Earnings call transcript: WSFS Financial reports Q2 2025 growth in deposits and lending

WSFS Financial Corporation, with a market capitalization of $3.04 billion, reported solid financial performance for the second quarter of 2025, with core earnings per share reaching $1.27. The company showed strong growth in deposits and its home lending business, contributing to a positive outlook. Stock prices saw a modest increase, reflecting investor confidence in the company’s strategic direction and operational efficiency. According to InvestingPro analysis, the stock is currently trading near its Fair Value, suggesting balanced market pricing.

Key Takeaways

• Core earnings per share stood at $1.27, indicating robust financial health.
• Total client deposits increased by 1% quarter-over-quarter and 5% year-over-year.
• The home lending business showed significant momentum, enhancing revenue growth.
• Stock buybacks amounted to $77.7 million, representing 2.7% of outstanding shares.
• The company raised its return on assets outlook to approximately 1.30%.

Company Performance

WSFS Financial Corporation demonstrated resilience and growth in Q2 2025, driven by strategic initiatives and market conditions. The company reported a core return on assets of 1.38% and a core return on tangible common equity of 18.03%. Trading at a P/E ratio of 11.83, the company generated revenue of $996.36 million with a 3.83% growth rate. The core net interest margin expanded slightly to 3.89%, reflecting effective interest rate management. The increase in deposits and growth in the wealth business, which expanded by 17% year-over-year, underscore the company’s competitive positioning. InvestingPro subscribers can access additional insights through comprehensive Pro Research Reports, which provide deep-dive analysis of WSFS’s financial metrics and growth potential.

Financial Highlights

• Revenue: Not explicitly provided, but driven by deposit and lending growth.
• Earnings per share: $1.27, reflecting strong operational performance.
• Core net interest margin: 3.89%, a 1 basis point expansion.
• Total client deposits: Increased by 1% quarter-over-quarter and 5% year-over-year.
• Non-interest deposits: Grew 11% year-over-year, now over 30% of total deposits.

Outlook & Guidance

WSFS Financial has raised its return on assets outlook to approximately 1.30% and expects the net interest margin to remain around 3.85%. Analyst consensus is optimistic, with price targets ranging from $59 to $70, suggesting potential upside. The company anticipates low single-digit growth in its commercial portfolio and double-digit growth in fee revenue. Despite a flat consumer portfolio growth outlook, excluding Upstart, WSFS is optimistic about its strategic initiatives and market positioning. Net charge-offs are expected to be between 35-45 basis points. InvestingPro data shows the company maintains a FAIR Financial Health Score of 2.43, with particularly strong marks in profitability metrics.

Executive Commentary

David Burg, CFO, highlighted the momentum in the home lending business, stating, "We’re generating great momentum in our home lending business." CEO Rodger Levenson emphasized the company’s capital allocation strategy, noting, "Our first option for excess capital is to invest in the business." Levenson also pointed to the company’s market position, saying, "We continue to see nice, organic growth from this unique position we have in our market."

Risks and Challenges

• Interest rate volatility: Potential impacts on net interest margin and earnings.
• Tariff uncertainty: Although sentiment is improving, it remains a concern.
• Competition: Maintaining growth amidst strong competition in the financial sector.
• Economic conditions: Any downturn could affect loan growth and asset quality.
• Regulatory changes: Potential impacts on operational and financial strategies.

WSFS Financial Corporation remains focused on strategic growth and operational efficiency, with a positive outlook for the remainder of 2025. The company’s ability to navigate market challenges and leverage opportunities will be crucial in sustaining its performance trajectory.

Full transcript - WSFS Financial Corporation (WSFS) Q2 2025:

Tina, Conference Operator: Thank you for standing by. My name is Tina and I will be your conference operator today. At this time I would like to welcome everyone to the WSFS Financial Corporation second quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press STAR followed by the number one on your telephone keypad. If you would like to withdraw your question, press STAR one again. Thank you. I’d now like to turn the call over to David Burg, Chief Financial Officer. Sir, you may begin.

David Burg, Chief Financial Officer, WSFS Financial Corporation: Thank you, Tina, and good afternoon, and thank you, everyone, for joining our second quarter 2025 earnings call. Our Earnings Release and Earnings Release Supplement, which we 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 our Chief Operating Officer, Arthur Bacci. Prior to reviewing our financial results, I would like to read our Safe Harbor Statement. Our discussion today will include information about our management’s view of our future expectations, plans, and prospects that constitute forward-looking statements.

