WSFS FINANCIAL CORPORATION
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, and exhibits thereto,hereto, contains estimates, predictions, opinions, projections and other “forward-looking statements” as that phrase is defined in the Private Securities Litigation Reform Act of 1995. Such statements include, without limitation, references to the Company’s predictions or expectations of future business or financial performance as well as its goals and objectives for future operations, financial and business trends, business prospects and management’s outlook or expectations for earnings, revenues, expenses, capital levels, liquidity levels, asset quality or other future financial or business performance, strategies or expectations. The words “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project” and similar expressions, among others, generally identify forward-looking statements. Such forward-looking statements are based on various assumptions (some of which may be beyond the Company’s control) and are subject to risks and uncertainties (which change over time) and other factors which could cause actual results to differ materially from those currently anticipated. Such risks and uncertainties include, but are not limited to:
•the impacts related to or resulting from bank failures and other economic industry volatility, including potential increased regulatory requirements and costs and potential impacts to macroeconomic conditions;
•possible additional loan losses and impairment of the collectability of loans;
•the Company’s level of nonperforming assets and the costs associated with resolving problem loans including litigation and other costs;costs and complying with government-imposed foreclosure moratoriums;
•changes in market interest rates, which may increase funding costs and reduce earning asset yields and thus reduce margin;
•the impact of changes in interest rates and the credit quality and strength of underlying collateral and the effect of such changes on the market value of the Company’s investment securities portfolio;portfolio, which could impact market confidence in our operations;
•the credit risk associated with the substantial amount of commercial real estate, commercial and industrial, and construction and land development and commercial and industrial loans in ourthe Company's loan portfolio;
•the extensive federal and state regulation, supervision and examination governing almost every aspect of the Company’s operations, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations issued in accordance with this statute and potential expenses associated with complying with such regulations;
•the Company’s ability to comply with applicable capital and liquidity requirements, (including the finalized Basel III capital standards), including ourits ability to generate liquidity internally or raise capital on favorable terms;
•possible changes in trade, monetary and fiscal policies and stimulus programs, laws and regulations and other activities of governments, agencies, and similar organizations;
•any impairments of the Company's goodwill or other intangible assets;
•the success of the Company’sCompany's growth plans including the successful integration of past and future acquisitions;across our WSFS Bank, Cash Connect® and/or Wealth Management segments;
•the Company’s ability to successfully integrate and fully realize the cost savings and other benefits of its acquisitions, manage risks related to business disruption following those acquisitions, and post-acquisition customerCustomer acceptance of the Company’s products and services and related customerCustomer disintermediation;
•negative perceptions or publicity with respect to the Company generally and, in particular, the Company’s trust and wealth management business;
•failure of the financial and/or operational controls of the Company’s Cash Connect® and/or Wealth Management segments;
•adverse judgments or other resolution of pending and future legal proceedings, and costscost incurred in defending such proceedingsproceedings;
•the Company's reliance on third parties for certain important functions, including the operation of its core systems, and any failures by such third parties;
•system failurefailures or cybersecurity incidents or other breaches of the Company’s network security;security, particularly given remote working arrangements;
•the Company’s ability to recruit and retain key employees;Associates;
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•the effects of weather, including climate change, and natural disasters such as floods, droughts, wind, tornadoes and hurricanes as well as effects from geopolitical instability, armed conflicts, public health crises and man-made disasters including terrorist attacks;
•the effects of regional or national civil unrest (including any resulting branch or ATM closures or damage);
•possible changes in the speed of loan prepayments by the Company’s customersCustomers and loan origination or sales volumes;
•possible changes in market valuations and/or the speed of prepayments of mortgage-backed securities (MBS) due to changes in the interest rate environment and the related acceleration of premium amortization on prepayments in the event that prepayments accelerate;
•regulatory limits on the Company’s ability to receive dividends from its subsidiaries and pay dividends to its stockholders;
•any compounding effects or unexpected interactions of the risks discussed above; and
As used in this Annual Report on Form 10-K, the terms "WSFS"“WSFS”, "the Company"“the Company”, "registrant"“registrant”, "we"“we”, "us"“us”, and "our"“our” mean WSFS Financial Corporation and its subsidiaries, on a consolidated basis, unless the context indicates otherwise.
The following are registered trademarks of the Company: Bryn Mawr Trust®, Cash Connect® is our registered trademark.Connect®, NewLane Finance®, Powdermill® Financial Solutions, WSFS Institutional Services®, WSFS Mortgage® and WSFS Wealth® Investments. Any other trademarks appearing in this Annual Report on Form 10-K are the property of their respective holders.
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PART I
ITEM 1. BUSINESS
OUR BUSINESS
A fixture in the Delaware Valley.community, WSFS Bank has been in operation for more than 185191 years. In addition to its focus on stellar customer experiences, theWSFS Bank has continued to fuel growth and remain a leader in our community. We are a relationship-focused and locally-managed community banking institution. We state ourand wealth franchise, complemented by nationwide businesses. Our mission simply:is simple: “We Stand for Service.” Our strategy of “Engaged Associates, delivering stellar experiences growing Customer Advocates and value forliving our Owners”culture, enriching the Communities we serve” focuses on exceeding customerCustomer expectations, delivering stellar experiences and building customer advocacy through highly-trained, relationship-oriented, friendly, knowledgeable and empowered Associates. As of December 31, 2023, we serviced our Customers primarily from our 114 offices located in Pennsylvania (57), Delaware (40), New Jersey (14), Florida (1), Nevada (1) and Virginia (1), our ATM network, our website at www.wsfsbank.com and our mobile app.
As of December 31, 2023, the Company had six consolidated subsidiaries: WSFS Bank, The Bryn Mawr Trust Company of Delaware (BMT-DE), Bryn Mawr Capital Management, LLC (BMCM), WSFS Wealth Management, LLC (Powdermill)(Powdermill®), WSFS CapitalSPE Services, LLC, and 601 Perkasie, LLC.
•BMT-DE, a Delaware state chartered non-depository trust company, supplements our existing Wealth Management LLC (West Capital),segment by offering Delaware advantage trust services including directed trusts, asset protection trusts and dynasty trusts via centers of influence such as estate planning attorneys. BMT-DE has approximately $53.0 billion in AUM and AUA at December 31, 2023.
•BMCM is a registered investment adviser and provides fee-only asset management services. On January 1, 2023, WSFS subsidiaries Cypress Capital Management, LLC (Cypress) and Christiana TrustWest Capital Management, LLC merged and rebranded as BMCM. In the third quarter of 2023, BMCM expanded its business in Southern Delaware and established a new presence in Boca Raton, Florida with the acquisition of a registered investment advisory firm's business based in Rehoboth Beach, Delaware. BMCM had approximately $3.3 billion in AUM and AUA at December 31, 2023.
•Powdermill® provides multi-family office services to affluent clientele in the local community and throughout the U.S.
•WSFS SPE Services, LLC provides commercial domicile services which include providing employees, directors, subleases of office facilities and registered agent services in Delaware and Nevada.
•601 Perkasie, LLC was formed to hold certain tax credit investments.
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As of December 31, 2023, WSFS Bank had two wholly-owned subsidiaries: Beneficial Equipment Finance Corporation (BEFC), and 1832 Holdings, Inc. WSFS Bank had one majority-owned subsidiary, NewLane Finance Company (NewLane Finance®).
•BEFC, a small equipment and fixed assets leasing company, was acquired during the Beneficial Bancorp, Inc. (Beneficial) acquisition. Subsequent to the Beneficial acquisition, BEFC ceased origination of Delaware (Christiana Trust DE). We also have onenew leases and its leasing operations were combined with NewLane Finance®, described below.
•1832 Holdings, Inc. was formed to hold certain debt and equity investment securities.
•NewLane Finance® originates small business leases and provides commercial financing to businesses nationwide, targeting various equipment categories including technology, software, office, medical, veterinary and other areas. In addition, NewLane Finance® offers new product offerings for insurance through its subsidiary, Prime Protect.
As of December 31, 2023, WSFS had three unconsolidated subsidiary,subsidiaries, WSFS Capital Trust III (the Trust), Royal Bancshares Capital Trust I, and Royal Bancshares Capital Trust II.
•The Trust was formed in 2005 to issue $67.0 million aggregate principal amount of Pooled Floating Rate Capital Securities. These securities are currently callable and have a maturity date of June 1, 2035. The proceeds from this issue were used to fund the redemption of $51.5 million Floating Rate WSFS Capital Trust I Preferred Securities (formerly, WSFS Capital Trust I). WSFS Capital Trust I invested all of the proceeds from the sale of the Pooled Floating Rate Capital Securities in our Junior Subordinated Debentures. Although WSFS owns $2.0 million of the common securities of the Trust, the Trust is not consolidated into the Company’s Consolidated Financial Statements as the Company is not deemed to be the primary beneficiary of the entity.
•Royal Bancshares Capital Trust I (Trust I) and Royal Bancshares Capital Trust II (Trust II) (collectively, the RBC Trusts), which were acquired from Bryn Mawr Bank Corporation. The RBC Trusts were utilized for the sole purpose of issuing and selling capital securities representing preferred beneficial interests. Although WSFS owns an aggregate of $0.8 million of the common securities of Trust I and Trust II, the RBC Trusts are not consolidated into the Company’s Consolidated Financial Statements as the Company is not deemed to be the primary beneficiary of these entities.
Segment Information
For financial reporting purposes, our business has three wholly-owned subsidiaries:segments: WSFS Bank, Cash Connect® and Wealth Investments, 1832 Holdings, Inc.Management. The WSFS Bank segment provides loans and Monarch Entity Services LLC (Monarch).leases, deposits and other financial products to commercial and consumer customers. Cash Connect® provides ATM vault cash, smart safe and cash logistics services in the U.S, servicing non-bank ATMs and smart safes nationwide and supporting ATMs for WSFS Bank Customers with one of the largest branded ATM networks in our region. The Wealth Management segment provides a broad array of planning and advisor services, investment management, personal and institutional trust services, and credit and deposit products to individuals, corporate, and institutional clients.
As of December 31, 2023, WSFS Bank's banking business is commercial lending primarily funded by customer-generated deposits.had a total loan and lease portfolio of $12.8 billion. We have built a $4.0$9.9 billion commercial loan and lease portfolio by recruiting the best seasoned commercial lenders in our markets, and offering the high level of service and flexibility typically associated with a community bank.bank and through acquisitions. We fund this businessour lending businesses primarily with deposits generated through commercial relationships and retail deposits. As of December 31, 2017, we service our customers primarily from our 76 offices located in Delaware (46), Pennsylvania (28), Virginia (1) and Nevada (1) andconsumer deposits, as well as through our website at www.wsfsbank.com. Wedigital banking platforms.
WSFS Bank also offeroffers a broad variety of consumer loan products, retail securities and insurance brokerage services through our retail branches, and mortgage and title services through those branches and through Pennsylvania-based WSFS Mortgage. WSFS Mortgage®. Our WSFS Mortgage® business is a mortgage banking company and abstract and title company specializing in a variety of residential mortgage and refinancing solutions.
Cash Connect®
Our Cash Connect® segment business is a premier provider of ATM vault cash, smart safe (safes that automatically accept, validate, record and hold cash in a secure environment) and other cash logistics services through strategic partnerships with several of the largest networks, manufacturers and service providers in the U.S.ATM industry. Cash Connect®services non-bank and WSFS-branded ATMs and smart safes nationwide. As of December 31, 2023, Cash Connect® manages $970.1 millionapproximately $1.9 billion in total cash and services approximately 23,00033,000 non-bank ATMs and approximately 1,6008,700 smart safes nationwide. Cash Connect® provides related services such as online reporting and ATM cash management, predictive cash ordering and reconcilement services, armored carrier management, ATM processing equipment salesloss protection and deposit safe cash logistics. As of December 31, 2023, Cash Connect® also operates over 440supports 590 owned or branded ATMs for theWSFS Bank, which has one of the largest branded ATM networknetworks in Delaware.our market.
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Wealth Management
Our Wealth Management segmentbusiness provides a broad array of fiduciary,planning and advisory services, investment management, trust services, and credit and deposit products to clients through six businesses. WSFS Wealth Investments provides insurance and brokerage products primarily to our retail banking clients. Cypress is a registered investment adviser with $901.5 millionin AUM (includes $146.9 million of Christiana Trust assets for which Cypress serves as sub-adviser). Cypress' primary market segment is high-net-worth individuals, offering a “balanced” investment style focused on preservation of capital and providing current income. West Capital, a registered investment adviser with approximately $861.2 million in AUM, is a fee-only wealth management firm which operates under a multi-family office philosophy and provides fully-customized solutions tailored to the unique needs of institutions and high-net-worth individuals. Christiana Trust, with $16.8 billion in AUM and assets under administration (includes $146.9 million of Christiana Trust assets for which Cypress serves as sub-adviser), provides fiduciary and investment services to personal trust clients; and trustee, agency, bankruptcy administration, custodial and commercial domicile services toindividual, corporate, and institutional clients. PowdermillCombined, these businesses had $84.3 billion of AUM and AUA at December 31, 2023.
Bryn Mawr Trust® is our predominant Private Wealth Management brand, providing advisory, investment management and trustee services to institutions, affluent and high-net-worth individuals. Private Wealth Management, which includes Private Banking, serves high-net-worth clients and institutions by providing trustee and advisory services, financial planning, customized investment strategies, brokerage products such as annuities and customized banking services including credit and deposit products tailored to its clientele. Private Wealth Management includes businesses that operate under the bank’s charter, through a broker/dealer and as a registered investment advisor (RIA). It generates revenue through fee-only arrangements, net interest income and other fee-only services such as estate administration, trust tax planning and custody. Powdermill® is a multi-family office that specializesspecializing in providing unique, independent solutions to high-net-worth individuals, families and corporate executives through a coordinated, centralized approach. WSFS Private Banking serves high-net-worth clients by delivering credit and deposit products and partnering with other business units to deliver investment management
The Bryn Mawr Trust Company of Delaware provides personal trust and fiduciary productsservices to families and services.individuals across the U.S. and internationally. WSFS Institutional Services® provides trustee, agency, bankruptcy administration, custodial and commercial domicile services to institutional, corporate clients and special purpose vehicles.
For segment financial information for the years ended December 31, 2023, 2022 and 2021, see Note 21 to the Consolidated Financial Statements in this report.
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WSFS POINTS OF DIFFERENTIATION STRATEGY
Our focus on this differentiation strategy supports our core franchise with a mix of organic and acquisition-related growth and builds value for our stockholders. Since December 31, 2018, our commercial loans and leases, which exclude loans held-for-sale, have been ablegrown 146% from $4.0 billion to distinguish themselves$9.9 billion at December 31, 2023. Over the same period, customer deposits have grown 202% from large national or international banks by providing our customers with the service levels, responsiveness and local decision making they prefer. $5.4 billion to $16.4 billion.
The following factors summarize what we believe is our differentiation strategy:
Our Mission
We Stand for Service® is our mission and our daily call to action. Since 1832, WSFS has been a service-oriented, locally-managed community banking institution serving Greater Philadelphia and Delaware region families and businesses. We strive to meet our Customers’ evolving banking needs and to exceed their expectations each and every day.
Values
Our values are the foundation of our pointsculture. They define us and serve as our moral compass. Our values are rooted in integrity; we do the right thing, unconditionally. We live our values every day; they nourish our culture and practiced over time, become “the WSFS way.” Our values are the fuel that ignites our virtuous cycle: when we do well, our Community does well and when our Community does well, we do well.
•Service: Serving others is fundamental to our mission and grounds our purpose. We serve by listening, caring, collaborating, volunteering and “getting things done” for those who rely on us to be there for them.
•Truth: The truth is non-negotiable. The truth brings clarity to a challenging situation or sensitive matter; it guides us with confidence and conviction. Being open and honest earns trust and underpins our conversations, decisions and communications.
•Respect: We value and respect each other and all we serve. The many unique attributes of differentiation:our team makes us stronger. Respecting others’ beliefs, experiences, perspectives and feelings sparks dialogue, facilitates learning and growth, drives change, inspires innovation and builds valued relationships.
Engagement and Customer AdvocacyCulture
Our business model is built on a concept called Human Sigma, which we have implemented in our strategyfoundation of “Engaged Associates delivering stellar experiences growing Customer Advocates and value for our Owners.” The Human Sigmaengagement. Our model identified by Gallup, Inc., begins with Associates (employees) who take ownership offor their jobsresponsibilities and thereforeimpact; as such, they are more likely to consistently perform at a higher level. We significantly invest significantly in recruitment, training, developmentour culture and talent managementengagement as they underpin all that we do at WSFS, including attracting, inspiring and retaining our Associates, aredelivering stellar Customer experiences and strengthening the cornerstonewell-being of our business model. Thiscommunities as evidenced by our Vision: "We envision a day when everyone will thrive." Our strategy, motivates“Engaged Associates, and unleashes innovation and productivity to engageliving our most valuable asset,culture, enriching the Communities we serve” builds upon that principal.
Our strategy in action starts our Customers, by providing them with stellar experiences. Asvirtuous cycle. It’s a result, we build Customer Advocates, or Customers who have developed an emotional attachment to the Bank.simple premise that plays out in a big way every day. Research studies continue to show avalidate the direct link between Associate engagement customer advocacy and a company’s financial performance. Our success with this strategy, creates awhich drives our virtuous cycle, further building an environmentis built upon that research and reinforces our culture that is evidenced in our Company results.
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Human Resources
At December 31, 2023, we had 2,229 full-time equivalent Associates. Our Associates are not represented by a collective bargaining unit and we believe our relationship with our Associates is strong.
During 2023, WSFS captured the voice of engagementour Associates and advocacy.our Customers through multiple channels to measure our Associate and Customer engagement.
•Our Associate Engagement scores consistently rankengagement survey results placed WSFS in the top decile88th percentile of companies polled. In 2017, ourGallup's global overall company-level database. Our Associate engagement ratio was 16.5:12.4:1, which means there were 16.512.4 engaged Associates for every actively disengaged Associate. This compares to a 2.6:1 ratio in 2003 and currently, a U.S. working population ratio of 2.1:1.
•Customer loyalty remained consistent during the year, as measured by our customers ranked us a “five” outNet Promoter Scores (NPS). WSFS achieved an overall NPS of “five,” strongly agreeing with68.1 in 2023, which placed WSFS in the statement “WSFS is the perfect banktop quartile of Medallia's global database of financial services companies for me.”relationship surveys.
By fostering a culture of engaged and empowered Associates, we believe we have become the employer and bank of choice in our market. In 2017, for the 12th consecutive year,2023, we were named a top workplace in Delaware in honored to receive the following accolades:
•Received The News Journal’s ‘Top Workplaces’ survey, ranking second in the large company category. We were also named the ‘Top Bank’ in DelawareGallup Exceptional Workplace Award for the seventh time;
•Named to Forbes' list of America's Best Banks for the fourth year in a rowrow;
•Named a 2023 honoree of The Civic 50 Greater Philadelphia by the Philadelphia Foundation, in partnership with Points of Light and namedother local partners, for the second year in a “Top Workplace”row;
•Selected as Reader's Pick for Named "Best of Biz" for Customer Service in South Jersey Magazine;
•Recognized in Newsweek's List of America's Best Regional Banks and Credit Unions 2024; and
•Named one of America's Best Midsize Employers in 2023 by Forbes.
During 2023, our Associates continued to embody our strategy through the following community enrichment activities:
•Volunteered more than 18,000 hours during 2023 through Team WSFS, our corporate volunteer program;
•In June, we held our first-ever "We Stand for Service Day", during which approximately 1,200 of our Associates provided nearly 5,000 hours of service to more than 80 nonprofit and community organizations across the Greater Philadelphia, Southern New Jersey and Delaware region.
•We contributed $4.9 million to the WSFS CARES Foundation, the charitable giving arm of WSFS Bank, to enhance community support activities, which included a one-time $2.0 million special contribution in the greater Philadelphia market by Philly.com earning third placefourth quarter.
•The WSFS CARES Foundation provided grants and donations totaling more than $2.7 million to more than 390 community organizations located across Delaware, New Jersey and Pennsylvania, bolstering our key pillars of support including community investments, affordable housing, revitalization and business economic empowerment, education and leadership development, and strengthening those in need.
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Diversity, Equity and Inclusion
Beyond having diverse talent and Customers, WSFS works to create a truly inclusive environment with opportunities to find commonalities, build relationships and provide support to our diverse Communities from different backgrounds and cultures. We are committed to enhancing workforce diversity, creating developmental opportunities and continually improving hiring practices to retain our status as an employer of choice.
During 2023, the mid-sizeCompany completed the following Diversity, Equity, and Inclusion (DEI) accomplishments:
•The number of Associates engaged as members of one or more Resource groups more than doubled compared to 2022.
•Launched the inaugural cohort of a formalized, 9-month mentoring program for Associates in Resource Groups.
•Implemented monthly challenges to increase leadership opportunities to engage in DEI trainings, conversations, and activities.
•Developed an interactive DEI scorecard to assist with monitoring trends and reporting data for each Executive Leadership Team member.
•Facilitated Implicit Bias and Ally Training to Associates.
•Successfully launched an external DEI page on the company category.website.
•Integrated the ability to display pronouns into email signatures.
•Established DEI engagement goals for Executive Leadership Team.
•Implemented a recognition program which allows Associates the opportunity to recognize colleagues for demonstrating behaviors that promote inclusion and belonging.
Community Banking Model
Our size and community banking model play a key role in our success. Our approach to business combines a service-oriented culture with a strongfull complement of products and services, all aimed at meeting the needs of our retailconsumer, business and businesswealth Customers. We believe the essence of being a community bank means that we are:
•Small enough to offer Customers responsive, personalized service and direct access to decision makers, yet
•Large enough to provide all the products, services and servicesbalance sheet lending capacity needed by our target market customers.Customers.
As the financial services industry has consolidated, many independent banks have been acquired by national companies that have centralized their decision-making authority away from their customers and focused their mass-marketingproduct offerings on a regional or even national customer base. As a result, many of these banks have lost the deep knowledge of the local markets expected by our Customer base. We believe this trend has underserved smallersmall and medium size business owners who have become accustomed to dealing directly with their bank’s senior executives, discouraged retailconsumer customers who often experience deteriorating levels of service in branches and other service outlets, and frustratedresulted in less empowered bank employees who are no longer empoweredless engaged to provide good and timely service to their customers.
We have created the largest, premier, locally headquartered community bank in the Greater Philadelphia and Delaware region, offering the benefits of local market knowledge and decision-making, a full-service product suite, the balance sheet to compete with larger regional and national banks, and most importantly, a culture of engaged Associates that bring to life WSFS’ mission of We Stand For Service in our daily delivery of stellar Customer experiences.
WSFS Bank offers:
•One primary point of contact - eachcontact: Each of our relationship managers is responsible for understanding his or hertheir Customers’ needs and bringing together the right resources in theWSFS Bank to meet those needs.
•A customized approach to serving our Customers - weCustomers: We believe that this gives us an advantage over our competitors who are too large or centralized to offer customized products or services.
•Products and services that our Customers value - thisvalue: This includes a broad array of banking, cashtreasury management, capital markets and trust and wealth management products, as well as a legal lending limit high enough to meet the credit needs of our Customers, especially as they grow.
•Rapid response and a company that is easy to do business with - ourwith: Our Customers tell us this is an important differentiator from larger in-market competitors.
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| (Most recent available statistics) | Delaware | Southeastern Pennsylvania (1) | National Average | |||||||||
Unemployment (For December 2017) (2) (3) | 4.7 | % | 3.5 | % | 4.1 | % | ||||||
Median Household Income (2012-2016) (4) | $ | 61,017 | $ | 79,158 | $ | 55,322 | ||||||
Population Growth (2010-2017) (4) (5) | 7.1 | % | 2.4 | % | 5.5 | % | ||||||
Our Diversified Business
Diversified Revenue Streams
With over 25 discrete lines of business, our diversified revenue model is a key differentiator for the Company. We focus on relationship-based lending which provides the potential for higher profit margins, more resilient deposits and strong consumer relationships. In addition, our diversified fee revenue businesses, which include banking fees, Wealth, Trust, Cash Connect®, and capital markets, account for 32.8% of our noninterest income and further differentiate us from our peers and provide additional growth opportunities for the Company.
Balance Sheet Management
We put a great deal of focus on actively managing our balance sheet. This manifests itself in:
•Disciplined lending - We maintain discipline in our lending with a particular focus on portfolio diversification and granularity. Diversification includes limits on loans to one borrower as well as industry and product concentrations. We supplement this portfolio diversification with a disciplined underwriting process and the benefit of knowing our customers. We have also taken a proactive approach to identifying credit-related trends in our local economy and have responded to areas of concern.
•Focus on credit quality - We seek to control credit risk in our investment portfolio and use this portion of our balance sheet primarily to help us manage liquidity and interest rate risk, while providing marginal income and tax relief. Our philosophy and pre-purchase due diligence hashave allowed us to avoid the significantcontrol credit risk in our investment write-downs taken by many of our bank peers during the last economic downturn.portfolio.
•Asset/Liabilityliability management strategies - We have created anOur investment portfolio that is consistent with the approved risk appetite of our Board of Director’s approved risk appetiteDirectors. We work to optimize duration, yield and we believe the portfolio contains minimal risks dueliquidity and to our exclusion of non-Agency (private label) mortgage-backed securities (MBS) and other asset-backed securities. We also believe that our thorough due diligence is effective in mitigating theminimize credit risk associated withwithin policy guidelines. The concentration in agency MBS (96% of investment portfolio) and bank qualified municipal securities that we have added. Further, our portfolio is highly liquid given our large amountbonds (4% of Agency MBS.investment portfolio) provides liquidity, yield and credit to meet the intended risk profile.
Disciplined Capital Management
We understand that our capital (or stockholders’ equity) belongs to our stockholders. They have entrusted this capital to us with the expectation that it will earn an appropriate return relative to the riskrisks we take. Mindful of this balance, we prudently, but aggressively, manage our capital.
We continue to execute our current Board-approved share repurchase plans, as well as any future Board-approved share repurchase plans, including opportunistically repurchasing shares, based on current valuation levels, above our stated practice of returning a minimum of 35% of annual net income to stockholders through dividends and share repurchases.
Performance Expectations and Alignment with Stockholder Priorities
We are focused on high-performing, long-term financial goals. We define “high-performing” as the top quintile of a relevant peer group in return on assets (ROA), return on tangible common equity (ROTCE) and EPS growth.key financial metrics. Management incentives are, in large part, based on driving performance in these areas.of ROA as well as return on average tangible common equity (ROTCE), which is a non-GAAP financial measure, and EPS. More details on management incentive plans will be included in the proxy statement for our 2018 annual meeting2024 Annual Meeting of stockholders.Stockholders.
Core ROA for 2023 excludes (i) a $12.0 million charge for the settlement of a legal claim brought by Universitas Education, LLC.,realized/unrealized gains on equity investments, (ii) the impacts of the re-measurement of our deferred tax assetvaluation adjustments related to our derivative liability established from the Tax Cutssale of 360,000 Visa Class B shares in 2Q 2020, (iii) FDIC special assessment, (iv) corporate development and Jobs Act (Tax Reform Act), which was enacted in December 2017, (iii)restructuring expense, (v) certain contributions to the WSFS CARES Foundation, and (vi) income tax impact of the decisionadjustments related to surrender our bank-owned life insurance (BOLI) policies, (iv) a $1.5 million contribution to the WSFS Foundation, (v) a significant and unusual fraud loss previously disclosed on Form 8-K filed on June 26, 2017, (vi) corporate development costs and (vii) securities gains. policy surrender.
For a reconciliation of coreCore ROA to ROA, the most comparable GAAP measure, please refer to “Reconciliation of Core ROA”non-GAAP financial measures included in Item 1” located at the end of this section. For further information related to the legal settlement, see Note 23 to the Consolidated Financial Statements.
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Growth Plans
We have achieved success over the long-term in lending and deposit gathering, growing the Wealth Management segment’s assets under administrationclient base and product offerings and growing Cash Connect®’s customer base and services. Our success has been the result of a focused strategy that provides service, responsiveness and careful execution in a consolidating marketplace.
We plan to continue to grow by:
•Building fee income through investment in and growth of our Wealth Management and Cash Connect® segments.
◦Wealth Management AUA/AUM ended 2023 31% above 2022 balances. WSFS Institutional Services® ended 2023 as the securitization industry's fourth most active trustee for U.S. Asset and Mortgage Backed Securities by number of deals completed according to Asset-Backed Alert’s ABS Database.
◦Cash Connect® saw increased fee revenue due to the rising interest rate environment, increasing market share in the ATM vault cash space, and continued growth in the smart safe space. The division, in partnership with our retail strategy, continued to serve the Greater Philadelphia and the Delaware region through the WSFS ATM network. The number of owned or branded ATMs was 590 as of December 31, 2023.
•Continuing strong growth in commercial and consumer lending by:
◦Offering local decision-making by seasoned banking professionals.professionals with significant local market experience.
◦Executing our community banking model that combines stellar experiences with the banking products and services our business customers’customers demand.
◦Continuing to grow our NewLane Finance® leasing business.
◦Adding seasoned lending professionals that have helped us win customers in our Delaware, and southeastern Pennsylvania and southern New Jersey markets.
•Continuing to grow deposits by:
◦Providing a stellar experience to our Customers.Customers and offering products through our branch network, increasing our market presence in Delaware, southeastern Pennsylvania and southern New Jersey.
◦Further expanding our commercialCommercial and Small Business Customer relationships with deposit and cash management products.
◦Expanding services within WSFS Institutional Services® and increasing cross-sell opportunities within Private Wealth Management.
◦Finding creative ways to build deposit market share such as targeted marketing programs.
◦Making strategic investments to build our Interest Rate Derivatives, Foreign Exchange, and Trade Finance lines of business.
◦Employing products and services that enable customers to better manage their own market risk exposures, providing additional sources of non-interest fee income for the Company.
◦Making continued investments in preferred southeastern Pennsylvania locations.a team of highly experienced markets personnel and improved technology solutions.
•Seeking targeted, strategic opportunities in our non-banking businesses while we also acquired the assets of Powdermill Financial Solutions, LLC, a multi-family office serving an affluent clientele in the local community and throughout the U.S., and West Capital Management, Inc., an independent, fee-only wealth management firm providing fully-customized solutions tailored to the unique needs of institutions and high net worth individuals which operates under a multi-family office philosophy. In 2015, we completed the acquisition of Alliance Bancorp Inc. of Pennsylvania (Alliance) and its wholly-owned banking subsidiary Alliance Bank. In 2017, we focusedfocus on optimizing our recent acquisitionsfranchise investments.
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•Continuing investment in southeastern Pennsylvaniaour franchise to increase adoption and our Wealth business. Over the next several years, we expect our growth to continue to be a mixusage of organic growth and acquisition-related growth, consistentdigital channels aligned with our long-term strategy.strategy by
◦Enabling business outcomes through optimizing and leveraging the full capabilities of current and future investments in our franchise to increase Associate efficiencies and improve the overall Customer experience.
◦Building out Salesforce to support our customer relationship management with focus on change management, adoption and governance
◦Increased control, transparency, automation & efficiencies through platform integrations, enhancements and bot implementations
◦Advancing how we use data, the deployment of artificial intelligence, and predictive modeling to create operational efficiencies and redesign business models
◦Continue to build upon people, processes and controls within a focus on information security and fraud prevention
Disciplined Cost Management
We maintain a disciplined cost management strategy while continuing to make prudent investments in our businesses through the lens of our Strategic Plan. This is evident in management's continued investment in the franchise, fully supported by business cases indicating strong return on investment, and driving our future growth.
Innovation
Our organization is committed to product and service innovation as a means to drive growth and to stay ahead of changing customer demands and emerging competition. We are focused on developing and maintaining a strong “culture of innovation” that solicits, captures, prioritizes and executes innovation initiatives, including feedback from our customers, as well as leveraging technology from product creation to process improvements. Cash Connect®, a premier provider of ATM vault cash, smart safe and other cash logistics services in the U.S., serves as an innovation engine by driving enhancements such as mobile phone cash withdrawals from WSFS ATMs, and has developed best-in-class cash logistics and reconciliation software. WSFS Institutional Services®, which offers owner and indenture trustee services for asset-backed securities, custody, escrow, verification agent services as well as numerous other services, has partnered with several technology firms and fintechs to enhance and expand our client offerings. These innovations have created internal efficiencies and valued services for our local banking customers, institutional clients and merchants across the nation. We intend to continue to leverage technology and innovation to grow our business and to successfully execute on our strategy.
Our organization is committed to product and service innovation as a means to drive growth and to stay ahead of changing customer demands and emerging competition. We are focused on developing and maintaining a strong “culture of innovation” that solicits, captures, prioritizes and executes innovation initiatives, including feedback from our customers, as well as leveraging technology from product creation to process improvements.
We have embraced a partnership model to help diversify our consumer business and learn from innovators in the industry. We position ourselves with strategic partners when it is the best experience for our industry.Customers and aligned to our strategic plan. Through these partnerships, we look forward to offering and supporting even more innovative products to the financial services marketplace, continuing our organizational learning in this fast-developing space, and participating in value creation for our stockholders. These current partnerships include:
•Spring EQ, LLC: A digital mortgage solution specializing in home equity, refinancing, cash out, and home purchase loans.
•Upstart: A leading white label lending-as-a-service platform provider specializing in risk-based priced unsecured consumer loans. Our values address integrity, service, accountability, transparency, honesty, growth and desire to improve. They are the core of our culture, they make us who we are and we live them every day.
•LendKey Technologies, Inc.: A digital lending platform that specializes in student loans and student loan refinancing.
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•Cred Technologies (cred.ai): A Philadelphia-based fintech company that provides a high-tech, mobile-first everyday card spending experience. Through our partnership with cred.ai, we issue credit cards and provide deposit accounts.
Enterprise Risk Management
We manage our risks through our Enterprise Risk Management (ERM) program administered by the Chief Risk Officer (CRO) and ERM department. Our stand-alone ERM department is separate from our lines of business. Formal risk appetite statements have been developed for each risk category throughout the institution; these statements are reviewed and approved by the Board annually. From a regulatory perspective, our stockholders. Since 2012,ERM program is evaluated as part of the regular Safety and Soundness examination by the Office of the Comptroller of the Currency (OCC).
Key Risk Indicators (KRIs) or risk metrics are continually monitored in relation to risk appetite though a Risk Assessment Summary dashboard. Each KRI has an assigned quantitative tolerance level which considers our commercial loans have grown from $2.2 billion to $4.0 billion,overall risk appetite, regulatory requirements, the bank’s peer group statistics, best practices, and general industry guidelines. As part of our ERM program, approximately 100 KRIs are monitored company-wide. In the event that risk levels exceed our defined risk appetite, management action is required.
The ERM department facilitates a strong 13% compound annual growth rate (CAGR). Over the same period, customer deposits have grown from $3.1 billion to $5.0 billion, a 10% CAGR. More importantly, since 2006 stockholder value has increased at a far greater rate than our banking peers. An investmentrisk liaison program, consisting of $100 in WSFS stock in 2006 would be worth $239 at December 31, 2017. By comparison, $100 investedindividuals in the Nasdaq Bank Index in 2006 would be worth $150 at December 31, 2017.first line of defense that monitor and report risks from their respective business lines. ERM engages and has credible challenge discussions with Risk Liaisons and business line leaders to gather information for ERM reporting. ERM reporting is also provided to the Board of Directors quarterly. In addition, our Management Risk Committee (MRC), which meets each quarter, provides management governance and oversight of the Company's risk management program on an enterprise-wide basis, and includes members of the Company's executive and senior management teams.
Our primary market is the Greater Philadelphia and Christiana Trust DEDelaware region, including southeastern Pennsylvania and southern New Jersey. This market benefits from an urban concentration as well as one unconsolidated subsidiary, the Trust.
| (Most recent available statistics) | Delaware | Southeastern Pennsylvania(1) | Southern New Jersey(2) | National Average | ||||||||||||||||||||||
Unemployment (For November 2023) (3) (4) (5) | 4.2% | 2.8% | 4.2% | 3.7% | ||||||||||||||||||||||
Median Household Income (2018-2022) (6) | $79,325 | $95,554 | $92,310 | $75,149 | ||||||||||||||||||||||
Population Growth (2020-2022) (7) | 3.0% | (0.5)% | 0.6% | 0.5% | ||||||||||||||||||||||
(1)Comprised of Bucks, Chester, Delaware, Montgomery, and equity investment securities. Monarch offers commercial domicile services which include providing employees, directors, subleasePhiladelphia Counties
(2)Comprised of office facilitiesBurlington and registered agent services inCamden Counties
(3)Bureau of Labor Statistics - Delaware and Nevada.National unemployment rates are as of November 2023, seasonally adjusted
(5)Bureau of Labor Statistics - Southern New Jersey unemployment rate is a simple average of the ATM industry. The Wealth Management segment provides a broad array of fiduciary, investment management, creditNovember 2023 not seasonally adjusted unemployment rates for Burlington and deposit products to clients.Camden Counties
(7)U.S. Census Bureau - Quick Facts 2020 - 2022
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS’ EQUITY
Condensed average balance sheets for each of the last threetwo years and analyses of net interest income and changes in net interest income due to changes in volume and rate are presented in “Results of Operations” included in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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CREDIT EXTENSION ACTIVITIES
Over the past several years we have focused on growing the more profitable, relationship-oriented segments of our loan portfolio.portfolio as well as growing our consumer portfolio primarily through our consumer partnerships. Our current portfolio lending activity is concentrated on lending to small- to mid-sized businesses in the mid-Atlantic region of the U.S., primarily in Delaware, southeastern Pennsylvania, southern Pennsylvania,New Jersey, Maryland and New Jersey, as well as in northern Virginia. Since 2013, our total net commercial loans have increased by $1.8 billion, or 79% and accounted for 83% of our net loan portfolio at December 31, 2017, compared to 82% at December 31, 2013. Based on current market conditions, we expect our focus on growing commercial and industrial loans and other relationship-based commercial loans to continue during the remainder of 20182024 and beyond.
The following table shows the composition of our loan and lease portfolio at year-end for the last fivetwo years:
| At December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Types of Loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | 2,540,070 | 20.2 | % | $ | 2,575,345 | 21.9 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner-occupied commercial | 1,886,087 | 15.0 | 1,809,582 | 15.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgages | 3,801,180 | 30.2 | 3,351,084 | 28.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction | 1,035,530 | 8.2 | 1,044,049 | 8.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial small business leases | 623,622 | 5.0 | 558,981 | 4.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential(1) | 870,705 | 6.9 | 761,882 | 6.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer(2) | 2,012,134 | 16.0 | 1,810,930 | 15.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross loans and leases | 12,769,328 | 101.5 | 11,911,853 | 101.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | 186,126 | 1.5 | 151,861 | 1.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loans and leases(3) | $ | 12,583,202 | 100.0 | % | $ | 11,759,992 | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Includes reverse mortgages, at fair value of $2.8 million and $2.4 million at December 31, 2023 and 2022, respectively.
(2)Includes home equity lines of credit, installment loans unsecured lines of credit and education loans.
(3)Excludes$29.3 million and $43.0 million of commercial and industrial loans and residential loans held for sale at December 31, 2023 and 2022, respectively.
