as it crosses our threshold with the loan pricing that we have, that's accretive to what we're doing.

And that's really the way we're selective on clients. We can be super aggressive on credit pricing for the right opportunity as long as we get the full relationship. So we really look at it much more that way than trying to think about how much in deposits we may or may not get from a client.

Okay. That's great. Thanks for clarifying that, I appreciate it. And back to the capital goals, is there a time frame on when you want to get that towards 12%? Or are we still -- it's just going to be multi-quarters ahead?

Yes. No particular time frame, Chris. For example, when you look at this quarter, if you just look at this quarter, I think we're down 15 bps. And if you just do the math on the CET1, if you just do the math on that, you're talking about kind of 2.5 to 3 years. So I think it's a multiyear trajectory.

But we also look at TC is really important. Our security portfolio is really important and the impact on capital. So we look at a number of different factors there. So no. No particular time line. We want to continue with a measured approach at about 100%. But again, we may deviate from that quarter-to-quarter.

Okay. And I guess to that point, does the AOCI return -- is any of that lumpy in the next year or 2 in terms of some preplanned return?

I wouldn't say so. I think it's been pretty consistent. Most -- probably 95% of our portfolio is invested in MBS, and so there's no credit risk there. It's been pretty consistent with the way that AOCI has been coming off. We've had it moved the other way in the last couple of quarters, and that's really been a function of rates. But it's down materially from where we were post-COVID, and will continue to tick down kind of gradually.

Your next question, from the line of Janet Lee with TD Cowen.

On Institutional Services, I know that there's -- a big portion of that growth is coming from the market share gains, specifically on the Corporate Trust side, but you've also been benefiting from the secular tailwinds from the private capital securitization. I just want to see if you could provide some context around whether the strength there industry-wide is persisting or if there's any change there, and whether that's an important factor when we forecast your investment management or Wealth and Trust revenues?

Yes. So Janet, let me back up a little bit and just talk about I think it's important when you think about Institutional Services to consider both businesses there, both Corporate Trust and Global Capital Markets. When you look at, for example, our NIB growth this quarter, both were important contributors. As I mentioned in my opening remarks, both were also important contributors on the fee side.

To your direct question around the growth of that ABS and MBS market, it has continued to grow. And the first half of '26 rankings just came out. We increased share, but the market also grew. And that market has been growing 20% to 30%, and we've been growing on top of that. So I think generally, when you have -- whenever you can obviously take share in a market that's growing that quickly, it's very accretive to results, and that's what's been happening.

But I think it's important to also recognize what the differentiating factors are for us. And there are a number of them. But in general, we have -- I can summarize it by saying that we have the balance sheet strength of some of the larger players, but are much more nimble and are much more -- and have a much better service model. And so when you think about our ability to move quickly, our ability to innovate with clients, that has allowed us to take share. And that market is a market where reputation matters a lot. And the better we do, the more we win. And so those have been some of the dynamics that have been at play here and what has allowed us to take share on top of the strong growth.

I think that market has been a good, growing market for a number of years. I don't think that this pace of growth is something I would necessarily extrapolate. But we believe -- we continue to believe in our ability to win share and play in different asset classes and play different roles there.

And going back to noninterest-bearing deposits, obviously, very impressive growth again this quarter, and I appreciate the comment around how we -- sustaining this level of growth may not be -- it's not an easy feat. In terms of your 3.85% net interest margin guidance, are you contemplating any further growth in noninterest-bearing deposits? Or maybe what level of NIB as a percentage of total deposit is assumed in your guidance?

Yes. So I think it's generally -- I think if we keep it at this level, it would be really great. I'm not sure we can sustain it at this level of 37%. Historically, we've kind of run in the low 30s, but I think low to mid 30s -- mid-30s is -- will be a good level to maintain. And in general, as we grow deposits, we want to maintain that level. I think this has been real outperformance.

But Janet, I think the other thing to consider is when you have noninterest-bearing deposit growth, based on where rates are today, if those deposits are invested in cash, it's not necessarily accretive to net interest margin. So it's really a push, I would say, generally to where net interest margin is. So the upside to net interest margin is really going to be driven by our ability to loan growth, our ability to invest those noninterest-bearing deposits at something that's higher than cash, because otherwise, it would just be a push.

And with no further questions in the queue, I would like to turn the call back over to David Burg.

Okay. Thank you very much. We appreciate you joining the call today. If you have any specific follow-up questions, please reach out to Andrew at Investor Relations or me. Have a great day and a great weekend, everyone.

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

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.

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 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 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 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. 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 2 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 1/3 of total revenue, grew 11% year-over-year. This was driven by broad-based growth across our fee businesses and led by Wealth & 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 & 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 represents 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 at 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 2 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.

[Operator Instructions] Your first question comes from the line of Russell Gunther at Stephens.

I'd like to start on the deposit growth, please, and if we could touch on just the overall sustainability. Would love to get some incremental color in terms of the Wealth & Trust vertical, maybe just parsing the drivers of growth here between the impact of market share gains versus the comment some of this is short term and transactional in nature?

Yes. Sure, Russell. Happy to address that. Thanks for the question. So as you know, as you saw, our deposit growth was very strong this quarter. And as we noted in our remarks, we did have some elevated transactional deposits at the end of the quarter, and those were both in Commercial and Trust. 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.

Okay. Excellent. And then my second question would just be to kind of parse your original 2026 guide where you have 3 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 3 cuts have on that ROA target of 1.40% plus or minus?

Yes. Yes. So one is, as I mentioned, when we come out in July, as you know, the rates have been very volatile and the expectations have changed a lot, and we'll see what happens in the back half of the year. When we update our outlook, we will certainly provide kind of a more clear picture. Clearly, the March cut didn't happen. And as you noted, we are asset sensitive, so that does provide a little bit of a tailwind for us. What we have said in the past, what I had said is that generally kind of about 2 basis points per rate cut across the year was the cost to us of the rate cut. And so I would expect the same the other way, but I think it is important to note, and I'll come back to my question on competition. We are seeing more deposit competition really across the board and more pricing competition and that's both in Commercial and Consumer across businesses.

So I think that's definitely something that's in the market. 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're 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.

The next question comes from Janet Lee at TD Cowen.

So the total loan growth was on a period-end basis was muted, but it looks like the commentaries around C&I utilization and pipelines are pretty strong, and a lot of that growth seems to have been offset by some CRE payoffs and partnership consumer loans. So as you think about -- as we think about the loan growth in the coming quarters, how should we think about the cadence of partnership consumer loan runoffs as well as the paydown impacts? Should we see a pickup in loan growth?

Yes. So I'll start off. So yes, exactly as you summarized it. I think we saw -- we're very happy and pleased with the fundings and the momentum that we have on the C&I side of the Commercial business, and I'll touch on both Commercial and Consumer. We -- especially if you look at it across the last 2 quarters, we had annualized growth in C&I of 7% this quarter. Last quarter, we had annualized growth of 15%. And when you look at the fundings across both of those quarters, they've been really strong and up materially over where they were a year ago. So we feel good about the C&I momentum. And as you know, C&I is really our primary product with respect to commercial lending. That's where we want to lead with, that's the product that also delivers our deposit growth and the broader relationship as well as transactional activity. And so that is the product that we're very focused on.

So when you look across the 2 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.