Actual results may differ materially from historical results or those indicated by these forward-looking statements due to risks and uncertainties, including but not limited to the risk factors included in our Annual Report on Form 10-K and our most recent quarterly reports on Form 10-Q, as well as other documents we periodically file with the Securities and Exchange Commission. All comments made during today’s call are subject to the Safe Harbor Statement. I will now turn to our financial results during the second quarter. WSFS performed well as we continue to demonstrate the strength of our franchise and diverse business model. Results included a core earnings per share of $1.27, core return on assets of 1.38%, and core return on tangible common equity of 18.03%. All of these metrics are up versus the first quarter. Core net interest margin expanded 1 basis point to 3.89%.

This reflects a reduction in total funding costs of 9 basis points, with a deposit beta of 43% for the quarter. These reductions were partially offset by lower loan yields, primarily driven by the announced Upstart sale, which accelerated the disposition of a non-strategic portfolio that has been in runoff. Core fee revenue grew 9% quarter-over-quarter, driven by broad-based growth across a number of businesses, including Wealth, Capital Markets, and Mortgage. Our wealth business grew 17% year-over-year, led by 39% growth in institutional services and 7% in The Bryn Mawr Trust Company of Delaware. Total client deposits increased 1% linked quarter, driven by an increase in trust deposits. On a year-over-year basis, client deposits grew 5%, driven by growth across consumer, commercial, and trust. Importantly, non-interest deposits grew 11% year-over-year and now represent over 30% of our total client deposits.

Gross loans were generally flat quarter over quarter, but we saw strong momentum in several areas. We saw the highest quarter of commercial fundings in over a year and particularly strong fundings in C&I where loan balances grew 2% linked quarter. In our consumer business, we had strong growth in residential mortgage which grew 2% linked quarter and in HELOCs which grew 8% linked quarter. These results reflect the momentum of our newly combined home lending business as well as the learnings attained from our partnership with Spring EQ. Total net credit costs were $14.3 million, reflecting lower net charge-offs for the quarter. Net charge-offs were 30 basis points with approximately half of that coming from the impact of the Upstart sale. Excluding Upstart, total net charge-offs were 14 basis points.

Our problem asset levels were stable and NPAs declined to 51 basis points of total assets as a result of payoffs while delinquencies ticked up in the quarter. The relationship that drove the majority of the increase fully paid off in July. During the second quarter, WSFS returned $87.3 million of capital, including $77.7 million in buybacks which represented 2.7% of our outstanding shares. Year to date we have returned approximately $150 million of capital resulting in buybacks of 4.4% of our outstanding shares. On the last page of the supplement, we provided our mid-year outlook and now assume two 25 basis point rate cuts for the remainder of the year, one in September and one in December. Overall, we’re increasing our ROA outlook for the year to approximately 1.30%.

As we continue to drive high performance and growth, we expect low single-digit growth in our commercial portfolio and flat growth in our consumer portfolio excluding Upstart. We’re generating great momentum in our home lending business and we expect those originations to largely offset the continued runoff in our Spring EQ partnership portfolio. For deposits, our outlook remains the same and we expect to continue to generate broad-based growth across our business. For the year we’re raising our NIM outlook to approximately 3.85% and this outlook now includes the two additional rate cuts I mentioned earlier. We continue to be focused on deposit repricing opportunities and maintaining our beta through any interest rate cuts. We also continue to see strong momentum and growth opportunities in our fee businesses which contribute almost a third of our total revenue.

Our wealth and trust business is performing very well, and the outlook for double-digit fee revenue growth this year remains unchanged. In the second quarter, WSFS completed the sale of its Powdermill Financial Solutions business, which provided tax and other administrative services. In addition, we decided to unwind a wealth advisory partnership with Commonwealth Financial Network as a result of Commonwealth’s announced sale to LPL Financial. While these transactions will result in some near-term revenue headwinds, they create important strategic opportunities to broaden our product offering and expand our wealth franchise. We expect our overall fee revenue will go low single digits as Cash Connect revenues are expected to decline primarily as a result of interest rate reductions and lower volume. As a reminder, the interest rate fee revenue decline is more than offsetting Cash Connect funding costs, resulting in a higher profit margin.

Net charge-offs are expected to be between 35 to 45 basis points of average loans for the year, excluding the full impact of Upstart, which has at this point largely been divested. Our commercial portfolio continues to perform well, but losses may remain uneven. Our outlook for efficiency remains unchanged at approximately 60%, and we will continue to leverage opportunities to invest in the franchise while prudently managing our expense base. Lastly, as seen on slide 9 of the earnings supplement, we will continue to execute buybacks as part of a multi-year glide path to our CET1 capital target of 12% while retaining discretion to adjust the pace based on the macro environment, business performance, or potential investment opportunities that we see. We are very excited about the future and remain committed to delivering high performance. Thank you, and we’ll now open the line for questions.