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| At December 31, | |||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||
| Types of Loans | |||||||||||||||||||||||||||||||||||
| Commercial real estate: | |||||||||||||||||||||||||||||||||||
| Commercial mortgage | $ | 1,187,705 | 24.9 | % | $ | 1,163,554 | 26.2 | % | $ | 966,698 | 25.8 | % | $ | 805,459 | 25.3 | % | $ | 725,193 | 24.6 | % | |||||||||||||||
| Construction | 281,608 | 5.9 | % | 222,712 | 5.0 | % | 245,773 | 6.5 | % | 142,497 | 4.5 | % | 106,074 | 3.5 | % | ||||||||||||||||||||
| Total commercial real estate | 1,469,313 | 30.8 | % | 1,386,266 | 31.2 | % | 1,212,471 | 32.3 | % | 947,956 | 29.8 | % | 831,267 | 28.1 | % | ||||||||||||||||||||
| Commercial | 1,464,554 | 30.7 | % | 1,287,731 | 29.0 | % | 1,061,597 | 28.3 | % | 920,072 | 28.9 | % | 810,882 | 27.6 | % | ||||||||||||||||||||
| Commercial — owner-occupied | 1,079,247 | 22.6 | % | 1,078,162 | 24.3 | % | 880,643 | 23.5 | % | 788,598 | 24.8 | % | 786,360 | 26.7 | % | ||||||||||||||||||||
| Total commercial loans | 4,013,114 | 84.1 | % | 3,752,159 | 84.5 | % | 3,154,711 | 84.1 | % | 2,656,626 | 83.5 | % | 2,428,509 | 82.4 | % | ||||||||||||||||||||
| Consumer loans: | |||||||||||||||||||||||||||||||||||
| Residential real estate | 253,301 | 5.3 | % | 289,611 | 6.5 | % | 283,963 | 7.6 | % | 247,627 | 7.8 | % | 258,848 | 8.8 | % | ||||||||||||||||||||
| Consumer | 558,493 | 11.7 | % | 450,029 | 10.1 | % | 360,249 | 9.5 | % | 327,543 | 10.3 | % | 302,234 | 10.3 | % | ||||||||||||||||||||
| Total consumer loans | 811,794 | 17.0 | % | 739,640 | 16.6 | % | 644,212 | 17.1 | % | 575,170 | 18.1 | % | 561,082 | 19.1 | % | ||||||||||||||||||||
| Gross loans | 4,824,908 | 101.1 | % | 4,491,799 | 101.1 | % | 3,798,923 | 101.2 | % | 3,231,796 | 101.6 | % | 2,989,591 | 101.5 | % | ||||||||||||||||||||
| Less: | |||||||||||||||||||||||||||||||||||
| Deferred fees (unearned income) | 7,991 | 0.2 | % | 7,673 | 0.2 | % | 8,500 | 0.2 | % | 6,420 | 0.3 | % | 6,043 | 0.2 | % | ||||||||||||||||||||
| Allowance for loan losses | 40,599 | 0.9 | % | 39,751 | 0.9 | % | 37,089 | 1.0 | % | 39,426 | 1.3 | % | 41,244 | 1.3 | % | ||||||||||||||||||||
Net loans (1) | $ | 4,776,318 | 100.0 | % | $ | 4,444,375 | 100.0 | % | $ | 3,753,334 | 100.0 | % | $ | 3,185,950 | 100.0 | % | $ | 2,942,304 | 100.0 | % | |||||||||||||||
The following tables show ourtable shows the remaining contractual maturity and rate sensitivity of the loan portfolio by remaining contractual maturityloan category as of December 31, 2017. The first table details the total loan portfolio by type of loan. The second table details the total loan portfolio by those with fixed interest rates and those with adjustable interest rates.2023. Loans may be pre-paid, so the actual maturity may differ from the contractual maturity. Prepayments tend to be highly dependent upon the interest rate environment. Loans having no stated maturity or repayment schedule are reported in the "Less than One Year" category.
| (Dollars in thousands) | Less than One Year | One to Five Years | Five to Fifteen Years | Over Fifteen Years | Total | |||||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||||||||
| Interest rate: | ||||||||||||||||||||||||||||||||
| Fixed | $ | 60,040 | $ | 500,229 | $ | 258,515 | $ | 32,752 | $ | 851,536 | ||||||||||||||||||||||
| Adjustable | 226,245 | 996,920 | 409,954 | 55,415 | 1,688,534 | |||||||||||||||||||||||||||
| Total | $ | 286,285 | $ | 1,497,149 | $ | 668,469 | $ | 88,167 | $ | 2,540,070 | ||||||||||||||||||||||
| Owner-occupied commercial | ||||||||||||||||||||||||||||||||
| Interest rate: | ||||||||||||||||||||||||||||||||
| Fixed | $ | 50,541 | $ | 359,435 | $ | 518,772 | $ | 218,738 | $ | 1,147,486 | ||||||||||||||||||||||
| Adjustable | 15,494 | 207,611 | 447,266 | 68,230 | 738,601 | |||||||||||||||||||||||||||
| Total | $ | 66,035 | $ | 567,046 | $ | 966,038 | $ | 286,968 | $ | 1,886,087 | ||||||||||||||||||||||
| Commercial mortgages | ||||||||||||||||||||||||||||||||
| Interest rate: | ||||||||||||||||||||||||||||||||
| Fixed | $ | 140,780 | $ | 840,061 | $ | 480,722 | $ | 173,095 | $ | 1,634,658 | ||||||||||||||||||||||
| Adjustable | 272,616 | 728,542 | 1,142,127 | 23,237 | 2,166,522 | |||||||||||||||||||||||||||
| Total | $ | 413,396 | $ | 1,568,603 | $ | 1,622,849 | $ | 196,332 | $ | 3,801,180 | ||||||||||||||||||||||
| Construction | ||||||||||||||||||||||||||||||||
| Interest rate: | ||||||||||||||||||||||||||||||||
| Fixed | $ | 7,861 | $ | 57,012 | $ | 60,089 | $ | 2,820 | $ | 127,782 | ||||||||||||||||||||||
| Adjustable | 387,571 | 309,927 | 199,069 | 11,181 | 907,748 | |||||||||||||||||||||||||||
| Total | $ | 395,432 | $ | 366,939 | $ | 259,158 | $ | 14,001 | $ | 1,035,530 | ||||||||||||||||||||||
| Commercial small business leases | ||||||||||||||||||||||||||||||||
| Interest rate: | ||||||||||||||||||||||||||||||||
| Fixed | $ | 28,127 | $ | 503,038 | $ | 92,457 | $ | — | $ | 623,622 | ||||||||||||||||||||||
| Adjustable | — | — | — | — | — | |||||||||||||||||||||||||||
| Total | $ | 28,127 | $ | 503,038 | $ | 92,457 | $ | — | $ | 623,622 | ||||||||||||||||||||||
Residential(1) | ||||||||||||||||||||||||||||||||
| Interest rate: | ||||||||||||||||||||||||||||||||
| Fixed | $ | 7,898 | $ | 22,123 | $ | 92,971 | $ | 465,272 | $ | 588,264 | ||||||||||||||||||||||
Adjustable(2) | 11 | 240 | 23,613 | 255,767 | 279,631 | |||||||||||||||||||||||||||
| Total | $ | 7,909 | $ | 22,363 | $ | 116,584 | $ | 721,039 | $ | 867,895 | ||||||||||||||||||||||
| Consumer | ||||||||||||||||||||||||||||||||
| Interest rate: | ||||||||||||||||||||||||||||||||
| Fixed | $ | 3,409 | $ | 317,287 | $ | 461,665 | $ | 729,090 | $ | 1,511,451 | ||||||||||||||||||||||
| Adjustable | 9,046 | 32,662 | 15,247 | 443,728 | 500,683 | |||||||||||||||||||||||||||
| Total | $ | 12,455 | $ | 349,949 | $ | 476,912 | $ | 1,172,818 | $ | 2,012,134 | ||||||||||||||||||||||
| Total loans and leases | $ | 1,209,639 | $ | 4,875,087 | $ | 4,202,467 | $ | 2,479,325 | $ | 12,766,518 | ||||||||||||||||||||||
| (Dollars in thousands) | Less than One Year | One to Five Years | Over Five Years | Total | ||||||||||||
| Commercial mortgage loans | $ | 200,227 | $ | 510,041 | $ | 477,437 | $ | 1,187,705 | ||||||||
| Construction loans | 97,298 | 121,955 | 62,355 | 281,608 | ||||||||||||
| Commercial loans | 441,556 | 606,422 | 416,576 | 1,464,554 | ||||||||||||
| Commercial owner-occupied loans | 87,725 | 295,296 | 696,226 | 1,079,247 | ||||||||||||
Residential real estate loans (1) | 25,487 | 3,991 | 223,823 | 253,301 | ||||||||||||
| Consumer loans | 26,093 | 42,728 | 489,672 | 558,493 | ||||||||||||
| Total gross loans | $ | 878,386 | $ | 1,580,433 | $ | 2,366,089 | $ | 4,824,908 | ||||||||
| Rate sensitivity: | ||||||||||||||||
| Fixed | $ | 147,301 | $ | 714,702 | $ | 1,224,396 | $ | 2,086,399 | ||||||||
Adjustable(2) | 731,084 | 865,731 | 1,141,694 | 2,738,509 | ||||||||||||
| Total gross loans | $ | 878,385 | $ | 1,580,433 | $ | 2,366,090 | $ | 4,824,908 | ||||||||
(2) Includes hybrid adjustable-rate mortgages.
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Commercial Lending
Pursuant to section 5(c) of the Home Owners’ Loan Act (HOLA), federal savings banks are generally permitted to invest up to 400% of their total regulatory capital in nonresidential real estate loans and up to 20% of their assets in commercial loans, but no more than 10% may be in loans that do not qualify as small business loans. As a federal savings bank that was formerly chartered as a Delaware savings bank, the Bank has certain additional lending authority.
Commercial, owner-occupied commercial, owner-occupied, commercial mortgage and construction loans have higher levels of risk than residential mortgage lending. These loans typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment experience on loans secured by income-producing properties is typically dependent on the successful operation of the related real estate project and may be more subject to adverse conditions in the commercial real estate market or in the general economy than residential mortgage loans. The majority of our commercial and commercial real estatemortgage loans are concentrated in Delaware southeastern Pennsylvania (Chester and Delaware counties) and nearby areas.Pennsylvania.
We offer commercial real estate mortgage loans on multi-family properties and on other commercial real estate. Generally, loan-to-value ratios for these loans do not exceed 80% of appraised value at origination.
Our commercial mortgage portfolio was $1.2$3.8 billion at December 31, 2017.2023. Generally, this portfolio is diversified by property type, with no type representing more than 33%30% of the portfolio. The three largest type istypes are retail-related (shopping(non-mall, neighborhood shopping centers and other retail), residential multi-family, and office with outstanding balances of $366.4 million.$1.1 billion, $1.0 billion and $0.7 billion at December 31, 2023, respectively. The average loan size of a loan in the commercial mortgage portfolio is $0.6$1.1 million and only six46 loans are greater than $8.0$12.0 million, with noeight loans greater than $12.0$24.0 million.
We offer commercial construction loans to developers. In some cases these loans are made as “construction/permanent” loans, which provides for disbursement of loan funds during construction with automaticthe option of conversion to mini-permanent loans (one - five years) upon completion of construction. These construction loans are short-term, usually not exceeding twothree years, with interest rates generally indexed to our WSFS prime rate, the “Wall Street” prime rate or London InterBank Offeredthe Secured Overnight Financing Rate (LIBOR)(SOFR), in most cases, and are adjusted periodically as these indices change. The loan appraisal process includes the same evaluation criteria as required for permanent mortgage loans, but also takes into consideration: completed plans, specifications, comparables and cost estimates. Prior to approval of each loan, these criteria are used as a basis to determine the appraised value of the subject property when completed. Our policy requires that all appraisals be reviewed independently from our commercial business development staff. At origination, the loan-to-value ratios for construction loans generally do not exceed 75%. The initial interest rate on the permanent portion of the financing is determined by the prevailing market rate at the time of conversion to the permanent loan. At December 31, 2017, $355.1 million2023, $1.8 billion was committed for construction loans, of which $203.1 million$1.0 billion was outstanding. TheAlso at December 31, 2023, the residential construction and land development (CLD) portfolio represented $140.4$607.4 million, or 3%5%, of total loans and 20% of Tier 1 capital (Tier 1 + ALLL), and the commercial CLD portfolio represented $62.7$204.1 million, or 1%2%, of total loans. These portfolios include $21.0At December 31, 2023, the construction portfolio included $101.6 million of “land hold” loans, which are land loans not currently being developed, at December 31, 2017.
developed.
Commercial and industrial and owner-occupied commercial loans make up the remainder of our commercial portfolio and include loans for working capital, financing equipment and real estate acquisitions, business expansion and other business purposes. These relationships generally range in amounts of up to $30.0$100.0 million (with two relationships exceeding this level) with an average loan balance in the portfolio of $0.3$1.4 million, and terms ranging from less than one year to ten years. The loans generally carry variable interest rates indexed to our WSFS prime rate, “Wall Street” prime rate or LIBOR. As ofSOFR. At December 31, 2017,2023, our commercial and industrial and owner-occupied commercial loan portfolios were $2.5$4.4 billion and represented 53%35% of our total loan and lease portfolio. These loans are diversified by industry, with no industry representing more than 13%12% of the portfolio.
Small business and middle market commercial loans that include specialty-lending products, including small business leases and SBA loans, comprise the remainder of our commercial portfolio. As of December 31, 2023, our small business and SBA loans include loan exposures up to $1.4 million and $2.7 million, respectively.
Our commercial small business leases generated through NewLane Finance®, finance critical equipment through advanced technologies, a customer-centric approach and transparent business lending practices. The commercial small business leases portfolio was $623.6 million, or 5% of total loans, at December 31, 2023. These leases included initial average deal sizes of approximately $28 thousand, with yields ranging from 5% to 25% and initial maturity terms of 12 to 84 months.
Federal law limits the Bank’s extensions of credit to any one borrower to 15% of our unimpaired capital (approximately $98.1$355.5 million), and an additional 10% if the additional extensions of credit are secured by readily marketable collateral. Extensions of credit include outstanding loans as well as contractual commitments to advance funds, such as standby letters of credit. Our internal "House Limit" to any one borrowing relationship is $100.0 million. At December 31, 2017,2023, no borrower had collective (relationship) total extensions of credit exceeding theseeither the legal lending limits.limits or our internal limit.
15
Residential Real Estate Lending
Generally, we originate held-for-sale residential first mortgage loans with loan-to-value ratios of up to 80% and require private mortgage insurance or government guarantee for up to 35% of the mortgage amount for mortgage loans with loan-to-value ratios exceeding 80%. We do not have any significant concentrations of such insurance with any one insurer. On a very limited basis, we have originated or purchased loans with loan-to-value ratios exceeding 80% without a private mortgage insurance requirement.requirement or government guarantee. Any such loans are either originated for sale into the secondary market or held for investment. At December 31, 2017,2023, the balance of all such loans was approximately $9.3$123.9 million.
To protect the propriety of our liens, we require borrowers to provide title insurance. We also require fire, extended coverage casualty and flood insurance (where applicable) for properties securing residential loans. All properties securing our residential loans are appraised by independent, licensed and certified appraisers and are subject to review in accordance with our standards. The exception to this policy is when we in limited circumstances receive an "appraisal waiver" from one of the governmental agencies, Fannie Mae or Freddie Mac.
The majority of our adjustable-rate, residential real estate loans have interest rates that adjust yearly or bi-yearly after an initial period. The change in rate for the first adjustment date could be higher than the typical limited rate change of two percentage points per annum at each subsequent adjustment date. Adjustments are generally based upon a margin (currently(as of December 31, 2023, ranging from 2.75% for U.S.the U.S Treasury, index; 2.25%and 2.75% to 3.00% for LIBOR index)the Standard Overnight Finance Rate) over the weekly average yield on U.S. Treasury securities adjusted to a constant maturity, as published by the Board of Governors of the Federal Reserve System (the Federal Reserve).
Usually, the maximum rate on these loans is six percent5.0% above the initial interest rate. We underwrite adjustable-rate loans under standards consistent with private mortgage insurance and secondary market underwriting criteria. We do not originate adjustable-rate mortgages with payment limitations that could produce negative amortization.
The adjustable-rate mortgage loans in our loan portfolio help mitigate the risk related to our exposure to changes in interest rates. However, there are unquantifiable credit risks resulting from potential increased costs to the borrower as a result of re-pricing adjustable-rate mortgage loans. During periods of rising interest rates, the risk of default on adjustable-rate mortgage loans may increase due to the upward adjustment of interest costs to the borrower. Further, although adjustable-rate mortgage loans allow us to increase the sensitivity of our asset base to changes in interest rates, the extent of this interest sensitivity is limited by the periodic and lifetime interest rate adjustment limitations. Accordingly, there can be no assurance that yields on our adjustable-rate mortgages willmay not adjust sufficiently to compensate for increases to our cost of funds during periods of extreme interest rate increases.
The original contractual loan payment period for residential loans is normally 10 to 30 years. Because borrowers may refinance or prepay their loans without penalty, these loans tend to remain outstanding for a substantially shorter period of time. First mortgage loans customarily include “due-on-sale” clauses. This provision gives us the right to declare a loan immediately due and payable in the event the borrower sells or otherwise disposes of the real property subject to the mortgage. We enforce due-on-sale clauses through foreclosure and other legal proceedings to the extent available under applicable laws.
In general, loans are sold without recourse except for the repurchase right arising from standard contract provisions covering violation of representations and warranties or, under certain investor contracts, a default by the borrower on the first payment. We also have limited recourse exposure under certain investor contracts in the event a borrower prepays a loan in total within a specified period after sale, typically 120 days. The recourse is limited to a pro rata portion of the premium paid by the investor for that loan, less any prepayment penalty collectible from the borrower. There were no repurchaseswas one loan repurchased in 20172023 for $0.8 million, two repurchased in 2022 for $0.8 million, and 2016, and one repurchase totaling $0.4 millionnone repurchased in 2015.2021.
Consumer Lending
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Our in-house originations consist primarily of home equity lines of credit and equity-secured installment loans. At December 31, 2017,2023, home equity lines of credit outstanding totaled $301.7$466.4 million and equity-secured installment loans totaled $148.2$221.0 million. In total, these product lines represented 81%approximately 34% of total consumer loans. Typically, maximum loan to value (LTV) limits are 89%85% for primary residences and 75%70% for all other properties. At December 31, 2017,2023, we had $574.4 million$1.4 billion in total commitments for home equity lines of credit. Home equity lines of credit offer customers the convenience of checkbook and debit card access, and revolving credit features for a portion of the life of the loan and typically are more attractive in a low interest rate environment. Home equity lines of credit expose us to the risk that falling collateral values may leave us inadequately secured. This credit risk is mitigated as the loans amortize over time. Additionally, during 2017 we purchased certain second-lien home equity installment loans throughby our partnership with Spring EQ, LLC (Spring EQ). These select loans meet or exceed our current underwriting standards and are similar to home equity loans originated through our branch network. Further during 2017, we grew student loans through our partnershiplimit on the combined LTV on residences with LendKey Technologies Inc (LendKey). These loans are primarily to consolidate existing student debt and are also underwritten in accordance with our current credit standards.a value greater than $2.5 million.
The following table shows the composition of our consumer loan portfolio at year-end for the last fivetwo years:
| At December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer Partnerships(1) | $ | 1,181,616 | 59 | % | $ | 967,829 | 54 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home equity lines of credit | 466,390 | 23 | 495,755 | 27 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Installment Loans - Other(2) | 221,040 | 11 | 179,939 | 10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Education loans | 84,480 | 4 | 95,920 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unsecured lines of credit | 58,608 | 3 | 71,487 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total consumer loans | $ | 2,012,134 | 100 | % | $ | 1,810,930 | 100 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| At December 31, | |||||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||||||||||||||
| (Dollars in thousands) | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||
| Equity secured installment loans | $ | 148,212 | 26.5 | % | $ | 82,182 | 18.3 | % | $ | 89,218 | 24.7 | % | $ | 72,795 | 22.2 | % | $ | 69,230 | 22.9 | % | |||||||||||||||
| Home equity lines of credit | 301,658 | 54.0 | 290,310 | 64.5 | 226,592 | 62.9 | 218,683 | 66.8 | 193,255 | 63.9 | |||||||||||||||||||||||||
| Student loans | 72,105 | 12.9 | 42,932 | 9.5 | 15,941 | 4.4 | 587 | 0.2 | 144 | — | |||||||||||||||||||||||||
| Personal loans | 21,401 | 3.8 | 22,007 | 4.9 | 17,604 | 4.9 | 16,082 | 4.9 | 16,397 | 5.5 | |||||||||||||||||||||||||
| Unsecured lines of credit | 12,194 | 2.2 | 10,613 | 2.4 | 9,244 | 2.6 | 9,415 | 2.9 | 13,147 | 4.4 | |||||||||||||||||||||||||
| Other | 2,923 | 0.6 | 1,985 | 0.4 | 1,650 | 0.5 | 9,981 | 3.0 | 10,061 | 3.3 | |||||||||||||||||||||||||
| Total consumer loans | $ | 558,493 | 100.0 | % | $ | 450,029 | 100.0 | % | $ | 360,249 | 100.0 | % | $ | 327,543 | 100.0 | % | $ | 302,234 | 100.0 | % | |||||||||||||||
(2)Includes secured and unsecured installment loans, personal and other loans.
Loan Originations, Purchases and Sales
We engage in traditional lending activities primarily in Delaware, southeastern Pennsylvania, southern New Jersey, and contiguous areas of neighboring states. As a federal savings bank, however, we may originate, purchase and sell loans throughout the U.S. We purchase limited amounts of loans from outside our traditional lending area through our relationships with Spring EQ and LendKey, when such purchases are deemed appropriate. We originate fixed-rate and adjustable-rate residential real estate loans through our banking offices and WSFS Mortgage®, our mortgage banking company.
Commercial:We originate commercial real estatemortgage and commercial loans through our commercial lending division and Small Business Administration (SBA)SBA loan program. Commercial loans are made for working capital, financing equipment acquisitions, business expansion and other business purposes. During 20172023, we originated $1.2$2.4 billion of commercial and commercial real estatemortgage loan exposures compared to $1.1$2.3 billion in 2016.2022. To reduce our exposure on certain types of these loans, and/or to maintain relationships within internal lending limits, at times we will sell a portion of our commercial loan portfolio, typically through loan participations. Commercial loan sales totaled $33.3$261.5 million and $43.0$201.6 million in 20172023 and 2016,2022, respectively. These amounts represent gross contract amounts and do not necessarily reflect amounts outstanding on those loans. We also periodically buy loan participations from other banks. Commercial loan participation purchases totaled $19.3$264.2 million and $51.9$241.9 million in 20172023 and 2016,2022, respectively.
Residential and Consumer: During 2023, we originated $343.7 million of residential loans, a decrease compared to $493.5 million in 2022. From time to time, we have purchased whole loans and loan participations in accordance with our ongoing asset and liability management objectives. There were no purchases in 2023 or 2022 related to our Community Reinvestment Act (CRA) obligations. We sell most newly originated mortgage loans in the secondary market to generate fee income and to manage our overall balance sheet mix. Residential loan sales totaled $195.7 million in 2023 and $498.1 million in 2022. We hold certain fixed-rate mortgage loans for investment, consistent with our current asset/liability management strategies and our relationship-based lending philosophy.
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At December 31, 2023, we serviced $248.3 million of residential first mortgage loans and reverse mortgage loans for others, compared to $286.4 million at December 31, 2022. At December 31, 2023, we had $211.3 million of residential first mortgage loans serviced by others, compared to $233.7 million at December 31, 2022. We also serviced residential first mortgage loans and reverse mortgage loans for our own portfolio totaling $659.4 million and $528.2 million at December 31, 2023 and 2022, respectively. We offer government-insured reverse mortgages to our customers. These loans do not close in our name and we process them as a reverse mortgage broker. During 2023 and 2022, we originated $3.3 million and $0.8 million in reverse mortgages, respectively.
Our consumer lending activity is conducted through our branch offices, our website, our partnerships with Spring EQ, Upstart, and LendKey and referrals from other parts of our business. We originate a variety of consumer credit products including home equity loans, home equity lines of credit, automobile loans, unsecured lines of credit and other secured and unsecured personal installment loans.
Fee Income from Lending Activities
We earn fee income from lending activities, including fees for originating, loans, servicing loans and selling loans and loan participations. We also receive fee income for making commitments to originate construction, residential and commercial real estatemortgage loans. Additionally, we collect fees related to existing loans which include prepayment charges, late charges, assumption fees and interest rate swap fees. As part of the loan application process, the borrower also may pay us for out-of-pocket costs to review the application, whether or not the loan is closed.
Most loan fees are not recognized in our Consolidated Statements of Income immediately, but are deferred as adjustments to yield in accordance with GAAP, and are reflected in interest income over the expected life of the loan. Those fees represented interest income of $5.1$8.8 million, $4.2$12.1 million and $4.7$25.4 million during 2017, 2016,2023, 2022 and 20152021 respectively. Loan fee income was mainly due to fee accretion on new and existing loans (including the acceleration of the accretion on loans that paid early), loan growth and prepayment penalties. The increase in loan fee income was concentrated in commercial mortgages and construction loans due to the associated growth in these portfolio categories.
LOAN AND LEASE LOSS EXPERIENCE, PROBLEM ASSETS AND DELINQUENCIES
Our results of operations can be negatively impacted by nonperforming assets, which include nonaccruing loans, nonperforming real estate investments, other real estate owned and restructured loans. Nonaccruing loans are those on which the accrual of interest has ceased. Loans are placed on nonaccrual status immediately if, in our opinion, collection is doubtful, or when principal or interest is past due 90 days (120 days for leases and consumer loans from our partnership with Upstart) and collateral is insufficient to cover principal and interest payments. Interest accrued, but not collected at the date a loan is placed on nonaccrual status, is reversed and charged against interest income. In addition, the accretion of net deferred loan fees is suspended when a loan is placed on nonaccrual status. Subsequent cash receipts are applied either to the outstanding principal balance or recorded as interest income, depending on our assessment of the ultimate collectability of principal and interest.
We manage our portfolio to identify problem loans as promptly as possible and take immediate actions to minimize losses. To accomplish this, our LoanRisk Management Administration and Risk Management Department monitorsCredit and Asset Recovery departments monitor the asset quality of our loans and investments in real estate portfolios and reports such information to the Consumer Credit Quality Committee, Credit Policy Committee, the Finance Division, and the Audit and Executive CommitteesCommittee of theour Board of Directors and the Bank’s Controller’s Department.Directors.
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SOURCES OF FUNDS
We manage our liquidity risk and funding needs through our Treasury function and our Asset/Liability Committee. As a result of increased deposit growth, our loan-to-total customer funding ratio at December 31, 2017 was 96%, better than our 2017 strategic goal of 98%. We have significant experience managing our funding needs through both borrowings and deposit growth.
As a financial institution, we and the Bank have access to several sources of funding. Among these are:
•Loan repayments
•Investment securities
•Federal funds purchased
•Federal Reserve Bank Term Funding Program (BTFP)
•Federal Home Loan BanksBank (FHLB) borrowings
•Federal Reserve Discount Window access
•Brokered deposits
•Trust preferred borrowings
•Senior and subordinated debt
Our branch expansion and renovation programstrategy has been focused on expanding our market penetration and retail footprint in Delaware, and southeastern Pennsylvania and southern New Jersey and attracting new customers in part to provide additional deposit growth. However, in recent years we have intentionally reduced reliance on higher-cost, typically single-service certificate of deposit (CD) accounts. Core customer deposit growth (deposits excluding CDs) was $382.7 million during 2017, a 10% increase over 2016.
Deposits
WSFS Bank is the largest independent full-service bank and trust institution headquartered and operating in Delaware. The Bank primarily attracts deposits through its retail branch offices and loan production offices, in Delaware’sDelaware, southeastern Pennsylvania and southern New Castle, Sussex and Kent Counties,Jersey, as well as nearby southeastern Pennsylvania.through our digital banking platforms.
The following table shows the maturities of certificates of deposit of $100,000$250,000 or more as of December 31, 2017:2023:
| (Dollars in thousands) | |||||
| Maturity Period | December 31, 2023 | ||||
| Less than 3 months | $ | 111,858 | |||
| Over 3 months to 6 months | 33,642 | ||||
| Over 6 months to 12 months | 160,011 | ||||
| Over 12 months | 6,565 | ||||
| Total | $ | 312,076 | |||
| (Dollars in Thousands) | |||
| Maturity Period | December 31, 2017 | ||
| Less than 3 months | $ | 88,239 | |
| Over 3 months to 6 months | 14,046 | ||
| Over 6 months to 12 months | 64,063 | ||
| Over 12 months | 132,586 | ||
| Total | $ | 298,934 | |
Federal Home Loan Bank Advances
As a member of the FHLB, we are able to obtain FHLB advances. At December 31, 2017,2023, we had $710.0 million inno FHLB advances with a weighted average ratecompared to $350.0 million of 1.51%. OutstandingFHLB advances from the FHLB had rates ranging from 0.94% to 1.73% at December 31, 2017.2022. Pursuant to collateral agreements with the FHLB, the advances are secured by qualifying first mortgage loans, qualifying fixed-income securities, FHLB stock and an interest-bearing demand deposit account with the FHLB. As a member of the FHLB, we are required to purchase and hold shares of capital stock in the FHLB and we were in an amount at least equal to 0.10%compliance with this requirement with a stock investment in FHLB of our member asset value plus 4.00% of advances outstanding. As$15.4 million as of December 31, 2017, our FHLB stock investment totaled $31.3 million.2023 and with $24.1 million at December 31, 2022.
We received $1.6$1.1 million in dividends from the FHLB during 2017.2023 compared to $0.3 million during 2022. For additional information regarding FHLB stock, see Note 1112 to the Consolidated Financial Statements.
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Trust Preferred Borrowings
In 2005, the TrustCompany issued $67.0 million of aggregate principal amount of Pooled Floating Rate Securities at a variable interest rate of 177 basis points over the three-month LIBOR rate. The reference rate on these securities was updated to three-month term SOFR upon the discontinuation of LIBOR on June 30th, 2023. These securities are currently callable and have a maturity date of June 1, 2035.
Each of Trust I and Trust II issued an average rate of 1.54%, compared to $130.0 million at an average rate of 0.79% at December 31, 2016.
The rights of holders of common securities of the RBC Trusts are subordinate to the rights of the holders of capital securities only in the event of a default; otherwise, the common securities’ economic and voting rights are pari passu with the capital securities. The capital and common securities of the RBC Trusts are subject to mandatory redemption upon the maturity or call of the junior subordinated debentures held by each. Unless earlier dissolved, the RBC Trusts will dissolve on December 15, 2034. The junior subordinated debentures are the sole assets of the RBC Trusts, mature on December 15, 2034, and may be called at par by the Company any time. The Company records its investments in the RBC Trusts’ common securities of $0.4 million each as investments in unconsolidated entities and records dividend income upon declaration by Trust I and Trust II.
Senior and Subordinated Debt
On December 3, 2020, the Company issued $150.0 million of senior notes due 2019 which were issued in 20122030 (the 2012 senior notes)2030 Notes). The 2012 senior notes were redeemed using a portion of the proceeds from our 2016 issuance of senior unsecured fixed-to-floating rate notes (the 2016 senior notes) described below. We recorded noninterest expense of $0.7 million due to the write-off of unamortized debt issuance costs in connection with this redemption.
The proceedsCompany assumed $30.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2025 (the 2025 Notes) from Bryn Mawr Bank Corporation, which were issued in a private placement to institutional accredited investors on August 6, 2015. Effective February 15, 2023, the Company redeemed all remaining after the redemptionoutstanding principal amount of the 20122025 Notes. The 2025 Notes bore interest at a variable rate that reset quarterly to a level equal to the then-current three-month LIBOR plus an issuance spread of 3.068%.
The Company assumed $70.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes are being used for general corporate purposes.due 2027 (the 2027 Notes) from Bryn Mawr Bank Corporation, which were issued by Bryn Mawr Bank Corporation in an underwritten public offering on December 13, 2017. The 2027 Notes mature on December 15, 2027, and had a fixed annual interest of 4.25% until and including December 14, 2022, and currently bear interest at a variable rate of 7.70%. The variable rate will reset quarterly to a level equal to the three-month term SOFR plus 2.31% until December 15, 2027, or any early redemption date.
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Reconciliation of December 31, 2017,non-GAAP financial measures included in Item 1
We prepare our financial statements in accordance with U.S. GAAP. To supplement our financial information presented in accordance with U.S. GAAP, we had 1,159 full-time equivalent Associates (employees). Our Associates are not represented by a collective bargaining unit.provide the following non-GAAP financial measures in Item 1: core ROA and the tangible common equity to tangible assets ratio. We believe these measures provide investors with useful information for understanding the Company’s performance when analyzing changes in our relationshipunderlying business between reporting periods and provide for greater transparency with our Associatesrespect to supplemental information used by management in its financial and operational decision making. We believe the presentation of these non-GAAP financial measures, when used in conjunction with GAAP financial measures, is very good,a useful financial analysis tool that can assist investors in assessing the company’s operating performance and underlying prospects. This analysis should not be considered in isolation or as evidenced by our being named a “Top Workplace”substitute for the 12th consecutive year in The News Journal’s ‘Top Workplaces’ surveyanalysis of our Associates, ranking second in the large company category . In addition, we were named a ‘Top Workplace’ in our newer, greater-Philadelphia market by philly.com, earning third place in the mid-size company category.results as reported under GAAP.
Core ROA is calculated as follows:
| For the year ended | |||||
| (Dollars in thousands) | December 31, 2023 | ||||
| Calculation of Core ROA (non-GAAP): | |||||
| Net income attributable to WSFS (GAAP) | $ | 269,156 | |||
| Less: Unrealized gains on equity investments, net | (329) | ||||
| Realized gain on sale of equity investment, net | (9,493) | ||||
| Plus: Visa derivative valuation adjustment | 2,460 | ||||
| FDIC special assessment | 5,052 | ||||
| Corporate development and restructuring expenses | 3,701 | ||||
| Contribution to WSFS CARES Foundation | 2,000 | ||||
| Plus: Tax adjustments: BOLI surrender | 7,056 | ||||
| Less: Tax impact of pre-tax adjustments | (764) | ||||
| Adjusted net income (non-GAAP) | $ | 278,839 | |||
| Average assets | $ | 20,203,037 | |||
| ROA (GAAP) | 1.33 | % | |||
| Core ROA (non-GAAP) | 1.38 | % | |||
The tangible common equity to tangible assets ratio is calculated as follows:
| (Dollars in thousands) | December 31, 2023 | ||||
| Period End Tangible Assets | |||||
| Period end assets | $ | 20,594,672 | |||
| Goodwill and intangible assets | (1,004,560) | ||||
| Tangible assets | $ | 19,590,112 | |||
| Period End Tangible Common Equity | |||||
| Period end Stockholder’s equity of WSFS | $ | 2,477,636 | |||
| Goodwill and intangible assets | (1,004,560) | ||||
| Tangible common equity | $ | 1,473,076 | |||
| Tangible common equity to assets | 7.52 | % | |||
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REGULATION
Overview
The Company and the Bank are subject to extensive federal and state banking laws, regulations, and policies that are intended primarily for the protection of depositors. Thedepositors, the Deposit Insurance Fund of the Federal Deposit Insurance Corporation (FDIC) and the banking system as a whole, areand not for the protection of our other creditors and stockholders. The Office of the Comptroller of the Currency (OCC) is the Bank’s primary regulator and the Federal Reserve is the Company’s primary regulator. The Consumer Financial Protection Bureau (CFPB) regulates the Bank’s compliance with federal consumer financial protection laws.
The statutes enforced by, and regulations and policies of, these agencies affect most aspects of our business, including prescribing permissible types of activities and investments, the amount of required capital and reserves, requirements for branch offices, the permissible scope of our activities and various other requirements. These laws and regulations and the ways in which they are applied to us can change significantly. For example, the Dodd-Frank Act, which was enacted in 2010 and amended by the Economic Growth Act in 2018, imposed significant new restrictions and an expanded framework of regulatory oversight for banking institutions and their holding companies.
The Bank’s deposits are insured by the FDIC to the fullest extent allowed by law. As an insurer of bank deposits, the FDIC promulgates regulations, conducts examinations, requires the filing of reports, and generally superviseshas authority to examine the operations of all institutions to which it provides deposit insurance.
The Dodd-Frank Act,laws and regulations to which was enacted in 2010, imposed new restrictions and an expanded framework of regulatory oversight for financial institutions and their holding companies, including insured depository institutions. The law also established the Consumer Financial Protection Bureau (CFPB) as an independent agency within the Federal Reserve. Some of the provisions of the Dodd-Frank Act have increased our expenses, decreased our revenues, and changed the activities in which we engage.
Transition from London Inter-Bank Offered Rate (LIBOR)
LIBOR, a fully phased-in basis,benchmark interest rate that was widely referenced in the past, is no longer published as of June 30, 2023.Financial market regulators had taken steps in previous years to prepare for the transition away from LIBOR and to encourage banks and other market participants to do the same. The United Kingdom Financial Conduct Authority (FCA) caused several LIBOR settings to cease publication after December 31, 2021 and the Bank was “well-capitalized” under the prompt corrective action rules.remaining settings to cease publication after June 30, 2023.
The Company’s commercial and consumer businesses used various products that were indexed to LIBOR. Most of institutions. The LCR measures an organizations’ ability to meet liquidity demands over a 30-day horizon; the NSFR would test the same capacity over a one-year horizon. Neither requirement applies directly tothese instruments gave the Company ordiscretion to determine a replacement benchmark rate when LIBOR became unavailable.
This discretion combined with the Bank, butLIBOR Act's safe harbor allowed the policies embedded in them may inform the work of the examinersCompany to select and migrate to SOFR as they consider our liquidity.
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Regulation of the Company
General
The Company is a registered savings and loan holding company and is subject to the regulation, examination, supervision and reporting requirements of the Federal Reserve. The Federal Reserve conducts regular safety and soundness examinations or inspections of the Company, which result in ratings for risk management, financial condition, and potential impact on subsidiary depository institution(s), a composite rating, and a rating for subsidiary depository institution(s) (referred to collectively as the “RFI/C(D)” rating). The Federal Reserve treats the ratings and the examination reports as highly confidential, and they are not available to the public.
The Company is also a public company subject to the reporting requirements of the SEC. We file electronically with the SEC our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. We make available on the investor relations page of our website at www.wsfsbank.com, free of charge, copies of these reports as soon as reasonably practicable after filing or furnishing them to the SEC. The information on our website is not incorporated by reference in this Annual Report on Form 10-K.
Restrictions on Acquisitions
Federal law generally prohibits a savings and loan holding company from acquiring, without prior regulatory approval, from acquiring direct or indirect control, of all or substantially all of the assets, of any other savings association or savings and loan holding company, or more than 5% of the voting shares of a savings association or savings and loan holding company. These provisions also prohibit, among other things, any director or officer of a savings and loan holding company, or any individual who owns or controls more than 25% of the voting shares of such holding company, from acquiring control of any savings association that is not a subsidiary of such savings and loan holding company, unless the acquisition is approved by the Federal Reserve. Comparable restrictions apply to a savings and loan holding company’s acquisition or control of a bank or bank holding company although in such event the savings and loan holding company would become a bank holding company.
The Company is a grandfathered unitary thrift holding company, a status that allows us to acquire companies or business lines that engage in a wide range of non-banking activities. Should we lose that status, we will be constrained in our ability to acquire many non-banking companies or business lines. We do not currently own any companies that a non-grandfathered unitary thrift holding company would not be allowed to hold.
Safe and Sound Banking Practices
Savings and loan holding companies and their non-bank subsidiaries are prohibited from engaging in activities that represent unsafe and unsound banking practices or constitute violations of laws or regulations. For example, the Federal Reserve opposes any repurchase of common stock or any other regulatory capital instrument if the repurchase would be inconsistent with the savings and loan holding company’s prospective capital needs and continued safe and sound operation. As another example, a savings and loan holding company may not impair its subsidiary savings association’s soundness by causing it to make funds available to non-depository subsidiaries or their customers if the Federal Reserve believedbelieves it not prudent for the Company to do so. The Federal Reserve can assess civil money penalties on a party for unsafe and unsound activities conducted on a knowing or reckless basis, if those activities caused more than a minimal loss to an institution or pecuniary gain to the party. The penalties can range up to $25,000 for certain reckless violations and up to $1.0 million for certain knowing violations for each day such a violation continues.
Source of Strength
In addition, pursuant to the Dodd-Frank Act, the capital rules for savings and loan holding companies are no less stringent than those that apply to their subsidiary savings associations.
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Dividends
The principal sources of the Company’s cash are debt issuances and dividends from the Bank, supplemented by earningsdividends from its other operating subsidiaries (Cypress,(including Bryn Mawr Capital Management, LLC, Powdermill West Capital®,WSFS SPE Services, LLC and ChristianaThe Bryn Mawr Trust DE)Company of Delaware). Our earnings and activities are affected by federal, state and local laws and regulations. For example, these include limitations on the ability of the Bank to pay dividends to the holding company and our ability to pay dividends to our stockholders. It is the policy of the Federal Reserve that holding companies should pay cash dividends on common stock only out of earnings available for the period for which the dividend is being paid and only if prospective earnings retention is consistent with the organization’s expected future capital needs and current and prospective financial condition. The policy provides that holding companies should not maintain a level of cash dividends that undermines the holding company’s ability to serve as a source of strength to its banking subsidiary. Consistent with this policy, a banking organization should have comprehensive policies on dividend payments that clearly articulate the organization’s objectives and approaches for maintaining a strong capital position and achieving the objectives of the Federal Reserve’s policy statement.
