WSFS Financial Q3 2026 Earnings Call Transcript
WSFS Financial (NASDAQ:WSFS) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
WSFS Financial Corporation reported a strong third quarter with a core EPS of $1.75, core ROA of 1.58%, and core return on tangible common equity of 20.7%, all of which surpassed prior quarter levels.
The company experienced a 15% increase in core PPNR and a 14% rise in core net income year-over-year, with a core EPS growth of 25%.
Net interest margin expanded by 1 basis point to 3.88%, with expectations to maintain a cumulative interest-bearing deposit beta of around 35% by year-end 2026.
Core fee revenue declined by 1% linked quarter but increased by 3% year-over-year, with significant growth in the wealth and trust division, which saw a 30% year-over-year increase.
Loan growth was reported at 1% linked quarter, driven by strong performance in commercial and consumer lending, particularly in residential mortgage and home equity loans.
Client deposits declined 3% linked quarter due to transactional deposit outflows, but average core deposits grew 10% year-over-year.
Asset quality remained stable with a net recovery for the second time this year and a decrease in delinquencies by 11% year-over-year.
The company returned $70 million to shareholders during the quarter, with $60 million through share repurchases, and aims to continue strong capital returns.
Management indicated a positive outlook for loan growth and deposit trends, with a moderate expectation for deposit pressure in the current competitive environment.
Full Transcript
OPERATOR
Hello everyone. Thank you for joining us, and welcome to WSFS Financial Corporation Third Quarter Earnings Call. After today’s prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I’d now like to turn the call over to your host for today, Mr. David Burg, Chief Financial Officer. Sir, please go ahead.
David Burg (Chief Financial Officer)
Thank you very much. Good afternoon, and thank you for joining our third 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, 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 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 Report 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 third quarter, WSFS’ performance continued to demonstrate the strength of our franchise and diverse business model. Results included a core EPS of $1.75, core ROA of 1.58%, and core return on tangible common equity of 20.7%, which are all above the prior quarter level. On a year-over-year basis, core PPNR increased 15% and core net income increased 14%, resulting in core EPS growth of 25%. Net interest margin expanded by 1 basis point linked quarter to 3.88%, reflecting the benefit of loan growth and higher investment securities yields, partially offset by a 4 basis point increase in client deposit costs. We exited the rate cycle with a cumulative interest-bearing deposit beta of 41% and experienced an 18% deposit beta in the September rate hike. We continue to see deposit pricing pressure in the market and expect our beta to drift up over time.
We expect to exit 2026 with an upcycle beta of 35% across the September rate increase and another rate increase in December. Core fee revenue, which represents nearly a third of total revenue, declined 1% linked quarter and increased 3% year over year. The growth in our fee revenue was led by wealth and trust, which increased 30% year over year and now represents approximately 60% of our total fee revenue. Our wealth and trust business has delivered double-digit year-over-year growth for eight consecutive quarters, demonstrating our ability to generate growth through various interest rate and market environments.
Wealth and trust’s growth was broad-based, with Corporate Trust, Global Capital Markets, the Bryn Mawr Trust Co. of Delaware, and Private Wealth all delivering double-digit growth year over year. Within WSFS Institutional Services, Corporate Trust and Global Capital Markets increased 45% and 48% year over year, respectively, reflecting continued success in winning new mandates and capturing market share. Our personal trust business, the Bryn Mawr Trust Co. of Delaware, grew 22% year over year, driven by continued new account growth, while Private Wealth increased 14% year over year driven by higher AUM. Cash Connect fees declined year over year due to the impact of the 2025 interest rate cuts and lower volumes, but the business delivered another quarter with a profit margin of 15%, which is up meaningfully from the prior year.
Gross loans grew 1% linked quarter, or 5% annualized. Excluding the continued runoff of the Spring EQ portfolio, loans grew 2% linked quarter and 7% year over year. In Commercial, we continue to see momentum in C&I, which grew 1% linked quarter and is up 9% year over year. While C&I fundings moderated from the elevated levels in recent quarters, client activity remains healthy and is supported by a solid pipeline. In Consumer, Home Lending delivered another strong origination quarter despite the interest rate environment.