Yes. This is Rodger, Janet. I would just add to that. I think over time, on the consumer side, we -- the spring portfolio will continue to roll off consistent with what you saw this quarter. It may be impacted by rate cuts a little bit so there's a little bit of refi risk in that. But that's sort of, I think, a pretty good going rate of attrition there. I think our goal is and some of the progress that you've seen in our home lending business is to offset as much as possible of that growth and hopefully, over time, overcome that with our home lending products that we have. And then the Commercial business will operate exactly as David has said. We're obviously taking a very hard look at those maturing loans along the criteria that David outlined. Much of that is acquired loans. And we want to make sure that to the extent we're going to extend those loans or refinance those loans, they fit our overall criteria from an asset quality and return standpoint.

So that's just a little bit of kind of longer picture of what you should see. C&I should be the primary driver and then hopefully, the growth of the home lending to offset the continued runoff of spring.

Got it. That's very helpful. And not to put words in your mouth, but if I were to interpret your prior commentary on net interest margin earlier, with no rate cuts, your earning asset yields would obviously benefit more, but you're expecting deposit costs to go up versus the 1.33% level in the first quarter. So that mitigates -- that results in a flattish NIM from here. Is that the right way to think about it?

Yes. Janet, I wouldn't say necessarily go up. The way I would think about it is, as you know, with the rate cuts, we had -- we would have repricing in our loans and so our yields have been coming down, which we've been offsetting with our deposit decreases. So in the absence of the rate cuts, we would see the stabilization in the loan yields. So on the deposit pricing side, we've had good repricing, but what I was suggesting with my earlier comments is we have seen more price competition come into the market. And when you look at our deposit prices, whether that's the CD that we have, for example, flagship CDs of 3%, our money market product is also at 3%, we're definitely far away from the high point in the market. And we see many competitors who did not move in the last rate cut and some competitors that have held or increased their pricing in some of these products.

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 and -- 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're 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 the account.

Your next question comes from the line of Christopher Marinac at Brean Capital, LLC.

I wanted to ask about the capital plans. And curious if the regulatory changes that may be happening this year kind of would cause you to revisit that again as you continue to execute the authorization quarter-to-quarter?

Chris, the -- yes, with respect to the buybacks, I guess I'll take you back to our framework that we laid out when we launched really the -- when we updated our buyback framework at the beginning of last year, and we said that we will be on a multiyear glide path returning capital towards a 12% CET1 target. And we said that we would approximately return about 100% of our net income, plus or minus. Some quarters a little bit more, some quarters a little bit less, and that's generally -- when you look at the last 5 quarters, that's really generally where we've been.

When we think about capital return in general, it's -- obviously our #1 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 ratio. 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 common 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.

Great, David. That's very helpful. And I guess kind of a related question. I mean, as you sort of have the ability to be picky about the new loans that you do, have kind of your internal thresholds for return gone up over the past several quarters in terms of what would be acceptable versus not acceptable for a new credit?

I would say, Chris, no necessarily changes in our thresholds. We do look at -- I think what's really important to us is looking at the relationship pricing altogether rather than thinking about loans in a transactional level. And so we put all of that into the mix. The deposits are obviously a big part of that, other fee activity are a big part of that. And we're certainly not -- we're not the low price point in the market. And so we think about credit, we think about relationship pricing, and those are the things that drive our hurdle.

Your next question comes from Manuel Navas at Piper Sandler.

On the Corporate Trust side and the Global Capital Markets side, those 40% great revenue quarters up year-over-year, is there some better way to track that? How should we think about that going forward? You said that this is a great quarter, not all of them can be this great, but how should we think about those businesses over the course of the whole year?

Yes. So yes, those 2 businesses are essentially what comprises our Institutional Services business. The -- as you know, the Corporate Trust business really focuses on ABS and MBS securitizations. The Capital Markets business focuses on distressed debt and bankruptcies, and we saw good momentum across both businesses. We've been -- there've been a couple of drivers behind that. When you look at -- we've been investing in headcount and technology across the businesses. And those businesses are very important. Referrals and relationships are very important in those businesses. And we have developed over time, unique product expertise across those businesses. We have the ability to be innovative, we can respond faster to clients. And as we continue to do more work in those businesses, our reputation has really spread, and we continue to win other and new mandates. And so that's been a great trend.

In addition, our -- the strength of our balance sheet and our credit ratings, and as you know, we have 3 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.

Okay. I appreciate that. In terms of the loan growth potential, can you speak to customer sentiment beyond what's captured in the better pipelines that are up 35% and line utilization is up. But just kind of what -- how are your footprint thinking about what's going on in the environment? Or is it seems like it's business as usual?

Manuel, it's Rodger. So you can imagine, been spending a fair bit of time out and about with our clients and prospects. And I would say generally that it's business as usual. I think all this volatility, including what's going on right now overseas, I think it's kind of set in that there's going to be some volatility and that businesses are kind of moving on, and they're investing and they're seeing opportunities to grow as a general statement. I would say, at the beginning of the year, some of our local businesses had some exposure to the weather. We had a pretty rough period of time there in the early part of the year, but we -- businesses have kind of moved past that. And I'd say, generally, optimism is at a pretty reasonable level at this point. And you 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.

I appreciate that commentary. Is there any opportunity to add talent, any talent that you feel like you need to add to keep that lending trajectory going?

So we're always interested, as David said, investing in the business and in the Commercial business, in particular, that's all about adding talent. And I think the bar for us, though, is very high. So we're looking at people who can move books of business, have deep relationships in the market and are culturally consistent with us across the commercial platform. Just as a reminder, an example of that last year, in the sort of right between the third and the fourth quarter, we hired the M&T Market President for the Greater Philly region, Greater Philly and Delaware region, somebody we've known for a long period of time to join us and that was a significant pickup for us. And I think that's indicative of the fact that very well-known individual proven person in the marketplace could have gone wherever pretty much I think he wanted to go and he chose WSFS. And so I think that shows that we're kind of the provider of choice for people who are at larger institutions who want to be part of something that has a balance sheet big enough to support larger customers with a product offering at a bigger bank, but in a much more nimble service-driven way.

So I would expect that we will see more talent like that coming to us over time as it has for as long as I can remember.

[Operator Instructions] Next up, we have Charlie Driscoll from KBW.

This is Charlie on for Kelly Motta. Circling back on the capital priority question with the possible regulatory relief boosting capital and still meaningfully above your medium-term CET1 targets? 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.

So no update, Charlie, on that topic. Clearly, we -- we've talked about, we'd love to find opportunities, particularly in our fee businesses for investment, whether they're one-off talent or small acquisitions or potentially even something larger. I think our profile is growing in that space significantly, particularly the Wealth & Trust area. So we'll continue to look for those opportunities.

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.

Great. And then just on credit broadly, you booked a big recovery in the quarter. Maybe any inside baseball you can give on that specific credit? And any broader kind of commentary on what you're seeing in your portfolio? Is there any areas you're more concerned about or looking at more carefully?

Yes, Charlie, I would say, on that specific credit, generally, we take a conservative posture with the way we look at our assets. This was -- as a reminder, this was a loan that was an acquired loan, not a loan that we originated and was kind of unique to our portfolio, but it was a loan to a fund that was invested in office real estate. We didn't have direct collateral -- we didn't have the direct recourse to the collateral. 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 recovery. 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 5 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 1 or 2 credits that could be specific problems, but nothing systemic that we're seeing overall and something we continue to monitor closely.