Additionally, as discussed above, the Federal Reserve possesses enforcement powers over savings and loan holding companies and their non-bank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices, or violations of applicable statutes and regulations. Among these powers is the authority to proscribe the payment of dividends by bank and savings and loan holding companies.
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Regulation of WSFS Bank
General
As a federally chartered savings association the Bank is subject to regulation, examination and supervision by the OCC. The OCC conducts regular safety and soundness examinations of the Bank, which result in ratings for capital, asset quality, management, earnings, liquidity, and sensitivity to market risk and a composite rating (referred to collectively as the “CAMELS” rating.)ratings). The OCC treats the CAMELS ratings and the examination reports as highly confidential, and they are not available to the public. The lending activities and other investments of the Bank must comply with various federal regulatory requirements. The OCC periodically examines the Bank forregarding information technology, asset management/trust, and compliance with certain regulatory requirements. The Bank must file reports with the OCC describing its activities and financial condition, including a quarterly “call report” that is publicly available. The FDIC also has the authority to conduct special examinations of the Bank, and theBank. The CFPB has back-up enforcementexclusive authority overto examine the Bank.Bank for compliance with federal consumer financial laws. The Bank is also subject to certain reserve requirements promulgated by the Federal Reserve.
Transactions with Affiliates;Affiliates and Insiders; Tying Arrangements
The Bank is subject to certain restrictions in its dealings with us and our affiliates. Transactions between savings associations and any affiliate are governed by Sections 23A and 23B of the Federal Reserve Act, with additional limitations found in Section 11 of the Home Owners’ Loan Act. An affiliate of a savings association, generally, is any company or entity which controls or is under common control with the savings association or any subsidiaryassociation. Some but not all subsidiaries of thea savings association that is commonly controlled bymay be exempt from the definition of an affiliate or a bank or savings association.affiliate. In a holding company context, the parent holding company of a savings association (such as the Company) and any companies which are controlled by such parent holding company are affiliates of the savings association. Generally, Sections 23A and 23B (i) limit the extent to which the savings association or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of such institution’s capital stock and surplus, and limit the aggregate of all such transactions with all affiliates to an amount equal to 20% of such capital stock and surplus and (ii) require that all such transactions be on terms substantially the same, or at least as favorable, to the institution or subsidiary as those that would be provided to a non-affiliate. The term “covered transaction” includes the making of loans to thean affiliate, purchase of assets from thean affiliate, issuance of a guarantee on behalf of thean affiliate and several other types of transactions. Extensions of credit to an affiliate usually must be over-collateralized. In addition to the restrictions imposed by Sections 23A and 23B, the Home Owners’ Loan Act also prohibits a savings association from (i) lending or otherwise extending credit to an affiliate that engages in any activity impermissible for bank holding companies, or (ii) purchasing or investing in any stocks, bonds, debentures, notes or similar obligations of any affiliate, except for the purchase of shares of a subsidiary.
Restrictions also apply to extensions of credit by the Bank to its executive officers, directors, principal shareholders, and their related interests and to similar individuals at the Company and the Bank’s affiliates. In general, such extensions of credit (i) may not exceed certain dollar limitations, (ii) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties, and (iii) must not involve more than the normal risk of repayment or present other unfavorable features. Certain extensions of credit also require the approval of the Bank’s Board of Directors.
The Bank may not extend credit, lease, sell property, or furnish any service or fix or vary the consideration for themthe foregoing on the condition that (i) the customer obtain or provide some additional credit, property, or service from or to the Bank or the Company or their subsidiaries (other than a loan, discount, deposit, or trust service or that are related to and usually provided in connection with any such product or service) or (ii) the customer not obtain some other credit, property, or services from a competitor, except to the extent reasonable conditions aresuch a condition is reasonably imposed to assure the soundness of the credit extended. The Federalfederal banking agencies have, however, allowed banks and savings associations to offer combined-balance productsdiscount packages and otherwise to offer more favorable terms if a customer obtains two or more traditional bank products. The law authorizes the Federal Reserve to grant additional exceptions by regulation or order.
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Regulatory Capital Requirements
A related set of rules, discussed below under “Prompt Corrective Action.Action,”
imposes additional requirements on insured depository institutions based on the same risk-based capital ratios and leverage ratio. Separately, the Home Owners’ Loan Act requires a savings association to maintain a ratio of tangible capital to total assets of at least 1.5%. In general terms, tangible capital is Tier 1 capital less intangible assets and certain other assets.
Under the revisedregulatory capital rules, the components of common equity Tier 1 capital include common stock instruments (including related surplus), retained earnings, and certain minority interests in the equity accounts of fully consolidated subsidiaries (subject to certain limitations). A savings association must make certain deductions from and adjustments to the sum of these components to determine common equity Tier 1 capitalcapital. The required deductions for federal savings associations include, among other items, goodwill (net of associated deferred tax liabilities), certain other intangible assets (net of deferred tax liabilities), certain deferred tax assets, gains on sale in connection with securitization exposures and investments in and extensions of credit to certain subsidiaries engaged in activities not permissible for national banks. The adjustments require several complex calculations and include adjustments to the amounts of deferred tax assets, mortgage servicing assets, and certain investments in the capital of unconsolidated financial institutions that are includable in common equity Tier 1 capital. Additional Tier 1 capital includes noncumulative perpetual preferred stock and related surplus, and certain minority interests in the equity accounts of fully consolidated subsidiaries not included in common equity Tier 1 capital (subject to certain limitations). Tier 2 capital includes subordinated debt with a minimum original maturity of five years, related surplus, certain minority interests in in the equity accounts of fully consolidated subsidiaries not included in Tier 1 capital (subject to certain limitations), and limited amounts of a bank’s allowance for loan and leasecredit losses (ALLL)(ACL). Certain deductions and adjustments are necessary for both additional Tier 1 capital and Tier 2 capital. Tangible capital has the same definition as Tier 1 capital.
The revised capital rules also modifiedratios for the risk weights for several typesBank and the Company, as of assets. The risk weights range from 0% for cash, U.S. government securities, and certain other assets, 50% for qualifying residential mortgage exposures, 100% for corporate exposures and non-qualifying mortgage loans and certain other assets, to 600% for certain equity exposures. Loans that are past due by 90 days or more and commercial real estate loans either with a loan-to-value ratioDecember 31, 2023, indicate regulatory capital levels in excess of the supervisory ceilings or without a certain amount of contributed capital fromregulatory minimums and the borrower must be risk-weighted at 150%. Mortgage servicing assets and deferred tax assets that are not deducted from common equity Tier 1 capital in accordance with the adjustment stated above are risk-weighted at 250%.
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Prompt Corrective Action
All banks and savings associations are subject to a “prompt corrective action” regime. This regime is designed primarily to impose increasingly stringent limits on insured depository institutions as their capital deteriorates below certain levels. There are five different capital levels: well capitalized,well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. A well-capitalized institution usually is entitled to various regulatory advantages, such as expedited treatment of applications, favorable deposit insurance assessments, and no express restrictions on brokered deposits. The revised capital rules summarized above raised the thresholds for well-capitalized status. In order to be “well capitalized”“well-capitalized”, an OCC-regulated savings association must have a common equity Tier 1 risk-based capital ratio of at least 6.5%, a Tier 1 risk-based capital ratio of at least 8.0%, a total risk-based capital ratio of at least 10.0%, and a 5.0%Tier 1 leverage ratio of at least 5.0%, and not be subject to any written agreement, order or capital directive, or prompt corrective action directive issued by the OCC. An adequately capitalized savings association must maintain a common equity Tier 1 risk-based capital ratio of at least 4.5%, a Tier 1 risk-based capital ratio of at least 6.0%, a total risk-based capital ratio of at least 8.0%, and a Tier 1 leverage ratio of at least 4.0%. If a savings association falls below any one of these floors, it becomes undercapitalized and subject to a variety of restrictions on its operations. There is no tangible capital requirement under prompt corrective action.
As of December 31, 2017,2023, the Bank met all of the prerequisites for well-capitalized status. Additionally, for the Company to be considered “well-capitalized” under Federal Reserve regulations, the Bank must be well-capitalized and the Company must not be subject to any written agreement, order, capital directive, or prompt corrective action directive issued by the Federal Reserve to meet and maintain a specific capital level for any capital measure.
Dividend Restrictions
Both OCC and Federal Reserve regulations govern capital distributions by Federalfederal savings associations to their holding companies. Covered distributions include cash dividends, stock repurchases and other transactions charged to the capital account of a savings association to make capital distributions.association. A savings association must file a notice with the Federal Reserve at least 30 days before making any capital distribution. TheA federal savings association also must file an application with the OCC for approval of a capital distribution if, eitheramong other things: (1) the total capital distributions for the current calendar year (including the proposed capital distribution) exceed the sum of the institution’s net income for that year to date plus the institution’s retained net income for the preceding two years, (2) the institution would not be at least adequately capitalizedwell-capitalized following the distribution, or (3) the distribution would violate any applicable statute, regulation, agreement or OCC-imposed condition, or (4)condition. If an application to the institutionOCC is not eligible for expedited treatment of its filings. In certain situations, a Federalrequired, the federal savings association may be able to filemust provide the OCC a copy of the notice it files with the OCC rather than an application; in other situations, no application or notice is required for the OCC, although notice to the Federal Reserve still is necessary. During 2017, the Bank paid dividends to the Company after receiving approval from the OCC.
Reserve.
The OCC may prohibit a proposed capital distribution whichthat would otherwise be permitted by OCC regulations, if the OCC determines that such distribution would constitute an unsafe or unsound practice.
Under federal law, an insured depository institution may notcannot make any capital distribution if the capital distribution would cause the institution to become undercapitalized or if it is already undercapitalized. The FDIC also prohibits an insured depository institution from paying dividends on its capital stock or interest on its capital notes or debentures (if such interest is required to be paid only out of net profits) or distributing any of its capital assets while it remains in default in the payment of any assessment due the FDIC. The Bank is currently not in default in any assessment payment to the FDIC.
Insurance of Deposit Accounts
The Bank’s deposits are insured to the maximum extent permitted by the Deposit Insurance Fund. As insurer, the FDIC is authorized to conduct examinations of, and to require reporting by, insured institutions. It also may prohibit any insured institution from engaging in any activity determined by regulation or order to pose a serious threat to the FDIC. The FDIC also has the authority to initiate enforcement actions against savings associations, after giving the OCC an opportunity to take such action.
The maximum deposit insurance amount per depositor per insured depository institution per the FDIAcertain types of accounts is $250,000.
The FDIC has adopteduses a risk-based premium system that providesto calculate quarterly assessments for quarterly assessments. In addition, all institutions with deposits insured by the FDIC are required to pay assessments to fund interest payments on bonds issued by the Financing Corporation, a mixed-ownership government corporation established to recapitalize the predecessor to the Deposit Insurance Fund. These assessments will continue until the Financing Corporation bonds mature in 2019.
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On October 18, 2022 the FDIC adopted a final rule to increase initial base deposit insurance assessment rates for insured depository institutions by 2 basis points, beginning with the exceptionfirst quarterly assessment period of large2023. The increased assessment rate schedules will remain in effect unless and complex banking organizations are assigned to one of three risk categories based on their composite CAMELS ratings. Each of the three risk categories has a range of rates, and the rate for a particular institution is determined based on seven financial ratios and the weighted average of its component CAMELS ratings. The FDIC may adjust assessment rates downward asuntil the reserve ratio of the Deposit Insurance FundDIF meets or exceeds 2.0% and higher thresholds.2%. As a result of the new rule, the FDIC insurance costs of insured depository institutions, including the Bank, have increased.
The FDIC may terminate the deposit insurance of any insured depository institution, including us,the Bank, if it determines after a hearing that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, order or any condition imposed by an agreement with the FDIC. It also may suspend deposit insurance temporarily during the hearing process for the permanent termination of insurance, if the institution has no tangible capital. Management is not aware of any existing circumstances that would result in termination of our deposit insurance.
Reserves
Pursuant to regulations of the Federal Reserve, a savings association must maintain reserves against its transaction accounts. During 2017, no reserves were required to be maintained on the first $15.5 million of transaction accounts, reserves of 3% were required to be maintained against the next $99.6 million of transaction accounts and a reserve of 10% was required to be maintained against all remaining transaction accounts. These percentages are subject to adjustment by the Federal Reserve. Because required reserves must be maintained in the form of vault cash or in a noninterest bearing account at a Federal Reserve Bank, the effect of the reserve requirement may reduce the amount of an institution’s interest-earning assets. During 2020, in response to the COVID-19 pandemic, the Federal Reserve reduced all reserve requirement ratios to zero. The Federal Reserve indicated that it may adjust reserve requirement ratios in the future if conditions warrant.
Branch Office Network
The Bank maintains branch offices in three states: Delaware, Pennsylvania and New Jersey. A federal savings association may open new branch offices in any state or relocate branch offices. Prior OCC approval is necessary unless the association is an “eligible” savings association and meets certain other conditions. The Bank currently qualifies as an eligible savings association. If prior approval is necessary, the OCC will consider the effect of the acquisition on a safe and sound banking system, the branch office's role in providing fair access to financial services by helping to meet the credit needs of the entire community, the association's compliance with laws and regulations, and the fair treatment of customers including efficiency and better service. If a federal savings association acquires branch offices through a merger with or through a branch purchase from another bank or savings association, the acquiring federal savings association must submit a Bank Merger Act application to the OCC, which requires a favorable decision on the acquisition of the branch offices. The Bank has grown its branch office network primarily through mergers with other institutions, rather than branch office purchases or de novo offices. A federal savings association also may open agency offices for certain purposes without prior OCC approval. The Bank does not have any agency offices and has no plans to open any such offices.
Consumer Protection Regulations
The Bank’s offerings of retail products and services to consumers are subject to a large number of statutes and regulations designed to protect the finances of consumers and to promote lending to various sectors of the economy and population. These laws include, but are not limited to the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Truth in Savings Act, the Electronic Funds Transfer Act, federal and theirstate prohibitions on unfair, deceptive, or abusive acts or practices, and regulations implementing regulations.each of these statutes. The CFPB has exclusive authority to examine the Bank for compliance with these laws. States may adopt more stringent consumer financial protection statutes that could apply to us as well. The CFPB is responsible for writing and revising the Federal regulations, but the OCC is responsible for ensuring compliance by Federal savings associations with less than $10 billion in consolidated assets, such as the Bank. State attorneys general also may file suit to enforce federal and state laws.
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Debit Card Interchange Fees
The Federal Reserve has issued rules under the Electronic Fund Transfer Act, as amended by a section of the Dodd-Frank Act, known as the Durbin Amendment, to limit interchange fees that an issuer with $10 billion or more in assets, such as the Bank, may receive or charge for an electronic debit card transaction. Under the rules, the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction is the sum of 21 cents per transaction and five basis points multiplied by the value of the transaction. In addition, the rules allow for an upward adjustment of no more than one cent to an issuer’s debit card interchange fee if the issuer develops and implements policies and procedures reasonably designed to achieve the fraud-prevention standards set out in the rule. The Bank became subject to these rules beginning July 1, 2020.
In October 2023, the Federal Reserve proposed changes to its rules implementing the Durbin Amendment that would decrease the maximum interchange fees that an issuer may receive for an electronic debit transaction to the sum of 14.4 cents and four basis points multiplied by the value of the transaction, and increase the fraud prevention adjustment to 1.3 cents.We are evaluating the impact of the proposal.
Privacy and Cybersecurity
Several Federalfederal statutes and regulations require savings associations (as well as banks and other financial institutions) to take several steps to protect nonpublic consumer financial information. The Bank has prepared a privacy policy, which it must disclose to consumers annually. In some cases, the Bank must obtain a consumer's consent before sharing information with an unaffiliated third party, and the Bank must allow a consumer to opt out of the Bank's sharing of information with its affiliates for marketing and certain other purposes. Additional conditions come into play in the Bank's information exchanges with credit reporting agencies. The Bank's privacy practices and the effectiveness of its systems to protect consumer privacy are one of the subjects covered in the OCC's periodic compliance examinations.
The Federalfederal banking agencies pay close attention to the cybersecurity practices of savings associations, banks, and their holding companies and affiliates. The interagency council of the agencies, the Federal Financial Institutions Examination Council, has issued several policy statements and other guidance for banks as new cybersecurity threats arise. FFIEC has recently focused on such matters as compromised customer credentials and business continuity planning. Examinations by the banking agencies now include review of an institution’s information technology and its ability to thwart cyber attacks.or mitigate cyber-attacks. Additionally, banking organizations are required to notify their primary federal regulator of significant computer security incidents within 36 hours of determining that such an incident has occurred.
Bank Secrecy Act and Anti-Money Laundering
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Bank Secrecy Act and anti-money laundering compliance has been a special focus of the OCC and the other Federalfederal banking agencies in recent years. Any non-compliance is likely to result in an enforcement action, often with substantial monetary penalties and reputation damage. A savings association or bank that is required to strengthen its compliance program often must put on hold any initiatives that require banking agency approval.
The Office of Foreign Assets Control (OFAC), an office within the U.S. Treasury Department, administers laws and Executive Orders that prohibit U.S. entities from engaging in transactions with certain prohibited parties. OFAC publishes lists of persons and organizations suspected of aiding, harboring or engaging in terrorist acts, known as Specially Designated Nationals and Blocked Persons. Generally, if a bank or savings association identifies a transaction, account or wire transfer relating to a person or entity on an OFAC list, it must freeze the account or block the transaction, file a suspicious activity report and notify the appropriate authorities.
Community Reinvestment Act
All savings associations and banks are subject to the Community Reinvestment Act (CRA), which requires each such institution to help meet the credit needs of low- to moderate-income communities and individuals within the institution’s assessment area. The CRA does not impose specific lending requirements, and it does not contemplate that a savings association or bank would take any action inconsistent with safety and soundness. The Federalfederal banking agencies evaluate the performance of each of their regulated institutions periodically. Evaluations that result in a conclusion of “Needs to Improve” or “Unsatisfactory”“Substantial Non-Compliance” may block or impede regulatory approvals for other actions by an institution.
The Bank's assessment areas include the entire state of Delaware as well as Montgomery, Chester and Delaware counties in Pennsylvania. The Bank received a rating of “Satisfactory”“Outstanding” in its most recent performance evaluation.
On October 24, 2023, the Federal Reserve, FDIC, and OCC issued a final rule revising their framework for evaluating banks’ records of community reinvestment under the CRA. Under the revised framework, banks with assets of at least $2 billion, such as the Bank, are considered large banks and their retail lending, retail services and products, community development financing, and community development services will be subject to periodic evaluation. Depending on a large bank’s geographic distribution of lending, the evaluation dated August 7, 2017.
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| For the year ended | |||
| (Dollars in thousands) | December 31, 2017 | ||
| Net income (GAAP) | $ | 50,244 | |
| Plus: Re-measurement of deferred tax asset and BOLI policy surrender | 22,452 | ||
| Provision for legal settlement (after tax) | 7,627 | ||
| Fraud loss (after tax) | 1,826 | ||
| WSFS Foundation contribution (after tax) | 963 | ||
| Corporate development expenses (after tax) | 563 | ||
| Early extinguishment of debt costs (after tax) | 446 | ||
| Less: Securities gains (after tax) | 1,280 | ||
| Core net income (non-GAAP) | $ | 82,841 | |
| Average assets | $ | 6,820,471 | |
| ROA (GAAP) | 0.74 | % | |
| Core ROA (non-GAAP) | 1.21 | % | |
ITEM 1A. RISK FACTORS
As a financial services organization, we are subject to a number of risks inherent in our transactions and present in the business decisions we make. Described below are the primary risks and uncertainties that if realized could have a material and adverse effect on our business, financial condition, results of operations, or cash flows, and our access to liquidity. The risks and uncertainties described below are not the only risks we face.
We have identified our major risk categories as: market risk, credit risk, capital and liquidity risk, compliance risk, operational risk, strategic risk, reputation risk and model risk. Market risk is the risk of loss due to changes in external market factors such as interest rates. Credit risk is the risk of loss that arises when an obligor fails to meet the terms of an obligation. We are exposed to both customer credit risk, from our loans, and institutional credit risk, principally from our various business partners and counterparties. LiquidityCapital and liquidity risk is the risk that financial condition or overall safety and soundness are adversely affected by an inability, or perceived inability, to meet obligations and support business growth. Compliance risk is the risk that we fail to adequately comply with applicable laws, rules and regulations. Operational risk is the risk of loss arising from inadequate or failed processes, people or systems, external events (i.e.,(such as natural disasters) or compliance, reputation or legal matters and includes those risks as they relate directly to the Company as well as to third parties with whom we contract or otherwise do business. Strategic risk is the risk from changes in the business environment, improper implementation of decisions or inadequate responsiveness to changes in the business environment. Reputation risk is the risk of loss that arises from negative publicity or perceptions regarding our business practices. Model risk refers to the possibility of unintended business outcomes arising from the design, implementation or use of models.
1. Market Risk
Difficult market conditions and unfavorable economic trends could adversely affect our industry and our business.
We are exposed to downturns in the Greater Philadelphia and Delaware mid-Atlanticregion, Mid-Atlantic and overall U.S. economy and housing markets. While certain economic conditions in the U.S. have shown signs of improvement in recent years, economic growth has been slow and uneven as consumers continue to recover from previously high unemployment rates, lower housing values, concerns about the level of U.S. government debt and fiscal actions that may be taken to address this, as well as economic and political conditions in the global markets. Unfavorable economic trends, sustained high unemployment, high costs of living, and declines in real estate values can cause a reduction in the availability of commercial credit and can negatively impact the credit performance of commercial and consumer loans, resulting in increased write-downs. These negative trends can cause economic pressure on consumers and businesses and diminish confidence in the financial markets, which may adversely affect our business, financial condition, results of operations and ability to access capital. A worsening of these conditions, such as a recession or economic slowdown, would likely exacerbate the adverse effects of these difficult market conditions on us and others in the financial services industry. In particular, we may face the following risks in connection with these events:
•An increase in the number of customers unable to repay their loans in accordance with the original terms, which could result in a higher level of loan and lease losses and provision for loan and lease losses;
•Decreases in customer deposits;
•Impaired ability to assess the creditworthiness of customers as the models and approaches we use to select, manage and underwrite our customers become less predictive of future performance;
•Impaired ability to estimate the losses inherent in our credit exposure as the process we use to make such estimates requires difficult, subjective and complex judgments based on forecasts of economic or market conditions that might impair the ability of our customers to repay their loans, and this estimating process becomes less accurate and thus less reliable as economic conditions worsen;
•Increases in foreclosures, delinquencies and customer bankruptcies, as well as more restricted access to commercial credit;
•Downward pressure on our stock price or an impaired ability to access the capital markets or otherwise obtain needed funding on attractive terms or at all;
•Changes in the regulatory environment, including regulations promulgated or to be promulgated under the Dodd-Frank Act,federal banking legislation or other new regulations, and changes in accounting standards, which could influence recognition of loan and lease losses and our allowance for credit losses, and could result in earlier recognition of loan losses;losses and decreases in capital; and
•Increased competition due to intensified consolidation of the financial services industry.industry and competition from non-banks.
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Changes in interest rates and other factors beyond our control could have an adverse impact on our earnings.
Over the past several years, our earnings have been, and continue to be, significantly impacted by substantial fluctuations in the interest rate environment. In response to the economic and financial effects of the COVID-19 pandemic, the Federal Reserve initially reduced interest rates through 2020 and 2021 and instituted quantitative easing measures as well as domestic and global capital market support programs. In 2022 and 2023, to curb rising inflation, the Federal Reserve increased the target Federal Funds rate−the interest rate that banks charge each other for overnight lending in order to help maintain the reserve requirements of the Federal Reserve−to a range between 5.25% and 5.50% as of December 2023 and enacted policies to achieve that target range. As the increases in the target Federal Funds rate resulted in increased costs of operating a financial institution, the costs of borrowing increased while the availability of credit and the favorable credit terms available under the Federal Reserve’s 2020 and 2021 policies generally decreased.
Our operating income and net income depend to a significant extent on our net interest margin, which is the difference between the interest yields we receive on loans, securities and other interest-earning assets and the interest rates we pay on interest-bearing deposits and other liabilities. Net interest margin is affected by changes in market interest rates, because different types of assets and liabilities may react differently, and at different times, to market interest rate changes. When interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a period, an increase in market rates of interest could reduce net interest income. Similarly, when interest-earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could reduce net interest income. These rates are highly sensitive to many factors beyond our control, including competition, general economic conditions and monetary and fiscal policies of various governmental regulatory agencies, including the Federal Reserve.Reserve and the target Federal Funds rate.
We seek to manage our risk from changes in market interest rates by adjusting the rates, maturity, repricing, and balances of our different types of interest-earning assets and interest-bearing liabilities, but these interest rate risk management techniques are not capable of eliminating such risks and they may not be as effective as we intend. AIn particular, rapid increaseincreases or decreasedecreases in interest rates could have anunusually adverse effecteffects on our net interest margin, including the impact of deposit betas, and results of operations.operations to the extent our interest rate risk management techniques are insufficient to mitigate these risks in a timely manner. The results of our interest rate sensitivity simulation models depend upon a number of assumptions which may prove to be inaccurate. There can be no assurance that we willWe may not be able to successfully manage our interest rate risk. In addition, increases in market interest rates and/or adverse changes in the local residential real estate market, the general economy or consumer confidence would likely have a significant adverse impact on our noninterest income, as a result of reduced demand for residential mortgage loans that we pre-sell.
Interest rate increases often result in larger payment requirements for our borrowers, which increasesincrease the potential for default and could result in a decrease in the demand for loans. At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from higher interest rates. In a declining interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates. In addition, in a low interest rate environment, loan customers often pursue long-term fixed rate credits, which could adversely affect our earnings and net interest margin if rates increase. Changes in interest rates also can affect the value of loans, securities and other assets. An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to an increase in nonperforming assets and a reduction of income recognized, which could have a materialan adverse effect on our results of operations and cash flows. Further, when we place a loan on nonaccrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income. At the same time, we continue to have a cost to fund the loan, which is reflected as interest expense, without any interest income to offset the associated funding expense. Thus, an increase in the amount of nonperforming assets would have an adverse impact on net interest income.
The market value of our investment securities portfolio may be impacted by the level of interest rates and the credit quality and strength of the underlying collateral.
Our net interest income varies as a result of changes in interest rates as well as changes in interest rates across the yield curve. When interest rates are low, borrowers have an incentive to refinance into mortgages with longer initial fixed rate periods and fixed rate mortgages, causing our securities to experience faster prepayments. Increases in prepayments on our portfolio will cause our premium amortization to accelerate, lowering the yield on such assets. If this happens, we could experience a decrease in interest income, which may negatively impact our results of operations and financial position.condition.
Future changes in interest rates may reduce the market value of our investment securities.securities, which could impact market confidence in our operations. A series of bank failures in the spring of 2023 was precipitated by losses in the value of securities portfolios due to rising interest rates and subsequent reduction in deposits. In addition, our securities portfolio is subject to risk as a result of our exposure to the credit quality and strength of the issuers of the securities or the collateral backing such securities. Any decrease in the value of the underlying collateral will likely decrease the overall value of our securities, affecting equity and possibly impacting earnings.
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Changes in or questions about the soundness of other financial institutions could adversely affect us.
Our ability to engage in routine funding transactions could be adversely affected by the actions of and changes in the commercial soundness of other financial institutions. Defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, have led to market-wide liquidity problems and could lead to losses or defaults by us or by other institutions.institutions and damage to our reputation by association. Such events could materially and adversely affect our business, results of operations.operations, or financial condition.
The financial services industry and our market area are highly competitive.
We compete with regional and national financial institutions and other non-bank companies, some of which may have larger client bases, operate with greater resources, and offer lending terms and services that we do not or cannot offer. Some of these competitors may have other advantages, such as the favorable tax treatments available to credit unions. The financial services industry continues to consolidate due to the benefits of operating at a larger scale and is undergoing rapid technological development that may require us to further develop and invest in our digital capabilities. This competition can affect the pricing for our products and services and if the Company cannot compete effectively, we may lose market share and income resulting in an adverse effect on our business, results of operations and financial condition.
2. Credit Risk
Significant increases of nonperforming assets, from the current level, or greater than anticipated costs to resolve these credits, willcan have an adverse effect on our earnings.
Our nonperforming assets, which consist of non-accrual loans, assets acquired through foreclosure, and troubled debt restructurings (TDRs)restructured loans adversely affect our net income in various ways. We do not record interest income on nonaccrual loans and assets acquired through foreclosure. We must establish an allowance for loancredit losses which reserves for losses inherent in the loan and lease portfolio that are both probable and reasonably estimable. From time to time, we also write down the value of properties in our portfolio of assets acquired through foreclosure to reflect changing market values. Additionally, there are legal fees associated with the resolution of problem assets as well as carrying costs such as taxes, insurance and maintenance related to assets acquired through foreclosure. The resolution of nonperforming assets requires the active involvement of management, which can distract management from daily operations and other income producing activities. Finally, if our estimate of the allowance for loancredit losses is inadequate, we will have to increase the allowance for loancredit losses accordingly, which will have an adverse effect on our earnings. Significant increases in the level of our nonperforming assets from the current level, or greater than anticipated costs to resolve these credits, will have an adverse effect on our earnings.
Our loan portfolio includes a substantial amount of commercial real estate,mortgage, commercial and industrial, and construction and land development and commercial and industrial loans. The credit risk related to these types of loans is greater than the risk related to residential loans.
Our commercial loan portfolio includes commercial and industrial loans, commercial real estatemortgage loans, and construction and land development loans. Commercial real estatemortgage loans generally carry larger loan balances and involve a greater degree of risk of nonpayment or late payment than home equity loans or residential mortgage loans. Any significant failure to pay or late payments by our customers would adversely affect our earnings. The increased credit risk associated with these types of loans is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the larger size of loan balances, and the potential that adverse changes in general economic and working conditions can adversely affect income-producing properties.properties, such as reduced office usage as a result of remote work policies. A portion of our commercial real estate,mortgage, construction and land development and commercial and industrial loan portfolios includes a balloon payment feature. A number of factors may affect a borrower’s ability to make or refinance a balloon payment, including the financial condition of the borrower, the prevailing local economic conditions and the prevailing interest rate environment.
Furthermore, commercial and industrial loans secured by owner-occupied properties are dependent upon the successful operation of the borrower’s business. If the operating company suffers difficulties, including reduction in sales volume and/or profitability, the borrower’s ability to repay the loan may be impaired. Loans secured by properties where repayment is dependent upon payment of rent by third party tenants or the sale of the property may be impacted by loss of tenants, lower lease rates needed to attract new tenants or the inability to sell a completed project in a timely fashion and at a profit.
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We are exposed to increased credit losses and credit related expenses in the event of a major natural disaster, public health crisis, other catastrophic event or significant climate change effects.
The occurrence of a major natural or environmental disaster, public health crisis or similar catastrophic event, as well as significant climate change effects such as rising sea levels or wildfires, especially in densely populated geographic areas, could increase our credit losses and credit related expenses. A natural disaster, public health crisis or catastrophic event or other significant climate change effect that either damages or destroys residential or multifamily real estate underlying mortgage loans or real estate owned properties, or negatively affects the ability of borrowers to continue to make payments on loans, could increase our serious delinquency rates and average loan loss severity in the affected areas. Such events could also cause downturns in economic and market conditions generally, which could have an adverse effect on our business and financial results. We may not have adequate insurance coverage for some of these natural, catastrophic, public health or climate change-related events.
Concentration of loans in our primary markets may increase our risk.
Our success depends primarily on the general economic conditions and housing markets in the state of Delaware, southeastern Pennsylvania, southern New Jersey and northern Virginia, as a large portion of our loans are made to customers in these markets. This makes us vulnerable to a downturn in the local economy and real estate markets in these areas. Declines in real estate valuations in these markets would lower the value of the collateral securing those loans, which could cause us to realize losses in the event of increased foreclosures. Local economic conditions have a significant impact on the ability of borrowers to repay loans as well as our ability to originate new loans. In addition, weakening in general economic conditions such as inflation, stagflation, increased costs-of-living, recession, unemployment, natural disasters or other factors beyond our control could negatively affect demand for loans, the performance of our borrowers and our financial results.
If our allowance for loancredit losses is not sufficient to cover actual loan and lease losses, our earnings will decrease.
We make various assumptions and judgments about the collectability of the loans and leases in our portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans.loans and leases. In determining the amount of the allowance for loancredit losses, we review our loansportfolio mix and oursegmentation, modeling methodology, historical loss experience, relevant available information from internal and delinquency experience,external sources relating to qualitative adjustment factors, prepayment speeds and we evaluatereasonable and supportable forecasts about future economic conditions. If our assumptions are incorrect or if there is a significant deterioration in economic conditions, our allowance for loancredit losses may not be sufficient to cover probable or incurredexpected credit losses in our loan and lease portfolio, resulting in unanticipated losses and additions to our allowance for loancredit losses. While we believe that our allowance for loan losses was adequate at December 31, 2017, there is no assurance that it will be sufficient to cover future loan losses, especially if there is a significant deterioration in economic conditions. Material additions to our allowance for credit losses could materially decrease our net income.
3. Capital and Liquidity Risk
Our inability to grow deposits in the future could materially adversely affect our liquidity and ability to grow our business.
A key part of our future growth strategy is to grow deposits. The market for deposits is highly competitive, with intense competition in attracting and retaining deposits. We compete on the basis of the rates we pay on deposits, features and benefits of our products, the quality of our customer service and the competitiveness of our digital banking capabilities. Our ability to originate and maintain deposits is also highly dependent on the strength of the Bank and the perceptions of customers and others of our business practices and our financial health. Adverse perceptions regarding our reputation could lead to difficulties in attracting and retaining deposits accounts. Negative public opinion could result from actual or alleged conduct in a number of areas, including lending practices, regulatory compliance, inadequate protection of customer information or sales and marketing activities, and from actions taken by regulators or others in response to such conduct.
The demand for the deposit products we offer may also be reduced due to a variety of factors, such as demographic patterns, changes in customer preferences, reductions in consumers’ disposable income, regulatory actions that decrease customer access to particular products or the availability of competing products. Competition from other financial services firms and others that use deposit funding products may affect deposit renewal rates, costs or availability. Changes we make to the rates offered on our deposit products may affect our profitability and liquidity.
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The FDIA prohibits an insured bank from accepting brokered deposits or offering interest rates on any deposits significantly higher than the prevailing rate in the bank’s normal market area or nationally (depending upon where the deposits are solicited), unless it is “well capitalized,“well-capitalized,” or it is “adequately capitalized” and receives a waiver from the FDIC. A bank that is “adequately capitalized” and accepts brokered deposits under a waiver from the FDIC may not pay an interest rate on any deposit in excess of 75 basis points over certain prevailing market rates. There are no such restrictions under the FDIA on a bank that is “well capitalized”“well-capitalized” and at December 31, 2017,2023, the Bank met or exceeded all applicable requirements to be deemed “well capitalized”“well-capitalized” for purposes of the FDIA. However, there can be no assurance that the Bank willmay not continue to meet thosethese requirements. Limitations on the Bank’s ability to accept brokered deposits for any reason (including regulatory limitations on the amount of brokered deposits in total or as a percentage of total assets) for any reason in the future could materially adversely impact our funding costs and liquidity. Any limitation on the interest rates the Bank can pay on deposits could competitively disadvantage us in attracting and retaining deposits and have a materialan adverse effect on our business.
We could experience an unexpected inability to obtain needed liquidity.
Liquidity is essential to our business, as we use cash to fund loans and investments, other interest-earning assets and deposit withdrawals that occur in the ordinary course of our business. We also are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. Additionally, the operations of our Cash Connect® segment depends on us having access to large amounts of cash.
Our principal sources of liquidity include customer deposits, the Bank Term Funding Program FHLB borrowings, brokered certificates of deposit, sales of loans, repayments to the Bank from borrowers and paydowns and sales of investment securities. Our ability to obtain funds from these sources could become limited, or our costs to obtain such funds could increase, due to a variety of factors, including changes in our financial performance, or, the imposition of regulatory restrictions on us, or adverse developments in the capital markets, including weakening economic conditions or negative views and expectations about the prospects for the financial services industry as a whole. If our ability to obtain necessary funding is limited or the costs of such funding increase, our ability to meet our obligations or grow our banking business would be adversely affected and our financial condition and results of operations could be harmed.
Restrictions on our subsidiaries’ ability to pay dividends to us could negatively affect our liquidity and ability to pay dividends.
We are a separate and distinct legal entity from our subsidiaries, including the Bank. We receive substantially all of our revenue from dividends from our subsidiaries. These dividends are the principal source of funds to pay dividends on our common stock, $0.01 par value per share (Common Stock) and interest and principal on our debt. Various federal and/or state laws and regulations limit the amount of dividends that ourthe Bank and certain of our nonbank subsidiaries may pay us.us, and the OCC may block dividend payments by the Bank. Also, our right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. Limitations on our subsidiaries to pay dividends to us could have a materialan adverse effect on our liquidity and on our ability to pay dividends on Common Stock.our common stock. Additionally, if our subsidiaries’ earnings are not sufficient to make dividend payments to us while maintaining adequate capital levels; we may not be able to make dividend payments to our common stockholders.
4. Compliance Risk
We are subject to extensive regulation which could have an adverse effect on our operations.
We are subject to extensive federal and state regulation, supervision and examination governing almost all aspects of our operations. The laws and regulations governing our business are intended primarily to protect depositors, our customers, the public, the FDIC’s Deposit Insurance Fund, and the banking system as a whole, and not our stockholders or holders of our debt. Since July 21, 2011, theThe Federal Reserve has beenis the primary federal regulator for the Company, and the OCC has beenis the Bank’s primary regulator.regulator and the CFPB regulates the Bank’s compliance with consumer financial protection laws. The banking laws, regulations and policies applicable to us govern a variety of matters, including certain debt obligations, changes in control, maintenance of adequate capital, and general business operations, including permissible types, amounts and terms of loans and investments, the amount of reserves held against deposits, restrictions on dividends, establishment of new offices, and the maximum interest rate that may be charged by law.law and treatment of customers. In addition, federal and state banking regulators have broad authority to supervise our banking business, including the authority to prohibit activities that represent unsafe or unsound banking practices or constitute violations of statute, rule, regulation or administrative order. Failure to appropriately comply with any such laws, regulations or regulatory policies could result in sanctions by regulatory agencies, civil money penalties or damage to our reputation, all of which could adversely affect our business, results of operations, financial condition or prospects. A government shutdown or understaffing at the Federal Reserve, the OCC and/or the CFPB could result in unforeseen delays in our ability to receive approval for certain transactions or deal with other regulatory issues. Such a delay could adversely affect our business, results of operations, or financial condition.
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We are subject to changes in federal and state banking statutes, regulations and governmental policies, and their interpretation or implementation. Certain of our subsidiaries are registered with the SEC as investment advisers and, as such, are subject to regulation, supervision and enforcement by the SEC under the Investment Advisers Act. Regulations affecting banks and other financial institutions in particular are undergoing continuous review and frequently change and the ultimate effect of such changes cannot be predicted. Regulations and laws may be modified at any time, and new legislation may be enacted that will affect us. Any changes in any federal and state law, as well as regulations and governmental policies could subject us to additional compliance costs and otherwise affect us in substantial and unpredictable ways, including ways that may adversely affect our business, results of operations, financial condition or prospects.
We face a risk of noncompliance and enforcement action withunder the Bank Secrecy Act and other anti-money laundering statutes and regulations.
The Bank Secrecy Act, the USA PATRIOT Act of 2001, and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports when appropriate. TheyThese laws and regulations also mandateprovide that we are ultimately responsible to ensure our third party vendors adhere to the same laws and regulations. In addition to other bank regulatory agencies, the Federal Financial Crimes Enforcement Network of the Department of the TreasuryFinCEN is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the state and federal banking regulators, as well as the U.S. Department of Justice, CFPB, Drug Enforcement Administration, and Internal Revenue Service.
We are also subject to increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control of the Department of the TreasuryOFAC regarding, among other things, the prohibition ofon transacting business with, and the need to freeze assets of, certain persons and organizations identified as a threat to the national security, foreign policy or economy of the U.S.United States. If our policies, procedures and systems or those of our third party vendors are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including any acquisition plans. Any of these results could have a materialan adverse effect on our business, financial condition, results of operations and future prospects.