Residential mortgage and home equity loans were up 6% linked quarter and 24% year over year. Client deposits declined 3% linked quarter, primarily reflecting the expected outflow of elevated transactional deposits at the end of the prior quarter. Within Institutional Services and Commercial, average deposits, which are a better measure of client activity, were up slightly linked quarter. On a year-over-year basis, average core deposits were up 10%, with average noninterest deposits growing 20%. Noninterest deposits now represent 35% of our total average deposits.
Core noninterest expenses decreased 3% linked quarter and were generally flat year over year as our efficiency ratio declined to 56.1%. While our expenses benefited from several nonrecurring items this quarter, we continue to focus on expense discipline while investing in the franchise. Turning to asset quality, most credit metrics remain stable, and we had a net recovery this quarter for the second time this year. Year to date, net charge-offs totaled 3 basis points of average gross loans. Delinquencies decreased 3% linked quarter and 11% year over year, reaching their lowest level in two years. Problem assets increased by $57.5 million, or 12% linked quarter, primarily driven by several downgrades across multifamily, construction, and C&I. Despite the linked-quarter increase, problem assets are down 16% compared to a year ago. Nonperforming assets were generally flat linked quarter, as an increase from a student housing-related loan was offset by other payoffs. Our credit costs for the quarter included an $8 million specific reserve related to this loan.
During the quarter, we continued to execute on our capital return framework, returning $70 million of capital to shareholders, including $60 million through share repurchases. Year to date, we have repurchased 5.6% of our outstanding shares and returned over 90% of net income to shareholders. We’re pleased with these results and remain committed to delivering high performance. We will now open the line for questions.
OPERATOR
We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Russell Gunther with Stephens.
Russell, please go ahead.
Russell Gunther (Analyst at Stephens)
Thank you. Hey, good afternoon, guys.
David Burg (Chief Financial Officer)
Good afternoon, Russell.
Russell Gunther (Analyst at Stephens)
I wanted to—hey David, I wanted to start, please, on the loan growth. You guys typically talk to a mid-single-digit type of result, and that’s what we saw this quarter. Just curious to get your sense for how you’re thinking about the fourth quarter from both an order of magnitude and mix perspective. C&I seems like it’s still tracking really well. And then, David, perhaps bigger picture, with the recent backup in rates and anticipated future Fed hikes, is there an absolute level of rates where demand destruction occurs and your internal target of mid-single digits is at risk?
David Burg (Chief Financial Officer)
Yeah, Russell, I would say this quarter we, as you saw, continue to kind of maintain the performance, and we got growth out of the areas where we’ve gotten growth over the last few quarters over the year. On the commercial side, we continue to see solid momentum within our C&I book, which is our primary area of focus, and we continue to grow that portfolio. While fundings this quarter were a little bit weaker than what we saw in the first half of the year—the last couple of quarters—I would say they’re back down to a more normalized level, consistent with where activity has been over the last couple of years versus the first half of the year this year, which was exceptionally strong. So I think this is a more normalized level, and I think where we would expect to be.
On the consumer side, as you know, our strategy has been to really focus on real estate-secured lending, and our growth really has been coming from our mortgage portfolio and our home equity portfolio. And despite the high interest rate environment, we continue to see really good growth in that portfolio in our footprint this quarter. The pipeline there has been coming down because of the rate environment. Clearly, with mortgages above 7%, that definitely has an impact on your origination demand.
So we don’t expect to see the kind of growth that we’ve been seeing over the course of the year there going forward. But on a competitive basis, we still feel like we have a differentiated origination strategy, and we still feel good about our ability to compete and grow in this market, but most likely at a slower rate there.
Russell Gunther (Analyst at Stephens)
Okay. Assuming helpful rates. Yeah, yeah, no, understood, thank you. And then switching gears to your deposit beta commentary and the slide in the deck. So the 35% IB beta where you’d expect to be in fourth quarter, that is a step down or a better result than the experience in the recent rate-down cycle. So I guess my question is, sort of through the cycle with incremental hikes, would you expect to retrace to that 40%-ish level, or given your kind of well-above-peer noninterest-bearing mix and below-peer loan-to-deposit ratio, would you expect to be able to outperform kind of prior-cycle experience and this 35% is something we should contemplate as sustainable going forward?
