What WSFS Financial (WSFS) Said on Its Q3 Earnings Call

Key Points

• Strong Q3 performance: WSFS reported core EPS of $1.75, up 25% year over year, while core net income rose 14% and core pre-provision net revenue increased 15%. Core ROA reached 1.58% and core ROTCE was 20.7%.
• Growth remained broad-based: Loans grew 5% annualized, led by C&I, residential mortgage and home equity lending, while wealth and trust revenue surged 30% year over year. However, client deposits declined 3% sequentially because of expected institutional-services and commercial-banking outflows.
• Deposit costs and capital returns remain key considerations: Management expects deposit pricing pressure to persist and reduced the pace of share repurchases amid rate volatility, though WSFS still returned $70 million to shareholders during the quarter. Credit metrics were largely stable, but problem assets rose 12% sequentially and included an $8 million specific reserve.

WSFS Financial NASDAQ: WSFS reported third-quarter 2026 core earnings per share of $1.75, with core return on assets of 1.58% and core return on tangible common equity of 20.7%, Chief Financial Officer David Burg said during the company’s earnings call. Each measure increased from the prior quarter.

Core pre-provision net revenue rose 15% from a year earlier, while core net income increased 14% and core EPS grew 25%, according to Burg. Net interest margin expanded 1 basis point sequentially to 3.88%, supported by loan growth and higher yields on investment securities, partly offset by a 4-basis-point increase in client deposit costs.

Deposit Costs and Margin Outlook

Burg said WSFS continues to encounter deposit-pricing pressure and expects its deposit beta to rise over time. The company exited the rate cycle with a cumulative interest-bearing deposit beta of 41% and recorded an 18% beta in connection with the September rate increase.

Management expects to exit 2026 with an up-cycle beta of 35% when incorporating the September increase and an assumed December rate increase. However, Burg told analysts that the normalized beta through the broader rate-increase cycle could be approximately 45% to 50%, consistent with the prior rising-rate cycle.

WSFS remains asset sensitive, Burg said, and he estimated that a 25-basis-point rate increase could add roughly 2 to 3 basis points to net interest margin. He added that heightened competition for deposits could reduce that benefit, making approximately 2 basis points a more appropriate expectation.

The company’s securities portfolio yield has risen to about 2.80% as WSFS reinvests principal and interest proceeds into higher-yielding securities. Management intends to keep the portfolio in the low-20% range as a percentage of assets rather than materially expand it. Burg estimated that reinvestment opportunities in securities and loans could provide roughly 4 to 5 basis points of annual net interest margin benefit.

Loan Growth Led by C&I and Home Lending

Gross loans increased 1% from the prior quarter, or 5% on an annualized basis. Excluding continued runoff in the Spring EQ portfolio, loans grew 2% sequentially and 7% year over year.

Commercial and industrial loans rose 1% sequentially and 9% from a year earlier. Burg said C&I funding moderated from elevated levels during the first half of the year but remains at a more normalized level, while client activity and the pipeline remain healthy.

Residential mortgage and home equity loans increased 6% sequentially and 24% year over year, despite the interest-rate environment. Burg said mortgage origination demand has been affected by rates above 7%, and WSFS does not expect the same pace of consumer real estate lending growth to continue. Still, he said the company believes its origination strategy remains differentiated and competitive.

Chairman, President and CEO Rodger Levenson said higher rates are making some commercial real estate projects harder to justify because of debt-service coverage requirements. However, he said the company has not seen a material impact in its review of commercial real estate loans maturing over the next 24 months. WSFS has been assessing those loans using a 7.5% coupon to identify potential stress, he said.

Levenson said the bank has not observed a meaningful change in C&I clients’ willingness to invest, although competition for C&I relationships remains substantial.

Deposits, Fee Revenue and Institutional Services

Client deposits declined 3% sequentially, primarily due to expected outflows of elevated transactional balances in institutional services and commercial banking at the end of the prior quarter. Average deposits increased slightly from the second quarter.

Average core deposits increased 10% year over year, while average non-interest-bearing deposits grew 20%. Non-interest-bearing balances represented 35% of total average deposits.

Burg said the company generally expects deposit growth and loan growth to track at mid-single-digit rates over time. Deposit growth has outpaced lending over the past year, aided by institutional services and commercial banking, but management expects that difference to normalize.

Core fee revenue declined 1% from the prior quarter but rose 3% year over year. Wealth and trust revenue grew 30% year over year and represented about 60% of total fee revenue. The business has produced double-digit year-over-year growth for eight consecutive quarters.

• Corporate trust revenue increased 45% year over year.
• Global capital markets revenue increased 48% year over year.
• The Bryn Mawr Trust Company of Delaware increased 22% year over year.
• Private wealth revenue rose 14% year over year, aided by higher assets under management.

Burg attributed institutional-services growth to new mandates and market-share gains. He said the securitization market has remained resilient across rate environments, although sustained higher rates could slow activity in some asset classes. Management’s longer-term goal is to grow wealth and trust revenue at a double-digit rate, though Burg said the quarter’s 30% growth rate should not be viewed as a sustained level.

Cash Connect fees declined from a year earlier due to 2025 interest-rate cuts and lower volumes, though the business generated a 15% profit margin. Burg said a 25-basis-point rate increase would raise both annualized Cash Connect fee revenue and expenses by roughly $2.5 million, producing several hundred thousand dollars of annual profitability pressure. The company is seeking to reduce non-interest-earning in-transit cash to mitigate the impact.

Expenses, Credit and Capital Returns

Core non-interest expenses declined 3% sequentially and were generally flat from a year earlier, helping reduce the efficiency ratio to 56.1%. Burg said results benefited from roughly $2 million to $3 million in favorable nonrecurring items, including lower medical expense after elevated costs in the second quarter. Management said it intends to continue lowering the efficiency ratio gradually while maintaining investments in the franchise.

Asset-quality metrics were largely stable, and WSFS recorded a net recovery for the second time in 2026. Year-to-date net charge-offs totaled 3 basis points of average gross loans. Delinquencies fell 3% sequentially and 11% from a year earlier to their lowest level in two years.

Problem assets increased $57.5 million, or 12% sequentially, reflecting several downgrades in multifamily, construction and C&I loans. They remained down 16% from a year earlier. Nonperforming assets were generally unchanged as an increase tied to a student-housing-related loan was offset by other payoffs. The company recorded an $8 million specific reserve associated with that loan.

WSFS returned $70 million of capital to shareholders during the quarter, including $60 million through share repurchases. The company has repurchased 5.6% of shares outstanding year to date and returned more than 90% of net income to shareholders.

Burg said WSFS remains focused on reaching a 12% medium-term capital target but reduced the pace of buybacks because of interest-rate volatility and its tangible common equity ratio. The company returned about 80% of net income to shareholders in the third quarter, compared with about 100% in prior quarters, and may maintain a similar pace in the coming quarter.

About WSFS Financial (NASDAQ:WSFS)

WSFS Financial Corporation is the financial holding company for WSFS Bank, a full-service community banking institution headquartered in Wilmington, Delaware. Founded in 1832, WSFS is one of the oldest and largest locally managed banks in the Delaware Valley.

WSFS Bank provides a range of banking services for individuals, families, businesses and institutions. Its offerings include checking and savings accounts, consumer lending, residential mortgages, commercial loans, treasury and cash-management services, and online and mobile banking.

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