We are subject to numerous laws designed to protect consumers and promote community investment, including the Community Reinvestment Act and fair lending laws and failurethe Community Reinvestment Act. Failure to comply with these laws or perform satisfactorily could lead to a wide variety of sanctions.
The Community Reinvestment Act, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose community investment and nondiscriminatory lending requirements on financial institutions. The CFPB, the DepartmentAdverse findings in an evaluation of Justice and other federal agencies are responsible for enforcing these laws and regulations. A successful regulatory challenge to an institution’s performance under the Community Reinvestment Act orour fair lending laws and regulationscompliance could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Private parties may also have the ability to challenge an institution’sour performance under fair lending laws in private class action litigation. Such actions could have a materialan adverse effect on our business, financial condition, results of operations and future prospects.
The Community Reinvestment Act imposes community investment obligations on insured depository institutions. If the Bank does not perform satisfactorily under the Community Reinvestment Act, as determined by the OCC, the Company and the Bank could be restricted in their ability to expand through mergers, acquisitions, and/or the establishment of branches.
The fiscal, monetary and regulatory policies of the federal government and its agencies could have a materialan adverse effect on our results of operations.
The Federal Reserve regulates the supply of money and credit in the U.S. Its policies determine in large part the cost of funds for lending and investing and the return earned on those loans and investments, both of which affect our net interest margin. Its policies can also adversely affect borrowers, potentially increasing the risk that they may fail to repay their loans. Congress controls fiscal policy through decisions on taxation and expenditures. Depending on industries and markets involved, changes to tax law and increased or reduced public expenditures could affect us directly or the business operations of our customers. Changes in Federal Reserve policies, fiscal policy, and our regulatory environment generally are beyond our control, and we are unable to predict what changes may occur or the manner in which any future changes may affect our business, financial condition and results of operations.
If we fail to comply with legal standards, we could incur liability to our clients or lose clients, which could negatively affect our earnings.
Managing or servicing assets with reasonable prudence in accordance with the terms of governing documents and applicable laws is important to client satisfaction, which in turn is important to the earnings and growth of our investment businesses. Failure to comply with these standards, adequately manage these risks or manage the differing interests often involved in the exercise of fiduciary responsibilities could also result in liability.
The CFPB has reshaped consumer financial regulations through rulemaking and enforcement of prohibitions against unfair, deceptive or abusive business acts or practices. Compliance with any such change may impact the manner in which WSFS and WSFS Bank offer consumer financial products or services, and our results of operations.
As an insured depository institution with $10 billion or more in total assets, WSFS Bank is subject to supervision, examination, and enforcement with respect to consumer protection laws by the CFPB. The CFPB has broad authority to administer and carry out provisions of the Dodd-Frank Act with respect to the Company's consumer financial products and services and may impose requirements more onerous than those of other bank regulatory agencies. For example, the Dodd-Frank Act authorizes the CFPB to write rules or bring enforcement actions to prohibit acts or practices that are unfair, deceptive or abusive in connection with consumer financial products or services, and the concept of an "abusive" act or practice did not previously exist in federal banking law.
The CFPB has initiated enforcement actions against a variety of bank and non-bank market participants with respect to a number of consumer financial products and services, which has resulted in those participants expending significant time and money, including the costs of penalties, to respond to the actions pursued by the CFPB. As part of its rulemaking and enforcement activities, the CFPB has adopted interpretations of consumer protection laws that have required many market participants to change their practices and expend substantial resources to do so. The CFPB has used its authorities to penalize market participants and/or change market practices in several areas of the financial services industry, including automobile loan servicing, credit card account management, debt collection, small business lending, the operation of ATMs, mortgage origination, depository account management, the charging of late fees or other credit card fees, the charging of overdraft fees and insufficient funds fees on deposit accounts, and consumer reporting, among others.
There continues to be uncertainty as to how CFPB's strategies and priorities will impact the Company's business and operations. Any changes by the CFPB in regulatory expectations, interpretations or practices could increase the risk of additional enforcement actions, fines and penalties, which could have an adverse impact on our business, results of operations, and financial condition.
5. Operational Risk
Our operations depend upon the use of goodwill and/computer programs, algorithms, and other analytical tools. If such technology is ineffective at its intended purposes or intangible assetsincludes errors in computer code, unintended bias, bad data, misuse of data, or fraud, it may adversely affect our operations. Additionally, as societal norms, legal requirements, businesses and markets evolve, our technology may not accurately reflect this evolution. There may also be technology-related issues that exist, or that develop in the future, that we have not anticipated, identified or mitigated, including when processes are changed or new products and services are introduced. In particular, the implementations of new technologies and digital solutions may cause business disruptions that affect our ability to maintain relationships with clients, customers, depositor and employees. If our risk management framework does not effectively identify and control such risks, we could require charges to earnings, whichsuffer unexpected losses or be adversely affected, and that could negatively impacthave an adverse effect on our business, results of operations.operations and financial condition.
Our results of operations and financial condition could be materially adversely affected if our Cash Connect® division’s established segment’s policies, procedures and controls are inadequate to prevent a misappropriation of funds, or if a misappropriation of funds is not insured or not fully covered through insurance.
The profitability of our Cash Connect® segment depends to a large degree on its ability to accurately and efficiently distribute, track, and settle large amounts of cash to its customers’ ATMs which, in turn, depends on the successful implementation and monitoring of a comprehensive seriessystem of financial and operational controls that are designed to help prevent, detect, and recover any potential loss of funds. These controls require the implementation and maintenance of complex proprietary software, the ability to track and monitor an extensive network of armored car companies, and the ability to settle large amounts of electronic funds transfers (EFT) from various ATM networks. There is a risk that those associated with armored car companies, ATM networks and processors, ATM operators, or other parties may misappropriate funds belonging to Cash Connect®. Cash Connect® has experienced such occurrences in the past. If our Cash Connect® division’s established policies, procedures and controls are inadequate, or not properly executed to prevent or detect a misappropriation of funds, or if a misappropriation of funds is not insured or not fully covered through any insurance maintained by us, our business, results of operations or financial condition could be materiallyadversely affected.
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System failure or cybersecurity breaches of our deferred tax assetsnetwork security could adversely affect oursubject us to increased operating results and regulatory capital ratios.
Our risk management processes and procedures may not be effectiveoperations are dependent upon our ability to protect our computer equipment against damage from fire, power loss, telecommunications failure or a similar catastrophic event. Any damage or failure that causes an interruption in mitigating our risks
Although we devote significant resources and Board oversight and management focus to ensuring the integrity of our systems through information security and business continuity programs, our computer systems, software and networks, and those of our third-party service providers, are vulnerable to external or internal security breaches, acts of vandalism, computer viruses or malware, misplaced or lost data, denial-of-service attacks, programming or human errors, or other similar events. We also experience large volumes of phishing and other forms of social engineering attempted for the purpose of perpetrating fraud against us, our Associates, or our Customers. In addition to cyber-attacks or other security breaches involving the theft of sensitive and confidential information, hackers recently have engaged in attacks against large financial institutions that are designed to disrupt key business services, such as consumer-facing web sites. We and our third-party vendors or other service providers have experienced all of these events and expect to continue to experience them in the future. Any of these occurrences could have an adverse effect on our business, financial condition and results of operations. Although the impact to date from these events has not had an adverse effect on us, we cannot be sure this will be the case in the future. We are not able to anticipate or implement effective preventive measures against all security breaches of these types, especially because attacks are increasingly sophisticated, change frequently, often not recognized until launched, and can originate from a wide variety of sources. Our early detection and response mechanisms could fail to detect, mitigate or remediate these risks in a timely manner. Despite our implementation of protective measures and endeavoring to modify them as circumstances warrant, our computer systems, software and networks may be vulnerable to human error, equipment failure, natural disasters, power loss, unauthorized access, supply chain attacks, distributed denial of service attacks, computer viruses and other malicious code, and other events that could result in significant liability and damage to our reputation, and have an ongoing impact on the security and stability of our operations. In addition, although we maintain insurance coverage that may, subject to terms and conditions, cover certain aspects of cyber and information security risks, such insurance coverage may be insufficient to cover all losses, such as litigation costs or financial losses that exceed our policy limits or are not covered under any of our current insurance policies.
Information security risks for financial institutions like us have increased recently in part because of new technologies, the use of the internet, cloud, and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others. Additionally, like many large enterprises, we have introduced more remote work arrangements for our Associates. The increase in remote work arrangements over the past few years has introduced potential new vulnerabilities to cyber threats. We also face increased cybersecurity risk as we deploy additional technologies and digital solutions, including our website and personalized messaging app. We may also face increased cybersecurity risk for a period of time after acquisitions as we transition the acquired entity’s historical systems and networks to our standards. Moreover, any cyber-attack or other security breach may persist for an extended period of time without detection. We endeavor to design and implement policies and procedures to identify such cyber-attacks or breaches as quickly as possible; however, we expect that any investigation of a cyber-attack or breach would take substantial amounts of time, and that there may be extensive delays before we obtain full and reliable information. During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, all of which would further increase the costs and consequences of such an attack or breach.
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The SEC recently enacted rules, effective as of December 18, 2023, requiring public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on annual basis material information regarding their cybersecurity risk management, strategy, and governance. If we fail to comply with these new requirements we could incur regulatory fines in addition to other adverse consequences to our reputation, business, financial condition and results of operations.
We may also be subject to liability under various data protection laws. In the normal course of business, we collect, process, and retain sensitive and confidential information regarding our Customers and Associates, including personal data. As a result, we are subject to numerous laws and regulations designed to protect this information, such as U.S. federal, state and international laws governing the protection of personally identifiable information. These laws and regulations are increasing in complexity and number. If any person, including any of our associates, negligently disregards or intentionally breaches our established controls with respect to client or employee data, or otherwise mismanages or misappropriates such data, we could be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution. In addition, unauthorized disclosure of sensitive or confidential client or employee data, whether through system failure, employee negligence, fraud or misappropriation, could damage our reputation and cause us to lose clients and related revenue. Potential liability in the event of a security breach of client data could be significant. Depending on the circumstances giving rise to the breach, this liability may not be subject to a contractual limit or an exclusion of consequential or indirect damages.
We rely on third parties for certain important functions. Any failures by those vendors and service providers could disrupt our business operations or expose us to loss of confidential information or intellectual property.
Our use of third-party service providers exposes us to the risk of failures in their operations and their risk and control environments. We outsource certain key functions to external parties, including some that are critical to financial condition.reporting (including our use of hedge accounting), valuations, our mortgage-related investment activity, loan underwriting, and loan servicing. We may enter into other key outsourcing relationships in the future and continue to expand our existing reliance on third-party service providers. If one or more of these key external parties were not able to perform their functions for a period of time, perform them at an acceptable service level or handle increased volumes, or if one of them experiences a disruption in its own business or technology from any cause, our business operations could be constrained, disrupted, or otherwise negatively affected. Our use of third-party service providers also exposes us to the risk of losing intellectual property or confidential information and to other harm, including to our reputation. Our ability to monitor the activities or performance of third-party service providers may be constrained, which may make it difficult for us to assess and manage the risks associated with these relationships.
Our business may be adversely impacted by litigation and regulatory enforcement, which could expose us to significant liabilities and/or damage our reputation.
From time to time, we have and may become party to various litigation claims and legal proceedings. Our businesses involve the risk that clients or others may sue us, claiming that we have failed to perform under a contract or otherwise failed to carry out a duty perceived to be owed to them. Our trust, custody and investment management businesses are particularly subject to this risk. This risk may be heightened during periods when credit, equity or other financial markets are deteriorating in value or are particularly volatile, or when clients or investors are experiencing losses. In addition, as a publicly-heldpublicly-traded company, we are subject to the risk of claims under the federal securities laws, and volatility in our stock price and those of other financial institutions increases this risk. Actions brought against us may result in injunctions, settlements, damages, fines or penalties, which could have a materialan adverse effect on our business, financial condition or results of operations or require changes to our business. Even if we defend ourselves successfully, the cost of litigation may be substantial, and public reports regarding claims made against us may cause damage to our reputation among existing and prospective clients or negatively impact the confidence of counterparties, rating agencies and stockholders, consequently negatively affecting our earnings.
In the ordinary course of our business, we also are subject to various regulatory, governmental and enforcement inquiries, investigations and subpoenas. These may be directed generally to participants in the businesses in which we are involved or may be specifically directed at us. In enforcement matters, claims for disgorgement, the imposition of civil and criminal penalties and the imposition of other remedial sanctions are possible.
WSFS Bank provides indenture trustee and loan agency services, including administrative and collateral agent fee-based services for first lien, second lien, debtor-in-possession and exit facilities, and WSFS Bank professionals work with ad hoc committees, unsecured creditors’ committees, borrowers and other professionals involved in restructuring and bankruptcy. In this capacity, in the normal course of business, WSFS Bank may be named as a party in litigation. Although WSFS Bank has no credit or direct exposure in conjunction with this administrative role, the fact that the Bank’s name appears in the case caption may create the erroneous impression that WSFS Bank may have financial exposure in such a lawsuit.
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Errors, breakdowns in controls or other mistakes in the provision of services to clients or in carrying out transactions for our own account can subject us to liability, result in losses or negatively affect our earnings in other ways.
In our asset servicing, investment management, fiduciary administration and other business activities, we effect or process transactions for clients and for us that involve very large amounts of money. Failure to properly manage or mitigate operational risks can have adverse consequences, and increased volatility in the financial markets may increase the magnitude of resulting losses. Given the high volume of transactions we process, errors that affect earnings may be repeated or compounded before they are discovered and corrected.
6. Strategic Risk
Our business strategy includes significant investment in growth plans, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth and investment in infrastructure effectively.
We are pursuing a significant growth strategy for our business. Our growth initiatives have required us to recruit experienced personnel to assist in such initiatives. The failure to retain such personnel would place significant limitations on our ability to successfully execute our growth strategy. In addition, as we expand our lending beyond our current market areas, we could incur additional risk related to those new market areas. We may not be able to expand our market presence in our existing market areas or successfully enter new markets.
A weak economy, low demand and competition for credit may impact our ability to successfully execute our growth plan and adversely affect our business, financial condition, results of operations, reputation and growth prospects. While we believe we have the executive management resources and internal systems in place to successfully manage our future growth, there can be no assurance growth opportunities will be available or that we will successfully manage our growth.
We regularly evaluate potential acquisitions and expansion opportunities. If appropriate opportunities present themselves, we expect to engage in selected acquisitions or other business growth initiatives or undertakings. We may not successfully identify appropriate opportunities, may not be able to negotiate or finance such activities and such activities, if undertaken, may not be successful.
We have in the past and may in the future pursue acquisitions, which may disrupt our business and adversely affect our operating results of operations, and we may fail to realize all of the anticipated benefits of any such acquisition.
We have historically pursued acquisitions, and may seek acquisitions in the future. We may not be able to successfully identify suitable candidates, negotiate appropriate acquisition terms, complete proposed acquisitions, successfully integrate acquired businesses into the existing operations, or expand into new markets. Once integrated, acquired operations may not achieve levels of revenues, profitability, or productivity comparable with those achieved by our existing operations, or otherwise perform as expected.
Acquisitions, such as our acquisition of Bryn Mawr Trust in January 2022, involve numerous risks, including difficulties in the integration of the operations, technologies, services and products of the acquired companies, and the diversion of management’s attention from other business concerns. We may not properly ascertain all such risks prior to an acquisition or prior to such a risk impacting us while integrating an acquired company. As a result, difficulties encountered with acquisitions could have a materialan adverse effect on our business, financial condition and results of operations.
Furthermore, we must generally receive federal regulatory approval before we can acquire a bankanother insured depository institution or bankits holding company. In determining whether to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on competition, the financial condition of the acquiring institution and the target, the future prospects of the acquiring institution, including current and projected capital levels, the competence, experience, and integrity of management, compliance with laws and regulations, the convenience and needs of the communities to be served, including the acquiring institution’s record of compliance under the Community Reinvestment Act, and the effectiveness of the acquiring institution in combating money laundering activities.laundering. In addition, we cannot be certain when or if, or on what terms and conditions, any required regulatory approvals will be granted. Consequently, we may not obtain regulatory approval for a proposed acquisition on acceptable terms or at all, in which case we would not be able to complete the acquisition despite the time and expenses invested in pursuing it.
Key employeesassociates may be difficult to attract and retain.
Our Associates are our most important resource and, in many areas of the financial services industry, competition for qualified personnel is intense. We invest significantly in recruitment, training, development and talent management as our Associates are the cornerstone of our model. If we were unable to continue to attract and retain qualified key employeesassociates to support the various functions of our businesses, our performance, including our competitive position, could be materially adversely affected. As economic conditions improve, we may face increased difficulty in retaining top performers and critical skilled employees.associates. If key personnel were to leave us and equally knowledgeable or skilled personnel are unavailable within the CompanyWSFS or could not be sourced in the market, our ability to manage our business may be hindered or impaired.
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7. Reputation Risk
Damage to our reputation could significantly harm our businesses.
Our ability to attract and retain customers, clients, investors, and highly-skilled management and employeesAssociates is affected by our reputation. Public perceptionreputation and the reputation of the financial services industry has declined as a whole. Adverse developments may result in additional scrutiny or new litigation against us and potential sources of the recent economic downturnreputational damage are discussed throughout these risk factors. Although we monitor developments for areas of potential risk to our reputation and related government response. We face increased publicbrand, negative perceptions or publicity could adversely impact our business, financial condition and regulatory scrutiny resulting from the financial crisis and economic downturn. results of operations.
Significant harm to our reputation can also arise from other sources, including economic changes, regulatory scrutiny, employee misconduct, actual or perceived unethical behavior, litigation or regulatory outcomes, failing to deliver minimum or required standards of service and quality, compliance failures, disclosure of confidential information, significant or numerous failures, interruptions or breaches of our information systems, and the activities of our clients, customers and counterparties, including vendors. Actions by
In particular, the success of our Wealth Management segment is highly dependent on reputation. Our Wealth Management segment derives the majority of its revenue from noninterest income which consists of trust, investment and other servicing fees, and our ability to attract trust and wealth management clients is highly dependent upon external perceptions of this segment’s level of service, trustworthiness, business practices and financial services industry generallycondition. Negative perceptions or by certain members or individuals inpublicity regarding these matters could damage the industry may have a significant adverse effect ondivision’s and our reputation. reputation among existing customers and corporate clients, which could make it difficult for the Wealth Management segment to attract new clients and maintain existing ones.
We could also suffer significant harm to our reputation if we fail to properly identify and manage potential conflicts of interest. Management of potential conflicts of interests has become increasingly complex as we expand our business activities through more numerous transactions, obligations and interests with and among our clients. The actual or perceived failure to adequately address conflicts of interest could affect the willingness of clients to deal with us, which could adversely affect our businesses.businesses, financial condition and results of operations
8. Model Risk
The quantitative models we use to manage certain accounting and risk management functions may not be effective, which may cause material adverse effects on our results of operations and financial condition.
We use quantitative models to help manage certain aspects of our business and to assist with certain business decisions, including estimating probable loan losses, measuring the fair value of financial instruments when reliable market prices are unavailable and estimating the effects of changing interest rates and other market measures on our financial condition and results of operations. Our modeling methodologies rely on many assumptions, historical analyses and correlations. These assumptions may be incorrect, particularly in times of market distress, and the historical correlations on which we rely may no longer be relevant. Additionally, as businesses and markets evolve, our measurements may not accurately reflect this evolution. Even if the underlying assumptions and historical correlations used in our models are adequate, our models may be deficient due to errors in computer code, bad data, misuse of data, fraud or the use of a model for a purpose outside the scope of the model’s design.
As a result, our models may not capture or fully express the risks we face, may suggest that we have sufficient capitalization when we do not, or may lead us to misjudge the business and economic environment in which we will operate. If our models fail to produce reliable results on an ongoing basis, we may not make appropriate risk management or other business or financial decisions. Furthermore, strategies that we employ to manage and govern the risks associated with our use of models may not be effective or fully reliable, and as a result, we may realize losses or other lapses.
Banking regulators continue to focus on the models used by banks and bank holding companies in their businesses. The failure or inadequacy of a model may result in increased regulatory scrutiny on us or may result in an enforcement action or proceeding against us by one of our regulators.
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9. General Risk
Impairment of goodwill and/or intangible assets could require charges to earnings, which could negatively impact our results of operations.
Goodwill and other intangible assets arise when a business is purchased for an amount greater than the net fair value of its identifiable assets. We have recognized goodwill as an asset on the balance sheet in connection with several recent acquisitions. We evaluate goodwill and intangibles for impairment at least annually. Although we have determined that goodwill and other intangible assets were not impaired during 2023, a significant and sustained decline in our stock price and market capitalization, a significant decline in our expected future cash flows, a significant adverse change in the business climate, slower growth rates or other factors could result in impairment of goodwill or other intangible assets. Any future write-down of the goodwill or other intangible assets could result in a material charge to earnings.
Changes in accounting standards or changes in how the accounting standards are interpreted or applied could adversely impact the Company’s financial statements.
From time to time, the Financial Accounting Standards Board (FASB) or the SEC may change the financial accounting and reporting standards that govern the preparation of the Company’s financial statements. In addition, the FASB, SEC, banking regulators and the Company’s independent registered public accounting firm may also amend or even reverse their previous interpretations or positions on how various standards should be applied. These changes may be difficult to predict and could impact how we prepare and report the Company’s financial statements. In some cases, the Company could be required to apply a new or revised standard retroactively, potentially resulting in the Company restating prior period’s financial statements.
Changes in the value of our deferred tax assets could adversely affect our results of operations and regulatory capital ratios.
Our deferred tax assets are subject to an evaluation of whether it is more likely than not that they will be realized for financial statement purposes. In making this determination, we consider all positive and negative evidence available, including the impact of recent operating results, as well as potential carryback of tax to prior years’ taxable income, changes in statutory tax rates, reversals of existing taxable temporary differences, tax planning strategies and projected earnings within the statutory tax loss carryover period. If we conclude in the future that a significant portion of our deferred tax assets are not more likely than not to be realized, we will record a valuation allowance, which could adversely affect our financial position, results of operations and regulatory capital ratios.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
The Company maintains an Information Security Program to safeguard all WSFS information assets against unauthorized use, disclosure, modification, damage, or loss. Information Security, in conjunction with Operations, Technology, and Executive Leadership, work together to provide and maintain security processes and procedures pursuant to which the Company will:
•Ensure the security and confidentiality of customer and bank records covered by law.
•Protect against any anticipated threats or hazards to the security of such records.
•Protect against the unauthorized access or use of such records or information in ways that could result in substantial harm to the Company, our Customers, and Associates.
•Establish guidelines and practices for ensuring Information Technology compliance to external and regulatory requirements.
•Ensure proper and effective Business Continuity and Disaster Recovery programs are implemented and tested.
The Company's Chief Information Security Officer (CISO) is designated as the program coordinator responsible for coordinating and overseeing the program.
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Our Information Security Department performs annual risk assessments to evaluate the effectiveness of the controls as set forth in the Information Security Program to support the requirements under Gramm-Leach Bliley Act (GLBA), and Federal Financial Institutions Examination Council (FFIEC) Guidance on Securing Customer Information. The focus areas include:
•technology systems used for information that is collected, processed and stored;
•assessing internal and external cybersecurity threats and vulnerabilities;
•performing regular penetration and controls testing;
•evaluation and assessment of impact should the information or systems become compromised;
•evaluation for the effectiveness of the governance structure for Information security risk management.
Internal and external Penetration Testing is performed annually. Tests are conducted or reviewed by independent third parties or qualified Associates independent of those that develop or maintain the security program. Testing is performed annually by third party auditors contracted through the Company's Risk Management Department. Management reviews test results promptly and ensures that appropriate steps are taken to address adverse test results.Remediation efforts are organized and made available to the Risk committee of the Board of Directors (Risk Committee)as well as for review by third party auditors and examiners.
The Company has implemented a Cybersecurity Incident Response Plan (CSIRP), which is integrated into its Master Business Continuity Plan, to identify, assess and respond to cybersecurity threats. The CSIRP provides a well-defined, consistent, and organized approach to information security related incidents and is supplemented by playbooks designed to respond to specific attacks. The CSIRP requires approval by the Executive Leadership Team under the Cybersecurity Committee and is governed by the Continuity of Operations Policy that is approved annually by the Board of Directors.
The Company is not aware of any cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company's business strategy, results of operations or financial condition.
Governance
Our Information Security Policy and Information Security Program are the standards used to protect the Bank’s confidential information. The Information Security Policy is annually reviewed, updated, and approved by the Risk Committee and the Board of Directors.
The CISO reports security related incidents, findings, changes, etc. to the Risk Committee, on an annual basis or quarterly as needed. This information is communicated through the Company's Risk Department. The CISO has more than 25 years of experience in the information security field, including 20 years at WSFS, and holds several professional certifications and memberships in the Information Security, IT, and financial services fields.
The Board and Senior Management are charged with the ultimate responsibility for understanding the company’s risk environment. A Management Risk Committee, chaired by our Chief Risk Officer (CRO), is responsible to oversee the Company’s risk management program on an enterprise-wide basis.
The Company has dedicated incident management and response teams in place to facilitate response protocols and execute designed strategies necessary to mitigate business risk and support recovery initiatives. The Incident Management Team structure is based on the Incident Command System and follows a flexible, adaptable approach with response team membership designed to support expanding response team needs. An Incident Response Task Force (IRTF) is in place to oversees the assessment of cybersecurity incidents and operational response needs. The CISO and the Head of Regulatory Affairs/Relations co-lead IRTF response.
The CSIRP includes a framework to timely report cybersecurity incidents to our Executive Leadership Team. The severity of an incident is based on perceived impacts that include the severity of damage, compromise, or loss, and probability of further exploitation or escalation. The Chief Information Officer (CIO) and CRO are notified of all incidents that are determined to be significant. based on perceived impacts of the incident or event. The Chief Executive Officer and Board of Directors are notified of these incidents by the CIO and CRO as necessary.
For further information on risks to the Company from cybersecurity threats, see "System failure or cybersecurity breaches of our network security could subject us to increased operating costs as well as litigation and other potential losses" under Item 1A. Risk Factors."
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ITEM 2. PROPERTIES
Our headquarters are located inat 500 Delaware Ave., Wilmington, Delaware where we lease 78,432 square feet of space. At December 31, 2017,2023, we conducted our business through 58 full-service branches88 banking offices located in Delaware, southeastern Pennsylvania and southeastern Pennsylvania. Eight of our branches were owned while all other facilities were leased.southern New Jersey.
In addition to our branch network, we own or lease office space for five26 other loan production offices and facilities located in Delaware, southeastern Pennsylvania, southern New Jersey, Florida, Nevada and Virginia and we lease thirteen other facilities in Delaware, southeastern Pennsylvania and Nevada to house operational activities, Cash Connect® and our Wealth Management. Management businesses. We owned 37 of our banking offices and other facilities while all other locations were leased.
At December 31, 2017,2023, our premises and equipment had a net book value of $48.0$104.5 million. All of these properties are generally in good condition and are appropriate for their intended use.
While these facilities are adequate to meet our current needs, available space is limited and additional facilities may be required to support future expansion.
For additional detail regarding our properties and equipment, see Note 8 to the Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
For information regarding legal proceedings, see Note 2324 to the Consolidated Financial Statements.
Item 103 of Regulation S-K requires disclosure of certain environmental matters when a governmental authority is a party to the proceedings and the proceedings involve potential monetary sanctions unless we reasonably believe the monetary sanctions will not equal or exceed a threshold which we determine is reasonably designed to result in disclosure of any such proceeding that is material to our business or financial condition. We have determined such disclosure threshold to be $1 million.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for Registrant’s Common Equity and Related Stockholder Matters
Our Common Stockcommon stock is traded on the Nasdaq Global Select Market under the symbol “WSFS.” At February 23, 2018,26, 2024, we had 1,075 3,404registered common stockholders of record. The following table sets forth the range of high and low sales prices for the Common Stock for each full quarterly period within the two most recent fiscal years as well as the quarterly dividends paid.
The closing market price of our Common Stockcommon stock at February 23, 201826, 2024 was $49.05.$41.81.
| Stock Price Range | |||||||||||||
| Low | High | Dividends | |||||||||||
| 2017 | 4th | $ | 45.75 | $ | 52.50 | $ | 0.09 | ||||||
| 3rd | 42.45 | 49.45 | 0.07 | ||||||||||
| 2nd | 42.90 | 50.55 | 0.07 | ||||||||||
| 1st | 43.25 | 48.20 | 0.07 | ||||||||||
| $ | 0.30 | ||||||||||||
| 2016 | 4th | $ | 31.90 | $ | 47.64 | $ | 0.07 | ||||||
| 3rd | 31.47 | 39.31 | 0.06 | ||||||||||
| 2nd | 30.56 | 37.10 | 0.06 | ||||||||||
| 1st | 26.40 | 33.71 | 0.06 | ||||||||||
| $ | 0.25 | ||||||||||||
Dividends
Securities Authorized for Issuance Under Equity Compensation Plans
Shown below is information as of December 31, 20172023 with respect to compensation plans under which equity securities of the Registrant are authorized for issuance.
| Equity Compensation Plan Information | |||||||||||||||||
| (a) | (b) | (c) | |||||||||||||||
| Number of Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-Average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||||||||
Equity compensation plans approved by stockholders(1) | 252,851 | $ | 43.49 | 3,313,543 | |||||||||||||
| Equity compensation plans not approved by stockholders | N/A | N/A | N/A | ||||||||||||||
| Total | 252,851 | $ | 43.49 | 3,313,543 | |||||||||||||
| Equity Compensation Plan Information | |||||||||
| (a) | (b) | (c) | |||||||
| Number of Securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-Average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||
Equity compensation plans approved by stockholders (1) | 1,339,106 | $ | 19.08 | 472,690 | |||||
| Equity compensation plans not approved by stockholders | N/A | N/A | N/A | ||||||
| TOTAL | 1,339,106 | $ | 19.08 | 472,690 | |||||
Share Repurchases:
During the fourthfirst quarter of 2015,2020, the Board of Directors approved a stockshare repurchase program authorizing the repurchase of up to 5% (1,492,661 shares)7,594,977 shares, or 15% of totalour outstanding shares as of Common Stock.March 31, 2020. This repurchase program was completed during the first quarter of 2023. During the second quarter of 2022, the Board of Directors approved an additional share repurchase authorization under the program of 6,358,727 shares of common stock, or 10% of its outstanding shares as of June 30, 2022. Under the program, purchasesprograms, repurchases may be made from time to time in the open market or through negotiated transactions, subject to market conditions and other factors, and in accordance with applicable securities laws. There is no fixed termination date forThe programs are consistent with our intent to return a minimum of 35% of annual net income to stockholders through dividends and share repurchases while maintaining capital ratios in excess of regulatory minimums and, in the case of the Bank, the “well-capitalized” benchmarks.
During the three months ended December 31, 2023, the Company had 241,000 shares of common stock repurchased under the current share repurchase program, and the repurchase program may be suspended or discontinued at any time.programs.
| Month | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Maximum Number of Shares that May Yet Be Purchased Under the Programs | |||||||||||||||||||
| October 1, 2023 - October 31, 2023 | — | $ | — | — | 5,582,593 | ||||||||||||||||||
| November 1, 2023 - November 28, 2023 | 169,000 | 38.49 | 169,000 | 5,413,593 | |||||||||||||||||||
| December 1, 2023 - December 31, 2023 | 72,000 | 41.50 | 72,000 | 5,341,593 | |||||||||||||||||||
| Total | 241,000 | 39.39 | 241,000 | ||||||||||||||||||||
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| 2017 | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Maximum Number of Shares that May Yet Be Purchased Under the Programs | ||||||||
| October | 22,000 | $ | 50.02 | 22,000 | 728,194 | |||||||
| November | 16,000 | 49.14 | 16,000 | 712,194 | ||||||||
| December | 13,000 | 50.08 | 13,000 | 699,194 | ||||||||
| Total | 51,000 | 49.76 | 51,000 | |||||||||
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph and table which follow show the yearly percentage change in the cumulative total shareholder return on our Common Stockcommon stock over the last five years compared with the cumulative total shareholder return of the Dow Jones Total Market Index, and the Nasdaq Bank Index and KBW Nasdaq Regional Bank Index over the same period as obtained from Bloomberg L.P. Cumulative total shareholder return on our Common Stockcommon stock or the indices equals the total increase in value since December 31, 2012,2018, assuming reinvestment of all dividends paid into the Common Stockcommon stock or the index, respectively. The graph and table were prepared assuming $100 was invested on December 31, 20122018 in our Common Stockcommon stock and in each of the indices. There can be no assurance that our future stock performance will be the same or similar to the historical stock performance shown in the graph below. We neither make nor endorse any predictions as to stock performance.
| December 31, 2018 through December 31, 2023 Cumulative Total Return | |||||||||||||||||||||||||||||||||||
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||||||||||||||||||||||
| WSFS Financial Corporation | $ | 100 | $ | 117 | $ | 122 | $ | 137 | $ | 126 | $ | 129 | |||||||||||||||||||||||
| Dow Jones Total Market Index | 100 | 125 | 138 | 166 | 155 | 180 | |||||||||||||||||||||||||||||
| Nasdaq Bank Index | 100 | 124 | 115 | 164 | 138 | 133 | |||||||||||||||||||||||||||||
| KBW Nasdaq Regional Bank Index | 100 | 124 | 113 | 155 | 144 | 143 | |||||||||||||||||||||||||||||
December 31, 2012 through December 31, 2017 Cumulative Total Return | |||||||||||||||||||||||
| 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | ||||||||||||||||||
| WSFS Financial Corporation | $ | 100 | $ | 185 | $ | 185 | $ | 235 | $ | 339 | $ | 353 | |||||||||||
| Dow Jones Total Market Index | 100 | 133 | 150 | 151 | 170 | 206 | |||||||||||||||||
| Nasdaq Bank Index | 100 | 142 | 149 | 162 | 223 | 235 | |||||||||||||||||
ITEM 6. SELECTED FINANCIAL DATA
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| (Dollars in thousands, except per share and branch data) | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||
| At December 31, | |||||||||||||||||||
| Total assets | $ | 6,999,540 | $ | 6,765,270 | $ | 5,584,719 | $ | 4,851,749 | $ | 4,513,863 | |||||||||
Net loans (1) (5) | 4,807,373 | 4,499,157 | 3,795,141 | 3,214,457 | 2,973,795 | ||||||||||||||
Investment securities (2) | 999,308 | 958,889 | 886,891 | 866,292 | 817,115 | ||||||||||||||
| Other investments | 34,892 | 41,787 | 30,709 | 23,412 | 36,201 | ||||||||||||||
| Total deposits | 5,247,604 | 4,738,438 | 4,016,566 | 3,649,235 | 3,186,942 | ||||||||||||||
Borrowings (3) | 772,624 | 1,048,386 | 812,200 | 545,764 | 759,830 | ||||||||||||||
| Trust preferred borrowings | 67,011 | 67,011 | 67,011 | 67,011 | 67,011 | ||||||||||||||
| Senior debt | 98,171 | 152,050 | 53,757 | 53,429 | 53,100 | ||||||||||||||
| Stockholders’ equity | 724,345 | 687,336 | 580,471 | 489,051 | 383,050 | ||||||||||||||
| Number of full-service branches | 58 | 60 | 51 | 43 | 39 | ||||||||||||||
| For the Year Ended December 31, | |||||||||||||||||||
| Interest income | $ | 254,726 | $ | 216,578 | $ | 182,576 | $ | 160,337 | $ | 146,922 | |||||||||
| Interest expense | 33,455 | 22,833 | 15,776 | 15,830 | 15,334 | ||||||||||||||
| Net interest income | 221,271 | 193,745 | 166,800 | 144,507 | 131,588 | ||||||||||||||
| Noninterest income | 124,644 | 105,061 | 90,256 | 80,168 | 80,151 | ||||||||||||||
| Noninterest expenses | 226,461 | 188,666 | 165,460 | 148,535 | 132,929 | ||||||||||||||
| Provision for loan losses | 10,964 | 12,986 | 7,790 | 3,580 | 7,172 | ||||||||||||||
| Provision for income taxes | 58,246 | 33,074 | 30,273 | 18,803 | 24,756 | ||||||||||||||
| Net Income | 50,244 | 64,080 | 53,533 | 53,757 | 46,882 | ||||||||||||||
| Dividends on preferred stock and accretion of discount | — | — | — | — | 1,663 | ||||||||||||||
| Net income allocable to common stockholders | $ | 50,244 | $ | 64,080 | $ | 53,533 | $ | 53,757 | $ | 45,219 | |||||||||
| Earnings per share allocable to common stockholders: | |||||||||||||||||||
| Basic | $ | 1.60 | $ | 2.12 | $ | 1.88 | $ | 1.98 | $ | 1.71 | |||||||||
| Diluted | $ | 1.56 | $ | 2.06 | $ | 1.85 | $ | 1.93 | $ | 1.69 | |||||||||
| Interest rate spread | 3.81 | % | 3.79 | % | 3.79 | % | 3.62 | % | 3.51 | % | |||||||||
| Net interest margin | 3.95 | 3.88 | 3.87 | 3.68 | 3.56 | ||||||||||||||
| Efficiency ratio | 64.91 | 62.52 | 57.79 | 66.11 | 62.42 | ||||||||||||||
Noninterest income as a percentage of total revenue (4) | 35.72 | 34.81 | 31.53 | 35.68 | 37.64 | ||||||||||||||
| Return on average assets | 0.74 | 1.06 | 1.05 | 1.17 | 1.07 | ||||||||||||||
| Return on average equity | 6.92 | 10.03 | 10.24 | 12.21 | 11.60 | ||||||||||||||
Return on tangible common equity (6) | 9.74 | 12.85 | 11.92 | 13.80 | 13.99 | ||||||||||||||
| Average equity to average assets | 10.64 | 10.57 | 10.31 | 10.33 | 8.62 | ||||||||||||||
Tangible equity to assets (6) | 7.87 | 7.55 | 8.84 | 9.00 | 7.69 | ||||||||||||||
Tangible common equity to assets (6) | 7.87 | 7.55 | 8.84 | 9.00 | 7.69 | ||||||||||||||
| Ratio of nonperforming assets to total assets | 0.84 | 0.60 | 0.71 | 1.08 | 1.06 | ||||||||||||||
| Ratio of allowance for loan losses to total gross loans | 0.84 | 0.89 | 0.98 | 1.23 | 1.40 | ||||||||||||||
| Ratio of allowances for loan losses to nonaccruing loans | 111 | 174 | 175 | 164 | 133 | ||||||||||||||
| Ratio of charge-offs to average gross loans | 0.22 | 0.25 | 0.29 | 0.18 | 0.33 | ||||||||||||||
| (Dollars in thousands, except ratio data) | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||
| At December 31, | |||||||||||||||||||
| Period End Tangible Assets | |||||||||||||||||||
| Period end assets | $ | 6,999,540 | $ | 6,765,270 | $ | 5,584,719 | $ | 4,851,749 | $ | 4,513,863 | |||||||||
| Goodwill and intangible assets | (188,444 | ) | (191,247 | ) | (95,295 | ) | (57,594 | ) | (38,979 | ) | |||||||||
| Tangible assets | $ | 6,811,096 | $ | 6,574,023 | $ | 5,489,424 | $ | 4,794,155 | $ | 4,474,884 | |||||||||
| Period End Tangible Common Equity | |||||||||||||||||||
| Period end Stockholder’s equity | $ | 724,345 | $ | 687,336 | $ | 580,471 | $ | 489,051 | $ | 383,050 | |||||||||
| Goodwill and intangible assets | (188,444 | ) | (191,247 | ) | (95,295 | ) | (57,594 | ) | (38,979 | ) | |||||||||
| Tangible common equity | $ | 535,901 | $ | 496,089 | $ | 485,176 | $ | 431,457 | $ | 344,071 | |||||||||
| Tangible common equity to assets | 7.87 | % | 7.55 | % | 8.84 | % | 9.00 | % | 7.69 | % | |||||||||
| Period End Tangible Equity | |||||||||||||||||||
| Period end Stockholder’s equity | $ | 724,345 | $ | 687,336 | $ | 580,471 | $ | 489,051 | $ | 383,050 | |||||||||
| Goodwill and intangible assets | (188,444 | ) | (191,247 | ) | (95,295 | ) | (57,594 | ) | (38,979 | ) | |||||||||
| Tangible equity | $ | 535,901 | $ | 496,089 | $ | 485,176 | $ | 431,457 | $ | 344,071 | |||||||||
| Tangible equity to assets | 7.87 | % | 7.55 | % | 8.84 | % | 9.00 | % | 7.69 | % | |||||||||
| Period End Tangible Income | |||||||||||||||||||
| GAAP net income | $ | 50,244 | $ | 64,080 | $ | 53,533 | $ | 53,757 | $ | 46,882 | |||||||||
| Tax effected amortization of intangible assets | 1,954 | 1,621 | 1,201 | 820 | 625 | ||||||||||||||
| Net tangible income | $ | 52,198 | $ | 65,701 | $ | 54,734 | $ | 54,577 | $ | 47,507 | |||||||||
| Average Tangible Common Equity | |||||||||||||||||||
| Average stockholder’s equity | $ | 725,763 | $ | 638,624 | $ | 522,925 | $ | 440,273 | $ | 404,029 | |||||||||
| Average goodwill and intangible assets | (189,784 | ) | (127,168 | ) | (63,887 | ) | (44,828 | ) | (34,726 | ) | |||||||||
| Average noncumulative perpetual preferred stock | — | — | — | — | (29,627 | ) | |||||||||||||
| Average tangible common equity | $ | 535,979 | $ | 511,456 | $ | 459,038 | $ | 395,445 | $ | 339,676 | |||||||||
| Return on tangible common equity | 9.74 | % | 12.85 | % | 11.92 | % | 13.80 | % | 13.99 | % | |||||||||
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
On January 1, 2023, WSFS completed the merger and brand conversion of WSFS Capital Management, LLC (West Capital), and Cypress Capital Management, LLC (Cypress) and Christiana Trust Companyrenamed the combined entity Bryn Mawr Capital Management, LLC. BMCM is registered as an investment advisor with the U.S. Securities and Exchange Commission and is a wholly-owned subsidiary of WSFS. In the third quarter of 2023, BMCM expanded its business in Southern Delaware (Christiana Trust DE). We also have one unconsolidated subsidiary, WSFS Capital Trust III (the Trust). WSFS Bank has three wholly-owned subsidiaries: WSFS Wealth Investments, 1832 Holdings, Inc. and Monarch Entity Services LLC (Monarch).established a new presence in Boca Raton, Florida with the acquisition of a registered investment advisory firm's business based in Rehoboth Beach, Delaware.