David Burg (Chief Financial Officer)
Yeah. So maybe just to provide a little bit more context, in the previous rate-increasing cycle, our cumulative beta at the end of that cycle was about 50%. Then, as you indicated, on the down cycle with the cuts that we had last year, we were about low 40s—so 41%—and the 35% that we show here is assuming a December rate hike. So there’s a partial month, and the normalized beta always lags a little bit. I would expect we do see continued deposit pressure and competition in the market and pricing pressure, and really we’ve been seeing that over the course of the year, and it’s certainly continuing.
So I would expect that our normalized beta would be about 45% to 50% through this increase cycle, which would be consistent with the prior increase cycle—maybe a little bit better—but not as low as 35%.
Russell Gunther (Analyst at Stephens)
Thank you for the clarification. I appreciate it, David. And then I guess just last one quickly, if I could, in terms of Cash Connect profit margin in that vertical—really nicely as you mentioned—can you just remind us of the estimated impact to revenue in a rising rate environment as well as the overall profitability profile of that vertical as the Fed hikes? And is there anything strategically you can do to minimize kind of the negative impact of higher rates on the cash in transit?
David Burg (Chief Financial Officer)
Yeah, yeah. So yeah, in terms of the numbers when you think about—so for a rate increase of 25 basis points we would have about $2.7, $2.8 million increase to fees over the course of a year and a similar—maybe, yeah, $2.5 million, call it. And a similar increase to expenses, maybe a little bit more. So we would have a little bit of pressure margin in a rising rate environment because of the non-interest-earning cash that you mentioned, but both would essentially go up by about two and a half million over the course of a year.
We’ve taken steps to really try to optimize in-transit cash, try to minimize non-interest-earning cash so that we can mitigate that impact. But the profitability impact would be several hundred thousand dollars per 25 basis point rate hike over a year. So it shouldn’t be a significant impact and we’ll look to offset it with other levers.
Russell Gunther (Analyst at Stephens)
Got it. All right, that’s very helpful. Thank you guys for taking my question.
David Burg (Chief Financial Officer)
Thanks, Russell.
OPERATOR
Your next question comes from the line of Christopher Marinek with Brean Capital LLC. Christopher, please go ahead.
Christopher Marinek (Analyst at Brean Capital LLC)
Thanks. Good afternoon. I wanted to ask about the pace of deposits and how deposits will—if they will track loans or if you think deposits could be faster as time passes this next several quarters.
David Burg (Chief Financial Officer)
Yeah, Chris. So generally I think the way we think about it through the cycle is generally deposits tracking loans. You know, our expectation is probably mid-single digits across both. Generally what we’ve seen in the last year is deposit growth outpacing loan growth. If you look at our loan growth, it has been mid-single digits, about 5%. Our deposit growth has been—if you look at our core deposits—about 10% over the last year. We really had good momentum in a couple of businesses, institutional services and commercial. In institutional services we had a growing market and we were able to continue to take share and that was an important driver of the growth. But I think that’s something that will normalize and that’s why we would say mid-single digit is kind of the right growth rate probably.
Christopher Marinek (Analyst at Brean Capital LLC)
And then in general with interest rates where they are, do you do more with the securities portfolio than you have here historically? I’m more curious if this is just the relative attraction of rates makes you just be even more selective on the loan side and therefore do more elsewhere.
David Burg (Chief Financial Officer)
Yeah. So on the securities portfolio—so before this year, for the last couple of years we’ve been bringing down our portfolio and running it down to about the low 20s percent of assets. When we got to this year and we got to that level, especially with the rate increase that we’ve seen, we started to reinvest proceeds, principal and interest reinvestment into new securities and taking advantage of the higher yields. And that’s why you’ve seen our portfolio yield kind of tick up over the last few quarters.