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

David Burg, Chief Financial Officer, WSFS Financial Corporation: Hey, good afternoon guys. Hey Russell, maybe could we start on the loan growth discussion? I hear you on kind of what your overall expectations for commercial are for this year. It was a great C&I quarter, so it’d be helpful to just get some big picture takes on what your expectations are for that asset class, how you’re thinking about pay downs as a potential headwind, continuing going forward.

Rodger Levenson, Chairman, President, and CEO, WSFS Financial Corporation: Could you share any sentiment shift?

David Burg, Chief Financial Officer, WSFS Financial Corporation: Share from your commercial borrowers. Whether or not tariffs are still an overhang or has the environment improved for them at all, that would be a great place to start. Thank you. Sure, Russell. I’ll kick off. I think what I would say importantly is that we’re focused on accretive loan growth. As you know, we really value the C&I relationship model and we value our kind of C&I franchise. I think you’ll see us continuing to lean into C&I. We did have solid originations in commercial real estate and construction. We did have other payoffs. We’re very selective in terms of our originations in commercial real estate, focusing on high quality sponsors where we have strong relationships. We’re not going to chase things on price and are maintaining our profit margins. I think the focus for us continues to be around C&I growth.

We expect growth across both the C&I and commercial real estate franchise. We will continue to lean into C&I going forward.

Rodger Levenson, Chairman, President, and CEO, WSFS Financial Corporation: Yeah, hey Russell, it’s Rodger. Let me just add some color.

David Burg, Chief Financial Officer, WSFS Financial Corporation: Hey, Rodger. Hey, good to hear from you.

Rodger Levenson, Chairman, President, and CEO, WSFS Financial Corporation: What I’ve been hearing from customers and clients when I’m out and about as it relates to tariffs, I think that there’s certainly some level of uncertainty on how this all plays out and the timing of that. We’ve noticed with the passage of time, I think it’s kind of settling in a little bit post, you know, April 2nd. I’d say we’d see a mild uptick in optimism with our borrowers moving forward with some projects that have been put on hold. I wouldn’t declare it as kind of any significant change, because there’s really been, you know, very, very little impact to anybody. I think it’s starting to change the dynamic for some people in terms of, you know, moving ahead. All to be determined by what ultimately gets, you know, plays out. I’d say the sentiment is moving a little bit in the positive direction.

David Burg, Chief Financial Officer, WSFS Financial Corporation: Okay, that’s great, guys. Thank you both. On the expense side of things, I appreciate the core efficiency ratio guide here and unchanged for the year. David, it’d be helpful to get a sense for how you think about the second quarter shaping up as a potential run rate. If we could think about potential revenue related seasonality or merit increases. I know you mentioned Cash Connect and the offset that we could see in the bottom line. Just maybe help us with the glide path quarter to quarter if you could. Sure, happy to wrestle. Backing up a little bit to the first quarter, as you may recall, I think the first quarter had some one-time benefits and some timing related issues, which is why you see the jump to the second quarter.

I think this quarter, the number that you see here is a pretty good run rate to use for future growth. I think it may tick up a little bit just with kind of BAU activity and BAU hiring into the back half of the year, but generally off of the run rate that you see this quarter is a good number to work from. Okay, excellent.

Thank you, David.

Last one for me, guys. You bought back a bunch of stock. You barely put a dent in that CET1. You guys make a ton of money. I know it’s a multi-year target, but what piece of it, if any, do you expect either traditional depository M&A or M&A within your fee verticals to play a role in working that lower?

Rodger Levenson, Chairman, President, and CEO, WSFS Financial Corporation: Yeah, I’ll take that, Russell. Obviously we’re going at the buybacks hard because of the excess capital which we walked everybody through last quarter, and we will continue to do that. As we always said, our first option for excess capital is to invest in the business. If those opportunities come along, whether they’re in our fee businesses or the traditional banking business, we will certainly consider those. I think we have a little bit of a leaning on the fee business side, particularly the wealth and trust franchise, because we see such great growth potential there. We’re open to it across the entire franchise. I would say on the traditional banking business, we continue to see nice, organic growth from this unique position we have in our market. The bar would be high, but we’re open to it if it would be additive and consistent with our strategic plan.

David Burg, Chief Financial Officer, WSFS Financial Corporation: Thank you, Rodger. Thank you both for taking my questions. Thanks, Russell.