Our core banking business ishad a total loan and lease portfolio of $12.8 billion as of December 31, 2023, which was funded primarily through commercial lending primarily funded by customer-generated deposits, which primarily generates net interest income.relationships and consumer and customer generated deposits. We have built a $4.0$9.9 billion commercial loan and lease portfolio by recruiting the best seasoned commercial lenders in our markets, and offering the high level of service and flexibility typically associated with a community bank. We fund this business primarily with deposits generated through commercial relationships and retail deposits. As of December 31, 2017, we service our customers primarily from our 76 offices located in Delaware (46), Pennsylvania (28), Virginia (1) and Nevada (1)bank and through our website at www.wsfsbank.com.acquisitions. We also offer a broad variety of consumer loan products and retail securities and insurance brokerage services through our retail branches, andin addition to mortgage and title services through thoseour branches and through Pennsylvania-based WSFS Mortgage. WSFS Mortgage is a®, our mortgage banking company and abstract and title company specializing in a variety of residential mortgage and refinancing solutions. Our leasing business, conducted by NewLane Finance®, originates small business leases and provides commercial financing to businesses nationwide, targeting various equipment categories including technology, software, office, medical, veterinary and other areas. In addition, NewLane Finance® offers captive insurance through its subsidiary, Prime Protect.
Our Cash Connect® segment business is a premier provider of ATM vault cash, smart safe (safes that automatically accept, validate, record and hold cash in a secure environment) and other cash logistics services through strategic partnerships with several of the largest networks, manufacturers and service providers in the U.S. ItATM industry. Cash Connect® services non-bank and WSFS-branded ATMs and smart safes nationwide, and manages $970.1 millionapproximately $1.9 billion in total cash and services approximately 23,00033,000 non-bank ATMs and approximately 1,6008,700 smart safes nationwide. Cash Connect® provides related services such as online reporting and ATM cash management, predictive cash ordering and reconcilement services, armored carrier management, ATM processing equipment salesloss protection and deposit safe cash logistics. Cash Connect®also operates 440supports 590 owned or branded ATMs for theWSFS Bank Customers, which hasis one of the largest branded ATM networknetworks in Delaware.our market.
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Our Wealth Management segmentbusiness provides a broad array of fiduciary,planning and advisory services, investment management, trust services, and credit and deposit products to individual, corporate and institutional clients. Combined, these businesses had $84.3 billion of AUM and AUA at December 31, 2023.
Bryn Mawr Trust® is our predominant Private Wealth Management brand, providing advisory, investment management and trustee services to institutions, affluent and high-net-worth individuals. Private Wealth Management serves high-net-worth clients through six businesses, and primarily generates non-interest income. WSFS Wealth Investments provides insuranceinstitutions by providing trustee and advisory services, financial planning, customized investment strategies, brokerage products primarilysuch as annuities and traditional banking services such as credit and deposit products tailored to our retail banking clients. Cypress isits clientele. Private Wealth Management includes businesses that operate under the bank’s charter, through a broker/dealer and as a registered investment adviser with $901.5 million in AUM (includes $146.9 million of Christiana Trustadvisor (RIA). It generates revenue through a percentage fee based on account assets, for which Cypress servesfee-only arrangements, net interest income and other fee-only services such as sub-adviser). Cypress’ primary market segmentestate administration, trust tax planning and custody. Powdermill® is high net worth individuals, offering a ‘balanced’ investment style focused on preservation of capital and providing current income. West Capital, a registered investment adviser with approximately $861.2 million in AUM, is a fee-only wealth management firm which operates under a multi-family office philosophyspecializing in providing independent solutions to high-net-worth individuals, families and corporate executives through a coordinated, centralized approach.
BMT-DE provides fully-customized solutions tailored to the unique needs of institutionspersonal trust and high net worth individuals. Christiana Trust, with $16.8 billion in AUM and administration (includes $146.9 million of Christiana Trust assets for which Cypress serves as sub-adviser), provides fiduciary and investment services to personal trust clients,families and individuals across the U.S. and internationally. WSFS Institutional Services® provides trustee, agency, bankruptcy administration, custodial and commercial domicile services to institutional, corporate clients and institutional clients. Powdermill isspecial purpose vehicles.
As of December 31, 2023, we service our customers primarily from our 114 offices located in Pennsylvania (57), Delaware (40), New Jersey (14), Florida (1), Nevada (1) and Virginia (1), our ATM network, our website at www.wsfsbank.com, and our mobile app.
Notable Items Impacting Results of Operations, Financial Condition and Business Outlook
Notable items in 2023 include the following:
•WSFS completed the redemption of the $30.0 million of fixed-to-floating rate subordinated notes due 2025 (the 2025 Notes) acquired from Bryn Mawr Trust. The 2025 Notes were redeemed at a multi-family office that specializesprice of 100%, plus accrued and unpaid interest through the date of redemption.
•There was an increase in providing unique, independent solutionsthe allowance for credit losses (ACL) of $34.3 million during the year ended December 31, 2023, primarily due to high net worth individuals, familiesloan growth across the CRE, Consumer and corporate executives throughcommercial small business leasing portfolios as well as higher provisions on our CRE, commercial small business leasing, and Upstart portfolios and the elder care portfolio within C&I. See “Results of Operations - Provision/Allowance for Credit Losses (ACL)” for further information.
•We realized a coordinated, centralized approach.$9.5 million gain on our equity investment in Spring EQ, a digital home equity origination platform, which was sold during the fourth quarter.
•Recorded an income tax charge of $7.1 million from our decision to surrender $65.5 million of previously acquired BOLI policies. This resulted from recent changes in the interest rate environment lowering our yields on these long-term assets and the termination of a stable value protection wrap policy. We expect to deploy the net proceeds from the surrender into higher yielding interest-earning assets or payoff wholesale funding.
•Recorded a $5.1 million expense for the FDIC Special Assessment charged to recover losses to the Deposit Insurance Fund related to the closures of certain banks in 2023.
•We contributed $4.9 million to the WSFS Private Banking serves high net worth clientsCARES Foundation to enhance community support activities, which included a one-time $2.0 million special contribution in the fourth quarter.
•During 2023, WSFS repurchased 1,247,178 shares of common stock under the Company's share repurchase program at an average price of $41.52 per share, for an aggregate purchase price of $51.8 million and paid dividends on our common stock of $36.7 million, returning total capital to shareholders of $88.5 million.
•The Bank and the Company continue to be well above well-capitalized across all measures of regulatory capital, with total common equity tier 1 capital of 13.72% and 13.17%, respectively, and total risk-based capital of 14.96% and 15.23%, respectively.
•BMCM expanded into southern Delaware and established a new presence in Boca Raton, Florida, after an acquisition of a woman-founded, owned and managed registered investment advisory firm based in Rehoboth Beach, Delaware.
•In June, we held our first-ever "We Stand for Service Day", during which approximately 1,200 of our Associates provided nearly 5,000 hours of service to more than 80 nonprofit and community organizations across the Greater Philadelphia, Southern New Jersey and Delaware region.
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FINANCIAL CONDITION
Total assets increased $0.7 billion, or 3%, to $20.6 billion as of December 31, 2023, compared to $19.9 billion as of December 31, 2022. These increases are primarily comprised of the following (in descending order of magnitude):
•Net loans and leases, excluding loans held for sale, increased $823.2 million, primarily driven by delivering creditgrowth of $450.1 million in commercial mortgages, $201.2 million in consumer loans driven by our consumer partnerships and deposit products$108.8 million in residential.
•Total cash and partnering with other business unitscash equivalents increased $255.6 million, primarily due to deliverincreased deposits.
•Total investment managementsecurities decreased $299.6 million:
◦Investment securities, available-for-sale decreased $246.5 million, primarily due to repayments of $354.8 million, partially offset by increased market values on available-for-sale securities of $83.7 million and fiduciary products and services.$27.7 million in purchases.
Total liabilities increased $0.4 billion, or 2%, to $18.1 billion at December 31, 2023 compared to the prior year, primarily comprised of the following (in descending order of magnitude):
•Other borrowed funds increased $547.8 million primarily due to $565.0 million borrowed from the Bank Term Funding Program (BTFP) as a result of favorable terms and legal riskspricing.
•Total deposits increased $270.5 million, primarily driven by a $236.6 million increase in trust deposits.
•FHLB advances decreased $350.0 million due to the inherent complexityrepayment of fixed rate FHLB term advances as part of our routine balance sheet management.
•Other liabilities decreased $68.2 million primarily due to a net decrease of $65.3 million in collateral held on derivatives and derivative liabilities driven by changes in interest rates.
•Senior and subordinated debt decreased $29.8 million due to the redemption of the trust business. To mitigate these risks, we rely2025 Notes.
Stockholders’ equity increased $272.5 million to $2.5 billion at December 31, 2023 compared to the prior year. The increase was primarily due to earnings of $269.2 million during the year and a decrease of $81.9 million in accumulated other comprehensive loss from market value increases on investment securities, partially offset by significant levels of capital return to shareholders including $54.6 million from the hiring, development,repurchase of shares of common stock under our stock repurchase plan and retentionshares withheld to cover tax liabilities, and the payment of experienced Associates,dividends on our common stock of $36.7 million.
We repurchased 1,247,178 and 4,151,117 shares of our common stock in 2023 and 2022, respectively. We held 15,557,263 shares and 14,310,085 shares of our common stock as treasury shares at December 31, 2023 and 2022, respectively.
For further information on our regulatory capital requirements, refer to our Capital Resources discussion below.
LIQUIDITY AND CAPITAL RESOURCES
Capital Resources
Regulatory capital requirements for the Bank and the Company include a minimum common equity Tier 1 capital ratio of 4.50% of risk-weighted assets, a Tier 1 capital ratio of 6.00% of risk-weighted assets, a minimum Total capital ratio of 8.00% of risk-weighted assets and a minimum Tier 1 leverage capital ratio of 4.00% of average assets. In order to avoid limits on capital distributions and discretionary bonus payments, the Bank and the Company must maintain a capital conservation buffer of 2.5% of common equity Tier 1 capital over each of the risk-based capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory actions and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial controls, managerial oversight,statements.
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Regulators have established five capital tiers: well-capitalized, adequately-capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized. A depository institution’s capital tier depends upon its capital levels in relation to various relevant capital measures, which include leveraged and risk-based capital measures and certain other factors. Under the Prompt Corrective Action framework of the Federal Deposit Insurance Corporation Act, depository institutions that are not classified as well-capitalized are subject to various restrictions regarding capital distributions, payment of management fees, acceptance of brokered deposits and other operating activities. At December 31, 2023, the Bank was in compliance with regulatory capital requirements and all of its regulatory ratios exceeded “well-capitalized” regulatory benchmarks. The Bank’s December 31, 2023 common equity Tier 1 capital ratio of 13.72%, Tier 1 capital ratio of 13.72%, total risk based capital ratio of 14.96% and Tier 1 leverage capital ratio of 10.92%, all remain substantially in excess of “well-capitalized” regulatory benchmarks, the highest regulatory capital rating. In addition, and not included in the Bank's capital, the holding company held $197.3 million in cash to support potential dividends, acquisitions and strategic growth plans.
As part of our adoption of the CECL methodology in 2020, we elected to phase in the day-one adverse effects on regulatory capital that may result from the adoption of CECL over a three-year period, as permitted under a final rule of the federal banking agencies.
Liquidity
We manage our liquidity and funding needs through our Treasury function and our Asset/Liability Committee. We have a policy that separately addresses liquidity, and management monitors our adherence to policy limits. Also, liquidity risk management practices. Also,is a primary area of examination by the banking regulators.
Funding sources to support growth and meet our liquidity needs include cash from timeoperations, commercial, consumer, wealth and trust deposit programs, loan repayments, FHLB borrowings, repurchase agreements, BTFP borrowings, access to timethe Federal Reserve Discount Window, and access to the brokered deposit market as well as other wholesale funding avenues. In addition, we have a large portfolio of high-quality, liquid investments, primarily short-duration mortgage-backed securities, that provide a near-continuous source of cash flow to meet current cash needs, or can be sold to meet larger discrete needs for cash. We believe these sources are sufficient to meet our funding needs as well as maintain required and prudent levels of liquidity over the next twelve months and beyond.
As of December 31, 2023, the Company has $1.1 billion in cash, cash equivalents, and restricted cash. Our estimated uninsured deposits were $6.3 billion, or 38% of total customer deposits, and our estimated unprotected deposits (uninsured and uncollateralized) were $4.8 billion, or 29% of total customer deposits.
As of December 31, 2023, the Company had a readily available, secured borrowing capacity of $5.4 billion from the FHLB, $0.6 billion through the Federal Reserve Discount Window, and $1.7 billion through the BTFP. In addition, the Company had $1.5 billion in unpledged securities that could be used to support additional borrowings and $0.5 billion of cash deposited with the Federal Reserve Bank. The Company’s readily available, secured borrowing capacity to estimated unprotected deposits ratio is 202%.
During the year ended December 31, 2023, cash, cash equivalents and restricted cash increased $0.3 billion to $1.1 billion from $0.8 billion as of December 31, 2022. Cash provided by operating activities was $237.0 million, primarily reflecting the cash impact of earnings. Cash used for investing activities was $326.3 million primarily due to a $486.8 million net increase in loans and leases and purchases of loans held for investment of $313.4 million. These outflows were partially offset by net repayments of available-for-sale and held-to-maturity debt securities of $327.1 million and $73.0 million, respectively. Cash provided by financing activities was $344.9 million, primarily due to the borrowing of $565.0 million from the BTFP and a $252.5 million net increase in deposits, partially offset by $350.0 million for the repayment of fixed rate FHLB term advances, $54.6 million for repurchases of common stock under the previously announced stock repurchase plan, common stock dividends of $36.7 million, and the $30.0 million redemption of the 2025 Notes
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Our primary cash contractual obligations relate to operating leases, long-term debt, credit obligations, and data processing. At December 31, 2023, we had $211.3 million in total contractual payments for ongoing leases that have remaining lease terms of less than one year to 22 years, which includes renewal options that are exercised at our discretion. For additional information on our operating leases see Note 9 to the Consolidated Financial Statements. At December 31, 2023, we had obligations for principal payments on long-term debt including $67.0 million for our trust business may give rise to disputes with clientspreferred borrowings, due June 1, 2035, $70.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2027, and we may be exposed to litigation$150.0 million for our senior debt, due December 15, 2030. Royal Bancshares Capital Trust I (Trust I) and Royal Bancshares Capital Trust II (Trust II) (collectively, the RBC Trusts), which could result in significant costs. The ultimate outcomewere acquired from Bryn Mawr Bank Corporation, were utilized for the sole purpose of any litigation is uncertain.
We are also contractually obligated to make interest payments on our long-term debt through their respective maturities. For additional information regarding long-term debt, see Note 2312 to the Consolidated Financial StatementsStatements. At December 31, 2023, the Company had total commitments to extend credit of $4.1 billion, which are generally one year commitments. For additional information regarding commitments to extend credit, see Note 17 to the Consolidated Financial Statements.
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NONPERFORMING ASSETS
Nonperforming assets include nonaccruing loans, OREO and restructured loans. Nonaccruing loans are those on which we no longer accrue interest. Loans are placed on nonaccrual status immediately if, in the opinion of management, collection is doubtful, or when principal or interest is past due 90 days or more and the value of the collateral is insufficient to cover principal and interest. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed and charged against interest income. In addition, the amortization of net deferred loan fees is suspended when a loan is placed on nonaccrual status. Subsequent cash receipts are applied either to the outstanding principal balance or recorded as interest income, depending on management’s assessment of the ultimate collectability of principal and interest. Past due loans are defined as loans contractually past due 90 days or more as to principal or interest payments but which remain in accrual status because they are considered well secured and in the process of collection.
The following table shows our nonperforming assets and past due loans at the dates indicated:
| At December 31, | |||||||||||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | |||||||||||||||||||||||||||
| Nonaccruing loans: | |||||||||||||||||||||||||||||
| Commercial and industrial | $ | 29,389 | $ | 6,770 | |||||||||||||||||||||||||
| Owner-occupied commercial | 4,862 | 386 | |||||||||||||||||||||||||||
| Commercial mortgages | 22,292 | 5,159 | |||||||||||||||||||||||||||
| Construction | 12,617 | 5,143 | |||||||||||||||||||||||||||
| Residential | 2,579 | 3,199 | |||||||||||||||||||||||||||
| Consumer | 2,446 | 2,145 | |||||||||||||||||||||||||||
Total nonaccruing loans(1) | 74,185 | 22,802 | |||||||||||||||||||||||||||
| Other real estate owned | 1,569 | 833 | |||||||||||||||||||||||||||
Restructured loans(2) | — | 19,737 | |||||||||||||||||||||||||||
| Total nonperforming assets | $ | 75,754 | $ | 43,372 | |||||||||||||||||||||||||
| Past due loans: | |||||||||||||||||||||||||||||
| Commercial | $ | 1,552 | $ | 1,022 | |||||||||||||||||||||||||
Consumer(3) | 10,032 | 15,513 | |||||||||||||||||||||||||||
| Total past due loans | $ | 11,584 | $ | 16,535 | |||||||||||||||||||||||||
Troubled loans(4)(5): | |||||||||||||||||||||||||||||
| Commercial | $ | 85,330 | $ | — | |||||||||||||||||||||||||
| Residential | 777 | — | |||||||||||||||||||||||||||
| Consumer | 9,161 | — | |||||||||||||||||||||||||||
| Total troubled loans | $ | 95,268 | $ | — | |||||||||||||||||||||||||
Ratio of allowance for credit losses to total gross loans and leases(6) | 1.35 | % | 1.17 | % | |||||||||||||||||||||||||
Ratio of nonaccruing loans to total gross loans and leases(7) | 0.58 | 0.19 | |||||||||||||||||||||||||||
| Ratio of nonperforming assets to total assets | 0.37 | 0.22 | |||||||||||||||||||||||||||
| Ratio of allowance for credit losses to nonaccruing loans | 251 | 666 | |||||||||||||||||||||||||||
Ratio of allowance for credit losses to total nonperforming assets(8) | 246 | 350 | |||||||||||||||||||||||||||
(1)Includes nonaccrual loans held-for-sale.
(2)Accruing loans only, which includes acquired nonimpaired loans. Nonaccruing Troubled Debt Restructurings (TDRs) are included in their respective categories of nonaccruing loans.
(3)Includes delinquent, but still accruing, U.S. government guaranteed student loans with little risk of credit loss.
(4)Loans with certain modifications (as prescribed in ASU No. 2022-02) to borrowers experiencing financial difficulty.
(5)Includes troubled loan held-for-sale.
(6)Represents amortized cost basis for additional information.loans, leases and held-to-maturity securities.
(7)Total loans exclude loans held-for-sale and reverse mortgages.
(8)Excludes acquired PCD loans.
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Nonperforming assets increased $32.4 million between December 31, 2022 and December 31, 2023. This increase was primarily due to the transfer in of seven commercial relationships totaling $61.1 million and two CRE relationships totaling $19.4 million during the period. These inflows were partially offset by partial charge-offs on some of the C&I relationships totaling $20.7 million, several smaller payoffs and the continued collection of principal payments on the majority of these loans. The ratio of nonperforming assets to total assets slightly increased from 0.22% at December 31, 2022 to 0.37% at December 31, 2023.
The following table summarizes the changes in nonperforming assets during the periods indicated:
| Year Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | ||||||||||||||||||
| Beginning balance | $ | 43,372 | $ | 33,133 | ||||||||||||||||
| Additions | 110,586 | 34,041 | ||||||||||||||||||
| Collections | (19,874) | (17,293) | ||||||||||||||||||
Transfers to accrual(1) | (20,263) | (922) | ||||||||||||||||||
| Charge-offs | (38,067) | (5,587) | ||||||||||||||||||
| Ending balance | $ | 75,754 | $ | 43,372 | ||||||||||||||||
(1)Includes impact of ASU No. 2022-02 adoption.
The timely identification of problem loans is a key element in our strategy to manage our loan portfolio. Problem loans are all criticized, classified and nonperforming loans and other real estate owned. Timely identification enables us to take appropriate action and accordingly, minimize losses. An asset review system established to monitor the asset quality of our loans and investments in real estate portfolios facilitates the identification of problem assets. In general, this system uses guidelines established by federal regulation.
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RESULTS OF OPERATIONS
2022 compared with 2021
For a discussion of our results for the year ended December 31, 2022 compared to the year ended December 31, 2021, please see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 28, 2023.
2023 compared with 2022
We recorded net income attributable to WSFS of $50.2$269.2 million, or $1.56$4.40 per diluted common share, for the year ended December 31, 2017,2023, a decreaseincrease of $13.8$46.8 million compared to $64.1$222.4 million, or $2.06$3.49 per diluted common share, for the year ended December 31, 2016. Results for 2017 were impacted by the enactment of the Tax Cuts and Jobs Act (Tax Reform Act) in December 2017, which required us to re-measure our deferred tax asset, resulting in a tax charge of $14.5 million in the quarter ended December 31, 2017. Additionally and related to this tax change, we decided to surrender all of our bank-owned life insurance (BOLI) policies in 2018, resulting in an additional tax charge of $8.0 million for the quarter ended December 31, 2017, and we also contributed $1.5 million (pre-tax) to the WSFS Foundation in the same quarter. Further, as discussed above, during the first quarter of 2018, we agreed to settle a litigation matter which resulted in legal expense of $12.0 million recorded in the fourth quarter of 2017. Finally, in 2017 we had corporate development costs of $0.9 million compared to $8.5 million of similar costs in 2016.2022.
•Net interest income for the year ended December 31, 20172023 was $221.3$725.1 million, an increase of $27.5$62.2 million compared to 2016. Our provision for loan losses decreased $2.0 million in 2017, primarily due to improving economic conditions resulting in lower required reserves and net charge-offs compared to 2016. Noninterest, or fee income, increased $19.6 million primarily due to increased investment management and fiduciary revenue and growth in credit/debit card and ATM income. Finally, operating expenses increased $37.8 million in 2017, primarily reflecting higher employee-related and ongoing operating costs to support our organic and late 2016 acquisition growth, as well as a litigation settlement. See the Net Interest Income, Provision for Loan Losses, Noninterest (Fee) Income, and Noninterest Expense sections below for further information.
•Our provision for loan losscredit losses increased $5.2$40.0 million in 2016,2023, primarily due to higher provisions on our CRE, commercial small business leasing, and Upstart portfolios as a result of two credit eventswell as our elder care portfolio within C&I. See “Provision/Allowance for Credit Losses” for further information.
•Noninterest income increased $29.7 million in two different segments of our loan portfolio. Noninterest, or2023, primarily due to increases in income from Cash Connect®, Wealth Management fee income, increased $14.8 million due to continued growtha realized gain from our investment in wealth managementSpring EQ, and capital markets income. These increases were partially offset by decreases in other banking fees and mortgage banking businesses. Finally,activities, and unrealized gains on equity investments and income from BMTIA (business sold in 2022). See “Noninterest Income” for further information.
•Noninterest expense decreased $12.7 million in 2023, primarily due to net corporate development and restructuring costs incurred in 2022, partially offset by increases in other operating expenses increased $23.2 million in 2016, reflecting growth in ongoing operatingdriven by Cash Connect®, FDIC expenses, salaries and benefits costs, from our recent acquisitionsand professional fees. See “Noninterest Expense” for further information.
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Net Interest Income
The following table provides information regarding the average balances of, and yields/rates on, interest-earning assets and interest-bearing liabilities during the periods indicated:
| Year Ended December 31, | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest & Dividends | Yield/ Rate(1) | Average Balance | Interest & Dividends | Yield/ Rate (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans:(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial loans and leases | $ | 5,041,280 | $ | 346,389 | 6.88 | % | $ | 4,875,265 | $ | 253,293 | 5.21 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage loans | 4,570,839 | 317,603 | 6.95 | 4,281,768 | 203,611 | 4.76 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential | 820,600 | 38,886 | 4.74 | 790,650 | 35,420 | 4.48 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | 1,922,827 | 138,510 | 7.20 | 1,543,704 | 86,743 | 5.62 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans held for sale | 47,424 | 3,883 | 8.19 | 65,927 | 3,687 | 5.59 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans and leases | 12,402,970 | 845,271 | 6.82 | 11,557,314 | 582,754 | 5.05 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities(3) | 4,640,646 | 107,555 | 2.32 | 5,151,469 | 106,606 | 2.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Investment securities(3) | 367,026 | 8,783 | 2.71 | 338,979 | 6,899 | 2.39 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other interest-earning assets | 282,462 | 14,913 | 5.28 | 878,097 | 7,556 | 0.86 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-earning assets | 17,693,104 | 976,522 | 5.53 | 17,925,859 | 703,815 | 3.94 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | (169,140) | (140,916) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 256,984 | 243,579 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash in non-owned ATMs | 392,007 | 551,108 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank owned life insurance | 98,935 | 100,725 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other noninterest-earning assets | 1,931,147 | 1,783,340 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 20,203,037 | $ | 20,463,695 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities and stockholders’ equity: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing demand | $ | 3,019,050 | $ | 26,671 | 0.88 | % | $ | 3,377,321 | $ | 7,441 | 0.22 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Money market | 4,317,810 | 122,168 | 2.83 | 3,918,756 | 13,536 | 0.35 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Savings | 1,832,601 | 5,733 | 0.31 | 2,265,721 | 965 | 0.04 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Customer time deposits | 1,571,682 | 45,184 | 2.87 | 1,103,336 | 5,626 | 0.51 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing customer deposits | 10,741,143 | 199,756 | 1.86 | 10,665,134 | 27,568 | 0.26 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Brokered deposits | 214,608 | 10,064 | 4.69 | 36,461 | 613 | 1.68 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 10,955,751 | 209,820 | 1.92 | 10,701,595 | 28,181 | 0.26 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Federal Home Loan Bank advances | 103,268 | 5,348 | 5.18 | 12,841 | 538 | 4.19 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Trust preferred borrowings | 90,534 | 6,736 | 7.44 | 90,337 | 3,482 | 3.85 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior and subordinated debt | 221,975 | 9,815 | 4.42 | 248,389 | 8,246 | 3.32 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other borrowed funds(4) | 442,197 | 19,700 | 4.46 | 47,076 | 478 | 1.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 11,813,725 | 251,419 | 2.13 | 11,100,238 | 40,925 | 0.37 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | 5,306,511 | 6,376,459 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other noninterest-bearing liabilities | 787,573 | 590,814 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders’ equity of WSFS | 2,300,467 | 2,398,871 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest | (5,239) | (2,687) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 20,203,037 | $ | 20,463,695 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Excess of interest-earning assets over interest-bearing liabilities | $ | 5,879,379 | $ | 6,825,621 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest and dividend income | $ | 725,103 | $ | 662,890 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate spread | 3.40 | % | 3.57 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest margin | 4.11 | % | 3.71 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Weighted average yields for tax-exempt securities and loans have been computed on a tax-equivalent basis.
(2)Average balances are net of unearned income and include nonperforming loans.
(3)Includes securities held-to-maturity (at amortized cost) and securities available-for-sale (at fair value).
(4)Includes federal funds purchased.
55
Net interest income increased $27.5$62.2 million, or 14%9%, to $221.3$725.1 million in 2017,2023, compared to 2022 primarily due to a $60.6 million increase from the benefits of our asset-sensitive balance sheet and neta $4.0 million increase from the balance sheet size and mix, offset by a $2.4 million decrease in purchase accounting accretion. Net interest margin increased slightly40 bps to 3.95%4.11% in 2017 compared to 3.88%2023 from 3.71% in 2016.2022. The increases in net interest income and margin wereincrease was primarily due to loan portfolio growth,24 bps increase from the inclusionbalance sheet size and mix and 17 bps from the benefits of a full year of results from our acquisition of Penn Liberty in August 2016, and our redemption of the 2012 senior notes during the third quarter of 2017,asset-sensitive balance sheet, partially offset by higher interest expense related to deposit growth and higher FHLB advances.1 bp from lower purchase accounting accretion.
The following table provides certain information regarding changes in net interest income attributable to changes in the volumes of interest-earning assets and interest-bearing liabilities and changes in the rates for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on the changes that are attributable to: (i) changes in volume (change in volume multiplied by prior year rate); (ii) changes in rates (change in rate multiplied by prior year volume on each category); and (iii) net change (the sum of the change in volume and the change in rate). Changes due to the combination of rate and volume changes (changes in volume multiplied by changes in rate) are allocated proportionately between changes in rate and changes in volume.
| Year Ended December 31, | 2023 vs. 2022 | ||||||||||||||||
| (Dollars in thousands) | Volume | Yield/Rate | Net | ||||||||||||||
| Interest Income: | |||||||||||||||||
| Loans: | |||||||||||||||||
Commercial loans and leases(1) | $ | 8,940 | $ | 84,156 | $ | 93,096 | |||||||||||
| Commercial mortgage loans | 14,587 | 99,405 | 113,992 | ||||||||||||||
| Residential | 1,369 | 2,097 | 3,466 | ||||||||||||||
| Consumer | 24,137 | 27,630 | 51,767 | ||||||||||||||
| Loans held for sale | (1,216) | 1,412 | 196 | ||||||||||||||
| Mortgage-backed securities | (11,185) | 12,134 | 949 | ||||||||||||||
Investment securities(2) | 719 | 1,165 | 1,884 | ||||||||||||||
| Other interest-earning assets | (8,192) | 15,549 | 7,357 | ||||||||||||||
| Favorable | 29,159 | 243,548 | 272,707 | ||||||||||||||
| Interest expense: | |||||||||||||||||
| Deposits: | |||||||||||||||||
| Interest-bearing demand | (866) | 20,096 | 19,230 | ||||||||||||||
| Money market | 1,539 | 107,093 | 108,632 | ||||||||||||||
| Savings | (205) | 4,973 | 4,768 | ||||||||||||||
| Customer time deposits | 3,324 | 36,234 | 39,558 | ||||||||||||||
| Brokered certificates of deposits | 6,916 | 2,535 | 9,451 | ||||||||||||||
| FHLB advances | 4,654 | 156 | 4,810 | ||||||||||||||
| Trust preferred borrowings | 8 | 3,246 | 3,254 | ||||||||||||||
| Senior and subordinated debt | (946) | 2,515 | 1,569 | ||||||||||||||
| Other borrowed funds | 13,713 | 5,509 | 19,222 | ||||||||||||||
| Unfavorable | 28,137 | 182,357 | 210,494 | ||||||||||||||
| Net change, as reported | $ | 1,022 | $ | 61,191 | $ | 62,213 | |||||||||||
| Year Ended December 31, | 2017 vs. 2016 | 2016 vs. 2015 | |||||||||||||||||||||
| (Dollars in thousands) | Volume | Yield/Rate | Net | Volume | Yield/Rate | Net | |||||||||||||||||
| Interest Income: | |||||||||||||||||||||||
| Commercial real estate loans | $ | 8,796 | $ | 1,147 | $ | 9,943 | $ | 10,002 | $ | (486 | ) | $ | 9,516 | ||||||||||
| Residential real estate loans | (898 | ) | (157 | ) | (1,055 | ) | 1,082 | 1,766 | 2,848 | ||||||||||||||
Commercial loans (1) | 15,326 | 4,520 | 19,846 | 15,927 | 822 | 16,749 | |||||||||||||||||
| Consumer loans | 5,067 | 1,318 | 6,385 | 2,888 | (285 | ) | 2,603 | ||||||||||||||||
| Loans held for sale | (746 | ) | 430 | (316 | ) | 10 | 100 | 110 | |||||||||||||||
| Mortgage-backed securities | 1,346 | 2,207 | 3,553 | 130 | 1,451 | 1,581 | |||||||||||||||||
Investment securities (2) | (820 | ) | 596 | (224 | ) | 952 | 248 | 1,200 | |||||||||||||||
| FHLB Stock and deposits in other banks | 156 | (140 | ) | 16 | 306 | (911 | ) | (605 | ) | ||||||||||||||
| Favorable (unfavorable) | 28,227 | 9,921 | 38,148 | 31,297 | 2,705 | 34,002 | |||||||||||||||||
| Interest expense: | |||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||
| Interest-bearing demand | (174 | ) | (916 | ) | (1,090 | ) | 151 | 316 | 467 | ||||||||||||||
| Money market | (505 | ) | (841 | ) | (1,346 | ) | 531 | 346 | 877 | ||||||||||||||
| Savings | (134 | ) | (229 | ) | (363 | ) | 52 | 313 | 365 | ||||||||||||||
| Customer time deposits | (41 | ) | (1,463 | ) | (1,504 | ) | 630 | (385 | ) | 245 | |||||||||||||
| Brokered certificates of deposits | (231 | ) | (949 | ) | (1,180 | ) | (91 | ) | 392 | 301 | |||||||||||||
| FHLB advances | 124 | (3,680 | ) | (3,556 | ) | 621 | 1,078 | 1,699 | |||||||||||||||
| Trust Preferred borrowings | 184 | (506 | ) | (322 | ) | (70 | ) | 330 | 260 | ||||||||||||||
| Senior debt | (1,407 | ) | 536 | (871 | ) | 3,205 | (615 | ) | 2,590 | ||||||||||||||
| Other borrowed funds | 140 | (530 | ) | (390 | ) | (19 | ) | 272 | 253 | ||||||||||||||
| (Favorable) unfavorable | (2,044 | ) | (8,578 | ) | (10,622 | ) | 5,010 | 2,047 | 7,057 | ||||||||||||||
| Net change, as reported | $ | 26,183 | $ | 1,343 | $ | 27,526 | $ | 26,287 | $ | 658 | $ | 26,945 | |||||||||||
(2)Includes a tax-equivalent income adjustment related to senior debt was attributable to the redemptionmunicipal bonds.
56
Investment Securities
The following table provides information regardingdetails the maturity and weighted average balancesyield of the available-for-sale investment portfolio as of December 31, 2023:
| (Dollars in thousands) | Maturing During 2024 | Maturing From 2025 Through 2028 | Maturing From 2029 Through 2033 | Maturing After 2033 | Total | ||||||||||||||||||||||||
| Collateralized mortgage obligations (CMO) | |||||||||||||||||||||||||||||
| Amortized cost | $ | — | $ | 25,645 | $ | 65,192 | $ | 470,115 | $ | 560,952 | |||||||||||||||||||
| Weighted average yield | — | % | 2.37 | % | 1.97 | % | 1.84 | % | 1.88 | % | |||||||||||||||||||
| Fannie Mae (FNMA) mortgage-backed securities (MBS) | |||||||||||||||||||||||||||||
| Amortized cost | $ | — | $ | 60,147 | $ | 230,640 | $ | 3,253,975 | $ | 3,544,762 | |||||||||||||||||||
| Weighted average yield | — | % | 2.38 | % | 2.05 | % | 1.99 | % | 2.00 | % | |||||||||||||||||||
| Freddie Mac (FHLMC) MBS | |||||||||||||||||||||||||||||
| Amortized cost | $ | — | $ | 431 | $ | 51,704 | $ | 74,721 | $ | 126,856 | |||||||||||||||||||
| Weighted average yield | — | % | 2.43 | % | 2.39 | % | 3.15 | % | 2.84 | % | |||||||||||||||||||
| Ginnie Mae (GNMA) MBS | |||||||||||||||||||||||||||||
| Amortized cost | $ | — | $ | 1 | $ | 558 | $ | 45,774 | $ | 46,333 | |||||||||||||||||||
| Weighted average yield | — | % | 4.79 | % | 2.98 | % | 3.39 | % | 3.38 | % | |||||||||||||||||||
| Government-sponsored enterprises (GSE) | |||||||||||||||||||||||||||||
| Amortized cost | $ | — | $ | — | $ | 221,861 | $ | 3,578 | $ | 225,439 | |||||||||||||||||||
| Weighted average yield | — | % | — | % | 1.30 | % | 1.44 | % | 1.30 | % | |||||||||||||||||||
| Total amortized cost | $ | — | $ | 86,224 | $ | 569,955 | $ | 3,848,163 | $ | 4,504,342 | |||||||||||||||||||
| Weighted average yield | — | % | 2.38 | % | 1.78 | % | 2.01 | % | 1.99 | % | |||||||||||||||||||
As of December 31, 2023, WSFS does not have any tax-exempt securities within the available-for-sale investment portfolio. Yields are calculated on a weighted average basis using the investments amortized cost and yields/rates on, interest-earning assets and interest-bearing liabilities during the periods indicated:respective average yields for each investment category. Expected maturities of mortgage-backed securities may differ from contractual maturities due to calls or prepay obligations.