So that has been an opportunity and has been a contributor to our NIM. I think it will continue to do that. But we’re not anticipating growing our securities portfolio much beyond the current level. We want to keep it in the low 20s percent of assets. Generally, with that securities portfolio, we’ve been disciplined in not doing any restructurings. We’ve been taking advantage of the opportunity to reinvest at higher yields. That securities portfolio yields about 2.80% now.
And whether we reinvested in other securities at around 5% or loans at 6% or even higher, clearly we have some NIM pickup from that—probably four to five basis points a year of NIM pickup from the securities portfolio.
Christopher Marinek (Analyst at Brean Capital LLC)
Great, that’s very helpful. Thank you for that. And just a last one for me is if interest rates were to stay high for a while, would that have any impact on the capital target that I know is 12 on a medium term? Just curious if that would change at all.
David Burg (Chief Financial Officer)
Yeah, so yeah, our target still remains 12% over the medium term. But as you’re alluding to, it’s not a one-dimensional target, and we look at a couple different factors. One of them, an important one, is interest rate volatility and TCE ratio. And so our goal was as we get to 12%, we continue to have runoff in our AOCI, and so we continue to have our TCE ratio creep up as well. When interest rates increased this quarter, we’re definitely keeping an eye on that, and so we decided to just reduce the pace of buybacks a little bit there. So we did about 80% of our net income in terms of return to shareholders this quarter versus about 100% in the prior quarters. So I said we just took our foot off the gas a little bit and would likely stay there for this coming up quarter as well. So it does have an impact. I think the trajectory, Chris, is still towards that 12%.
In any given quarter, you know, we may deviate, but the longer-term trajectory is still towards that 12%.
Christopher Marinek (Analyst at Brean Capital LLC)
Great. David, thank you very much for taking our questions.
David Burg (Chief Financial Officer)
Thanks, Chris.
OPERATOR
Your next question comes from the line of Manuel Navas with Piper Sandler. Manuel, please go ahead.
Manuel Navas (Analyst at Piper Sandler)
Hey, good afternoon. How does the institutional services and trust business react to higher rates? Could that slow activity there, or do the market share gains more than offset that? And I’m just kind of wondering if that would have any impact on your non-interest-bearing deposits.
David Burg (Chief Financial Officer)
Yeah, so Manuel, generally what we saw—I’ll talk about this quarter and then maybe going forward. But this quarter we continue to see very healthy deal activity in that business. Even though the end-of-period deposits, because of the transactional deposits that build up that we mentioned at the end of the second quarter—even though we did see that outflow, it’s important to remember that that business has, throughout the quarter, on any given day, a lot of inflow and outflow just based on the transactional activity that happens.
And so point to point is not a great measure of activity, and that’s why we kind of tend to look at averages. But when we look at market share, we don’t necessarily have league tables for the third quarter, but certainly in the first half of the year relative to prior year, we gained meaningful share. When you look at fee growth quarter over quarter, the fee growth in that business grew about 5%. When we look at the number of deals and the deal activity, quarter over quarter increased about 4%. So all of our indicators are pointing to the fact that we’re continuing to perform well and continuing to compete well in that business.
In terms of your question of just broader activity in that market, the securitization—the kind of ABS and MBS market—has consistently been very resilient. It’s a broad market. The market’s grown through different rate environments. And so certainly I think if rates stay higher for longer or go up, there may be asset classes there where securitization activity is down maybe a little bit, but there are broad asset classes there, and we anticipate continued growth from that market.
Maybe not at the levels that it’s been growing—it’s been growing at 20% a year for the last couple of years—so maybe not at those levels, but we would expect continued growth in that market across asset classes.
Manuel Navas (Analyst at Piper Sandler)
Just a quick follow-up on that: is the average non-interest-bearing deposit levels that have really had strong growth this year—Is that pace of growth going to continue? Was that related to certain types of transactions that maybe you did more this year than other years in this business, or is this now maybe a better trajectory for the non-interest-bearing mix because you’re having so many market share gains in this business?
