Kelly Mota

Kelly Mota asked for clarification on the expense outlook, specifically a good jumping-off point for Q1 2026 and the expected cadence through the year, considering the noisy Q4 2025 results, and whether the loan guidance for next year accounts for additional payoffs.

Answer

CFO David Della Camera indicated that expense seasonality is expected to be relatively flat next year, with Q1 taxes offsetting normal increases, suggesting an underlying quarterly expense run rate of $159-$160 million. He confirmed that the loan guidance for next year does assume some larger payoffs, with expectations for lower loans in Q1 and modest growth in the back half of the year.

Kelly Motter inquired about Banner Corporation's expected normalized tax rate for 2026, sought clarification on unusual items impacting other non-interest income, and asked about the continued potential headwinds from commercial real estate payoffs and construction loan movements to permanent financing in 2026.

Answer

Rob Butterfield, Chief Financial Officer, confirmed that the lower Q4 2025 tax rate was due to year-end true-ups and expects a normalized tax rate of around 19% for 2026. He also clarified that a $1 million write-off of software assets, not typically backed out of core numbers, contributed to the $1.4 million loss on disposal of assets in non-interest income, and is not expected to recur. Jill Rice, Chief Credit Officer, reiterated her expectation that commercial real estate payoffs would continue to be a headwind in 2026, but projected mid-single-digit loan book growth for the year, supported by production numbers and new relationship managers.

Kelly Mota from KBW asked about WSFS Financial Corporation's talent acquisition strategy, specifically if there are other areas beyond the Philly Market President where the company seeks to bolster talent (e.g., product lines, wealth, core bank, or attractive geographies) and opportunities in referral pipelines. She also inquired about margin management, asset sensitivity, deposit base flexibility to absorb rate cuts, and the amounts of floating rate loans and indexed deposits.

Answer

David Burg, CFO, confirmed that WSFS Financial Corporation is actively adding talent in commercial relationship management and the wealth business, citing successful team liftouts and evaluating RIA acquisitions. He emphasized significant untapped potential in referral pipelines across wealth, commercial, small business, and home lending. Regarding the margin, David Burg stated a near-term sensitivity of about 3 basis points per 25 basis point rate cut, but noted that long-term actions (deposit repricing with a low 40s beta, hedging program with $850 million in-the-money floor options, reinvestment of new low-cost deposits, and securities portfolio rollover yielding 4-5 basis points annually) mitigate this to 1-2 basis points. He specified floating rate loans are slightly over 50% (loan beta ~50%, dropping to ~40% with hedges) and indexed deposits are $700-$800 million.

Kelly Mota asked about other areas where WSFS Financial Corporation is looking to add talent beyond the Philadelphia Market President, such as specific product lines, wealth management, the core bank, or attractive growth geographies. She also inquired about the company's ability to manage its net interest margin, specifically the deposit base's flexibility to absorb further rate cuts and potential near-term margin pressure.

Answer

CFO David Burg confirmed ongoing focus on increasing commercial relationship managers and wealth business talent, including successful liftouts and evaluating RIA acquisitions. He also highlighted significant untapped potential in referral pipelines across all business segments. Regarding the net interest margin, Mr. Burg outlined a near-term sensitivity of about 3 basis points per 25 basis point rate cut, but detailed several tools to mitigate this impact over the longer term, including deposit repricing (targeting a low 40s beta), a hedging program with floor options (currently $850 million in the money), reinvesting new low-cost deposits at higher yields, and a securities portfolio rollover providing 4-5 basis points of annual yield pickup. He also stated floating rate loans are a little over 50%, with a loan beta of about 50% (over 40% with hedges), and approximately $700-800 million in index deposits.