And with no further questions in the queue, I would like to turn the conference back to David Burg.

Okay. Well, thank you very much, everyone, for joining the call today. If you have any specific follow-up questions, please reach out to Andrew at Investor Relations or me. Have a great day.

Thank you.

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

Good day, and welcome to the WSFS Financial Corporation Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I'd now like to turn the call over to your host for today, Mr. David Burg, Chief Financial Officer. Sir, you may begin.

Great. Thank you very much, and good afternoon, everyone, and thank you for joining our fourth quarter 2025 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 are Rodger Levenson, Chairman, President and CEO; 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 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 the 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. Our businesses continued to perform very well in the quarter, providing strong momentum moving into 2026. For the fourth quarter, WSFS delivered a core earnings per share of $1.43, a core ROA of 1.42% and core return on tangible common equity of 18%, which are all up meaningfully on a year-over-year basis. These results closed out a successful 2025 that included a full year core EPS of $5.21, core ROA of 1.39% and core return on tangible common equity of 18%.

Our 4Q core EPS is up 29% over the prior year, and our 2025 full year EPS increased 19% over the prior year. These core results for the fourth quarter exclude several non-core items, which resulted in a $5 million impact to net income as well as the $0.09 impact to EPS in the quarter. These items are outlined on Page 5 of the supplement. Net interest margin was 3.83% for the quarter, down 8 basis points linked quarter, driven by the rate cuts and a onetime interest recovery last quarter, which accounted for 4 basis points of the decline.

Importantly, our NIM is up 3 basis points year-over-year while absorbing 75 basis points of interest rate cuts since the fourth quarter of 2024. We continue to successfully reprice our deposits, and our exit deposit beta for December was 43%. Core fee revenue increased 2% linked quarter and 8% year-over-year driven by double-digit growth in Wealth & Trust, capital markets and home lending.

Our Wealth & Trust business continues to perform very well and grew 13% year-over-year with 29% growth in WSFS Institutional Services and 24% growth in BMT of Delaware. For the full year 2025, WSFS Institutional Services was the fourth most active U.S. asset-backed and mortgage-backed securities trustee with nearly 12% market share, moving up 2 spots in the rankings relative to 2024. Total gross loans grew 2% linked quarter or 9% annualized, driven by broad-based growth across our businesses.

In commercial, growth was led by C&I, which delivered growth of 4% linked quarter or 15% annualized. And overall, we saw the largest quarterly fundings in over 2 years. Our residential mortgage and WSFS originated consumer loans continued to build on a strong momentum and grew 5% linked quarter. Total client deposits increased 2% linked quarter or 10% annualized, with growth across trust, private banking and consumer. Importantly, our noninterest-bearing deposits grew 6% linked quarter and now represent 32% of our total client deposits.

Turning to asset quality. We saw a meaningful improvement across our problem assets due to favorable net migration and payoffs and ended the year at the lowest level in over 2 years. Nonperforming assets were essentially flat compared to the prior quarter and ended the year down approximately 40% compared to year-end '24.

Delinquencies increased 46 basis points linked quarter due to several previously identified non-performing and problem assets moving to delinquent status in the quarter, 14 basis points of this increase was driven by non-performing loans. The remainder is primarily comprised of 2 office loans and 1 multifamily condo loan in our footprint.

One of the office loans was already resolved in January, while the other is a medical office expected to be sold in the first half of '26, which would result in a full repayment of our loan. We continue to work with the borrower on the remaining loan and believe we're well secured. Net charge-offs increased 16 basis points to 46 basis points of average loans, primarily due to the partial charge-off of a nonperforming land development loan.

Net charge-offs were 40 basis points for the year, excluding Upstart, which is on the midpoint of our prior outlook. During the fourth quarter, WSFS returned $119 million of capital including buybacks of $109 million or 3.7% of our outstanding shares. This took our total buybacks for the year to $288 million, representing over 9% of our outstanding shares.

On Slide 15 of the supplement, we provided our 2026 outlook, which assumes a continued stable economy and three 25 basis point rate cuts throughout the year in March, July and December. Overall, we expect to deliver another year of high performance and growth with a full year core ROA of approximately 1.40% and double-digit growth in core EPS.

As a reminder, we intend to maintain an elevated level of buybacks in line with our previously communicated glide path towards our capital target of 12%, while retaining discretion to adjust the pace of buybacks based on the macro environment, business performance and potential investment opportunities. We expect mid-single-digit loan growth overall with low single-digit growth in our consumer portfolio, where we expect continued momentum in residential mortgage and other real estate secured consumer loans, partially offset by the continued runoff of our Spring EQ partnership portfolio.

Building on a strong momentum in deposits in 2025, we expect continued broad-based deposit growth across our businesses in '26. Our outlook calls for deposit growth in the mid-single digits from 4Q levels. Our outlook for NIM is approximately 3.80% for the year, which incorporates the impact of the 3 additional interest rate cuts I mentioned. We continue to focus on deposit repricing opportunities while growing our portfolio and expect to maintain an interest-bearing deposit beta of low to mid-40s throughout the year. While the path and timing of future rate cuts remains uncertain, it's important to note that the impact of additional rate cuts on our financial results will not be linear.

As we continue to manage our margins through several levers, including deposit repricing actions, our hedge program and the securities portfolio strategy. We continue to see momentum and growth opportunities in our fee businesses, which contribute approximately 1/3 of our total revenue. Our overall fee revenue will grow mid-single digits, excluding Cash Connect.

Wealth & Trust is expected to continue the strong momentum and again grow double digits in 2026. Cash Connect revenue is expected to decline due to interest rates but will be more than offset in expenses. Our focus in Cash Connect continues to be on driving the profit margin which has increased meaningfully in 2025. Our outlook for net charge-offs is 35 to 45 basis points of average loans for the year, consistent with our 2025 results. While we have seen strong improvement in problem loans and nonperforming assets, commercial loan losses may remain uneven.

Our outlook calls for an efficiency ratio in a high 50s for the year. 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 excited about the future and remain committed to delivering high performance. Thank you, and we will now open the line for questions.

[Operator Instructions] Our first question comes from Manuel Navas from Piper Sandler.

On the loan growth, can you talk a little bit about the better commercial trends? And kind of what are you seeing out there in terms of sentiment? There's some better line utilization, the footings were up. Just kind of talk about what you're seeing in commercial that's driving this kind of strong originations and a good outlook.

Yes. Sure. And well, good afternoon I'll start off. So in commercial, as you know, in the first half of last year, there was quite a bit of uncertainty in the economy with the tax bill pending some of the tariffs and legislative issues that were ongoing. And I think as you heard Rodger mentioned a couple of times in our calls in the first couple of quarters of the year that small business owners and entrepreneurs were, when faced with that kind of uncertainty, we're kind of delaying some business decisions. And so what happened over the course of the year was we continue those discussions with clients.

We saw that pipeline really build in the third quarter and our pipeline reached over $300 million in the third quarter. And in the fourth quarter, when some of those things crystallized, we -- the environment -- people felt better about making some of those decisions with the passage of the tax bill, a little bit more clarity on legislative front. And so we saw very strong originations and fundings, and we continue to see good momentum. We're not going to see that kind of growth every single quarter. But we feel good about the momentum going forward from here.

I appreciate that. Can I switch over to capital return for a moment.

Sure.