Tina, Conference Operator: Our next question comes from the line of Manuel Navas with DA Davidson. Please go ahead. David, send.

David Burg, Chief Financial Officer, WSFS Financial Corporation: About some potential upside on the NIM in the back half of the year. It seems like the guide has a little bit of a trail down, so it’s kind of wondering about the exit NIM and where could there be upside.

Rodger Levenson, Chairman, President, and CEO, WSFS Financial Corporation: You’ve been really good at controlling deposits.

David Burg, Chief Financial Officer, WSFS Financial Corporation: Costs and just wanted to start there. Sure. Manuel, you broke up a little bit in the beginning, but I think you were asking about the NIM in the back half of the year, the run rate and where the upside could be, right? Yes, that is correct. Sorry about that. Okay. All right, thanks. No problem at all. I think, you know, as you saw our, let me give you the puts and takes there, but the NIM run rate that we had in the first couple of quarters was around 3.88, 3.89. We increased our guidance to 3.85 and that implies a little bit lower NIM in the second half of the year. That is driven really by a couple things. Primarily it’s the interest rate cuts that we have now baked into the forecast. We have one cut in September and an additional cut in December.

The December one is not going to have a huge impact, but obviously we’ll have the full quarter for the September cut and our impact perhaps per interest rate cut. I would say temporary impact, immediate impact is about a 2 to 3 basis point impact to our NIM from every 25 basis point interest rate cut. That is not, I would say that’s an impact in the first one or two quarters. As our beta catches up, I think we’d look to mitigate that NIM impact from 2 to 3 basis points to 1 basis point. The reason why you see a little bit softer NIM in the back half of the year is really because of the timing of the cuts. As we get into next year, again, assuming no other cuts, we would largely mitigate that impact. In terms of, I would say that’s one component.

The second component is, as you saw, we did sell our upstart portfolio. That portfolio has been in runoff, as you know. For the next couple of quarters, the impact of that portfolio relative to the run rate of the second quarter would be about 2 basis points of NIM. That would be a declining number because of the portfolio running off, but the immediate impact in the next couple quarters is 2 basis points per quarter. The combination of those two things gets us to a little bit softer run rate. Offsetting that to your point, we continue to obviously do everything we can around deposit pricing, repricing. We’ve exceeded our beta target. Our target was 40%. We got up to 43% this quarter. We still have some natural CD runoff that’s going to, the majority of our CD portfolio is in a six month.

We just priced at 4%. There’s not a huge repricing around the six month. We still have some longer dated CDs that are rolling off. We’ll have another quarter benefit there. Our securities portfolio, the rollover of our securities portfolio into loans or into other securities, frankly, will give us about 4 basis points a year of uplift. We still have some repricing levers to pull. The securities portfolio is going to give us a constant kind of 4 basis points per year. Those are certainly important mitigates. I appreciate that commentary. Just jumping back for the buyback piece, there’s been a—

Rodger Levenson, Chairman, President, and CEO, WSFS Financial Corporation: Portion of your buyback and you generally.

Have been price agnostic.

It’S been.

David Burg, Chief Financial Officer, WSFS Financial Corporation: Substantial this quarter and the first quarter. How much does pricing impact your thought process from here and how do you think about that pricing? Do you include AOCI recovery in that pricing and just how has that shifted over time? Yeah, as you said, we definitely increased the pace of buybacks in the first half of the year. We took advantage of the lower price opportunity, the lower price in our stock in the industry, what was happening in April, we took advantage of that to really lean into buybacks. To the extent that we see those price declines, we’ll continue to do that.

As Rodger said, generally regardless of price, our goal is that in a gradual glide path, if we don’t see opportunities to invest that capital in the business, which is always the first option, we will look to return that capital and we’ll look to return that capital through buybacks gradually. Obviously, taking into account AOCI risk, taking into account what’s happening in the environment, we’re always going to keep an eye on not just CET1, but also TCE to make sure that we’re being prudent around AOCI, but all else being equal, we’re going to look to continue to deploy the capital through buybacks and have that gradual pass down. We think that’s the right decision, again, second to having an investment in the business and opportunity there. Thank you. I mean, you were able to do this amount of buybacks and your CET1 barely changed.

Yeah, that’s exactly right. Obviously, we generate a good amount of capital, so that’s really important and accretive to us. I would say, number two, there are a couple of other effects. Our risk-weighted assets ticked down a little bit this quarter. When our AOCI goes down, the deferred tax asset associated with that is in our risk-weighted asset, it’s at 250% risk weight. We got a benefit there. It also depends on the balance sheet growth that you’re going to have. Depending on balance sheet growth, you’ll see that capital impacted more or less, depending on those factors. I appreciate the commentary. Thank you. Thanks, Mom.