David Burg (Chief Financial Officer)
Yeah, I don’t think so. If you look at year over year, our non-interest-bearing deposits for the company grew 20%, and certainly that’s not a pace that I would expect to continue. You know, our goal is to again grow deposits mid-single digits and for us to maintain and grow non-interest-bearing at the same rate so that we overall maintain the composition of deposits that we have. The growth that we had was actually driven across businesses. We had meaningful growth from institutional services. We also had growth in commercial and we had some non-interest-bearing growth in our consumer business as well. So it wasn’t a one-dimensional growth. But clearly institutional services had a big impact, and those transactional deposits are non-interest-bearing. And as we continue to take share, we’ve had outsized growth. But again, certainly would not expect the level that we’ve seen over the past year to continue.
Manuel Navas (Analyst at Piper Sandler)
Switching gears for a second—I appreciate the commentary. Switching gears, you indicated there’s an exit September NIM of 3.89% that’s broadly positive for the fourth quarter. Could you just kind of talk about expectations going forward? That NIM was for the whole month, right? So it doesn’t even have much of the impact of the rate increase, is that correct? And thoughts on what rate increases could do to the NIM going forward?
David Burg (Chief Financial Officer)
Yep, yep. So yeah, you’re right, it’s correct that that NIM is for the month, so it’s got a partial month of a rate increase. In terms of go-forward NIM, generally we remain asset sensitive. Just as a reminder, as you know, we had a hedging program in place to mitigate interest rate impact on the way down. But the tool that we used for that program were really floor options, and the reason why we used that tool was to maintain our upside if the rate cycle changed to increasing rates.
And so we feel good strategically about that decision. We remain asset sensitive. I would say for every 25 basis point increase, we would expect kind of a two to three basis point increase in our net interest margin. But it’s very dependent on the deposit beta. As you would expect—and as we’re seeing—more elevated deposit competition may put some pressure on that, which we are seeing. So I think somewhere in the order of maybe two basis points is a good way to think about it. But we obviously want to make sure that we’re growing market share, we’re defending our turf, and so we will be competitive on deposit pricing to do that, and that may put some pressure on that upside.
Manuel Navas (Analyst at Piper Sandler)
Thank you. I’ll step back into the queue. I appreciate the commentary.
David Burg (Chief Financial Officer)
Thanks, Manuel.
OPERATOR
Your next question comes from the line of Kelly Mata with KBW. Kelly, please go ahead.
Kelly Mata (Analyst at KBW)
Hi, thank you so much for the question. Maybe I’ll stay on the topic of margin. As you said, you are tilted asset sensitive. Just wondering, with loan yields in the quarter at 6.26, I would think that new originations would be still overall accretive to the book as well. David, can you provide kind of what the yield on new loans was and how that’s trended versus maybe the last quarter or year over year? Thanks.
David Burg (Chief Financial Officer)
Yeah, I would say, Kelly, our yield on new loans—I mean, generally there’s not a material pickup. So when you look at the fixed-rate loans that are maturing, there’s not a material pickup on those. So I would say it’s fairly neutral. But when you look at some of our new originations, clearly when you look at mortgage, when you look at new lien, you look at small business, they are accretive. So it’s a mix. It’s a mix. And variable rate, obviously.
Kelly Mata (Analyst at KBW)
Got it. That’s helpful. And your credit sensitivity has come down after you’ve exited some of those higher charge-off portfolios that you had. Obviously with rates higher though, maybe some deals aren’t penciling or there could be some incremental headwinds for borrowers. I know it’s early—are you seeing anything new to watch? I know you specifically called out the student portfolio housing credit that migrated, but just interested to hear more high-level thoughts on that.
Thank you.
Rodger Levenson (President and CEO)
Hey Kelly, it’s Roger. So the short answer to your question is we really haven’t. And you recall, you know, we have been doing a process looking forward 24 months on all maturing CRE loans and resizing those at a 7.5% coupon to see where there’s potential areas of stress. And at this point that process has not seen any kind of material impact. Hard to predict the future, especially with how high rates might go, but at this point we haven’t seen anything.
And I would just say that one particular loan that went to NPA this quarter, I would call that very one-off in a small portfolio for us with some unique circumstances.