This was a really strong quarter in terms of buybacks. What are kind of your parameters there? Is it just that CET1 ratio? This quarter also had return on AOCI, a little bit lower pricing, tangible book value per share growth you hit the 110% total payout. Like what should be the guidepost beyond CET1 going forward?

I think, Manuel, we look at all of those factors, I would say, primarily CET1 and TCE, which does incorporate that AOCI volatility. And of course, if we see our price dip, we take advantage of those opportunities. But generally, our approach is, as you know, the majority of our capital philosophy, our capital return philosophy is through buybacks.

Our dividend is kind of in the mid-teens. So about 85% of our capital returns is through buybacks. And we are continuing on this kind of multiyear glide path to get to the capital to our capital target. And so I think we have the capacity and you can kind of think about it as returning roughly 100% of net income a year. But I think importantly, we will talk about up and down depending on what we see. If there are investment opportunities, we want to take advantage of those. And similarly, if there's some kind of stress in the economy or the market, we may slow that down. So I think that's kind of the glide path, but all of the factors you mentioned are things we take into account.

Our next question comes from Russell Gunther from Stephens.

I wanted to start on Cash Connect, if we could. So 3 cuts baked into the outlook. I know 4Q tend to see some seasonally lower ATM volume. But as you look at the year ahead, what type of revenue hit are you guys anticipating here? And then within that, if you could talk to just overall margin expectations, you mentioned the improvement, I think from what was a high single-digit margin to a low double-digit one now. So just helpful to get the puts and takes positive and negative over the course of '26 in terms of profitability improvement here.

Yes, sure, sure, Russell. So yes, when you look at Cash Connect, as you mentioned, the interest rates do have an impact on the pricing, on the top line, but that's more than offsetting the expenses. So we do have a margin benefit there. I think the way to think about it is roughly about $2.5 million annual impact per 25 basis point rate cut is kind of roughly what you should think about.

On the topline. And so the impact of the rate cuts, like you said, about 3 rate cuts for the year, that's really kind of the way to think about the impact on the topline for Cash Connect. But you mentioned the margin. That's really been the story that we've been focused on because some of that macro pricing. But not only are the interest rates accretive to margin, but we've also been taking a number of other actions to continue to drive margin. And those are: number one, pricing. We've leveraged some of the scale that we have in the market to increase pricing across our products, and that's been a meaningful benefit.

Number two, we've had a couple of things that we're doing around expenses, and that includes both optimizing kind of in-transit cash as well as just efficient management of expenses in the business. And the third thing that we're doing is we're taking a look at the client portfolio across that business and thinking about and there's a page in the supplement, which shows the mix of that business between Smart Safes and bailment and you can see that Smart Safes have increased year-over-year from about 25% of total volume to about 33% of total units, rather. And the Smart Safes generally come with higher margin and higher kind of value-add products. And so as we continue to grow that business, which we think is kind of a growth vector within that business, that should also be accretive to our margins, and that's part of our strategy.

So it's a combination of not just rates, but all of those actions that have allowed us to drive the margin. And the goal is that we continue to drive that into the mid-single digits and hopefully higher.

That's very helpful, David. And then just switching gears overall to expenses. Great to see the high single -- the high 50 deficiency. But outside of the lower result we'll get like from the Cash Connect as we just discussed, are there areas of outright reduction that can support a lower run rate for the year? Just trying to think through what's a decent core not just for noninterest expense growth rate for WSFS?

Yes, Russell, I would say a couple of things there. Our efficiency for the year this year was 59%. We said high 50s. So we'd like to be in that range or a little bit better next year. We don't want to give a specific number because as you know, we want to take advantage of opportunities and invest in the franchise. And so if those opportunities exist with talent additions, or technology, we want to take advantage of those opportunities. And so that's why quarter-to-quarter, there may be fluctuations. But to give you a little bit of a sense of other things that we're doing on expenses, we do have a number of different productivity actions that we're taking. For example, we've been optimizing our real estate portfolio, and that's been a nice tailwind for us and will continue to be.

So we're really leveraging those opportunities hard. Another one is we have divested a number of products or businesses that are not central to our strategy. Those include upstart -- earlier in the year, powder mill, we exited the joint venture with Commonwealth and all of those things are also taking out expenses for things that are, again, not central to our strategy. And in addition to all of that, I think we're having really good strong discipline around our head count and expenses overall, including particularly in the shared functions.

So I mean all of those things give us confidence, but importantly, we want to really continue to invest in the business if those opportunities...

I hear you. I appreciate it. And then just last one for me. Curious as to the anticipated mix of deposit growth. So you guys are basically looking to match fund loan growth. Just wondering any willingness to flex with the below peer loan-to-deposit ratio around 76%, right? Just maybe fewer market rate deposits. And then I guess an adjacent question really would be just expectations around the overall size of the balance sheet, if you can touch on the investment portfolio and cash balances, how they could trend over the course of the year?

Sure. So first on deposits. So that's a trade-off that we do take into account. We've been running off, if you look over the course of the year, we've been reducing a little bit of our CD book, and that's been really price driven. So it's not an intentional runoff but we've been aggressive on pricing there, and that's really because of the strength of the deposit growth in other businesses, we were able to do that, particularly for clients that are -- that only have the CD relationship.

So we will continue to look at opportunities to flex pricing. But as you know, a lot of our deposit growth has come from noninterest-bearing deposits. And those are clearly kind of core operating deposits that we certainly want to continue to bring in and our super-accretive in the long run.

So I would say, we are trying to be fairly aggressive on pricing while continuing to grow core clients and relationships. And on your question around securities portfolio, we have -- over the course of the year, we've been bringing down our portfolio a bit, I'll say, over the course of the past couple of years from elevated levels. Now we've reached the point where it's in the low 20s, about 21%. And our intention is to keep it here. So from this point forward, we're going to -- anything that really that comes off the securities portfolio, we will look to reinvest it in the same type of securities that we essentially have.

So agency, not taking a lot of credit at all credit risk in any way, MBS, those types of securities. But we're going to keep it flat at this level.

Our next question comes from Kelly Motta from KBW.

Just at a high level, you over the past year or so, exited a couple of businesses where the risk-adjusted returns aren't there. It feels like given your guide and outlook, these the headwinds are abating somewhat. Are there any -- as you strategically look at your diversified businesses, are there any things that you're continuing to evaluate that you could share or kind of thresholds of profitability you look at of these kind of niche businesses and deposit and loan verticals that you have.

Yes. I'll start off, and I'm sure Rodger will weigh in as well. So Kelly, we continue to -- we have an initiative here, we call it relook where we continue to look at different parts of our business and think about the fit and the strategic fit of that going forward. And that's something that we continue to do. And like you said, we've done a good job of shedding some of those things. At the end of the day, I can't really discuss anything specific that's on the horizon right now, but it's really, I would say, part of our strategic plan and part of our ongoing strategy to always evaluate those type of things.

Yes, Kelly, it's Rodger. I would just add to what David said is I think if you look at the actions we took in '25, those were primarily decisions made and WSFS look very different than we are today. And because they were low scale, low profitability partnerships or businesses that we had, we thought it just made sense for the reasons that David said to move on from those.

I don't think there's a large group of followers to that, but I do think, as David said, there's opportunities to relook at a lot of things that we're doing based on the evolution of the company, and I think this was an important year to kind of start to build some of that muscle. We've always been very disciplined, obviously, about evaluating our profitability by business line and shared service area. I think this will -- this exercise will help us continue to do that. going forward.