57
| Year Ended December 31, | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest & Dividends | Yield/ Rate (1) | Average Balance | Interest & Dividends | Yield/ Rate (1) | Average Balance | Interest & Dividends | Yield/ Rate (1) | |||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||||||
Loans: (2) | ||||||||||||||||||||||||||||||||
| Commercial real estate loans | $ | 1,426,075 | $ | 71,646 | 5.02 | % | $ | 1,255,119 | $ | 61,705 | 4.92 | % | $ | 1,057,662 | $ | 52,189 | 4.93 | % | ||||||||||||||
| Residential real estate loans | 270,957 | 16,364 | 6.04 | 281,624 | 17,474 | 4.79 | 251,935 | 14,626 | 4.14 | |||||||||||||||||||||||
| Commercial loans | 2,449,194 | 115,941 | 4.76 | 2,125,810 | 96,098 | 4.55 | 1,765,540 | 79,349 | 4.47 | |||||||||||||||||||||||
| Consumer loans | 497,523 | 24,025 | 4.83 | 398,226 | 17,640 | 4.43 | 337,146 | 15,037 | 4.46 | |||||||||||||||||||||||
| Loans held for sale | 28,679 | 1,171 | 3.52 | 40,597 | 1,428 | 3.52 | 36,829 | 1,318 | 3.58 | |||||||||||||||||||||||
| Total loans | 4,672,428 | 229,147 | 4.92 | 4,076,900 | 189,198 | 4.66 | 3,422,639 | 157,220 | 4.61 | |||||||||||||||||||||||
Mortgage-backed securities (3) | 794,387 | 19,308 | 2.43 | 734,631 | 15,754 | 2.14 | 727,999 | 14,173 | 1.95 | |||||||||||||||||||||||
Investment securities (3) | 181,322 | 4,648 | 3.80 | 202,722 | 4,872 | 3.51 | 161,865 | 3,672 | 3.29 | |||||||||||||||||||||||
| Other interest-earning assets | 36,587 | 1,623 | 4.44 | 33,744 | 1,607 | 4.76 | 29,247 | 2,212 | 7.56 | |||||||||||||||||||||||
| Total interest-earning assets | 5,684,724 | 254,726 | 4.53 | 5,072,473 | 216,578 | 4.33 | 4,368,223 | 182,576 | 4.23 | |||||||||||||||||||||||
| Allowance for loan losses | (40,600 | ) | (38,422 | ) | (39,269 | ) | ||||||||||||||||||||||||||
| Cash and due from banks | 131,956 | 110,318 | 89,269 | |||||||||||||||||||||||||||||
| Cash in non-owned ATMs | 597,483 | 554,698 | 412,582 | |||||||||||||||||||||||||||||
| Bank owned life insurance | 102,161 | 95,228 | 79,833 | |||||||||||||||||||||||||||||
| Other noninterest-earning assets | 344,747 | 248,529 | 163,491 | |||||||||||||||||||||||||||||
| Total assets | $ | 6,820,471 | $ | 6,042,824 | $ | 5,074,129 | ||||||||||||||||||||||||||
| Liabilities and Stockholders’ Equity: | ||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||
| Interest-bearing deposits: | ||||||||||||||||||||||||||||||||
| Interest-bearing demand | $ | 947,914 | $ | 2,214 | 0.23 | % | $ | 834,703 | $ | 1,136 | 0.14 | % | $ | 695,930 | $ | 669 | 0.10 | % | ||||||||||||||
| Money market | 1,320,470 | 4,690 | 0.36 | 1,159,299 | 3,343 | 0.29 | 966,589 | 2,466 | 0.26 | |||||||||||||||||||||||
| Savings | 570,219 | 1,015 | 0.18 | 481,197 | 653 | 0.14 | 414,484 | 288 | 0.07 | |||||||||||||||||||||||
| Customer time deposits | 571,176 | 4,818 | 0.84 | 567,657 | 3,301 | 0.58 | 472,921 | 3,056 | 0.65 | |||||||||||||||||||||||
| Total interest-bearing customer deposits | 3,409,779 | 12,737 | 0.37 | 3,042,856 | 8,433 | 0.28 | 2,549,924 | 6,479 | 0.25 | |||||||||||||||||||||||
| Brokered deposits | 206,668 | 2,167 | 1.05 | 172,038 | 988 | 0.57 | 195,454 | 687 | 0.35 | |||||||||||||||||||||||
| Total interest-bearing deposits | 3,616,447 | 14,904 | 0.41 | 3,214,894 | 9,421 | 0.29 | 2,745,378 | 7,166 | 0.26 | |||||||||||||||||||||||
| FHLB advances | 716,962 | 8,263 | 1.15 | 735,975 | 4,707 | 0.64 | 621,024 | 3,008 | 0.48 | |||||||||||||||||||||||
| Trust preferred borrowings | 67,011 | 1,940 | 2.90 | 67,011 | 1,622 | 2.42 | 67,011 | 1,362 | 2.00 | |||||||||||||||||||||||
| Senior debt | 134,136 | 7,228 | 5.39 | 108,577 | 6,356 | 5.85 | 53,757 | 3,766 | 7.01 | |||||||||||||||||||||||
Other borrowed funds (4) | 130,951 | 1,120 | 0.86 | 133,486 | 727 | 0.54 | 134,517 | 474 | 0.35 | |||||||||||||||||||||||
| Total interest-bearing liabilities | 4,665,507 | 33,455 | 0.72 | 4,259,943 | 22,833 | 0.54 | 3,621,687 | 15,776 | 0.44 | |||||||||||||||||||||||
| Noninterest-bearing demand deposits | 1,352,322 | 1,087,502 | 884,857 | |||||||||||||||||||||||||||||
| Other noninterest-bearing liabilities | 76,879 | 56,755 | 44,660 | |||||||||||||||||||||||||||||
| Stockholders’ equity | 725,763 | 638,624 | 522,925 | |||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 6,820,471 | $ | 6,042,824 | $ | 5,074,129 | ||||||||||||||||||||||||||
| Excess of interest-earning assets over interest-bearing liabilities | $ | 1,019,217 | $ | 812,530 | $ | 746,536 | ||||||||||||||||||||||||||
| Net interest income | $ | 221,271 | $ | 193,745 | $ | 166,800 | ||||||||||||||||||||||||||
| Interest rate spread | 3.81 | % | 3.79 | % | 3.79 | % | ||||||||||||||||||||||||||
| Net interest margin | 3.95 | % | 3.88 | % | 3.87 | % | ||||||||||||||||||||||||||
We maintain an allowance for loan lossesACL at an appropriate level based on our assessment of estimable and probable losses in the loan portfolio, which we evaluate in accordance with applicable accounting principles, as discussed further in “Nonperforming“Nonperforming Assets.” Our evaluation is based on a review of the portfolio and requires significant, complex and difficult judgments.
For the year ended December 31, 20172023, we recorded a provision for loancredit losses of $11.0$88.1 million, a net change of $40.0 million, compared to $13.0the provision of credit losses of $48.1 million in 2016 and $7.8 million in 2015.2022. The provision in 2016 included $6.5 million related to two large relationships. The 2017 decrease in the provision for loan losses in comparison with 2016increase was due to improving economic conditions which resulted in lower required reserves and net charge-offs.
| Twelve months ended | |||||||||||
| (Dollars in thousands) | December 31, 2017 | December 31, 2016 | December 31, 2015 | ||||||||
| Noninterest income (GAAP) | $ | 124,644 | $ | 105,061 | $ | 90,256 | |||||
| Less: Securities gains, net | 1,984 | 2,369 | 1,478 | ||||||||
Adjusted noninterest income (non-GAAP) (1) | $ | 122,660 | $ | 102,692 | $ | 88,778 | |||||
The ACL was $186.1 million at December 31, 2023 compared to $151.9 million at December 31, 2022. The increase of the impactACL was primarily due to net loan growth across the CRE, Consumer, and commercial small business leasing portfolios and the higher provisions noted above. The ratio of new productsallowance for credit losses to total loans and expanded revenue sources. Feesleases was 1.35% at December 31, 2023 and 1.17% at December 31, 2022.
Net charge-offs were $53.8 million for cash managementthe year ended December 31, 2023 compared to $16.8 million for the year-ended December 31, 2022. The increase in net charge-offs was primarily driven by our Upstart and other servicescommercial small business leasing portfolios.
The following tables detail the allocation of the ACL and show our net charge-offs (recoveries) by portfolio category:
| (Dollars in thousands) | Commercial and Industrial(1) | Owner- occupied Commercial | Commercial Mortgages | Construction | Residential(2) | Consumer(3) | Total | |||||||||||||||||||||||||||||||||||||
| As of December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | $ | 64,564 | $ | 10,719 | $ | 36,055 | $ | 10,762 | $ | 5,483 | $ | 58,543 | $ | 186,126 | ||||||||||||||||||||||||||||||
| % of ACL to total ACL | 35 | % | 6 | % | 19 | % | 6 | % | 3 | % | 31 | % | 100 | % | ||||||||||||||||||||||||||||||
| Loan portfolio balance | $ | 3,163,692 | $ | 1,886,087 | $ | 3,801,180 | $ | 1,035,530 | $ | 867,895 | $ | 2,012,134 | $ | 12,766,518 | ||||||||||||||||||||||||||||||
| % to total loans and leases | 24 | % | 15 | % | 30 | % | 8 | % | 7 | % | 16 | % | 100 | % | ||||||||||||||||||||||||||||||
| Year ended December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | $ | 42,294 | $ | 184 | $ | 300 | $ | 794 | $ | 41 | $ | 22,394 | $ | 66,007 | ||||||||||||||||||||||||||||||
| Recoveries | 9,721 | 54 | 7 | 532 | 260 | 1,625 | 12,199 | |||||||||||||||||||||||||||||||||||||
| Net charge-offs (recoveries) | $ | 32,573 | $ | 130 | $ | 293 | $ | 262 | $ | (219) | $ | 20,769 | $ | 53,808 | ||||||||||||||||||||||||||||||
| Average loan balance | $ | 3,177,739 | $ | 1,863,542 | $ | 3,562,070 | $ | 1,008,768 | $ | 817,758 | $ | 1,922,828 | $ | 12,352,704 | ||||||||||||||||||||||||||||||
| Ratio of net charge-offs (recoveries) to average gross loans | 1.03 | % | 0.01 | % | 0.01 | % | 0.03 | % | (0.03) | % | 1.08 | % | 0.44 | % | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | Commercial and Industrial(1) | Owner- occupied Commercial | Commercial Mortgages | Construction | Residential(2) | Consumer(3) | Total | |||||||||||||||||||||||||||||||||||||
| As of December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | $ | 59,394 | $ | 6,019 | $ | 21,473 | $ | 6,987 | $ | 4,668 | $ | 53,320 | $ | 151,861 | ||||||||||||||||||||||||||||||
| % of ACL to total ACL | 39 | % | 4 | % | 14 | % | 5 | % | 3 | % | 35 | % | 100 | % | ||||||||||||||||||||||||||||||
| Loan portfolio balance | $ | 3,134,326 | $ | 1,809,582 | $ | 3,351,084 | $ | 1,044,049 | $ | 759,465 | $ | 1,810,930 | $ | 11,909,436 | ||||||||||||||||||||||||||||||
| % to total loans and leases | 26 | % | 15 | % | 28 | % | 9 | % | 7 | % | 15 | % | 100 | % | ||||||||||||||||||||||||||||||
| Year ended December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | $ | 19,004 | $ | 179 | $ | 581 | $ | — | $ | 186 | $ | 7,520 | $ | 27,470 | ||||||||||||||||||||||||||||||
| Recoveries | 6,112 | 278 | 223 | 2,567 | 665 | 793 | 10,638 | |||||||||||||||||||||||||||||||||||||
| Net charge-offs (recoveries) | $ | 12,892 | $ | (99) | $ | 358 | $ | (2,567) | $ | (479) | $ | 6,727 | $ | 16,832 | ||||||||||||||||||||||||||||||
| Average loan balance | $ | 3,043,836 | $ | 1,831,428 | $ | 3,319,687 | $ | 962,082 | $ | 787,273 | $ | 1,543,704 | $ | 11,488,010 | ||||||||||||||||||||||||||||||
| Ratio of net charge-offs (recoveries) to average gross loans | 0.42 | % | (0.01) | % | 0.01 | % | (0.27) | % | (0.06) | % | 0.44 | % | 0.15�� | % | ||||||||||||||||||||||||||||||
(1)Includes commercial small business leases and PPP loans.
(2)Excludes reverse mortgages.
(3)Includes home equity lines of credit, installment loans unsecured lines of credit and education loans.
58
Noninterest Income
Noninterest income increased $29.7 million to $289.9 million in our2023 from $260.1 million in 2022. This increase reflects a $26.9 million increase from Cash Connect® segment increased $1.8driven by the rising rate environment and continued growth in the smart safe space, $10.2 million due to several new servicesincrease in Wealth Management revenue, a $9.5 million gain realized from our investment in Spring EQ, and product enhancements. Partially offsetting these increases$4.0 million in capital markets income. The increase was partially offset by a $1.1$10.6 million decrease in other banking fees, including fees associated with our consumer lending partnerships, gain on sale of SBA loans and traditional bank service fees, and a $2.5 million decrease in mortgage banking activities partially reflecting our ongoing strategyactivities. In addition to these decreases, we recognized $6.0 million of selling most newly-originated residential mortgagesunrealized gains on equity investments and $2.6 million from BMTIA in the secondary market.2022. Our diverse fee-based businesses support sustainability of noninterest income through economic cycles.
Noninterest Expenses
Noninterest expense in 2017 increased $37.8decreased $12.7 million to $226.5 million from $188.7$561.6 million in 2016. Excluding the items listed in the table below, noninterest expense increased $28.4 million, or 16%, to $208.52023 from $574.3 million in 2017 from $180.12022. The decrease was primarily due to $61.5 million in 2016.
| Twelve months ended | ||||||||
| (Dollars in thousands) | December 31, 2017 | December 31, 2016 | December 31, 2015 | |||||
| Noninterest expenses (GAAP) | 226,461 | 188,666 | 165,460 | |||||
| Less: Provision for legal settlement | 12,000 | — | — | |||||
| Fraud loss | 2,844 | — | — | |||||
| WSFS Foundation contribution | 1,500 | — | — | |||||
| Debt extinguishment costs | 695 | — | 651 | |||||
Corporate development costs (1) | 878 | 8,529 | 7,620 | |||||
Adjusted noninterest expenses (non-GAAP) (2) | 208,544 | 180,137 | 157,189 | |||||
Income Taxes
We recorded $58.2$96.2 million of income tax expense for the year ended December 31, 20172023 compared to $78.0 million for the year ended December 31, 2022. The increase in income tax expense was primarily driven by an increase in income before taxes of $33.1 million and $30.3$64.7 million for the yearsyear ended December 31, 2016 and 2015, respectively.2023 compared to the year ended December 31, 2022. The effective tax rates for the years ended December 31, 2017, 20162023 and 20152022 were 53.7%, 34.0%,26.3% and 36.1%25.9%, respectively. The higher tax expense and effective tax rates in 2017 wererate for year ended December 31, 2023 increased primarily due to a re-measurement of our deferred tax asset resulting from the Tax Reform Act and the tax impact of our decision to surrender ourcertain BOLI policies in 2018. Volatility2023 that resulted in $7.1 million of tax expense. In addition, the 2022 effective tax rates is also impactedrate reflects the impact of the write-off of $6.7 million of nondeductible goodwill related to the sale of the BMT Insurance Advisors business. Further, the tax expense associated with nondeductible acquisition costs in 2023 decreased compared to 2022. There were no nondeductible acquisition costs during the year ended December 31, 2023 compared to $1.8 million incurred in 2022.
The effective tax rate reflects the recognition of certain tax benefits in the financial statements including those benefits from tax-exempt interest income, federal low-income housing/research and development tax credits, and excess tax benefits from recognized stock compensation. These tax benefits are offset by the leveltax effect of pretaxstock-based compensation expense related to incentive stock options, nondeductible acquisition costs and a provision for state income or loss, combined with the amounttax expense.
We frequently analyze our projections of tax-freetaxable income as well as the effects of stock compensation tax benefits, consistent withand make adjustments to our adoption during 2016 of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, Compensation - Stock Compensation, Compensation - Stock Compensation (Topic 718). The provision for income taxes includes federal, state and local income taxes that are currently payable or deferred becauseaccordingly.
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SEGMENT INFORMATION
For financial reporting purposes, our business has three reporting segments: WSFS Bank, Cash Connect®, and Wealth Management. The WSFS Bank segment provides loans and leases and other financial products to commercial and retailconsumer customers. Cash Connect® provides ATM vault cash, smart safe and other cash logistics services in the U.S through strategic partnerships with several of the largest networks, manufacturers and service providers in the ATM industry. Cash Connect® services non-bank and WSFS-branded ATMs and smart safes nationwide. The Wealth Management segment provides a broad array of fiduciary,planning and advisory services, investment management, trust services, and credit and deposit products to individual, corporate and institutional clients.
WSFS Bank Segment
The WSFS Bank segment income before taxes increased $19.0$38.9 million, or 24%18%, in 20172023 compared to 20162022 primarily due primarily to an increase in external net interest income of $27.2$80.0 million or 15%, reflecting strong organic and acquisition-related growth, continued optimization of our balance sheet mix, and continued strong performance in our purchased loan portfolio. The increase in net external customer interest income was partially offset by an increasedue to the rising interest rate environment and a decrease in external operating expenses of $12.4$40.3 million, or 8%, primarily driven by higherlower corporate development and restructuring costs, for compensation expense to support the growth of the business, higher infrastructure costs also associated with business growth, and a $1.2 million increase in the provision for loan losses, primarily driven by overall portfolio growth.
Cash Connect® Segment
The Cash Connect® segment income before taxes decreased $1.1to $4.2 million or 13%, in 2017 compared to 2016 primarily due to a $6.92023 from $7.3 million or 35%, increase in expenses associated with increased investments for several new services2022. During 2023, the Cash Connect® segment focused on expanding smart safe and product enhancements to our fee-basedATM managed services and smart safe offerings, which continue to both diversify and expand revenue sources, as well as an increase of $3.7 million, or 65% in funding costs. Offsetting these expense increases, external fee income while optimizing funding source composition and operational efficiency in the rapidly rising interest rate environment. The interest rate environment materially increased $10 million or 29%. At December 31, 2017vault operating expenses, resulting in a full-year 2023 ROA for the Cash Connect® segment of 0.80%, a decrease of 21bps in comparison with full-year 2022. Cash Connect® had over $970.1 million$1.9 billion in total cash managed compared to over $1.0at December 31, 2023 and $1.7 billion at December 31, 2016.2022. At year-end 2017,2023, Cash Connect® serviced over 20,000approximately 33,000 non-bank ATMs compared to approximately 26,300 at year-end 2022 as a result of a large industry participant exiting their ATM cash vault business and over 800 retailapproximately 8,700 smart safes nationwide compared to 16,000 ATMS and only 100approximately 7,500 smart safes at year-end 2016.2022.
Nonperforming assets include nonaccruing loans, OREO and restructured loans. Nonaccruing loans are those on which we no longer accrue interest. Loans are placed on nonaccrual status immediately if, in the opinion of management, collection is doubtful, or when principal or interest is past due 90 days or more and the value of the collateral is insufficient to cover principal and interest. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed and charged against interest income. In addition, the amortization of net deferred loan fees is suspended when a loan is placed on nonaccrual status. Subsequent cash receipts are applied either to the outstanding principal balance or recorded as interest income, depending on management’s assessment of the ultimate collectability of principal and interest. Past due loans are defined as loans contractually past due 90 days or more as to principal or interest payments but which remain in accrual status because they are considered well secured and in the process of collection.
The Wealth Management segment income before taxes decreased $6.6following table shows our nonperforming assets and past due loans at the dates indicated:
| At December 31, | |||||||||||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | |||||||||||||||||||||||||||
| Nonaccruing loans: | |||||||||||||||||||||||||||||
| Commercial and industrial | $ | 29,389 | $ | 6,770 | |||||||||||||||||||||||||
| Owner-occupied commercial | 4,862 | 386 | |||||||||||||||||||||||||||
| Commercial mortgages | 22,292 | 5,159 | |||||||||||||||||||||||||||
| Construction | 12,617 | 5,143 | |||||||||||||||||||||||||||
| Residential | 2,579 | 3,199 | |||||||||||||||||||||||||||
| Consumer | 2,446 | 2,145 | |||||||||||||||||||||||||||
Total nonaccruing loans(1) | 74,185 | 22,802 | |||||||||||||||||||||||||||
| Other real estate owned | 1,569 | 833 | |||||||||||||||||||||||||||
Restructured loans(2) | — | 19,737 | |||||||||||||||||||||||||||
| Total nonperforming assets | $ | 75,754 | $ | 43,372 | |||||||||||||||||||||||||
| Past due loans: | |||||||||||||||||||||||||||||
| Commercial | $ | 1,552 | $ | 1,022 | |||||||||||||||||||||||||
Consumer(3) | 10,032 | 15,513 | |||||||||||||||||||||||||||
| Total past due loans | $ | 11,584 | $ | 16,535 | |||||||||||||||||||||||||
Troubled loans(4)(5): | |||||||||||||||||||||||||||||
| Commercial | $ | 85,330 | $ | — | |||||||||||||||||||||||||
| Residential | 777 | — | |||||||||||||||||||||||||||
| Consumer | 9,161 | — | |||||||||||||||||||||||||||
| Total troubled loans | $ | 95,268 | $ | — | |||||||||||||||||||||||||
Ratio of allowance for credit losses to total gross loans and leases(6) | 1.35 | % | 1.17 | % | |||||||||||||||||||||||||
Ratio of nonaccruing loans to total gross loans and leases(7) | 0.58 | 0.19 | |||||||||||||||||||||||||||
| Ratio of nonperforming assets to total assets | 0.37 | 0.22 | |||||||||||||||||||||||||||
| Ratio of allowance for credit losses to nonaccruing loans | 251 | 666 | |||||||||||||||||||||||||||
Ratio of allowance for credit losses to total nonperforming assets(8) | 246 | 350 | |||||||||||||||||||||||||||
(1)Includes nonaccrual loans held-for-sale.
(2)Accruing loans only, which includes acquired nonimpaired loans. Nonaccruing Troubled Debt Restructurings (TDRs) are included in their respective categories of nonaccruing loans.
(3)Includes delinquent, but still accruing, U.S. government guaranteed student loans with little risk of credit loss.
(4)Loans with certain modifications (as prescribed in ASU No. 2022-02) to borrowers experiencing financial difficulty.
(5)Includes troubled loan held-for-sale.
(6)Represents amortized cost basis for loans, leases and held-to-maturity securities.
(7)Total loans exclude loans held-for-sale and reverse mortgages.
(8)Excludes acquired PCD loans.
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Nonperforming assets increased $32.4 million in 2017 in comparison with 2016. External operating expense increased $21.2 million compared to 2016, whichbetween December 31, 2022 and December 31, 2023. This increase was primarily due to the previously discussed legal settlement, higher ongoing operating expensestransfer in of seven commercial relationships totaling $61.1 million and two CRE relationships totaling $19.4 million during the period. These inflows were partially offset by partial charge-offs on some of the C&I relationships totaling $20.7 million, several smaller payoffs and the continued collection of principal payments on the majority of these loans. The ratio of nonperforming assets to supporttotal assets slightly increased from 0.22% at December 31, 2022 to 0.37% at December 31, 2023.
The following table summarizes the Powdermillchanges in nonperforming assets during the periods indicated:
| Year Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | ||||||||||||||||||
| Beginning balance | $ | 43,372 | $ | 33,133 | ||||||||||||||||
| Additions | 110,586 | 34,041 | ||||||||||||||||||
| Collections | (19,874) | (17,293) | ||||||||||||||||||
Transfers to accrual(1) | (20,263) | (922) | ||||||||||||||||||
| Charge-offs | (38,067) | (5,587) | ||||||||||||||||||
| Ending balance | $ | 75,754 | $ | 43,372 | ||||||||||||||||
(1)Includes impact of ASU No. 2022-02 adoption.
The timely identification of problem loans is a key element in our strategy to manage our loan portfolio. Problem loans are all criticized, classified and West Capital acquisitionsnonperforming loans and overall business growth. Excludingother real estate owned. Timely identification enables us to take appropriate action and accordingly, minimize losses. An asset review system established to monitor the settlement, segmentasset quality of our loans and investments in real estate portfolios facilitates the identification of problem assets. In general, this system uses guidelines established by federal regulation.
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RESULTS OF OPERATIONS
2022 compared with 2021
For a discussion of our results for the year ended December 31, 2022 compared to the year ended December 31, 2021, please see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 28, 2023.
2023 compared with 2022
We recorded net income before taxes increased $5.4attributable to WSFS of $269.2 million, or 51%. For further information related$4.40 per diluted common share, for the year ended December 31, 2023, a increase of $46.8 million compared to $222.4 million, or $3.49 per diluted common share, for the year ended December 31, 2022.
•Net interest income for the year ended December 31, 2023 was $725.1 million, an increase of $62.2 million compared to 2022, primarily due to the legal settlement, see Note 23 to the Consolidated Financial Statements.benefits of our asset-sensitive balance sheet and an increase from the balance sheet size and mix. The increase in external operating expense was partially offset by an increase of $9.5lower purchase accounting accretion. See “Net Interest Income” for further information.
•Our provision for credit losses increased $40.0 million or 36%, in external fee income reflecting growth in several2023, primarily due to higher provisions on our CRE, commercial small business linesleasing, and Upstart portfolios as well as our elder care portfolio within C&I. See “Provision/Allowance for Credit Losses” for further information.
•Noninterest income increased $29.7 million in 2023, primarily due to increases in income from Cash Connect®, Wealth Management fee income, a realized gain from our investment in Spring EQ, and capital markets income. These increases were partially offset by decreases in other banking fees and mortgage banking activities, and unrealized gains on equity investments and income from BMTIA (business sold in 2022). See “Noninterest Income” for further information.
•Noninterest expense decreased $12.7 million in 2023, primarily due to net corporate development and restructuring costs incurred in 2022, partially offset by increases in other operating expenses driven by Cash Connect®, FDIC expenses, salaries and benefits costs, and professional fees. See “Noninterest Expense” for further information.
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Net Interest Income
The following table provides information regarding the full-year positive impactaverage balances of, and yields/rates on, interest-earning assets and interest-bearing liabilities during the periods indicated:
| Year Ended December 31, | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest & Dividends | Yield/ Rate(1) | Average Balance | Interest & Dividends | Yield/ Rate (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans:(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial loans and leases | $ | 5,041,280 | $ | 346,389 | 6.88 | % | $ | 4,875,265 | $ | 253,293 | 5.21 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage loans | 4,570,839 | 317,603 | 6.95 | 4,281,768 | 203,611 | 4.76 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential | 820,600 | 38,886 | 4.74 | 790,650 | 35,420 | 4.48 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | 1,922,827 | 138,510 | 7.20 | 1,543,704 | 86,743 | 5.62 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans held for sale | 47,424 | 3,883 | 8.19 | 65,927 | 3,687 | 5.59 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans and leases | 12,402,970 | 845,271 | 6.82 | 11,557,314 | 582,754 | 5.05 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities(3) | 4,640,646 | 107,555 | 2.32 | 5,151,469 | 106,606 | 2.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Investment securities(3) | 367,026 | 8,783 | 2.71 | 338,979 | 6,899 | 2.39 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other interest-earning assets | 282,462 | 14,913 | 5.28 | 878,097 | 7,556 | 0.86 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-earning assets | 17,693,104 | 976,522 | 5.53 | 17,925,859 | 703,815 | 3.94 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | (169,140) | (140,916) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 256,984 | 243,579 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash in non-owned ATMs | 392,007 | 551,108 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank owned life insurance | 98,935 | 100,725 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other noninterest-earning assets | 1,931,147 | 1,783,340 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 20,203,037 | $ | 20,463,695 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities and stockholders’ equity: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing demand | $ | 3,019,050 | $ | 26,671 | 0.88 | % | $ | 3,377,321 | $ | 7,441 | 0.22 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Money market | 4,317,810 | 122,168 | 2.83 | 3,918,756 | 13,536 | 0.35 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Savings | 1,832,601 | 5,733 | 0.31 | 2,265,721 | 965 | 0.04 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Customer time deposits | 1,571,682 | 45,184 | 2.87 | 1,103,336 | 5,626 | 0.51 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing customer deposits | 10,741,143 | 199,756 | 1.86 | 10,665,134 | 27,568 | 0.26 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Brokered deposits | 214,608 | 10,064 | 4.69 | 36,461 | 613 | 1.68 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 10,955,751 | 209,820 | 1.92 | 10,701,595 | 28,181 | 0.26 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Federal Home Loan Bank advances | 103,268 | 5,348 | 5.18 | 12,841 | 538 | 4.19 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Trust preferred borrowings | 90,534 | 6,736 | 7.44 | 90,337 | 3,482 | 3.85 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior and subordinated debt | 221,975 | 9,815 | 4.42 | 248,389 | 8,246 | 3.32 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other borrowed funds(4) | 442,197 | 19,700 | 4.46 | 47,076 | 478 | 1.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 11,813,725 | 251,419 | 2.13 | 11,100,238 | 40,925 | 0.37 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | 5,306,511 | 6,376,459 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other noninterest-bearing liabilities | 787,573 | 590,814 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders’ equity of WSFS | 2,300,467 | 2,398,871 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest | (5,239) | (2,687) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 20,203,037 | $ | 20,463,695 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Excess of interest-earning assets over interest-bearing liabilities | $ | 5,879,379 | $ | 6,825,621 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest and dividend income | $ | 725,103 | $ | 662,890 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate spread | 3.40 | % | 3.57 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest margin | 4.11 | % | 3.71 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Weighted average yields for tax-exempt securities and loans have been computed on a tax-equivalent basis.
(2)Average balances are net of unearned income and include nonperforming loans.
(3)Includes securities held-to-maturity (at amortized cost) and securities available-for-sale (at fair value).
(4)Includes federal funds purchased.
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Net interest income increased $62.2 million, or 9%, to $725.1 million in 2023, compared to 2022 primarily due to a $60.6 million increase from the benefits of our combinations with Powdermill and West Capital,asset-sensitive balance sheet and a $4.0 million increase from the balance sheet size and mix, offset by a $2.4 million decrease in purchase accounting accretion. Net interest margin increased 40 bps to 4.11% in 2023 from 3.71% in 2022. The increase was primarily due to 24 bps increase from the balance sheet size and mix and 17 bps from the benefits of $3.2 millionour asset-sensitive balance sheet, partially offset by 1 bp from lower purchase accounting accretion.
The following table provides certain information regarding changes in net interest income attributable to changes in the provisionvolumes of interest-earning assets and interest-bearing liabilities and changes in the rates for loan lossesthe periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on the changes that are attributable to: (i) changes in 2017,volume (change in volume multiplied by prior year rate); (ii) changes in rates (change in rate multiplied by prior year volume on each category); and (iii) net change (the sum of the change in volume and the change in rate). Changes due to the private banking exposure described below, which impacted the 2016 provision only.combination of rate and volume changes (changes in volume multiplied by changes in rate) are allocated proportionately between changes in rate and changes in volume.
| Year Ended December 31, | 2023 vs. 2022 | ||||||||||||||||
| (Dollars in thousands) | Volume | Yield/Rate | Net | ||||||||||||||
| Interest Income: | |||||||||||||||||
| Loans: | |||||||||||||||||
Commercial loans and leases(1) | $ | 8,940 | $ | 84,156 | $ | 93,096 | |||||||||||
| Commercial mortgage loans | 14,587 | 99,405 | 113,992 | ||||||||||||||
| Residential | 1,369 | 2,097 | 3,466 | ||||||||||||||
| Consumer | 24,137 | 27,630 | 51,767 | ||||||||||||||
| Loans held for sale | (1,216) | 1,412 | 196 | ||||||||||||||
| Mortgage-backed securities | (11,185) | 12,134 | 949 | ||||||||||||||
Investment securities(2) | 719 | 1,165 | 1,884 | ||||||||||||||
| Other interest-earning assets | (8,192) | 15,549 | 7,357 | ||||||||||||||
| Favorable | 29,159 | 243,548 | 272,707 | ||||||||||||||
| Interest expense: | |||||||||||||||||
| Deposits: | |||||||||||||||||
| Interest-bearing demand | (866) | 20,096 | 19,230 | ||||||||||||||
| Money market | 1,539 | 107,093 | 108,632 | ||||||||||||||
| Savings | (205) | 4,973 | 4,768 | ||||||||||||||
| Customer time deposits | 3,324 | 36,234 | 39,558 | ||||||||||||||
| Brokered certificates of deposits | 6,916 | 2,535 | 9,451 | ||||||||||||||
| FHLB advances | 4,654 | 156 | 4,810 | ||||||||||||||
| Trust preferred borrowings | 8 | 3,246 | 3,254 | ||||||||||||||
| Senior and subordinated debt | (946) | 2,515 | 1,569 | ||||||||||||||
| Other borrowed funds | 13,713 | 5,509 | 19,222 | ||||||||||||||
| Unfavorable | 28,137 | 182,357 | 210,494 | ||||||||||||||
| Net change, as reported | $ | 1,022 | $ | 61,191 | $ | 62,213 | |||||||||||
(1)Includes a tax-equivalent income adjustment related to commercial loans.
(2)Includes a tax-equivalent income adjustment related to municipal bonds.
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Investment Securities
The Wealth Management segment income before taxes decreased $1.7 million,following table details the maturity and weighted average yield of the available-for-sale investment portfolio as of December 31, 2023:
| (Dollars in thousands) | Maturing During 2024 | Maturing From 2025 Through 2028 | Maturing From 2029 Through 2033 | Maturing After 2033 | Total | ||||||||||||||||||||||||
| Collateralized mortgage obligations (CMO) | |||||||||||||||||||||||||||||
| Amortized cost | $ | — | $ | 25,645 | $ | 65,192 | $ | 470,115 | $ | 560,952 | |||||||||||||||||||
| Weighted average yield | — | % | 2.37 | % | 1.97 | % | 1.84 | % | 1.88 | % | |||||||||||||||||||
| Fannie Mae (FNMA) mortgage-backed securities (MBS) | |||||||||||||||||||||||||||||
| Amortized cost | $ | — | $ | 60,147 | $ | 230,640 | $ | 3,253,975 | $ | 3,544,762 | |||||||||||||||||||
| Weighted average yield | — | % | 2.38 | % | 2.05 | % | 1.99 | % | 2.00 | % | |||||||||||||||||||
| Freddie Mac (FHLMC) MBS | |||||||||||||||||||||||||||||
| Amortized cost | $ | — | $ | 431 | $ | 51,704 | $ | 74,721 | $ | 126,856 | |||||||||||||||||||
| Weighted average yield | — | % | 2.43 | % | 2.39 | % | 3.15 | % | 2.84 | % | |||||||||||||||||||
| Ginnie Mae (GNMA) MBS | |||||||||||||||||||||||||||||
| Amortized cost | $ | — | $ | 1 | $ | 558 | $ | 45,774 | $ | 46,333 | |||||||||||||||||||
| Weighted average yield | — | % | 4.79 | % | 2.98 | % | 3.39 | % | 3.38 | % | |||||||||||||||||||
| Government-sponsored enterprises (GSE) | |||||||||||||||||||||||||||||
| Amortized cost | $ | — | $ | — | $ | 221,861 | $ | 3,578 | $ | 225,439 | |||||||||||||||||||
| Weighted average yield | — | % | — | % | 1.30 | % | 1.44 | % | 1.30 | % | |||||||||||||||||||
| Total amortized cost | $ | — | $ | 86,224 | $ | 569,955 | $ | 3,848,163 | $ | 4,504,342 | |||||||||||||||||||
| Weighted average yield | — | % | 2.38 | % | 1.78 | % | 2.01 | % | 1.99 | % | |||||||||||||||||||
As of December 31, 2023, WSFS does not have any tax-exempt securities within the available-for-sale investment portfolio. Yields are calculated on a weighted average basis using the investments amortized cost and respective average yields for each investment category. Expected maturities of mortgage-backed securities may differ from contractual maturities due to calls or 14%, in 2016 in comparison with 2015. External fee income increased $3.9 million, or 17%, reflecting growth in several business lines as well as the positive impactprepay obligations.
57
Provision/Allowance for Credit Losses (ACL)
We maintain an ACL at an appropriate level based on our combinations with Powdermillassessment of estimable and West Capital. The growth in fee income was offset by (i) an increaseprobable losses in the loan portfolio, which we evaluate in accordance with applicable accounting principles, as discussed further in “Nonperforming Assets.” Our evaluation is based on a review of the portfolio and requires significant, complex and difficult judgments.
For the year ended December 31, 2023, we recorded a provision for loancredit losses of $3.3$88.1 million, due to a private banking credit exposure granted under a business development initiative which resulted in a charge-offnet change of $3.5$40.0 million, and incremental loan loss provision, as well as (ii) an increase of $2.6 million, or 16%, in external operating expense compared to 2015, whichthe provision of credit losses of $48.1 million in 2022. The increase was primarily due to higher ongoingprovisions on our CRE, commercial small business leasing, and Upstart portfolios as well as our elder care portfolio within C&I.
The ACL was $186.1 million at December 31, 2023 compared to $151.9 million at December 31, 2022. The increase of the ACL was primarily due to net loan growth across the CRE, Consumer, and commercial small business leasing portfolios and the higher provisions noted above. The ratio of allowance for credit losses to total loans and leases was 1.35% at December 31, 2023 and 1.17% at December 31, 2022.
Net charge-offs were $53.8 million for the year ended December 31, 2023 compared to $16.8 million for the year-ended December 31, 2022. The increase in net charge-offs was primarily driven by our Upstart and commercial small business leasing portfolios.
The following tables detail the allocation of the ACL and show our net charge-offs (recoveries) by portfolio category:
| (Dollars in thousands) | Commercial and Industrial(1) | Owner- occupied Commercial | Commercial Mortgages | Construction | Residential(2) | Consumer(3) | Total | |||||||||||||||||||||||||||||||||||||
| As of December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | $ | 64,564 | $ | 10,719 | $ | 36,055 | $ | 10,762 | $ | 5,483 | $ | 58,543 | $ | 186,126 | ||||||||||||||||||||||||||||||
| % of ACL to total ACL | 35 | % | 6 | % | 19 | % | 6 | % | 3 | % | 31 | % | 100 | % | ||||||||||||||||||||||||||||||
| Loan portfolio balance | $ | 3,163,692 | $ | 1,886,087 | $ | 3,801,180 | $ | 1,035,530 | $ | 867,895 | $ | 2,012,134 | $ | 12,766,518 | ||||||||||||||||||||||||||||||
| % to total loans and leases | 24 | % | 15 | % | 30 | % | 8 | % | 7 | % | 16 | % | 100 | % | ||||||||||||||||||||||||||||||
| Year ended December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | $ | 42,294 | $ | 184 | $ | 300 | $ | 794 | $ | 41 | $ | 22,394 | $ | 66,007 | ||||||||||||||||||||||||||||||
| Recoveries | 9,721 | 54 | 7 | 532 | 260 | 1,625 | 12,199 | |||||||||||||||||||||||||||||||||||||
| Net charge-offs (recoveries) | $ | 32,573 | $ | 130 | $ | 293 | $ | 262 | $ | (219) | $ | 20,769 | $ | 53,808 | ||||||||||||||||||||||||||||||
| Average loan balance | $ | 3,177,739 | $ | 1,863,542 | $ | 3,562,070 | $ | 1,008,768 | $ | 817,758 | $ | 1,922,828 | $ | 12,352,704 | ||||||||||||||||||||||||||||||
| Ratio of net charge-offs (recoveries) to average gross loans | 1.03 | % | 0.01 | % | 0.01 | % | 0.03 | % | (0.03) | % | 1.08 | % | 0.44 | % | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | Commercial and Industrial(1) | Owner- occupied Commercial | Commercial Mortgages | Construction | Residential(2) | Consumer(3) | Total | |||||||||||||||||||||||||||||||||||||
| As of December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | $ | 59,394 | $ | 6,019 | $ | 21,473 | $ | 6,987 | $ | 4,668 | $ | 53,320 | $ | 151,861 | ||||||||||||||||||||||||||||||
| % of ACL to total ACL | 39 | % | 4 | % | 14 | % | 5 | % | 3 | % | 35 | % | 100 | % | ||||||||||||||||||||||||||||||
| Loan portfolio balance | $ | 3,134,326 | $ | 1,809,582 | $ | 3,351,084 | $ | 1,044,049 | $ | 759,465 | $ | 1,810,930 | $ | 11,909,436 | ||||||||||||||||||||||||||||||
| % to total loans and leases | 26 | % | 15 | % | 28 | % | 9 | % | 7 | % | 15 | % | 100 | % | ||||||||||||||||||||||||||||||
| Year ended December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | $ | 19,004 | $ | 179 | $ | 581 | $ | — | $ | 186 | $ | 7,520 | $ | 27,470 | ||||||||||||||||||||||||||||||
| Recoveries | 6,112 | 278 | 223 | 2,567 | 665 | 793 | 10,638 | |||||||||||||||||||||||||||||||||||||
| Net charge-offs (recoveries) | $ | 12,892 | $ | (99) | $ | 358 | $ | (2,567) | $ | (479) | $ | 6,727 | $ | 16,832 | ||||||||||||||||||||||||||||||
| Average loan balance | $ | 3,043,836 | $ | 1,831,428 | $ | 3,319,687 | $ | 962,082 | $ | 787,273 | $ | 1,543,704 | $ | 11,488,010 | ||||||||||||||||||||||||||||||
| Ratio of net charge-offs (recoveries) to average gross loans | 0.42 | % | (0.01) | % | 0.01 | % | (0.27) | % | (0.06) | % | 0.44 | % | 0.15�� | % | ||||||||||||||||||||||||||||||
(1)Includes commercial small business leases and PPP loans.
(2)Excludes reverse mortgages.
(3)Includes home equity lines of credit, installment loans unsecured lines of credit and education loans.