Kelly Mata (Analyst at KBW)
Great. Thanks for the color, Roger. I appreciate it. Last one for me. I know maybe it’s best to address it as part of the three separate businesses, but obviously Wealth and Trust has just been a tremendous source of growth and contribution to profitability that you have, obviously double-digit pace. Just wondering, as you look at your opportunity for further market share gains ahead, what do you think is a sustainable intermediate term of growth?
David Burg (Chief Financial Officer)
Our goal, Kelly, is to grow that business double digits. You know, I think we would not kind of expect the 30% that we had this year to continue at that level—this quarter rather. But I think double digit continues to be our goal. We benefited from, I would say, good market trends and an ability to take some share on top of that. And that’s really been powering the growth. So when you think about institutional services and the securitization activity, the amount of capital that’s being deployed into the capital markets, our ability to take advantage of that has been a big benefit. You think about our personal trust business and a lot of changes that are happening on the tax side between different states and some of the political changes that have been happening. There’s been a lot of thought and a lot of movement from trusts into Delaware, and so we’ve been able to take advantage of that.
And again, we continue to take share because we’re one of the leading players in doing that. So I think we’ve had some underlying tailwinds and we hope that continues. So we think there’s runway, but double digits is our goal in a sustained period of time.
Kelly Mata (Analyst at KBW)
Thank you so much. Nice quarter. I’ll step back.
David Burg (Chief Financial Officer)
Thanks, Kelly.
OPERATOR
Your next question comes from the line of Manuel Navas with Piper Sandler. Manuel, please go ahead.
Manuel Navas (Analyst at Piper Sandler)
Hey, thanks for having me back. What drove the linked-quarter salary and other OPEX declines, and just kind of thinking of the pretty strong efficiency ratio this quarter, how much can that sustain? I think a positive expense story is relatively new to you, so I would love to kind of understand that more.
David Burg (Chief Financial Officer)
Yeah, so when you look at salaries and benefits, the quarter-over-quarter decline was related to medical expenses. We had more elevated medical expenses in the second quarter, and so you saw that decline. More broadly, Manuel, I would say this quarter benefited from maybe $2 to $3 million of favorable non-recurring items, so maybe a run rate is, you know, a little bit higher than what you’re seeing this quarter. But generally, our goal has been to continue to take down our efficiency ratio, and that’s both through growing the revenue as well as controlling the expense base while continuing to invest in the business.
And so, you know, we’ve been able to take it down from a little bit over 60% to now 56, and our goal is to continue to gradually bring it down, but I would say in a moderate way that allows us to invest in the business.
Manuel Navas (Analyst at Piper Sandler)
I appreciate that. Again, switching gears, any commentary around the targets put out last quarter? Credit and NIMs seem to be trending better. For example, your normal cadence is to update mid-year and end of year, but just kind of thoughts on another mid-quarter update as I try for it.
David Burg (Chief Financial Officer)
Yeah, like you said, you know, we typically don’t update outlook at this point. But if you look at our credit trends, we’ve had two out of three quarters this year with recoveries—certainly we did not expect it. The environment continues to be strong, our processes are good. I think our expectation is that we would come in a bit better than our net charge-off guidance. We’re not seeing, as Roger mentioned, any major risks over the next few months that would expect us to deviate significantly to that older number.
So I think our expectation is that we probably come in a little bit better on the credit side charge-offs.
Manuel Navas (Analyst at Piper Sandler)
I appreciate it. Thank you for the questions.
OPERATOR
Your next question comes from the line of Janet Lee with TD Cowen. Janet, please go ahead.
David Burg (Chief Financial Officer)
Hey Janet.
Janet Lee (Analyst at TD Cowen)
On the non-interest-bearing deposit side this quarter, it seems like the outflows were really concentrated in what you identified as the non-transactional outflows. Is there any sort of seasonality component to it, or is there any identifiable trend where you have visibility into where there could be transactional outflows? Just trying to get a little more context around what that entailed.
David Burg (Chief Financial Officer)
Yeah, Janet, when you think about institutional services, it is a transaction-based business. And when you look across the quarter, there are meaningful flows that are coming in and out every day, really depending on the timing of the deposits. In the last quarter we had that inflow at the end of the quarter—it kind of coincided with the end of the quarter—but really the much more meaningful measure is the average, and that’s why I think that’s a more meaningful measure of client activity.