So it's -- when you go through a period of rapid growth like we did 4, 5 years ago, I think as you settle into your scale and you see whether you're getting that higher growth you're looking to free up capital and resources to continue to invest in those areas and in areas where we're not seeing that to either redeploy that capital or resources.

So it's an important part of our strategic plan and will continue to be going forward.

Got it. That's helpful. Maybe a question on M&A, if I could. It's been several years now since the last deal. I know you've been internally focused and clearly, you've had a nice glide path with what you're doing organically, but just as we get another year out entering 2026. I'm wondering if you have any updated thoughts here given the integration and work you've done so far?

Yes. This is Rodger again. I'm sure you're referring to bank M&A, which I'll address in a second. But as David said a couple of times, we're continuing to invest very heavily in the business, whether it's the fee businesses or the banking business, and that could come through one-off lift apps or talent or small firms or it could come to something larger.

As it relates to traditional banking we've been clear over the last year or so that if something came along that would strengthen our position, our very strong position in the greater Philly Delaware region, we would absolutely consider that. And I think we have demonstrated now our ability to execute on those very well. But we also feel good about the organic growth. And so we can continue to achieve our objectives as we outlined for '26 by focusing on the organic opportunity, and then we'll supplement those with inorganic opportunities should they come along.

Our next question comes from Christopher Marinac from Janney Montgomery Scott.

I wanted to look at sort of risk-adjusted returns in the loan portfolio, and particularly as Upstart is now behind you. Do you see those getting stronger? Or does the rate environment sort of limit what you can get on a risk-adjusted return?

Chris, it's David. Yes, I think -- so when you look at our loan pricing, our risk-adjusted returns, it's really a combination of the different businesses that we have. Like you said, when you -- if you look at the consumer business, we've divested Upstart and really, most of the portfolio is now a real estate secured portfolio. And so when we think about kind of risk-adjusted returns and going a little bit to the previous question, really, we want to focus on things where we feel we have a competitive advantage and are able to originate better than others in the market.

And that's really around the home lending product. And that goes both to -- and that really goes to risk-adjusted returns and our ability to not just grow but also grow at the right price points. And so that's why when you think about our growth going forward, it's really on the residential side on the home equity line side, installment line side, but kind of in that real estate secured portfolio, where losses are -- have a very different profile than on the unsecured portfolios that we've seen.

On the commercial side, we continue to be -- the primary product is really the C&I relationship product, and that's really where we continue to see the growth. We are not the lowest price point in the market. We are -- we sell kind of our relationship, our ability to provide different products, our ability to provide superior customer service and that personalized touch. That's really what we think is our competitive advantage. And so we're not the lowest price point in the market, but we think we're the best service in the market and the most responsive in the market. And so that's what we're going to continue to lean on.

So C&I is our primary product, but commercial real estate continues to be an important product that we're going to continue to grow with the right sponsors with whom we have relationships and who are known in our footprint.

Chris, this is Rodger. Obviously, 100% agree with what David. The other component which you'll hear us continue to talk about more is getting more out of our client relationships, particularly C&I, but across the platform by referrals throughout our franchise, especially on the wealth side.

So I think it's taking that total relationship view and allocating that to various products is where we see an opportunity to get a little bit more overall profitability through the franchise just because of the strength of the relationship. I think we've done a good job on that front, but we also feel like we're just getting started, particularly on those referrals into wealth and vice versa.

Great. I appreciate it. And then, David, just a quick question on taxes. Is that sort of 24%, 25% range still a good number to think about going forward?

Yes, yes, that's a good number. Yes, the tax bill really didn't have a material impact on our business, maybe a little bit of a negative impact because some deductions are no longer allowed charitable deductions, for example, up to a certain point. So a small impact, but generally, that's the right range.

Our next question comes from Janet Lee from TD Cowen.

I want to step back and understand the driver behind your strong -- very strong noninterest-bearing deposit growth in the quarter. I assume a lot of that has to do with wealth and trust momentum that has been growing. In terms and aside from the deposits, the wealth and trust revenue on the fee side is also growing double digits.

So I want to understand, is it a function of your overall institutional trust market increasing? Or are you taking market share? I want to understand the competitive dynamics there and whether that $340 million of noninterest-bearing deposit increase in the quarter should normalize in the quarter ahead?

Janet, it's David. Thanks for the question. So yes, I think generally, we expect that our noninterest deposit growth will be consistent with our interest bearing deposit growth. So we want to continue to at least maintain that NIB ratio and, of course, try to grow it. So I'm not sure the growth that you saw this quarter, the 6% quarter-over-quarter growth, that's probably not -- we're not going to put up that kind of growth every single quarter. But generally, we want to continue to grow those at least in line with total deposits. And I would say importantly, the growth that you've seen came from 2 businesses.

One is trust and two is private banking, predominantly in this particular quarter. But importantly, when you look at the composition of noninterest-bearing deposits across our business, it's pretty broad-based. About 40% of that is in consumer. About 35% of that is across trust and private banking and about 25% of that is in commercial. So every business is contributing meaningfully to that noninterest-bearing balance and really comes with the relationship growth and the relationship account growth that we have.

So again, while private banking and trust have been and predominantly trust have been the engines this quarter, I think the composition is pretty broad across the business.

Got it. And in terms of credit problem assets and NPAs were down quarter-over-quarter, NCOs increased a bit. So given the favorable migration in those problem assets, which I believe you cited at the lowest level in over 2 years, how should we think about -- how do you -- how does this impact your expectations around where your NCO could land versus that 35 to 45 basis points guide?

Yes. So it's the -- so you're absolutely right in terms of our problem assets, and we've had the migration, we're down about $95 million. It was a combination of just migration as well as payoffs and paydowns that contributed to that. I would say in terms of our net charge-off guide, this year, if you exclude upstart, we were 40 basis points, and we assume we're going to be in the same position next year. Really, commercial is going to continue to be uneven, and that's really kind of the message.

So you may see some fluctuations there. Some of the nonperforming assets, you may see some of those go to loss. But at the end of the day, I think we continue to feel good about our portfolio. And one of the things that differentiates us in our commercial real estate portfolio is the fact that we have a very high level of recourse.

So -- we have -- in our office portfolio, we have 80% recourse in our multifamily portfolio with 86% recourse. And so those, in addition to the asset collateral makes us feel better about those portfolios, but they will continue to be uneven. And then on the consumer side, with the divestiture of the upstart portfolio, really the majority of it is real estate secured. And so that portfolio from a net charge-off perspective has been low and continues to be very well.

Our last question comes from Manuel Navas from Piper Sandler.

Hopping on to try to clarify something. Is the double-digit EPS growth on core or reported EPS?

It's on -- it's looking at core relative to core, Manuel.

Okay. Great. A quick question on the NIM with that guide has there been any shifts in your hedging profile? Any other kind of wildcards in the NIM outlook?

No, no wild cards. As you know, our NIM -- as you see, our NIM outlook is for 3.80%. We finished -- the quarter was 3.83%. Our exit rate for the quarter in December was also 3.83%. We are -- we're trying to manage the interest rate cuts that are -- that we're forecasting or assuming in outlook for next year. And we do that through 3 ways.