Tina, Conference Operator: Our final question comes from the line of Kelly Motta with KBW.

This is Charlie on for Kelly. Thanks for the question.

Rodger Levenson, Chairman, President, and CEO, WSFS Financial Corporation: Hi Charlie.

In terms of expenses, it seemed like more of a run rateable quarter. Does that kind of still hold true? I know last quarter was a little low, and then you had the Cash Connect recovery. Maybe you could update us on the details of that process, and then more broadly just how you’re thinking about expenses going forward.

Sure.

David Burg, Chief Financial Officer, WSFS Financial Corporation: Let me start with Cash Connect. In Cash Connect, you’re right. We had a $1.6 million one-time insurance recovery in this quarter. The vast majority of that recovery relates to the client termination that you may remember we had in the fourth quarter of last year. I think it’s a very positive sign that we were able to have that recovery. As part of our normal course of business, we tend to be able to recover most of our losses in that business. I think that’s a validation of the way that we’ve been running that franchise. That was a one-time benefit in expenses. Other than that, this is a good run-rateable quarter for us. The first quarter had timing benefits and again had about a $4 million one-timer related to our incentive compensation true-ups, but this is a good quarter for us.

You’ll see us continue to invest in the business and continue to grow, continue to grow both from a technology perspective. We’ll continue to invest, we’ll continue to invest in talent. You’ll continue to see us grow, but at a moderate level from here. This is a good run-rate quarter. Charlie, the way we generally think about expenses, as we said before, is we’re managing the business not just for the short term, but we’re managing this business for growth. As we see disruptions in the market, opportunities to acquire talent, particularly in wealth, in our commercial business where we’ve recently hired a number of relationship managers, we’ll definitely lean in and continue to do that. Sometimes that creates timing mismatches between expenses and revenue, but we think that’s the right decision for the franchise and we’ll definitely continue to do that. That’s great.

Thank you. In terms of Cash Connect more broadly, I know last quarter you mentioned some price increases that could drive some better profitability, but offsetting softer volumes and then lower rates are also a factor. Just wondering, kind of like net net, if you’re seeing progress in driving profit margins in Cash Connect.

Yeah, we are. If you strip out that $1.6 million one-time benefit this quarter, you can see that our pre-tax margin, our net income would be up a little bit versus the prior quarter and our margin would be up a little bit. When you look across the year, you know, Cash Connect margin, if you normalize out the client termination last year in the fourth quarter, our margin would have been in the mid single digits and will be towards the higher single digits. This year, we’re above 8% and our goal is to push that into the teens. Like you said, the focus is really we’re implementing pricing increases. Some of that has already been implemented. There’s more to come from that. We expect about a $1 million pre-tax benefit this year from that and there’s more to come. Interest rates, as you know, also help profitability.

We get about $300,000, $400,000 of pre-tax benefit for every rate cut. The headwind in that business has been some of the client terminations, some of the events that have happened and some volumes as that industry consolidates a bit. We still think again the goal is to drive profit margin. We still feel good about that and from a market share perspective we still think we can still extract growth. It’s not a fast growing industry but we still think there’s growth there that we can go after.

Okay, understood, that’s great. Finally, for me, just circling back to the margin outlook, you guys raised it in the back half of the year. Just wondering, kind of looking out further into 2026, if you expect to have some of the same tailwinds with the deposit repricing and the betas there, a little more pressure. Just your thoughts, like looking out further at the margin. Thank you.

Yeah, as you know we’ve not given 2026 guidance. Our goal is to continue to perform at the top quintile relative to our peers. That’s what we continue to drive to. Our goal is to continue to push that ROA up. We will have some temporary impacts from interest rate cuts, but we’ll look to mitigate that. We think that we expect to continue to grow our fee businesses, which are very accretive to ROA. Our goal is definitely to continue to drive that margin up.

Okay, thank you. I’ll step back.

Thanks, Charlie.

Tina, Conference Operator: Thank you. With no further questions in queue, I will turn the conference back over to you, David.

Rodger Levenson, Chairman, President, and CEO, WSFS Financial Corporation: Okay, great.

David Burg, Chief Financial Officer, WSFS Financial Corporation: Thank you very much everyone. We appreciate your time and joining the call. If you have any specific follow up questions, feel free to reach out to Andrew and me. Have a great day and a weekend. Thanks everybody. Thank you. Bye bye.

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