58
Noninterest Income
Noninterest income increased $29.7 million to $289.9 million in 2023 from $260.1 million in 2022. This increase reflects a $26.9 million increase from Cash Connect® driven by the rising rate environment and continued growth in the smart safe space, $10.2 million increase in Wealth Management revenue, a $9.5 million gain realized from our investment in Spring EQ, and $4.0 million in capital markets income. The increase was partially offset by a $10.6 million decrease in other banking fees, including fees associated with our consumer lending partnerships, gain on sale of SBA loans and traditional bank service fees, and a $2.5 million decrease in mortgage banking activities. In addition to these decreases, we recognized $6.0 million of unrealized gains on equity investments and $2.6 million from BMTIA in 2022. Our diverse fee-based businesses support sustainability of noninterest income through economic cycles.
Noninterest Expenses
Noninterest expense decreased $12.7 million to $561.6 million in 2023 from $574.3 million in 2022. The decrease was primarily due to $61.5 million lower net corporate development and restructuring costs, partially offset by increases of $29.5 million in other operating expense driven by higher variable operating costs from Cash Connect®, $9.8 million in FDIC expenses which includes the $5.1 million FDIC special assessment charged to supportrecover losses to the PowdermillDeposit Insurance Fund related to closures of certain banks in 2023, $5.3 million in salaries and West Capital acquisitionsbenefits costs, and overall business growth.$2.7 million in professional fees.
We recorded $96.2 million of income tax expense for the year ended December 31, 2023 compared to $78.0 million for the year ended December 31, 2022. The increase in income tax expense was primarily driven by an increase in income before taxes of $64.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The effective tax rates for the years ended December 31, 2017, 20162023 and 2015 is provided in Note 20 to the Consolidated Financial Statements.
The effective tax rate reflects the recognition of certain tax benefits in the financial statements including those benefits from tax-exempt interest income, federal low-income housing/research and development tax credits, and excess tax benefits from recognized stock compensation. These tax benefits are offset by the tax effect of stock-based compensation expense related to incentive stock options, nondeductible acquisition costs and a provision for state income tax expense.
We frequently analyze our projections of taxable income and make adjustments to our provision for income taxes accordingly.
59
SEGMENT INFORMATION
For financial reporting purposes, our business has three reporting segments: WSFS Bank, Cash Connect®, and Wealth Management. The WSFS Bank segment provides loans and leases and other financial products to commercial and consumer customers. Cash Connect® provides ATM vault cash, smart safe and other cash logistics services in the U.S through strategic partnerships with several of the largest networks, manufacturers and service providers in the ATM industry. Cash Connect® services non-bank and WSFS-branded ATMs and smart safes nationwide. The Wealth Management segment provides a broad array of planning and advisory services, investment management, trust services, and credit and deposit products to individual, corporate and institutional clients.
WSFS Bank Segment
The WSFS Bank segment income before taxes increased $38.9 million, or 18%, in 2023 compared to 2022 primarily the result ofdue to an $80.0 million increase in totalnet external customer depositsinterest income due to the rising interest rate environment and a decrease in external operating expenses of $418.6$40.3 million, primarily driven by lower corporate development and restructuring costs, or 9%, partially offset by increases in inter-segment interest expense of $52.2 million and provision for credit losses of $39.6 million.
Cash Connect® Segment
The Cash Connect® segment income before taxes decreased to $4.2 million in 2023 from $7.3 million in 2022. During 2023, the Cash Connect® segment focused on expanding smart safe and ATM managed services to increase fee income while optimizing funding source composition and operational efficiency in the rapidly rising interest rate environment. The interest rate environment materially increased vault operating expenses, resulting in a decreasefull-year 2023 ROA for the Cash Connect® segment of FHLB advances of $144.2 million, or 17%0.80%, a decrease of $102 million or 78%21bps in fed funds sold, and a decrease of $53.9 million or 35%comparison with full-year 2022. Cash Connect® had $1.9 billion in senior debt, reflecting the redemption of the 2012 senior notes in 2017.
| Year Ended December 31, | ||||||||
| (Dollars in millions) | 2017 | 2016 | 2015 | |||||
| Beginning balance | 4,600 | 3,860 | 3,462 | |||||
| Interest credited | 15 | 9 | 7 | |||||
| Deposit inflows (outflows), net | 403 | 731 | 391 | |||||
| Ending balance | 5,018 | 4,600 | 3,860 | |||||
| (Dollars in thousands) | Less than One Year | One to Five Years | Over Five Years | Total | ||||||||||||
| Interest-rate sensitive assets: | ||||||||||||||||
Commercial loans (2)(3) | $ | 1,636,598 | $ | 583,913 | $ | 279,951 | $ | 2,500,462 | ||||||||
Real estate loans (1) (2) | 1,058,805 | 407,884 | 253,958 | 1,720,647 | ||||||||||||
| Mortgage-backed securities | 107,843 | 347,143 | 392,804 | 847,790 | ||||||||||||
Consumer loans (2) | 344,440 | 84,669 | 117,224 | 546,333 | ||||||||||||
| Investment securities | 45,091 | 75,180 | 70,858 | 191,129 | ||||||||||||
Loans held for sale (2) | 24,910 | — | — | 24,910 | ||||||||||||
| Reverse mortgage loans | (311 | ) | 10,963 | 9,162 | 19,814 | |||||||||||
| Total interest-rate sensitive assets: | 3,217,376 | 1,509,752 | 1,123,957 | 5,851,085 | ||||||||||||
| Interest-rate sensitive liabilities: | ||||||||||||||||
| Money market and interest-bearing demand deposits | 1,613,113 | — | 846,585 | 2,459,698 | ||||||||||||
| FHLB advances | 681,536 | 28,465 | — | 710,001 | ||||||||||||
| Savings accounts | 274,872 | — | 274,872 | 549,744 | ||||||||||||
| Retail certificates of deposit | 190,250 | 252,673 | 3,313 | 446,236 | ||||||||||||
| Brokered certificates of deposit | 223,821 | 1,619 | — | 225,440 | ||||||||||||
| Other borrowed funds | 62,615 | — | — | 62,615 | ||||||||||||
| Jumbo certificates of deposit | 85,523 | 3,518 | — | 89,041 | ||||||||||||
| Trust preferred securities | 67,011 | — | — | 67,011 | ||||||||||||
| Senior notes | — | 98,171 | — | 98,171 | ||||||||||||
| Total Interest-rate sensitive liabilities: | 3,198,741 | 384,446 | 1,124,770 | 4,707,957 | ||||||||||||
| Off Balance Sheet: | (75,000 | ) | 50,000 | 25,000 | — | |||||||||||
| Excess (deficiency) of interest-rate sensitive assets over interest-rate liabilities (interest-rate sensitive gap) | $ | (56,365 | ) | $ | 1,175,306 | $ | 24,187 | $ | 1,143,128 | |||||||
| One-year interest-rate sensitive assets/interest-rate sensitive liabilities | 98.24 | % | ||||||||||||||
| One-year interest-rate sensitive gap as a percent of total assets | (0.81 | )% | ||||||||||||||
NONPERFORMING ASSETS
Nonperforming assets (NPAs) include nonaccruing loans, nonperforming real estate, other real estate ownedOREO and restructured commercial, mortgage and home equity consumer debt.loans. Nonaccruing loans are those on which the accrual of interest has ceased.we no longer accrue interest. Loans are placed on nonaccrual status immediately if, in the opinion of management, collection is doubtful, or when principal or interest is past due 90 days or more and the value of the collateral is insufficient to cover principal and interest. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed and charged against interest income. In addition, the amortization of net deferred loan fees is suspended when a loan is placed on nonaccrual status. Subsequent cash receipts are applied either to the outstanding principal balance or recorded as interest income, depending on management’s assessment of the ultimate collectability of principal and interest. Past due loans are defined as loans contractually past due 90 days or more as to principal or interest payments but which remain in accrual status because they are considered well secured and in the process of collection.
The following table shows our nonperforming assets and past due loans at the dates indicated:
| At December 31, | |||||||||||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | |||||||||||||||||||||||||||
| Nonaccruing loans: | |||||||||||||||||||||||||||||
| Commercial and industrial | $ | 29,389 | $ | 6,770 | |||||||||||||||||||||||||
| Owner-occupied commercial | 4,862 | 386 | |||||||||||||||||||||||||||
| Commercial mortgages | 22,292 | 5,159 | |||||||||||||||||||||||||||
| Construction | 12,617 | 5,143 | |||||||||||||||||||||||||||
| Residential | 2,579 | 3,199 | |||||||||||||||||||||||||||
| Consumer | 2,446 | 2,145 | |||||||||||||||||||||||||||
Total nonaccruing loans(1) | 74,185 | 22,802 | |||||||||||||||||||||||||||
| Other real estate owned | 1,569 | 833 | |||||||||||||||||||||||||||
Restructured loans(2) | — | 19,737 | |||||||||||||||||||||||||||
| Total nonperforming assets | $ | 75,754 | $ | 43,372 | |||||||||||||||||||||||||
| Past due loans: | |||||||||||||||||||||||||||||
| Commercial | $ | 1,552 | $ | 1,022 | |||||||||||||||||||||||||
Consumer(3) | 10,032 | 15,513 | |||||||||||||||||||||||||||
| Total past due loans | $ | 11,584 | $ | 16,535 | |||||||||||||||||||||||||
Troubled loans(4)(5): | |||||||||||||||||||||||||||||
| Commercial | $ | 85,330 | $ | — | |||||||||||||||||||||||||
| Residential | 777 | — | |||||||||||||||||||||||||||
| Consumer | 9,161 | — | |||||||||||||||||||||||||||
| Total troubled loans | $ | 95,268 | $ | — | |||||||||||||||||||||||||
Ratio of allowance for credit losses to total gross loans and leases(6) | 1.35 | % | 1.17 | % | |||||||||||||||||||||||||
Ratio of nonaccruing loans to total gross loans and leases(7) | 0.58 | 0.19 | |||||||||||||||||||||||||||
| Ratio of nonperforming assets to total assets | 0.37 | 0.22 | |||||||||||||||||||||||||||
| Ratio of allowance for credit losses to nonaccruing loans | 251 | 666 | |||||||||||||||||||||||||||
Ratio of allowance for credit losses to total nonperforming assets(8) | 246 | 350 | |||||||||||||||||||||||||||
(1)Includes nonaccrual loans held-for-sale.
(2)Accruing loans only, which includes acquired nonimpaired loans. Nonaccruing Troubled Debt Restructurings (TDRs) are included in their respective categories of nonaccruing loans.
(3)Includes delinquent, but still accruing, U.S. government guaranteed student loans with little risk of credit loss.
(4)Loans with certain modifications (as prescribed in ASU No. 2022-02) to borrowers experiencing financial difficulty.
(5)Includes troubled loan held-for-sale.
(6)Represents amortized cost basis for loans, leases and held-to-maturity securities.
(7)Total loans exclude loans held-for-sale and reverse mortgages.
(8)Excludes acquired PCD loans.
52
| At December 31, | |||||||||||||||||||
| (Dollars in thousands) | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||
| Nonaccruing loans: | |||||||||||||||||||
| Commercial | $ | 19,057 | $ | 2,015 | $ | 5,328 | $ | 2,706 | $ | 4,305 | |||||||||
| Owner-occupied commercial | 3,654 | 2,078 | 1,091 | 2,475 | 5,197 | ||||||||||||||
| Commercial mortgages | 5,870 | 9,821 | 3,326 | 8,245 | 8,565 | ||||||||||||||
| Construction | 1,804 | — | — | — | 1,158 | ||||||||||||||
| Residential mortgages | 4,124 | 4,967 | 7,287 | 7,068 | 8,432 | ||||||||||||||
| Consumer | 1,927 | 3,995 | 4,133 | 3,557 | 3,293 | ||||||||||||||
| Total nonaccruing loans | 36,436 | 22,876 | 21,165 | 24,051 | 30,950 | ||||||||||||||
| Other real estate owned | 2,503 | 3,591 | 5,080 | 5,734 | 4,532 | ||||||||||||||
Restructured loans (1) | 20,061 | 14,336 | 13,647 | 22,600 | 12,332 | ||||||||||||||
| Total nonperforming assets (NPAs) | $ | 59,000 | $ | 40,803 | $ | 39,892 | $ | 52,385 | $ | 47,814 | |||||||||
| Past due loans: | |||||||||||||||||||
| Residential mortgages | $ | 356 | $ | 153 | $ | 251 | $ | — | $ | 533 | |||||||||
Commercial and commercial mortgages (3) | — | — | 17,529 | — | — | ||||||||||||||
| Consumer | 105 | 285 | 252 | — | — | ||||||||||||||
| Total past due loans | $ | 461 | $ | 438 | $ | 18,032 | $ | — | $ | 533 | |||||||||
Ratio of nonaccruing loans to total loans (2) | 0.76 | % | 0.51 | % | 0.56 | % | 0.75 | % | 1.05 | % | |||||||||
Ratio of allowance for loan losses to gross loans (2) | 0.84 | 0.89 | 0.98 | 1.23 | 1.40 | ||||||||||||||
| Ratio of NPA to total assets | 0.84 | 0.60 | 0.71 | 1.08 | 1.06 | ||||||||||||||
| Ratio of NPA (excluding accruing TDR) to total assets | 0.56 | 0.39 | 0.47 | 0.61 | 0.79 | ||||||||||||||
| Ratio of loan loss allowance to nonaccruing loans | 111.43 | 173.77 | 175.27 | 163.93 | 133.26 | ||||||||||||||
Nonperforming assets increased $18.2$32.4 million between December 31, 20162022 and December 31, 2017, which2023. This increase was primarily due to two largethe transfer in of seven commercial relationships intotaling $61.1 million and two CRE relationships totaling $19.4 million during the commercial and industrial portfolio totaling $18.0 million. As a resultperiod. These inflows were partially offset by partial charge-offs on some of the increase in nonperforming assets,C&I relationships totaling $20.7 million, several smaller payoffs and the continued collection of principal payments on the majority of these loans. The ratio of nonperforming assets to total assets slightly increased from 0.60%0.22% at December 31, 20162022 to 0.84%0.37% at December 31, 2017.
2023.
The following table provides an analysis ofsummarizes the changechanges in the balance of nonperforming assets during the last three years:periods indicated:
| Year Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | ||||||||||||||||||
| Beginning balance | $ | 43,372 | $ | 33,133 | ||||||||||||||||
| Additions | 110,586 | 34,041 | ||||||||||||||||||
| Collections | (19,874) | (17,293) | ||||||||||||||||||
Transfers to accrual(1) | (20,263) | (922) | ||||||||||||||||||
| Charge-offs | (38,067) | (5,587) | ||||||||||||||||||
| Ending balance | $ | 75,754 | $ | 43,372 | ||||||||||||||||
| Year Ended December 31, | |||||||||||
| (Dollars in thousands) | 2017 | 2016 | 2015 | ||||||||
| Beginning balance | $ | 40,803 | $ | 39,892 | $ | 52,385 | |||||
| Additions | 57,942 | 42,101 | 12,897 | ||||||||
| Collections | (19,884 | ) | (28,191 | ) | (14,167 | ) | |||||
| Transfers to accrual | (3,478 | ) | (681 | ) | (95 | ) | |||||
| Charge-offs/write-downs | (16,383 | ) | (12,318 | ) | (11,128 | ) | |||||
| Ending balance | $ | 59,000 | $ | 40,803 | $ | 39,892 | |||||
The timely identification of problem loans is a key element in our strategy to manage our loan portfolio. Problem loans are all criticized, classified and nonperforming loans and other real estate owned. Timely identification enables us to take appropriate action and accordingly, minimize losses. An asset review system established to monitor the asset quality of our loans and investments in real estate portfolios facilitates the identification of problem assets. In general, this system utilizesuses guidelines established by federal regulation.
53
RESULTS OF OPERATIONS
2022 compared with 2021
For a discussion of our results for the year ended December 31, 2017, we had2022 compared to the year ended December 31, 2021, please see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 28, 2023.
2023 compared with 2022
We recorded net income attributable to WSFS of $269.2 million, or $4.40 per diluted common share, for the year ended December 31, 2023, a increase of $46.8 million compared to $222.4 million, or $3.49 per diluted common share, for the year ended December 31, 2022.
•Net interest income for the year ended December 31, 2023 was $725.1 million, an immaterial amountincrease of loans classified$62.2 million compared to 2022, primarily due to the the benefits of our asset-sensitive balance sheet and an increase from the balance sheet size and mix. The increase was partially offset by lower purchase accounting accretion. See “Net Interest Income” for further information.
•Our provision for credit losses increased $40.0 million in 2023, primarily due to higher provisions on our CRE, commercial small business leasing, and Upstart portfolios as non-accrual, 90 days pastwell as our elder care portfolio within C&I. See “Provision/Allowance for Credit Losses” for further information.
•Noninterest income increased $29.7 million in 2023, primarily due or restructured where knownto increases in income from Cash Connect®, Wealth Management fee income, a realized gain from our investment in Spring EQ, and capital markets income. These increases were partially offset by decreases in other banking fees and mortgage banking activities, and unrealized gains on equity investments and income from BMTIA (business sold in 2022). See “Noninterest Income” for further information.
•Noninterest expense decreased $12.7 million in 2023, primarily due to net corporate development and restructuring costs incurred in 2022, partially offset by increases in other operating expenses driven by Cash Connect®, FDIC expenses, salaries and benefits costs, and professional fees. See “Noninterest Expense” for further information.
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Net Interest Income
The following table provides information regarding possible credit problems caused usthe average balances of, and yields/rates on, interest-earning assets and interest-bearing liabilities during the periods indicated:
| Year Ended December 31, | 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Average Balance | Interest & Dividends | Yield/ Rate(1) | Average Balance | Interest & Dividends | Yield/ Rate (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-earning assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans:(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial loans and leases | $ | 5,041,280 | $ | 346,389 | 6.88 | % | $ | 4,875,265 | $ | 253,293 | 5.21 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgage loans | 4,570,839 | 317,603 | 6.95 | 4,281,768 | 203,611 | 4.76 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential | 820,600 | 38,886 | 4.74 | 790,650 | 35,420 | 4.48 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | 1,922,827 | 138,510 | 7.20 | 1,543,704 | 86,743 | 5.62 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans held for sale | 47,424 | 3,883 | 8.19 | 65,927 | 3,687 | 5.59 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans and leases | 12,402,970 | 845,271 | 6.82 | 11,557,314 | 582,754 | 5.05 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities(3) | 4,640,646 | 107,555 | 2.32 | 5,151,469 | 106,606 | 2.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Investment securities(3) | 367,026 | 8,783 | 2.71 | 338,979 | 6,899 | 2.39 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other interest-earning assets | 282,462 | 14,913 | 5.28 | 878,097 | 7,556 | 0.86 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-earning assets | 17,693,104 | 976,522 | 5.53 | 17,925,859 | 703,815 | 3.94 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | (169,140) | (140,916) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 256,984 | 243,579 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash in non-owned ATMs | 392,007 | 551,108 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bank owned life insurance | 98,935 | 100,725 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other noninterest-earning assets | 1,931,147 | 1,783,340 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 20,203,037 | $ | 20,463,695 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities and stockholders’ equity: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing demand | $ | 3,019,050 | $ | 26,671 | 0.88 | % | $ | 3,377,321 | $ | 7,441 | 0.22 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Money market | 4,317,810 | 122,168 | 2.83 | 3,918,756 | 13,536 | 0.35 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Savings | 1,832,601 | 5,733 | 0.31 | 2,265,721 | 965 | 0.04 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Customer time deposits | 1,571,682 | 45,184 | 2.87 | 1,103,336 | 5,626 | 0.51 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing customer deposits | 10,741,143 | 199,756 | 1.86 | 10,665,134 | 27,568 | 0.26 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Brokered deposits | 214,608 | 10,064 | 4.69 | 36,461 | 613 | 1.68 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 10,955,751 | 209,820 | 1.92 | 10,701,595 | 28,181 | 0.26 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Federal Home Loan Bank advances | 103,268 | 5,348 | 5.18 | 12,841 | 538 | 4.19 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Trust preferred borrowings | 90,534 | 6,736 | 7.44 | 90,337 | 3,482 | 3.85 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Senior and subordinated debt | 221,975 | 9,815 | 4.42 | 248,389 | 8,246 | 3.32 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other borrowed funds(4) | 442,197 | 19,700 | 4.46 | 47,076 | 478 | 1.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 11,813,725 | 251,419 | 2.13 | 11,100,238 | 40,925 | 0.37 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | 5,306,511 | 6,376,459 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other noninterest-bearing liabilities | 787,573 | 590,814 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders’ equity of WSFS | 2,300,467 | 2,398,871 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest | (5,239) | (2,687) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 20,203,037 | $ | 20,463,695 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Excess of interest-earning assets over interest-bearing liabilities | $ | 5,879,379 | $ | 6,825,621 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest and dividend income | $ | 725,103 | $ | 662,890 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate spread | 3.40 | % | 3.57 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest margin | 4.11 | % | 3.71 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Weighted average yields for tax-exempt securities and loans have been computed on a tax-equivalent basis.
(2)Average balances are net of unearned income and include nonperforming loans.
(3)Includes securities held-to-maturity (at amortized cost) and securities available-for-sale (at fair value).
(4)Includes federal funds purchased.
55
Net interest income increased $62.2 million, or 9%, to have serious concerns about$725.1 million in 2023, compared to 2022 primarily due to a $60.6 million increase from the borrower’s abilitybenefits of our asset-sensitive balance sheet and a $4.0 million increase from the balance sheet size and mix, offset by a $2.4 million decrease in purchase accounting accretion. Net interest margin increased 40 bps to comply with present loan repayment terms thereby resulting4.11% in 2023 from 3.71% in 2022. The increase was primarily due to 24 bps increase from the balance sheet size and mix and 17 bps from the benefits of our asset-sensitive balance sheet, partially offset by 1 bp from lower purchase accounting accretion.
The following table provides certain information regarding changes in net interest income attributable to changes in the volumes of interest-earning assets and interest-bearing liabilities and changes in the rates for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on the changes that are attributable to: (i) changes in volume (change in volume multiplied by prior year rate); (ii) changes in rates (change in rate multiplied by prior year volume on each category); and (iii) net change (the sum of the change in volume and the change in rate). Changes due to the combination of rate and volume changes (changes in volume multiplied by changes in rate) are allocated proportionately between changes in rate and changes in volume.
| Year Ended December 31, | 2023 vs. 2022 | ||||||||||||||||
| (Dollars in thousands) | Volume | Yield/Rate | Net | ||||||||||||||
| Interest Income: | |||||||||||||||||
| Loans: | |||||||||||||||||
Commercial loans and leases(1) | $ | 8,940 | $ | 84,156 | $ | 93,096 | |||||||||||
| Commercial mortgage loans | 14,587 | 99,405 | 113,992 | ||||||||||||||
| Residential | 1,369 | 2,097 | 3,466 | ||||||||||||||
| Consumer | 24,137 | 27,630 | 51,767 | ||||||||||||||
| Loans held for sale | (1,216) | 1,412 | 196 | ||||||||||||||
| Mortgage-backed securities | (11,185) | 12,134 | 949 | ||||||||||||||
Investment securities(2) | 719 | 1,165 | 1,884 | ||||||||||||||
| Other interest-earning assets | (8,192) | 15,549 | 7,357 | ||||||||||||||
| Favorable | 29,159 | 243,548 | 272,707 | ||||||||||||||
| Interest expense: | |||||||||||||||||
| Deposits: | |||||||||||||||||
| Interest-bearing demand | (866) | 20,096 | 19,230 | ||||||||||||||
| Money market | 1,539 | 107,093 | 108,632 | ||||||||||||||
| Savings | (205) | 4,973 | 4,768 | ||||||||||||||
| Customer time deposits | 3,324 | 36,234 | 39,558 | ||||||||||||||
| Brokered certificates of deposits | 6,916 | 2,535 | 9,451 | ||||||||||||||
| FHLB advances | 4,654 | 156 | 4,810 | ||||||||||||||
| Trust preferred borrowings | 8 | 3,246 | 3,254 | ||||||||||||||
| Senior and subordinated debt | (946) | 2,515 | 1,569 | ||||||||||||||
| Other borrowed funds | 13,713 | 5,509 | 19,222 | ||||||||||||||
| Unfavorable | 28,137 | 182,357 | 210,494 | ||||||||||||||
| Net change, as reported | $ | 1,022 | $ | 61,191 | $ | 62,213 | |||||||||||
(1)Includes a changetax-equivalent income adjustment related to commercial loans.
(2)Includes a tax-equivalent income adjustment related to municipal bonds.
56
Investment Securities
The following table details the maturity and weighted average yield of the available-for-sale investment portfolio as of December 31, 2023:
| (Dollars in thousands) | Maturing During 2024 | Maturing From 2025 Through 2028 | Maturing From 2029 Through 2033 | Maturing After 2033 | Total | ||||||||||||||||||||||||
| Collateralized mortgage obligations (CMO) | |||||||||||||||||||||||||||||
| Amortized cost | $ | — | $ | 25,645 | $ | 65,192 | $ | 470,115 | $ | 560,952 | |||||||||||||||||||
| Weighted average yield | — | % | 2.37 | % | 1.97 | % | 1.84 | % | 1.88 | % | |||||||||||||||||||
| Fannie Mae (FNMA) mortgage-backed securities (MBS) | |||||||||||||||||||||||||||||
| Amortized cost | $ | — | $ | 60,147 | $ | 230,640 | $ | 3,253,975 | $ | 3,544,762 | |||||||||||||||||||
| Weighted average yield | — | % | 2.38 | % | 2.05 | % | 1.99 | % | 2.00 | % | |||||||||||||||||||
| Freddie Mac (FHLMC) MBS | |||||||||||||||||||||||||||||
| Amortized cost | $ | — | $ | 431 | $ | 51,704 | $ | 74,721 | $ | 126,856 | |||||||||||||||||||
| Weighted average yield | — | % | 2.43 | % | 2.39 | % | 3.15 | % | 2.84 | % | |||||||||||||||||||
| Ginnie Mae (GNMA) MBS | |||||||||||||||||||||||||||||
| Amortized cost | $ | — | $ | 1 | $ | 558 | $ | 45,774 | $ | 46,333 | |||||||||||||||||||
| Weighted average yield | — | % | 4.79 | % | 2.98 | % | 3.39 | % | 3.38 | % | |||||||||||||||||||
| Government-sponsored enterprises (GSE) | |||||||||||||||||||||||||||||
| Amortized cost | $ | — | $ | — | $ | 221,861 | $ | 3,578 | $ | 225,439 | |||||||||||||||||||
| Weighted average yield | — | % | — | % | 1.30 | % | 1.44 | % | 1.30 | % | |||||||||||||||||||
| Total amortized cost | $ | — | $ | 86,224 | $ | 569,955 | $ | 3,848,163 | $ | 4,504,342 | |||||||||||||||||||
| Weighted average yield | — | % | 2.38 | % | 1.78 | % | 2.01 | % | 1.99 | % | |||||||||||||||||||
As of December 31, 2017, we had $69.6 million2023, WSFS does not have any tax-exempt securities within the available-for-sale investment portfolio. Yields are calculated on a weighted average basis using the investments amortized cost and respective average yields for each investment category. Expected maturities of loans which, although performing at that date, required increased supervision and review. Theymortgage-backed securities may depending on the economic environment and other factors, become nonperforming assets in future periods. The amountdiffer from contractual maturities due to calls or prepay obligations.
57
Provision/Allowance for LoanCredit Losses (ACL)
We maintain an allowance for loan losses which representsACL at an appropriate level based on our best estimateassessment of estimable and probable losses within ourin the loan portfolio. As losses are realized, they are charged to this allowance. We established our allowanceportfolio, which we evaluate in accordance with guidance providedapplicable accounting principles, as discussed further in the SEC’s Staff Accounting Bulletin 102, Selected Loan Loss Allowance Methodology and Documentation Issues (SAB 102), Accounting Standards Codification (ASC) 450, Contingencies (ASC 450) and ASC 310, Receivables (ASC 310). The allowance includes two primary components: (i) an allowance established on loans collectively evaluated for impairment (general allowance), and (ii) an allowance established on loans individually evaluated for impairment (specific allowance). In addition, we also maintained an allowance for acquired loans.
For the year ended December 31, 2023, we recorded a provision for credit losses of $88.1 million, a net change of $40.0 million, compared to the provision of credit losses of $48.1 million in 2022. The increase was primarily due to higher provisions on our CRE, commercial small business leasing, and Upstart portfolios as well as our elder care portfolio within C&I.
The ACL was $186.1 million at December 31, 2023 compared to $151.9 million at December 31, 2022. The increase of the ACL was primarily due to net loan growth across the CRE, Consumer, and commercial small business leasing portfolios and the higher provisions noted above. The ratio of allowance for credit losses to total loans and leases was 1.35% at December 31, 2023 and 1.17% at December 31, 2022.
Net charge-offs were $53.8 million for the year ended December 31, 2023 compared to $16.8 million for the year-ended December 31, 2022. The increase in net charge-offs was primarily driven by our Upstart and commercial small business leasing portfolios.
The following tables detail the allocation of the ACL and show our net charge-offs (recoveries) by portfolio category:
| (Dollars in thousands) | Commercial and Industrial(1) | Owner- occupied Commercial | Commercial Mortgages | Construction | Residential(2) | Consumer(3) | Total | |||||||||||||||||||||||||||||||||||||
| As of December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | $ | 64,564 | $ | 10,719 | $ | 36,055 | $ | 10,762 | $ | 5,483 | $ | 58,543 | $ | 186,126 | ||||||||||||||||||||||||||||||
| % of ACL to total ACL | 35 | % | 6 | % | 19 | % | 6 | % | 3 | % | 31 | % | 100 | % | ||||||||||||||||||||||||||||||
| Loan portfolio balance | $ | 3,163,692 | $ | 1,886,087 | $ | 3,801,180 | $ | 1,035,530 | $ | 867,895 | $ | 2,012,134 | $ | 12,766,518 | ||||||||||||||||||||||||||||||
| % to total loans and leases | 24 | % | 15 | % | 30 | % | 8 | % | 7 | % | 16 | % | 100 | % | ||||||||||||||||||||||||||||||
| Year ended December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | $ | 42,294 | $ | 184 | $ | 300 | $ | 794 | $ | 41 | $ | 22,394 | $ | 66,007 | ||||||||||||||||||||||||||||||
| Recoveries | 9,721 | 54 | 7 | 532 | 260 | 1,625 | 12,199 | |||||||||||||||||||||||||||||||||||||
| Net charge-offs (recoveries) | $ | 32,573 | $ | 130 | $ | 293 | $ | 262 | $ | (219) | $ | 20,769 | $ | 53,808 | ||||||||||||||||||||||||||||||
| Average loan balance | $ | 3,177,739 | $ | 1,863,542 | $ | 3,562,070 | $ | 1,008,768 | $ | 817,758 | $ | 1,922,828 | $ | 12,352,704 | ||||||||||||||||||||||||||||||
| Ratio of net charge-offs (recoveries) to average gross loans | 1.03 | % | 0.01 | % | 0.01 | % | 0.03 | % | (0.03) | % | 1.08 | % | 0.44 | % | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | Commercial and Industrial(1) | Owner- occupied Commercial | Commercial Mortgages | Construction | Residential(2) | Consumer(3) | Total | |||||||||||||||||||||||||||||||||||||
| As of December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | $ | 59,394 | $ | 6,019 | $ | 21,473 | $ | 6,987 | $ | 4,668 | $ | 53,320 | $ | 151,861 | ||||||||||||||||||||||||||||||
| % of ACL to total ACL | 39 | % | 4 | % | 14 | % | 5 | % | 3 | % | 35 | % | 100 | % | ||||||||||||||||||||||||||||||
| Loan portfolio balance | $ | 3,134,326 | $ | 1,809,582 | $ | 3,351,084 | $ | 1,044,049 | $ | 759,465 | $ | 1,810,930 | $ | 11,909,436 | ||||||||||||||||||||||||||||||
| % to total loans and leases | 26 | % | 15 | % | 28 | % | 9 | % | 7 | % | 15 | % | 100 | % | ||||||||||||||||||||||||||||||
| Year ended December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||
| Charge-offs | $ | 19,004 | $ | 179 | $ | 581 | $ | — | $ | 186 | $ | 7,520 | $ | 27,470 | ||||||||||||||||||||||||||||||
| Recoveries | 6,112 | 278 | 223 | 2,567 | 665 | 793 | 10,638 | |||||||||||||||||||||||||||||||||||||
| Net charge-offs (recoveries) | $ | 12,892 | $ | (99) | $ | 358 | $ | (2,567) | $ | (479) | $ | 6,727 | $ | 16,832 | ||||||||||||||||||||||||||||||
| Average loan balance | $ | 3,043,836 | $ | 1,831,428 | $ | 3,319,687 | $ | 962,082 | $ | 787,273 | $ | 1,543,704 | $ | 11,488,010 | ||||||||||||||||||||||||||||||
| Ratio of net charge-offs (recoveries) to average gross loans | 0.42 | % | (0.01) | % | 0.01 | % | (0.27) | % | (0.06) | % | 0.44 | % | 0.15�� | % | ||||||||||||||||||||||||||||||
(1)Includes commercial small business leases and PPP loans.
(2)Excludes reverse mortgages.
(3)Includes home equity lines of credit, installment loans unsecured lines of credit and education loans.
58
Noninterest Income
Noninterest income increased $29.7 million to $289.9 million in 2023 from $260.1 million in 2022. This increase reflects a $26.9 million increase from Cash Connect® driven by the rising rate environment and continued growth in the smart safe space, $10.2 million increase in Wealth Management revenue, a $9.5 million gain realized from our investment in Spring EQ, and $4.0 million in capital markets income. The increase was partially offset by a $10.6 million decrease in other banking fees, including fees associated with our consumer lending partnerships, gain on sale of SBA loans and traditional bank service fees, and a $2.5 million decrease in mortgage banking activities. In addition to these decreases, we recognized $6.0 million of unrealized gains on equity investments and $2.6 million from BMTIA in 2022. Our diverse fee-based businesses support sustainability of noninterest income through economic cycles.
Noninterest Expenses
Noninterest expense decreased $12.7 million to $561.6 million in 2023 from $574.3 million in 2022. The decrease was primarily due to $61.5 million lower net corporate development and restructuring costs, partially offset by increases of $29.5 million in other operating expense driven by higher variable operating costs from Cash Connect®, $9.8 million in FDIC expenses which includes the $5.1 million FDIC special assessment charged to recover losses to the Deposit Insurance Fund related to closures of certain banks in 2023, $5.3 million in salaries and benefits costs, and $2.7 million in professional fees.
Income Taxes
We recorded $96.2 million of income tax expense for the year ended December 31, 2023 compared to $78.0 million for the year ended December 31, 2022. The increase in income tax expense was primarily driven by an increase in income before taxes of $64.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The effective tax rates for the years ended December 31, 2023 and 2022 were 26.3% and 25.9%, respectively. The effective tax rate for year ended December 31, 2023 increased primarily due to our decision to surrender certain BOLI policies in 2023 that resulted in $7.1 million of tax expense. In addition, the 2022 effective tax rate reflects the impact of the write-off of $6.7 million of nondeductible goodwill related to the sale of the BMT Insurance Advisors business. Further, the tax expense associated with nondeductible acquisition costs in 2023 decreased compared to 2022. There were no nondeductible acquisition costs during the year ended December 31, 2023 compared to $1.8 million incurred in 2022.
The effective tax rate reflects the recognition of certain tax benefits in the financial statements including those benefits from tax-exempt interest income, federal low-income housing/research and development tax credits, and excess tax benefits from recognized stock compensation. These tax benefits are offset by the tax effect of stock-based compensation expense related to incentive stock options, nondeductible acquisition costs and a provision for state income tax expense.
We frequently analyze our projections of taxable income and make adjustments to our provision for income taxes accordingly.
59
SEGMENT INFORMATION
For additionalfinancial reporting purposes, our business has three reporting segments: WSFS Bank, Cash Connect®, and Wealth Management. The WSFS Bank segment provides loans and leases and other financial products to commercial and consumer customers. Cash Connect® provides ATM vault cash, smart safe and other cash logistics services in the U.S through strategic partnerships with several of the largest networks, manufacturers and service providers in the ATM industry. Cash Connect® services non-bank and WSFS-branded ATMs and smart safes nationwide. The Wealth Management segment provides a broad array of planning and advisory services, investment management, trust services, and credit and deposit products to individual, corporate and institutional clients.
WSFS Bank Segment
The WSFS Bank segment income before taxes increased $38.9 million, or 18%, in 2023 compared to 2022 primarily due to an $80.0 million increase in net external customer interest income due to the rising interest rate environment and a decrease in external operating expenses of $40.3 million, primarily driven by lower corporate development and restructuring costs, or 9%, partially offset by increases in inter-segment interest expense of $52.2 million and provision for credit losses of $39.6 million.
Cash Connect® Segment
The Cash Connect® segment income before taxes decreased to $4.2 million in 2023 from $7.3 million in 2022. During 2023, the Cash Connect® segment focused on expanding smart safe and ATM managed services to increase fee income while optimizing funding source composition and operational efficiency in the rapidly rising interest rate environment. The interest rate environment materially increased vault operating expenses, resulting in a full-year 2023 ROA for the Cash Connect® segment of 0.80%, a decrease of 21bps in comparison with full-year 2022. Cash Connect® had $1.9 billion in total cash managed at December 31, 2023 and $1.7 billion at December 31, 2022. At year-end 2023, Cash Connect® serviced approximately 33,000 non-bank ATMs compared to approximately 26,300 at year-end 2022 as a result of a large industry participant exiting their ATM cash vault business and approximately 8,700 smart safes nationwide compared to approximately 7,500 smart safes at year-end 2022.
Wealth Management Segment
The Wealth Management segment income before taxes increased $28.9 million in 2023 compared to 2022, primarily attributable to growth in our institutional trust activity. At December 31, 2023, Wealth Management had AUA/AUM of $84.3 billion, a 31% increase from 2022 balances. WSFS Institutional Services® ended 2023 as the securitization industry's fourth most active trustee by number of deals for U.S. ABS and MBS according to Asset-Backed Alert’s ABS Database.
Segment financial information regardingfor the allowance, with consideration given to evaluations resulting from examinations performed by regulatory authorities, seeyears ended December 31, 2023, 2022 and 2021 is provided in Note 721 to the Consolidated Financial Statements.
60
ASSET/LIABILITY MANAGEMENT
Our primary asset/liability management goal is to optimize long term net interest income opportunities within the constraints of managing interest rate risk, ensuring adequate liquidity and funding and maintaining a strong capital base.
In general, interest rate risk is mitigated by closely matching the maturities or repricing periods of interest-sensitive assets and liabilities to ensure a favorable interest rate spread. We regularly review our interest-rate sensitivity, and use a variety of strategies as needed to adjust that sensitivity within acceptable tolerance ranges established by management and our Board of Directors. Changing the relative proportions of fixed-rate and adjustable-rate assets and liabilities is one of our primary strategies to accomplish this objective.
The allowance was $40.6 millionmatching of assets and liabilities may be analyzed using a number of methods including by examining the extent to which such assets and liabilities are “interest-rate sensitive” and by monitoring our interest-sensitivity gap. An interest-sensitivity gap is considered positive when the amount of interest-rate sensitive assets exceeds the amount of interest-rate sensitive liabilities repricing within a defined period, and is considered negative when the amount of interest-rate sensitive liabilities exceeds the amount of interest-rate sensitive assets repricing within a defined period. For additional information related to interest rate sensitivity, see "Quantitative and Qualitative Disclosures About Market Risk."