Deposit pricing being the main one, but also the hedging program in the securities portfolio. And on the hedging program, we are -- to give a quick update there, we have about $1.3 billion of hedges that are currently in the money. And with another rate cut, we would have $1.5 billion of hedges that are in the money. So that's an important tool that we use to mitigate subsequent rate cuts. And then the securities portfolio, as I mentioned earlier, we're reinvesting that now and kind of keeping it flat, and that's providing an uplift because the security portfolio is yielding.

The yield on that portfolio is like 2.35%, 2.4%, and we're reinvesting that at about 4.3%, 4.4%. So so about 200 basis point uplift, which is offsetting some of the interest rate impact. So all of that put together, that's why the impact for next year is a bit less than what the sensitivity would suggest. But that's -- those are the things we continue to manage.

And with that, you described really strong deposit growth with this outlook. And I think you talked a little bit about it in the trust business, but -- where do you see all the growth across all your other businesses? What are kind of the opportunities for deposit growth?

So yes, so our outlook, our goal is really for continued mid-single-digit deposit growth. As you know, in institutional services, we've continued to increase share and we believe we're going to continue to do that.

So that continues to be a growth engine.

Rodger mentioned the referrals that we are working on within commercial and wealth, and we think there's a huge opportunity for us around that, that we haven't tapped yet. So that's -- that should power additional deposit growth as well. And again, growing the C&I portfolio is also an important source of deposits for us.

So the combination of all those things, I would say as well as small business is also an important contributor of deposits that we think the growth is going to accelerate there. So we do feel good about the mix of businesses and all of them contributing.

And with no further questions in queue, I would like to turn the conference back over to David Burg.

Okay. Thank you, everyone, for joining the call today. If you have any specific follow-up questions, feel free to reach out to Investor Relations or me, and have a great day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Ladies and gentlemen, thank you for standing by. My name is Colby, and I will be your conference operator today. At this time, I would like to welcome you to the WSFS Financial Corporation Third Quarter Earnings Call. [Operator Instructions]

I'd now like to turn the call over to your host today to Mr. David Burg, Chief Financial Officer. Sir, you may begin.

Great. Thank you very much, and good afternoon, everyone, and thank you for joining our third quarter 2025 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 are Rodger Levenson, Chairman, President and CEO; 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 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. During the third quarter, WSFS continued to demonstrate the strength of our franchise and diverse business model. The company delivered a core EPS of $1.40, core return on assets of 1.48% and core return on tangible common equity of 18.7%, which are all up versus the second quarter. On a year-over-year basis, core net income increased 21%, core PPNR grew 6% and core earnings per share increased 30%. In addition, our tangible book value per share increased by 12%.

Net interest margin expanded 2 basis points to 3.91% quarter-over-quarter. This reflects a reduction in total funding cost of 2 basis points with a deposit beta of 37%. Given the September rate cut, our exit beta for September is 43%, which reflects the repricing actions taken after the rate cut. Net interest margin for the quarter benefited from an interest recovery from a previously nonperforming loan, which added about 4 basis points.

Core fee revenue was flat quarter-over-quarter as our results were impacted by 2 previously announced strategic exits in Wealth and Trust as well as the Spring EQ earn-out from last quarter. Excluding these items, core fee revenue grew 5% quarter-over-quarter, primarily driven by Capital Markets and Cash Connect. Our Wealth and Trust business continues to perform very well and grew 13% year-over-year.

Total client deposits increased 1% linked quarter, driven by commercial business. On a year-over-year basis, client deposits grew 5%, driven by growth across consumer, commercial, wealth and trust. Importantly, noninterest deposits grew 12% year-over-year and continue to represent over 30% of our total client deposits. Loans were down 1% linked quarter, driven by the previously announced sale of the Upstart loan portfolio and continued runoff in our Spring EQ portfolio. Excluding these items, loans were generally flat this quarter, but we saw solid momentum in several areas.

Our residential mortgage and WSFS originated consumer loan portfolios, both delivered strong growth with linked quarter increases of 5% and 3%, respectively. These results reflect the momentum of our home lending business as well as the learnings obtained from our partnership with Spring EQ. In commercial, new fundings this quarter were offset by lower line utilization and the payoff of problem loans, which supported improvements in our asset quality. Importantly, our commercial pipeline remains strong across both C&I and commercial real estate, increasing to approximately $300 million. We saw a meaningful improvement across our asset quality metrics during the quarter.

Total net credit costs were $8.4 million this quarter, down $5.9 million compared to the prior quarter. Net charge-offs were 30 basis points for the quarter and 21 basis points when excluding NewLane. Importantly, we saw a decline in problem assets, delinquencies and nonperforming assets this quarter. NPAs declined by over 30% to 35 basis points, driven by 2 large payoffs with no additional losses, while delinquencies declined by 34%. In each of these areas, we are now at or below the lowest level in the past year.

During the third quarter, WSFS returned $56.3 million of capital including buybacks of $46.8 million or 1.5% of our outstanding shares. Year-to-date, we have repurchased 5.8% of our outstanding shares. Despite these higher levels of repurchase, our capital position remains very strong with a CET1 of 14.39%, well in excess of our medium-term operating target of 12%. We intend to maintain an elevated level of buybacks in line with our previously communicated glide path towards our capital target of 12%. While retaining discretion to adjust the pace of these buybacks based on the macro environment, our business performance and potential investment opportunities. These results position us well to meet our previously announced full year outlook, even with an additional October rate cut, which was not previously included in our assumptions. While the half and timing of future rate cuts remains uncertain. It's important to note that the impact of additional rate cuts on our financial results will not be linear as we continue to manage our margins through deposit repricing our hedge program and securities portfolio strategy.

As we have done in the past, we will provide a full year '26 outlook in January with the release of our fourth quarter 2025 financial results. We remain excited about the future and committed to continue to deliver high performance. Thank you, and we'll now open the line for questions.

[Operator Instructions] Your first question comes from the line of Russell Gunther from Stephens Inc.

I wanted to start kind of with the bigger picture question, David, and you kind of touched on it towards the end of your prepared remarks. But that medium-term target on CET1 challenging to hit, given just how much money you guys make. So it would be helpful to get a sense just kind of big picture in your mind, what's your base case scenario to achieving that target? And sort of what does that assume for organic growth rates over the next couple of years, acquisitive growth, be it depositories or fee verticals? And then you mentioned potentially flexing the buyback at a more accelerated clip. Just your base case to get there would be helpful to start.

Yes. Yes, absolutely, Russell. So yes, look, as you've seen this year, we are buying back at a clip that's significantly ahead of both the last couple of years. We're buying back approximately 100% of our net income. Given some of the balance sheet dynamics, the sale of the Upstart portfolio, for example, the runoff in some of the partnership portfolios our RWA has not increased, and therefore, our capital levels, despite these buybacks, our capital levels are still very high and actually increased since the beginning of the year. So that's the dynamic. And as well as the profitability levels that you mentioned, we do generate a lot of capital. So I think that if you look forward, even with a robust growth rate on our balance sheet, we still have a lot of dry powder to execute the buybacks at or above the level of 100% of our net income for a couple of years, for 2 to 3 years.

And so that's really the strategic intention that we have. And depending on what happens with the balance sheet, we may accelerate that path. So I can completely see us leaning in more and doing even in excess of our net income on the buyback side. And obviously, as you said, we look at -- we continuously evaluate different investment opportunities. The first priority and the preference is always to invest the capital in the business where those accretive opportunities exist. But after that, we would look to return.