You’re always going to have some volatility above that, but looking at the quarter-over-quarter and year-over-year growth in the average is a far better measure of activity. So, in terms of seasonality, I would say not really. I think there are other places where there is some seasonality in deposits. For example, in our commercial business, we tend to have municipal inflows in the third quarter, which tend to come out in the fourth quarter. In consumer, we’ve seen some kind of buildup into the end of the year. So there are some seasonality effects that happen in other businesses. But within institutional services, again, last year we had a little bit of a buildup into year-end, but it’s not a pattern that I would count on.
Janet Lee (Analyst at TD Cowen)
Okay, got it. In terms of the lending environment, you gave color on still solid momentum in C&I, but maybe a little weaker sentiment. Are you seeing your clients being a little bit more hesitant given the rising rates, or is there a change in activity or sentiment you’re seeing on either side of C&I or CRE, where you may have a little bit more tempered growth outlook going forward?
Rodger Levenson (President and CEO)
Yeah, so to kind of put it in two parts: in CRE, there are definitely some projects that people are working on which are becoming harder to pencil out to get to the debt service coverage. So I think that’s something to watch. It’s not been a huge driver of new originations, but it’s definitely part of more of the flow that we hear being talked about, as well as maturing loans and their ability to get refinanced, whether it’s with us or somebody else.
On C&I, I’m not aware of any conversations that I’ve had with clients, or when we’re out and about, that the rate environment is changing their appetite to invest. I think they’re being thoughtful about investment, but I wouldn’t say there’s a change in appetite. What I do think is occurring is there’s a lot of competition out there, especially for C&I, and so we would expect to see some potential pressure, particularly for existing clients who are being approached by other folks.
And as David said, we’re going to defend our turf. At this point I would put that still in the characterization of kind of on the margin—pretty modest—but it’s definitely something we will continue to watch, especially if for some reason rates were to go a little bit higher than where they are today.
Janet Lee (Analyst at TD Cowen)
Got it. Thanks for the color. Maybe I missed it—you alluded to the double-digit investment management and fiduciary revenue. It seems like the double digit is obviously in place for 2026. What could derail that trajectory beyond it, do you think? The sustainability of that—do you have a good line of sight into that business being able to grow at a double-digit pace even in this current environment? It looks like a bulk of that is also market share gains—looks like that was your message, but just wanted to hear it from you again.
David Burg (Chief Financial Officer)
Yeah. So, Jan, I think when you look at that business, it’s important to recognize that, broadly speaking, about 70% of that business is not AUM-based and about 30% is AUM-based. So on the 70% that is non-AUM-based, it really is transactional activity—it’s not market driven—and there are different drivers in each of those businesses. That’s one of the benefits here, since there are different underlying drivers: you have the capital markets and securitization markets on one side, you have personal trust activity which is driven by policy and tax on the other side, and then you’ve got the AUM activity and the markets on the third side.
So there are different drivers, and that’s what gives us confidence that even if one of the engines is slowing down, we can have pickup elsewhere. I think the important thing we want to emphasize is, again, when you look at institutional services, which is more than half of the Wealth and Trust business, we are continuing to gain share in that business. You may have a slowdown in those markets—certainly, if rates stay higher, securitization markets are not immune to that and there will be some impact—but over the medium term, those markets are going to continue to grow and we expect to continue to be able to perform well and pick up share in that market.
And when we look at our indicators such as deal activity, fees, and the things that we’re participating in, we continue to see signs that our performance is strong despite some volatility on the deposit side in the market. So I think it comes down to the diversity of businesses that we have there and the diversity of drivers underlying those businesses.
Janet Lee (Analyst at TD Cowen)
Okay. Thank you so much for all the color.
OPERATOR
Thank you. And with no further questions in the queue, I would like to turn the conference back over to David Burg.
David Burg (Chief Financial Officer)
Okay. Thank you very much for joining our call today. If you have any specific follow-up questions, please reach out to Andrew at Investor Relations or me. And have a great day, everyone. Thank you.
OPERATOR
This concludes today’s call. Thank you for attending. You may now disconnect.
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