Okay. Got it. And then just second question for me. So asset quality resolution and trends were really constructive this quarter. You guys have a healthy reserve and we just talked about the healthy CET1 for that matter. So I guess how are you thinking about reserve levels here amid what is still a somewhat volatile macro? And then could you share particular sectors of your loan portfolio where you continue to keep closer incremental eye?

Yes. I think on asset quality, generally, as you've seen in our numbers, we have good momentum and good progress. I think -- I would say a couple of things. I think, first and foremost, with respect to asset quality, one of the things that we try to do, obviously, is disciplined originations. It starts there, and we try to have recourse for most of our lending, vast majority of it and those type of actions to make sure we have good underwriting. And then we also try to be proactive around engagement with clients should things -- should there be unexpected bumps and bruises. We try -- we have a very kind of long forward-looking pipeline. We stress our portfolio for higher rates and with our issues -- where we think there are issues at maturity, we try to engage very early and proactively with our clients. And that's been the key to working through our pipeline and some of the migration that you've seen and the favorable trends that you've seen.

And so I think commercial is always going to be lumpy and there may be 1 or 2 uneven situations. But generally, we feel good about our portfolio, and we feel good about continuing to make progress on resolving and working through the remaining NPAs. The consumer asset quality has been very strong, both within our home lending business and within the Spring portfolio. So we feel good about the trends, and we feel good about continuing to make progress.

In terms of our reserve, I would say that we -- it's -- when you look at the pure -- when you look at the pure macro data that goes into the model, it would suggest that we have the capacity to release some reserves. But we have conservatively made some qualitative offsets where we see still potential volatility in the macro economy to keep that reserve where it is. So I think that's purely a function of all the volatility that we see with rates, potential inflation, some of the labor weakness and us being an erring more on the conservative side. So hopefully, that covers the question, but please let me know if I missed something.

Your next question comes from the line of Kelly Motta from KBW. Your next question comes from the line of Christopher Marinac from Janney Montgomery Scott.

I wanted to dig in further to the Wealth and Trust business lines and just understand a little bit more about the future growth in terms of new accounts being opened versus just doing more business with existing accounts. I know you called a little bit of that out on the Bryn Mawr Trust, but I wanted to do more on the other pieces.

Sure. Chris, thanks for the question. So as you know, our wealth business is a pretty diverse business. And there are really 3 business lines within that business. There's the institutional services, there's the Bryn Mawr Trust of Delaware and then the private wealth management. And also about 60% of the revenue in that business is really not AUM-based revenue, not tied to AUM, but really tied to new accounts and tied to transaction activity. And so we've seen the places where we've seen a lot of new activity growth, new clients, new accounts have been both on the institutional services side and the BMT of Delaware side. When you look at year-over-year, institutional services is up about 30% this quarter, when you -- and BMT of Delaware is up about 20% this quarter. And so we're seeing growth in new accounts and transactions with existing clients. We're seeing a lot of activity there.

Chris, this is Art. I would tell you on a few things. I mean, the institutional services team just came back from the ABS East conference in Miami this week, and they're jazzed. I mean our reputation and our quality of service is really being recognized in the marketplace. There's been comments about deterioration in service with some other trustees. And so we are continuing to see a very robust pipeline with new clients and actually becoming the preferred provider for many clients.

On the BMT of Delaware side, similar thing. We've seen a recent bank acquisition that one of the subsidiaries was a Delaware Trust, and we're seeing clients starting to leave that and coming to us. We're seeing opportunities on the international side of that business. So that team is really continuing to look to grow its business. And then on the private wealth management side, we've kind of got past the Commonwealth divestiture, if you will. And the last 2 months have been net client cash flow positive, and we're starting to see very good referrals from commercial. We're also really honing in on COIs and really trying to focus on getting more business from some of our COIs. So I think all in all, we have a really positive outlook going into 2026 with our Wealth and Trust businesses.

Great. And I guess, just to extend one more thought. You have operating leverage on all ends of the company, but is the operating leverage greater in the wealth space where you can create more earnings from that versus the bank operation?

Yes. I think the -- one of the things that goes to the diversity of the business model, when you look at our profit margins in the wealth business, I would say they're higher than the traditional profit margins that you may see in other wealth businesses. And it's really -- it really goes to that model. We do have a lot of operating leverage and a lot of opportunity for scale there for sure, particularly institutional services in BMT of Delaware. So I definitely would echo that comment.

And I think you can see it in our deposit base that comes out of the trust business because that's large deposits. They're not using our branch network. They're not using ATMs. It's a very scalable business for us.

Your next question comes from the line of Janet Lee from TD Bank.

On Cash Connect business, as rates -- if rates were to come down, I would expect the revenue to get compressed, but then I believe that the funding side of it could offset. In terms of the NII benefit coming from the Cash Connect, how do you guys forecast in terms of the potential financial benefit coming from Cash Connect increasing? Or is it more compressed?

Yes. Yes, Janet, Happy to answer that. So I would say a couple of things on Cash Connect. One, I think the way you described it is exactly right. The Cash Connect revenue, the pricing is tied to interest rates. And so as interest rates come down, we would expect a reduction in our fee revenue in Cash Connect, but that will be more than offset in a reduction in expenses. And so basically, from a profitability perspective, we do benefit from rates coming down. And you can think of it as roughly for every 25 basis points, about a $300,000 kind of pretax profitability benefit. So that's -- as we've seen that play out over the last couple of cuts. And as we have the cuts, September is really not in the numbers yet, but as we have September, potentially the cut next week in December, all of those will flow in into the beginning of next year. I would say that's one dynamic with Cash Connect and we'll drive towards increasing profitability.

The other thing which is if you look at our segment reporting and Cash Connect, one of the things we've been talking about is increasing the profit margins in that business in general. And that's not just because of rates but also because of pricing leverage that we think we have in the market, given our market share, that's also on the expense and efficiency side. So there are a few different levers to that. And that's been playing out nicely so far. If you look at year-over-year, the profit margin in that business was about a little bit under 6%. And this year, we're over 10%. Last quarter, it's important to note that there was an insurance recovery last quarter, which -- so the margins look a bit elevated. But if you normalize for that, last quarter was about 8%. So we went from kind of 6% to 8% to 10% on that trajectory that we were looking for, and that's -- so we're executing against that strategy.

And Janet, just as a reminder, the way we account for the bailment business, the benefit that David is talking about won't necessarily flow through NII. It's a combination of fee income and noninterest expense.

And just on -- so you maintain your low single digit, all guidance including the low single-digit commercial loan growth for the year. So that includes the problem loan payoff that you experienced in the quarter? And also, could you help us size the -- or size the pace of the payoffs coming from the consumer partnership going forward? Should it decelerate from the current like $140 million levels? How should I think about the total impact of the payments and the trajectory there?

Yes, yes. So Janet, let me take the consumer first and then I'll circle back around to the commercial question. On the consumer side, we had 2 things happened this quarter, and it's important to separate them. One was we closed the sale of the Upstart portfolio. And that was about $85 million that came off our balance sheet at the beginning of the quarter. As you know, that was a nonstrategic portfolio that was in runoff it had some elevated net charge-offs. And so we made the strategic decision to exit that portfolio, and we're also able to release some reserves based on that transaction. So that's the Upstart portfolio.

Beyond that, the remaining runoff that you see is really in the Spring EQ portfolio, and that runoff for the quarter was about $50 million. And so that's the pace more or less that we would expect comes somewhere in the $15 million to $17 million per month is what we would expect in that runoff of Spring EQ. So we expect that to continue. However, we -- one of the -- I think one of the areas where we've been leaning into and we think we have -- we've had good momentum and we think we have continued momentum is in our Home Lending business, which is our mortgage business and our WSFS originated consumer loans, which are primarily HELOC, lines of credit and installment loans.

And we've had really annualized double-digit growth for a few quarters there. And that's really more than offsetting kind of the Spring EQ runoff that you see. So we think we have -- we think positively about that growth continuing. We think we have some differentiated origination capabilities in that mortgage business, we've been growing our origination officers. And so we feel good about leaning in to that area. So that's on the residential side, on the consumer side, rather.

On the commercial side, this quarter, as you said, this quarter was really impacted by a couple of things. One was the work, the payoff of the problem loans which obviously is a good thing. We like to see that, and that supports our asset quality improvement. We also saw line utilization being down this quarter. That's kind of a bit of a volatile number. That moves up and down. There's some of the economic uncertainty plays into that. But generally, that's just a function of kind of business activity. But generally, if you kind of separate that. We feel -- we continue to feel good about our pipeline altogether across the board, including C&I. I would say we're focused on definitely making accretive and profitable originations. There's a lot of competition in C&I.

We don't want to be the low -- we're not the low price point in the market. We want to be very thoughtful around profitability. We want to be very thoughtful about underwriting. But having said that, we feel very good about our pipeline. Our pipeline now is at a higher level than it's been in a number of quarters at about $300 million in total. So we feel good about our pipeline. And I would also add that we are continuing to win talent in the market, which gives us a lot of confidence. For example, we had -- we recently announced a new Philadelphia Market President who was the Market President for one of the major super regional banks in the area for Philadelphia. And so I think winning talent like that gives us confidence, and I think demonstrates the confidence that others have in the franchise as well. So yes, we feel good about -- it's hard to predict quarter-over-quarter, but we feel good about being able to grow that business and continue to lean in to C&I, and that's really the relationship engine that we want to anchor to.

Your next question comes from the line of Kelly Motta from KBW.

Sorry about the technical difficulties -- maybe just piggybacking where you left off last. You noted recruitment of [ Philadelphia ] Market President. Clearly, organic growth is a focus. Where -- are there other areas where you're looking to add talent where you think there's room to bolster up either in terms of product line, wealth or the core bank or parts of the geography that look like attractive growth opportunities and places where you could add some folks?

Yes. The answer is yes. So we're -- just like I mentioned, the commercial example. We have other relationship managers joining the commercial team. That continues to be an area that we're looking to continue to increase. And so that is an area of focus as well as the wealth business. That's been an area of focus all along. We've had some very successful lift-outs of teams in the last 12 to 18 months there that are really starting to bear fruit and play out the thesis, but that's another area where we're continuously looking at talent, both from a lift-out perspective as well as we look at potential RA acquisitions that we've done in the past. And so we continuously evaluate talent across our footprint. And we think we have a lot of opportunity there. And Art mentioned earlier the referrals, but that's something that we really think is -- there's a significant amount of opportunity in the referral pipelines across our businesses. That's between wealth and commercial, it's between small business. It's between our home lending business and each of those. So there's really a lot of untapped potential there as well.

Got it. That's helpful. And then maybe turning back to the margin. I apologize if I missed this, but you guys have done a really great job managing the margin, keeping an overall relatively level -- high level of margin and neutralizing some asset sensitivity. You get a couple of cuts here again this quarter. Do you think you have enough flex in the deposit base to absorb some of that? Or could there be some near-term pressure in that margin ahead?

Yes, Kelly, happy to go and to work through that a little bit. So I think there's -- I'll give you a short-term answer and a longer-term answer. From a shorter-term answer, we do have sensitivity in our net interest margin, as you mentioned. I would characterize that as about 3 basis points per 25 basis point rate cut. So that's really the near-term impact. So when you think about the net interest margin this quarter, we were at 3.91%. We had the one interest recovery. If you kind of normalize for that, we're in the high 3.80% and so with a couple of a few rate cuts that go into the fourth quarter, we would tick down to maybe about 3.80% around kind of in that ballpark. But the, I would say, the longer-term answer is that we have a number of tools that we use to offset that sensitivity after the initial impact in. The best evidence that I can give you of that is if you look at what's happened over the last year, where we've had 125 basis points of rate cuts, but our margins are up year-over-year over 10 basis points.

And so that sensitivity that I mentioned of about 3 basis points per cut, will go to 1 to 2 basis points as we are able to take the actions that we take. And those actions are -- one is the deposit repricing that you mentioned. We continue to -- our exit beta for the quarter, the cut obviously happened at the end of September. But if you look at the exit beta at the end of the month, it was about 43% in the low 40s. We're going to run a similar playbook for the other cuts, and we think that we can be kind of in that low 40% beta for each of the upcoming cuts. That's #1.

Two is we have, as you know, the hedging program, where we have floor options that mitigate and neutralize some of the asset sensitivity. We have about $850 million of those that are in the money right now. And with the next rate cut, another $250 million would come in the money. And if we have 3 more cuts you would have the entire $1.5 billion program actually in the money.

So that would neutralize essentially $1.5 billion of variable rate loans and essentially neutralize that to look like fixed. So that's something that we continue to deploy. We're going to continue to utilize that program. throughout '26. We're thoughtful about maturities there and making sure that, that full $1.5 billion is going to be deployed.

And the third thing, I would say that the third tool -- actually, 2 more things. The third tool that we've been using is obviously new to the extent that we've been growing new deposits, and we're able to reinvest it and you think about a steeper yield curve going forward, and you were able to originate those deposits and the low-cost deposits that we've been able to have and then reinvest them at the higher yields. That, of course, takes some time to play out, but that's a big supporter of the net interest margin.

And the last thing that I will call out is our securities portfolio. As you know, our securities portfolio yields south of 2.5%. And it rolls off -- we have about $500 million of cash flow every year that comes off that securities portfolio that then we reinvest either into loans or potentially other securities. We reinvested and we pick up a lot of yield. There's 4 to 5 basis points of annual yield pickup from that rollover. So the combination of all of those things, that's what allowed us to really mitigate the impact more than what the kind of the paper math would suggest, and we'll continue to lean in and deploy those tools.

Great. I really appreciate all the color on that. That's really helpful and it will be helpful to go back to just one point of tying up loose ends of clarification. Just can you remind me how much floating rate loans you have and maybe index deposits just to help manage our margin with that component?

Yes. So our floating rate loans -- our floating rate loans are a little bit over 50%. And so our loan beta is about 50%. But when you incorporate the hedges, the loan beta drops to a little bit over 40% -- so -- and that's really -- and so when you think about our deposit beta in that range as well, that's really -- that's how we try to neutralize the portfolio. That's how we think about it. So -- and on the deposit side, we -- as you know, we have the CD book, which is the time maturities that -- most of that CD book is in kind of the 6 months with a little bit of 11 months. And so that kind of matures on its cycle. The other deposits are mostly non-indexed. We have about $700 million to $800 million of kind of indexed deposits.

And with no further questions in queue, I would like to turn the conference back over to David Burg.

Okay. Thank you very much, everyone, for joining the call today. If you have any specific follow-up questions, please feel free to reach out to Investor Relations or me. Have a great day.

This concludes today's conference call. You may now disconnect.