The repricing and maturities of our interest-rate sensitive assets and interest-rate sensitive liabilities at December 31, 2017,2023 are shown in the following table:
| (Dollars in thousands) | Less than One Year | One to Five Years | Five to Fifteen Years | Over Fifteen Years | Total | |||||||||||||||||||||||||||
| Interest-rate sensitive assets: | ||||||||||||||||||||||||||||||||
Loans(1): | ||||||||||||||||||||||||||||||||
| Commercial loans and leases | $ | 4,270,467 | $ | 1,560,156 | $ | 360,958 | $ | 10,148 | $ | 6,201,729 | ||||||||||||||||||||||
| Commercial mortgage loans | 2,637,128 | 953,519 | 216,446 | 5,096 | 3,812,189 | |||||||||||||||||||||||||||
Residential(2) | 127,836 | 301,046 | 357,615 | 93,426 | 879,923 | |||||||||||||||||||||||||||
| Consumer | 944,286 | 776,008 | 235,189 | 33,589 | 1,989,072 | |||||||||||||||||||||||||||
| Loans held for sale | 26,193 | 5,283 | 4,010 | — | 35,486 | |||||||||||||||||||||||||||
| Investment securities, available-for-sale | 810,582 | 1,288,020 | 2,306,782 | 566,486 | 4,971,870 | |||||||||||||||||||||||||||
| Investment securities, held-to-maturity | 62,200 | 241,817 | 561,770 | 313,207 | 1,178,994 | |||||||||||||||||||||||||||
| Other interest-earning assets | 15,398 | — | — | — | 15,398 | |||||||||||||||||||||||||||
| Total interest-rate sensitive assets: | $ | 8,894,090 | $ | 5,125,849 | $ | 4,042,770 | $ | 1,021,952 | $ | 19,084,661 | ||||||||||||||||||||||
| Interest-rate sensitive liabilities: | ||||||||||||||||||||||||||||||||
| Interest-bearing deposits: | ||||||||||||||||||||||||||||||||
| Interest-bearing demand | $ | 1,467,765 | $ | — | $ | — | $ | — | $ | 1,467,765 | ||||||||||||||||||||||
| Savings | 882,060 | — | — | — | 882,060 | |||||||||||||||||||||||||||
| Money market | 4,088,226 | — | — | — | 4,088,226 | |||||||||||||||||||||||||||
| Customer time deposits | 1,695,594 | 86,290 | 1,583 | — | 1,783,467 | |||||||||||||||||||||||||||
| Trust preferred borrowings | 90,638 | — | — | — | 90,638 | |||||||||||||||||||||||||||
| Senior and subordinated debt | 70,000 | 148,400 | — | — | 218,400 | |||||||||||||||||||||||||||
| Other borrowed funds | 629,216 | — | — | 8,498 | 637,714 | |||||||||||||||||||||||||||
| Total interest-rate sensitive liabilities: | $ | 8,923,499 | $ | 234,690 | $ | 1,583 | $ | 8,498 | $ | 9,168,270 | ||||||||||||||||||||||
| (Shortfall) excess of interest-rate sensitive assets over interest-rate liabilities (interest-rate sensitive gap) | $ | (29,409) | $ | 4,891,159 | $ | 4,041,187 | $ | 1,013,454 | $ | 9,916,391 | ||||||||||||||||||||||
| One-year interest-rate sensitive assets/interest-rate sensitive liabilities | 99.67 | % | ||||||||||||||||||||||||||||||
| One-year interest-rate sensitive gap as a percent of total assets | (0.14) | % | ||||||||||||||||||||||||||||||
(1)Loan balances exclude nonaccruing loans, deferred fees and costs
(2)Includes reverse mortgage loans
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Generally, during a period of rising interest rates, a positive gap would result in an increase in net interest income while a negative gap would adversely affect net interest income. Conversely, during a period of $0.8 million from $39.8 million at December 31, 2016 and $3.51 million from $37.1 million at December 31, 2015. The allowance to total gross loans ratio was 0.84% at December 31, 2017, compared to 0.89% at December 31, 2016 and 0.98% at December 31, 2015. Excluding acquired loans,falling rates, a positive gap would result in a decrease in net interest income while a negative gap would augment net interest income. However, the allowance to total gross loans was 0.97% and 1.08% at December 31, 2017 and 2016, respectively.
| (Dollars in thousands) | December 31, 2017 | December 31, 2016 | December 31, 2015 | |||||||||
Total problem loans(1) as % of Tier 1 capital | 21.34 | % | 27.71 | % | 24.06 | % | ||||||
| Non-performing loans | $ | 36,436 | $ | 22,876 | $ | 21,165 | ||||||
| Delinquent loans | 25,279 | 22,176 | 43,685 | |||||||||
| Delinquent loans as % of total gross loans | 0.53 | % | 0.50 | % | 1.16 | % | ||||||
| Net charge-offs | 10,116 | 10,324 | 10,127 | |||||||||
| Net charge-offs as % of total gross loans | 0.22 | % | 0.25 | % | 0.29 | % | ||||||
| Year Ended December 31, | |||||||||||||||
| (Dollars in thousands) | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||
| Beginning balance | 39,751 | 37,089 | 39,426 | 41,244 | 43,922 | ||||||||||
| Provision for loan losses | 10,964 | 12,986 | 7,790 | 3,580 | 7,172 | ||||||||||
| Charge-offs: | |||||||||||||||
| Commercial Mortgage | 4,612 | 422 | 1,135 | 425 | 1,915 | ||||||||||
| Construction | 574 | 57 | 146 | 88 | 1,749 | ||||||||||
| Commercial | 5,008 | 5,052 | 6,303 | 3,587 | 2,636 | ||||||||||
| Owner-occupied Commercial | 296 | 1,556 | 738 | 1,085 | 1,225 | ||||||||||
| Residential real estate | 168 | 88 | 548 | 811 | 1,226 | ||||||||||
| Consumer | 2,394 | 5,456 | 2,555 | 1,982 | 3,905 | ||||||||||
| Overdrafts | 790 | 696 | 670 | 873 | 1,008 | ||||||||||
| Total charge-offs | 13,842 | 13,327 | 12,095 | 8,851 | 13,664 | ||||||||||
| Recoveries: | |||||||||||||||
| Commercial Mortgage | 255 | 322 | 222 | 202 | 685 | ||||||||||
| Construction | 306 | 484 | 185 | 242 | 989 | ||||||||||
| Commercial | 1,355 | 594 | 301 | 1,611 | 1,003 | ||||||||||
| Owner-occupied Commercial | 127 | 117 | 77 | 249 | 128 | ||||||||||
| Residential real estate | 178 | 254 | 226 | 168 | 122 | ||||||||||
| Consumer | 1,227 | 973 | 680 | 528 | 483 | ||||||||||
| Overdrafts | 278 | 259 | 277 | 453 | 404 | ||||||||||
| Total recoveries | 3,726 | 3,003 | 1,968 | 3,453 | 3,814 | ||||||||||
| Net charge-offs | 10,116 | 10,324 | 10,127 | 5,398 | 9,850 | ||||||||||
| Ending balance | 40,599 | 39,751 | 37,089 | 39,426 | 41,244 | ||||||||||
| Net charge-offs to average gross loans outstanding, net of unearned income | 0.22 | % | 0.25 | % | 0.29 | % | 0.18 | % | 0.33 | % | |||||
Impact of when future losses may occur and/or the actual amount of losses. While we have allocated the allowance by portfolio type in the following table, the entire reserve is available for any loan category to utilize. The allocation of the allowance by portfolio type at the end of each of the last five years and the percentage of outstanding loans in each category to total gross loans outstanding at such dates is shown in the table below:Inflation
| At December 31, | ||||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||
(Dollars in thousands) | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||
| Commercial mortgage | $ | 5,891 | 0.12 | % | $ | 8,915 | 0.20 | % | $ | 6,487 | 0.17 | % | $ | 7,266 | 0.23 | % | $ | 6,932 | 0.24 | % | ||||||||||||||
| Construction | 2,861 | 0.06 | 2,838 | 0.06 | 3,521 | 0.09 | 2,596 | 0.08 | 3,326 | 0.11 | ||||||||||||||||||||||||
| Commercial | 16,732 | 0.35 | 13,339 | 0.30 | 11,156 | 0.29 | 12,837 | 0.40 | 12,751 | 0.43 | ||||||||||||||||||||||||
| Owner-occupied commercial | 5,422 | 0.11 | 6,588 | 0.15 | 6,670 | 0.18 | 6,643 | 0.20 | 7,638 | 0.26 | ||||||||||||||||||||||||
| Residential real estate | 1,798 | 0.04 | 2,059 | 0.05 | 2,281 | 0.06 | 2,523 | 0.08 | 3,078 | 0.10 | ||||||||||||||||||||||||
| Consumer | 7,895 | 0.16 | 6,012 | 0.13 | 5,964 | 0.16 | 6,041 | 0.19 | 6,494 | 0.22 | ||||||||||||||||||||||||
Complexity Risk (1) | — | — | — | — | 1,010 | 0.03 | 1,520 | 0.05 | 1,025 | 0.04 | ||||||||||||||||||||||||
| Total | $ | 40,599 | 0.84 | % | $ | 39,751 | 0.89 | % | $ | 37,089 | 0.98 | % | $ | 39,426 | 1.23 | % | $ | 41,244 | 1.40 | % | ||||||||||||||
OFF BALANCE SHEET ARRANGEMENTS
We have no off balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. For a description of certain financial instruments to which we are party and which expose us to certain credit risk not recognized in our financial statements, see Note 1617 to the Consolidated Financial Statements included in this report.Statements.
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| (Dollars in thousands) | Total | 2018 | 2019-2020 | 2021-2022 | 2023 and Beyond | ||||||||||||||
Commitments to extend credit (1) | $ | 1,305,003 | $ | 1,305,003 | $ | — | $ | — | $ | — | |||||||||
| FHLB advances | 710,001 | 681,536 | 28,465 | — | — | ||||||||||||||
Principal payments on long term debt (2) | 100,000 | — | — | — | 100,000 | ||||||||||||||
Interest payments on long term debt (3) | 38,250 | 4,500 | 9,000 | 9,000 | 15,750 | ||||||||||||||
| Operating lease obligations | 211,455 | 10,636 | 20,864 | 20,167 | 159,788 | ||||||||||||||
| Data processing obligations | 15,535 | 5,778 | 8,718 | 1,039 | — | ||||||||||||||
| Total | $ | 2,380,244 | $ | 2,007,453 | $ | 67,047 | $ | 30,206 | $ | 275,538 | |||||||||
CRITICAL ACCOUNTING ESTIMATES
The discussion and analysisanalyses of the financial condition and results of operations are based on the Consolidated Financial Statements, which are prepared in conformity with GAAP.U.S. GAAP and general practices within the banking industry. The significant accounting policies of the Company are described in Note 12 to the Consolidated Financial Statements. The preparation of these Consolidated Financial Statements requires us to make estimates and assumptions affectingthat may materially affect the reported amounts of assets, liabilities, revenuerevenues and expenses. We regularly evaluate these estimates and assumptions including those related to the allowance for loancredit losses, business combinations, deferred taxes, fair value measurements and goodwill and other intangible assets. We base our estimates on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances. These form the basis for making judgments on the carrying value of certain assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The following are critical accounting policies that involvepolicy involves more significant judgments and estimates. The Company hasWe have reviewed thesethis critical accounting policiespolicy and estimates with the Audit Committee.
Allowance for LoanCredit Losses
We maintain an allowance for credit losses (ACL) which represents our best estimate of probableexpected losses withinin our loan portfolio. As losses are realized, they are charged to this allowance.financial assets, which include loans, leases and held-to-maturity debt securities. We establishedestablish our allowance in accordance with guidance provided in SAB 102, ASC 450, and ASC 310.326, Financial Instruments – Credit Losses. The allowanceACL includes two primary components: (i) an allowance established on loansfinancial assets which share similar risk characteristics collectively evaluated for impairment (general allowance)credit losses (collective basis), and (ii) an allowance established on loansfinancial assets which do not share similar risk characteristics with any loan segment and is individually evaluated for impairment (specific allowance)credit losses (individual basis). In addition, we also maintained an allowance for acquired loans.
We consider the determination of the allowanceACL to be critical because it requires significant judgment reflecting our best estimate of impairment related to specifically evaluated impaired loans as well as the inherent risk ofexpected credit losses based on our historical loss for those in the remaining loan portfolio.experience, current conditions and economic forecasts. Our evaluation is based upon a continuingcontinuous review of our loan portfolio,financial assets, with consideration given to evaluations resulting from examinations performed by regulatory authorities. See Note 7 to the Consolidated Financial Statements, for further discussion of the allowance.ACL.
The ACL may increase or decrease due to changes in economic conditions affecting borrowers and macroeconomic variables that our financial assets are more susceptible to, including unforeseen events such as natural disasters and pandemics, new information regarding existing financial assets, identification of additional problems assets, the fair value of underlying collateral, and other factors. These changes, both within and outside the netCompany’s control, may frequently update and have a material impact to our financial results.
Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses on our financial assets, acquired is recorded as goodwill. The fair values are preliminary estimates subject to adjustments duringand therefore the measurement period, which does not exceed one year after acquisition. The application of business combination principles, including the determinationappropriateness of the fair valueACL, could change significantly. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall ACL because a wide variety of net assets acquired, requires the use of significantfactors and inputs are considered in these estimates and assumptions. See discussionchanges in those factors and inputs considered may not occur at the same rate and may not be consistent across the Company’s portfolio mix and segmentation. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. As of Goodwill and Intangible Assets elsewhere in this section for further information. SeeDecember 31, 2023, the Company believes that its ACL was adequate.
For information on Recent Accounting Pronouncements see Note 2 to the Consolidated Financial Statements.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on net interest income and capital, while maximizing the yield/cost spread on our asset/liability structure. Interest rates are partly a function of decisions by the Federal Open Market Committee (FOMC) on the target range for the federal funds rate, and these decisions are sometimes difficult to anticipate. In response to the economic and financial effects of COVID-19, the FOMC reduced interest rates through 2020 and 2021 and instituted quantitative easing measures as well as domestic and global capital market support programs. The FOMC raised the federal funds target rate a total of 525 basis points between 2022 and 2023. In order to manage the risks associated with changes or possible changes in interest rates, we rely primarily on our asset/liability structure.
The matching of maturities or repricing periods of interest rate-sensitive assets and liabilities to promote a favorable interest rate spread and mitigate exposure to fluctuations in interest rates is our primary tool for achieving our asset/liability management strategies. We regularly review our interest rate sensitivity and adjust the sensitivity within acceptable tolerance ranges. At December 31, 2023 interest-bearing liabilities that mature or reprice within one year exceeded interest-earning assets (interest-sensitive gap) by $29.4 million. Our interest-sensitive assets as a percentage of interest-sensitive liabilities within the one-year window was 99.67% at December 31, 2023 compared with 116.93% at December 31, 2022. In addition, the one-year interest-sensitive gap as a percentage of total assets was (0.14)% at December 31, 2023 compared to 6.29% at December 31, 2022.
Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from interest rate risk inherent in our lending, investing, and funding activities. To that end, we actively monitor and manage our interest rate risk exposure. One measure, which we are required to perform by federal regulation, measures the impact of an immediate change in interest rates in 100 basis point increments on the economic value of equity ratio. The economic value of the equity ratio is defined as the economic value of the estimated cash flows from assets and liabilities as a percentage of economic value of cash flows from total assets.
The following table shows the estimated impact of immediate changes in interest rates on our net interest margin and economic value of equity at the specified levels at December 31, 2023 and December 31, 2022.
| Change in Interest Rate (Basis Points) | December 31, 2023 | December 31, 2022 | |||||||||||||||||||||
% Change in Net Interest Margin (1) | Economic Value of Equity (2) | % Change in Net Interest Margin (1) | Economic Value of Equity (2) | ||||||||||||||||||||
| 300 | 15.7% | 22.44% | 18.5% | 27.54% | |||||||||||||||||||
| 200 | 10.4% | 21.46% | 12.3% | 26.44% | |||||||||||||||||||
| 100 | 5.2% | 20.41% | 6.1% | 25.22% | |||||||||||||||||||
| 50 | 2.6% | 19.85% | 3.1% | 24.56% | |||||||||||||||||||
| 25 | 1.3% | 19.56% | 1.5% | 24.22% | |||||||||||||||||||
| — | —% | 19.26% | —% | 23.87% | |||||||||||||||||||
| (25) | (1.3)% | 18.96% | (1.6)% | 23.50% | |||||||||||||||||||
| (50) | (2.6)% | 18.64% | (3.3)% | 23.10% | |||||||||||||||||||
| (100) | (4.9)% | 18.00% | (6.8)% | 22.20% | |||||||||||||||||||
| (200) | (9.6)% | 16.50% | (14.0)% | 20.20% | |||||||||||||||||||
| (300) | (14.2)% | 14.80% | (21.2)% | 17.90% | |||||||||||||||||||
(1)The percentage difference between net interest income in a stable interest rate environment and net interest margin as projected under the various rate change environments.
(2)The economic value of equity ratio in a stable interest rate environment and the economic value of equity projected under the various rate change environments.
We also engage in other business activities that are sensitive to changes in interest rates. For example, mortgage banking revenues and expenses can fluctuate with changing interest rates. These fluctuations are difficult to model and estimate.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following audited Consolidated Financial Statements and related documents are set forth in this Annual Report on Form 10-K on the following pages:
| Page | |||||
Report of Independent Registered Public Accounting Firm (KPMG LLP, Philadelphia, PA, Auditor Firm ID: 185) | |||||
65
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
WSFS Financial Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial condition of WSFS Financial Corporation and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for further information.each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 29, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
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Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of the Allowance for Credit Losses for Loans and Leases Evaluated on a Collective Basis
As discussed in Footnotes 2 and 7 to the consolidated financial statements, the Company’s total allowance for credit losses as of December 31, 2023 was $186.1 million, of which $184.5 million related to the allowance for credit losses on loans and leases evaluated on a collective basis (the collective ACL). The collective ACL includes the measure of expected credit losses on a collective (pooled) basis for those loans and leases that share similar risk characteristics. For the commercial portfolio, the Company uses a base loss rate methodology which applies a probability of default (PD) and loss given default (LGD) which are calculated based on the historical rate of migration. The historical rate of migration is based on the historical rate of credit loss measured during a look-back period (LBP). The historical rate of credit loss is determined based on internally assessed risk ratings and loan segments and then adjusted for the economic forecast scenario and macroeconomic assumptions over reasonable and supportable forecast periods. For the retail and leasing portfolios, the Company uses a base loss rate methodology which calculates historical loss rates based on average net loss rates over the LBP that incorporates the economic forecast assigned to that loan. After the reasonable and supportable forecast periods, the Company reverts on a straight-line basis over the reversion period to its historical loss rates, evaluated over the LBP, for the remaining life of both commercial and retail loans and leases. The LBP, reasonable and supportable forecast, and reversion period are established for each portfolio segment. The Company estimates the exposure at default using a method which projects prepayments over the life of the loans and leases. In order to capture the unique risks of the loan and lease portfolio within the PD, LGD and average net loss rates, the Company segments the portfolio into pools, considering similar risk characteristics. A portion of the collective ACL is comprised of adjustments to historical loss information for various internal and external conditions. These adjustments are based on qualitative factors not reflected in the quantitative model but are likely to impact the measurement of estimated credit losses.
We identified the assessment of the December 31, 2023 collective ACL as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment. Specifically, the assessment encompassed the evaluation of the collective ACL methodology, including the methods and quantitative model used to estimate (1) the PD, LGD and average net loss rates and their significant assumptions, including portfolio segmentation, the economic forecast scenario and macroeconomic assumptions, the reasonable and supportable forecast periods, the LBP for both the commercial and retail portfolio, and credit risk ratings for commercial loans, and (2) the qualitative factors. The assessment also included an evaluation of the conceptual soundness and performance of the quantitative model. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the collective ACL estimates, including controls over the:
•development of the collective ACL methodology
•continued use and appropriateness of changes made to the quantitative model
•identification and determination of the significant assumptions used in the quantitative model
•application of certain qualitative factors
•analysis of the collective ACL results, trends, and ratios.
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We evaluated the Company’s process to develop the collective ACL estimates by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in:
•evaluating the Company’s collective ACL methodology for compliance with U.S. generally accepted accounting principles
•evaluating judgments made by the Company relative to the assessment and performance testing of the quantitative model used
•assessing the conceptual soundness and performance of the quantitative model used by inspecting the model documentation to determine whether the model is suitable for its intended use
•evaluating the selection of economic forecast scenario by comparing it to the Company’s business environment and relevant industry practices
•evaluating the length of the historical observation period and reasonable and supportable forecast periods by comparing to specific portfolio risk characteristics and trends
•determining whether the loan portfolio is segmented by similar risk characteristics by comparing to the Company’s business environment and relevant industry practices
•testing individual credit risk ratings for a selection of commercial loans by evaluating the financial performance of the borrower, sources of repayment, and any relevant guarantees or underlying collateral
•evaluating the effect of certain qualitative factors on the collective ACL compared with relevant credit risk factors and consistency with credit trends and identified limitations of the underlying quantitative model.
We also assessed the sufficiency of the audit evidence obtained related to the December 31, 2023 collective ACL by evaluating:
•cumulative results of the audit procedures
•qualitative aspects of the Company’s accounting practices
•potential bias in the account estimates.
| /s/ KPMG LLP | ||||||||||||||
| We have served as the Company's auditor since 1994. | ||||||||||||||
| Philadelphia, Pennsylvania | ||||||||||||||
| February 29, 2024 | ||||||||||||||
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CONSOLIDATED STATEMENTS OF INCOME
| Year Ended December 31, | ||||||||||||||||||||||||||
| (Dollars in thousands, except per share data) | 2023 | 2022 | 2021 | |||||||||||||||||||||||
| Interest income: | ||||||||||||||||||||||||||
| Interest and fees on loans and leases | $ | 845,271 | $ | 582,754 | $ | 393,248 | ||||||||||||||||||||
| Interest on mortgage-backed securities | 107,555 | 106,606 | 55,802 | |||||||||||||||||||||||
| Interest and dividends on investment securities: | ||||||||||||||||||||||||||
| Taxable | 2,803 | 2,812 | 2,805 | |||||||||||||||||||||||
| Tax-exempt | 5,980 | 4,087 | 2,719 | |||||||||||||||||||||||
| Other interest income | 14,913 | 7,556 | 1,795 | |||||||||||||||||||||||
| 976,522 | 703,815 | 456,369 | ||||||||||||||||||||||||
| Interest expense: | ||||||||||||||||||||||||||
| Interest on deposits | 209,820 | 28,181 | 14,923 | |||||||||||||||||||||||
| Interest on Federal Home Loan Bank advances | 5,348 | 538 | 5 | |||||||||||||||||||||||
| Interest on senior and subordinated debt | 9,815 | 8,246 | 6,497 | |||||||||||||||||||||||
| Interest on trust preferred borrowings | 6,736 | 3,482 | 1,274 | |||||||||||||||||||||||
| Interest on federal funds purchased | 1,673 | 443 | — | |||||||||||||||||||||||
| Interest on other borrowings | 18,027 | 35 | 21 | |||||||||||||||||||||||
| 251,419 | 40,925 | 22,720 | ||||||||||||||||||||||||
| Net interest income | 725,103 | 662,890 | 433,649 | |||||||||||||||||||||||
| Provision for (recovery of) credit losses | 88,071 | 48,089 | (117,087) | |||||||||||||||||||||||
| Net interest income after provision for (recovery of) credit losses | 637,032 | 614,801 | 550,736 | |||||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||
| Credit/debit card and ATM income | 59,718 | 40,088 | 29,479 | |||||||||||||||||||||||
| Investment management and fiduciary revenue | 131,050 | 121,608 | 62,348 | |||||||||||||||||||||||
| Deposit service charges | 25,393 | 24,484 | 22,090 | |||||||||||||||||||||||
| Mortgage banking activities, net | 4,799 | 7,271 | 23,216 | |||||||||||||||||||||||
| Loan and lease fee income | 5,718 | 6,275 | 7,533 | |||||||||||||||||||||||
| Security gains, net | — | — | 331 | |||||||||||||||||||||||
| Unrealized gains on equity investments, net | 329 | 5,980 | 5,141 | |||||||||||||||||||||||
| Realized gain (loss) on sale of equity investment, net | 9,493 | — | (706) | |||||||||||||||||||||||
| Bank owned life insurance income | 4,642 | 1,804 | 1,251 | |||||||||||||||||||||||
| Other income | 48,729 | 52,624 | 34,797 | |||||||||||||||||||||||
| 289,871 | 260,134 | 185,480 | ||||||||||||||||||||||||
| Noninterest expense: | ||||||||||||||||||||||||||
| Salaries, benefits and other compensation | 289,193 | 283,905 | 214,167 | |||||||||||||||||||||||
| Occupancy expense | 42,184 | 40,885 | 32,802 | |||||||||||||||||||||||
| Equipment expense | 42,242 | 40,994 | 29,040 | |||||||||||||||||||||||
| Professional fees | 21,200 | 18,497 | 15,614 | |||||||||||||||||||||||
| Data processing and operations expenses | 19,054 | 20,876 | 14,074 | |||||||||||||||||||||||
| Marketing expense | 7,914 | 7,230 | 5,413 | |||||||||||||||||||||||
| FDIC expenses | 15,887 | 6,098 | 4,081 | |||||||||||||||||||||||
| Loan workout and other credit costs | 852 | 702 | 663 | |||||||||||||||||||||||
| Corporate development expense | 3,931 | 42,749 | 11,676 | |||||||||||||||||||||||
| Restructuring expense | (230) | 22,473 | 1,346 | |||||||||||||||||||||||
| Recovery of legal settlement | — | — | (15,000) | |||||||||||||||||||||||
| Loss on early extinguishment of debt | — | — | 1,087 | |||||||||||||||||||||||
| Other operating expense | 119,406 | 89,917 | 63,553 | |||||||||||||||||||||||
| 561,633 | 574,326 | 378,516 | ||||||||||||||||||||||||
| Income before taxes | 365,270 | 300,609 | 357,700 | |||||||||||||||||||||||
| Income tax provision | 96,245 | 77,961 | 86,095 | |||||||||||||||||||||||
| Net income | $ | 269,025 | $ | 222,648 | $ | 271,605 | ||||||||||||||||||||
| Less: Net (loss) income attributable to noncontrolling interest | (131) | 273 | 163 | |||||||||||||||||||||||
| Net income attributable to WSFS | $ | 269,156 | $ | 222,375 | $ | 271,442 | ||||||||||||||||||||
| Basic earnings per share | $ | 4.40 | $ | 3.50 | $ | 5.71 | ||||||||||||||||||||
| Diluted earnings per share | $ | 4.40 | $ | 3.49 | $ | 5.69 | ||||||||||||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements
69
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(LOSS)
| Year Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | |||||||||||||||||
| Net income | $ | 269,025 | $ | 222,648 | $ | 271,605 | ||||||||||||||
| Less: Net (loss) gain attributable to noncontrolling interest | (131) | 273 | 163 | |||||||||||||||||
| Net income attributable to WSFS | $ | 269,156 | $ | 222,375 | $ | 271,442 | ||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||
| Net change in unrealized gains (losses) on investment securities available-for-sale | ||||||||||||||||||||
| Net unrealized gains (losses) arising during the period, net of tax expense (benefit) of $20,085, $(167,261), and $(29,523), respectively | 63,601 | (529,660) | (93,503) | |||||||||||||||||
| Less: reclassification adjustment for net gains on sales realized in net income, net of tax expense of $—, $—, and $80, respectively | — | — | (252) | |||||||||||||||||
| 63,601 | (529,660) | (93,755) | ||||||||||||||||||
| Net change in securities held-to-maturity | ||||||||||||||||||||
Net change in unrealized gains (losses) on securities reclassified to held-to-maturity, net of tax (benefit) expense of $(5,361), $34,319, and $32, respectively(1)(2) | 16,980 | (108,678) | (101) | |||||||||||||||||
| Net change in unfunded pension liability | ||||||||||||||||||||
| Change in unfunded pension liability related to unrealized (loss) gain and prior service cost, net of tax expense (benefit) of $1, $(5), and $50, respectively | (132) | 209 | 97 | |||||||||||||||||
| Net change in cash flow hedge | ||||||||||||||||||||
| Net unrealized gain arising during the period, net of tax expense of $504, $—, and $—, respectively | 1,596 | — | — | |||||||||||||||||
Amortization of unrealized gain on terminated cash flow hedges, net of tax benefit of $34, $51 and $119, respectively | (107) | (160) | (378) | |||||||||||||||||
| 1,489 | (160) | (378) | ||||||||||||||||||
| Net change in equity method investments | ||||||||||||||||||||
| Net change in other comprehensive (loss) income of equity method investments, net of tax (benefit) expense of $(27), $67, and $114, respectively | (85) | 213 | 362 | |||||||||||||||||
| Total other comprehensive income (loss) | 81,853 | (638,076) | (93,775) | |||||||||||||||||
| Total comprehensive income (loss) | $ | 351,009 | $ | (415,701) | $ | 177,667 | ||||||||||||||
(1)Includes $119.8 million, net of tax benefit, of unrealized losses on transferred investment securities with a book value of $1.1 billion from available-for-sale to held-to-maturity that were transferred in June 2022.
(2)Includes amortization of unrealized gains and losses on securities reclassified to held-to-maturity.
The accompanying notes are an integral part of these Consolidated Financial Statements
70
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
| December 31, | ||||||||||||||
| (Dollars in thousands, except per share and share data) | 2023 | 2022 | ||||||||||||
| Assets: | ||||||||||||||
| Cash and due from banks | $ | 629,310 | $ | 332,961 | ||||||||||
| Cash in non-owned ATMs | 458,889 | 499,017 | ||||||||||||
| Interest-bearing deposits in other banks including collateral (restricted cash) of $4,270 at December 31, 2023 and $4,650 at December 31, 2022 | 4,701 | 5,280 | ||||||||||||
| Total cash, cash equivalents, and restricted cash | 1,092,900 | 837,258 | ||||||||||||
| Investment securities, available for sale (amortized cost of $4,504,342 at December 31, 2023 and $4,834,550 at December 31, 2022) | 3,846,537 | 4,093,060 | ||||||||||||
| Investment securities, held to maturity, net of allowance for credit losses of $8 at December 31, 2023 and $10 at December 31, 2022 (fair value $985,931 at December 31, 2023 and $1,040,104 at December 31, 2022) | 1,058,557 | 1,111,619 | ||||||||||||
| Other investments | 17,434 | 26,120 | ||||||||||||
| Loans held for sale at fair value | 29,268 | 42,985 | ||||||||||||
| Loans and leases, net of allowance of $186,126 at December 31, 2023 and $151,861 at December 31, 2022 | 12,583,202 | 11,759,992 | ||||||||||||
| Bank-owned life insurance | 42,762 | 101,935 | ||||||||||||
| Stock in Federal Home Loan Bank of Pittsburgh, at cost | 15,398 | 24,116 | ||||||||||||
| Other real estate owned | 1,569 | 833 | ||||||||||||
| Accrued interest receivable | 85,979 | 74,448 | ||||||||||||
| Premises and equipment | 104,484 | 115,603 | ||||||||||||
| Goodwill | 885,898 | 883,637 | ||||||||||||
| Intangible assets | 118,662 | 128,595 | ||||||||||||
| Other assets | 712,022 | 714,554 | ||||||||||||
| Total assets | $ | 20,594,672 | $ | 19,914,755 | ||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||
| Liabilities: | ||||||||||||||
| Deposits: | ||||||||||||||
| Noninterest-bearing | $ | 4,917,297 | $ | 5,739,647 | ||||||||||
| Interest-bearing demand | 11,556,789 | 10,463,922 | ||||||||||||
| Total deposits | 16,474,086 | 16,203,569 | ||||||||||||
| Federal Home Loan Bank advances | — | 350,000 | ||||||||||||
| Trust preferred borrowings | 90,638 | 90,442 | ||||||||||||
| Senior and subordinated debt | 218,400 | 248,169 | ||||||||||||
| Other borrowed funds | 586,038 | 38,283 | ||||||||||||
| Accrued interest payable | 46,684 | 5,174 | ||||||||||||
| Other liabilities | 709,011 | 777,232 | ||||||||||||
| Total liabilities | 18,124,857 | 17,712,869 | ||||||||||||
| Stockholders’ Equity: | ||||||||||||||
| Common stock 0.01 par value, shares authorized of 90,000,000; shares issued of 76,095,094 at December 31, 2023 and 75,921,997 at December 31, 2022 | 761 | 759 | ||||||||||||
| Capital in excess of par value | 1,984,746 | 1,974,210 | ||||||||||||
| Accumulated other comprehensive loss | (593,991) | (675,844) | ||||||||||||
| Retained earnings | 1,643,657 | 1,411,243 | ||||||||||||
| Treasury stock at cost, 15,557,263 shares at December 31, 2023 and 14,310,085 shares at December 31, 2022 | (557,537) | (505,255) | ||||||||||||
| Total stockholders’ equity of WSFS | 2,477,636 | 2,205,113 | ||||||||||||
| Noncontrolling interest | (7,821) | (3,227) | ||||||||||||
| Total stockholders’ equity | 2,469,815 | 2,201,886 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 20,594,672 | $ | 19,914,755 | ||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements
71
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| (Dollars in thousands, except per share and share amounts) | Shares | Common Stock | Capital in Excess of Par Value | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | Total Stockholders’ Equity of WSFS | Non-controlling Interest | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 57,575,783 | $ | 576 | $ | 1,053,022 | $ | 56,007 | $ | 977,414 | $ | (295,293) | $ | 1,791,726 | $ | (2,246) | $ | 1,789,480 | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 271,442 | — | 271,442 | 163 | 271,605 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | (93,775) | — | — | (93,775) | — | (93,775) | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividend, $0.51 per share | — | — | — | — | (24,242) | — | (24,242) | — | (24,242) | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock including proceeds from exercise of common stock options | 119,893 | 1 | 1,521 | — | — | — | 1,522 | — | 1,522 | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 5,694 | — | — | — | 5,694 | — | 5,694 | |||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock (1) | — | — | (1,240) | — | — | (12,028) | (13,268) | — | (13,268) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | 57,695,676 | $ | 577 | $ | 1,058,997 | $ | (37,768) | $ | 1,224,614 | $ | (307,321) | $ | 1,939,099 | $ | (2,083) | $ | 1,937,016 | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 222,375 | — | 222,375 | 273 | 222,648 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | (638,076) | — | — | (638,076) | — | (638,076) | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividend, $0.56 per share | — | — | — | — | (35,746) | — | (35,746) | — | (35,746) | |||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling shareholders | — | — | — | — | — | — | — | (504) | (504) | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock including proceeds from exercise of common stock options | 109,473 | 1 | 3,178 | — | — | — | 3,179 | — | 3,179 | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in acquisition of BMT | 18,116,848 | 181 | 907,835 | — | — | — | 908,016 | — | 908,016 | |||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest assumed in acquisition | — | — | — | — | — | — | — | (913) | (913) | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 6,349 | — | — | — | 6,349 | — | 6,349 | |||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock (1) | — | — | (2,149) | — | — | (197,934) | (200,083) | — | (200,083) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | 75,921,997 | $ | 759 | $ | 1,974,210 | $ | (675,844) | $ | 1,411,243 | $ | (505,255) | $ | 2,205,113 | $ | (3,227) | $ | 2,201,886 | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 269,156 | — | 269,156 | (131) | 269,025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | 81,853 | — | — | 81,853 | — | 81,853 | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividend, $0.60 per share | — | — | — | — | (36,742) | — | (36,742) | — | (36,742) | |||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling shareholders | — | — | — | — | — | — | — | (4,463) | (4,463) | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock including proceeds from exercise of common stock options | 173,097 | 2 | 3,296 | — | — | — | 3,298 | — | 3,298 | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 9,605 | — | — | — | 9,605 | — | 9,605 | |||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock (1) | — | — | (2,365) | — | — | (52,282) | (54,647) | — | (54,647) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | 76,095,094 | $ | 761 | $ | 1,984,746 | $ | (593,991) | $ | 1,643,657 | $ | (557,537) | $ | 2,477,636 | $ | (7,821) | $ | 2,469,815 | |||||||||||||||||||||||||||||||||||||||
(1)Repurchase of common stock for the years ended December 31, 2023, 2022 and 2021 included 1,247,178, 4,151,117 and 267,309 shares repurchased, respectively, in connection with the Company's share buyback program approved by the Board of Directors, and 45,489, 113,039 and 31,188 shares withheld, respectively, to cover tax liabilities.
The accompanying notes are an integral part of these Consolidated Financial Statements
72
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | |||||||||||||||||
| Operating activities: | ||||||||||||||||||||
| Net income | $ | 269,025 | $ | 222,648 | $ | 271,605 | ||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||
| Provision for (recovery of) credit losses | 88,071 | 48,089 | (117,087) | |||||||||||||||||
| Depreciation of premises and equipment, net | 17,508 | 24,152 | 15,410 | |||||||||||||||||
| Accretion of fees, premiums and discounts, net | (27,376) | (28,378) | (38,257) | |||||||||||||||||
| Amortization of intangible assets | 15,527 | 18,401 | 10,583 | |||||||||||||||||
| Amortization of right of use lease asset | 15,567 | 17,990 | 11,844 | |||||||||||||||||
| Decrease in operating lease liability | (12,417) | (16,291) | (11,941) | |||||||||||||||||
| Income from mortgage banking activities, net | (4,799) | (7,271) | (23,216) | |||||||||||||||||
| Gain on sale of securities, net | — | — | (331) | |||||||||||||||||
| Loss (gain) on sale of other real estate owned and valuation adjustments, net | 195 | (221) | (385) | |||||||||||||||||
| Stock-based compensation expense | 9,605 | 6,349 | 5,694 | |||||||||||||||||
| Unrealized gains on equity investments, net | (329) | (5,980) | (5,141) | |||||||||||||||||
| Realized (gain) loss on sale of equity investment, net | (9,493) | — | 706 | |||||||||||||||||
| Deferred income tax (benefit) expense | (5,397) | (4,005) | 39,838 | |||||||||||||||||
| (Increase) decrease in accrued interest receivable | (11,531) | (22,151) | 2,739 | |||||||||||||||||
| Increase in other assets | (2,185) | (58,852) | (46,378) | |||||||||||||||||
| Origination of loans held-for-sale | (280,826) | (527,684) | (971,863) | |||||||||||||||||
| Proceeds from sales of loans held-for-sale | 198,920 | 501,186 | 991,411 | |||||||||||||||||
| Increase (decrease) in accrued interest payable | 41,510 | 1,196 | (714) | |||||||||||||||||
| (Decrease) increase in other liabilities | (60,781) | 315,065 | (4,807) | |||||||||||||||||
| Decrease (increase) in value of bank-owned life insurance | (2,053) | (1,311) | (1,048) | |||||||||||||||||
| Increase in capitalized interest, net | (1,738) | (2,078) | (3,014) | |||||||||||||||||
| Net cash provided by operating activities | $ | 237,003 | $ | 480,854 | $ | 125,648 | ||||||||||||||
| Investing activities: | ||||||||||||||||||||
| Purchases of investment securities held to maturity | $ | — | $ | (120,868) | $ | — | ||||||||||||||
| Repayments, maturities and calls of investment securities held to maturity | 72,966 | 66,186 | 20,365 | |||||||||||||||||
| Sale of investment securities available-for-sale | — | — | 14,051 | |||||||||||||||||
| Purchases of investment securities available-for-sale | (27,689) | (1,218,022) | (3,490,596) | |||||||||||||||||
| Repayments of investment securities available-for-sale | 354,783 | 1,015,603 | 697,480 | |||||||||||||||||
| Proceeds from bank-owned life insurance death benefit | 3,772 | 1,437 | — | |||||||||||||||||
| Proceeds from bank-owned life insurance surrender | 51,981 | — | — | |||||||||||||||||
| Net proceeds from sale of equity investments | 17,946 | — | 4,899 | |||||||||||||||||
| Net cash (paid for) from business combinations | (3,000) | 573,745 | — | |||||||||||||||||
| Net (increase) decrease in loans and leases | (486,819) | (41,324) | 1,453,471 | |||||||||||||||||
| Purchases of loans held for investment | (313,363) | (393,159) | (188,076) | |||||||||||||||||
| Purchases of FHLB stock | (134,279) | (51,518) | (625) | |||||||||||||||||
| Redemption of FHLB stock | 142,997 | 36,207 | 323 | |||||||||||||||||
| Sales of assets acquired through foreclosure, net | 833 | 1,964 | 2,489 | |||||||||||||||||
| Sale of premise and equipment | 17 | 1,191 | 427 | |||||||||||||||||
| Investment in premises and equipment, net | (6,406) | (8,809) | (6,576) | |||||||||||||||||
| Net cash used in investing activities | $ | (326,261) | $ | (137,367) | $ | (1,492,368) | ||||||||||||||
(continued on following page)
73
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
| Year Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | |||||||||||||||||
| Financing activities: | ||||||||||||||||||||
| Net (decrease) increase in demand and saving deposits | $ | (358,115) | $ | (1,123,468) | $ | 1,760,031 | ||||||||||||||
| Increase (decrease) in time deposits | 681,484 | (94,251) | (169,871) | |||||||||||||||||
| (Decrease) increase in brokered deposits | (70,915) | 61,705 | (202,625) | |||||||||||||||||
| Receipts from FHLB advances | 7,195,000 | 1,873,100 | 1,000 | |||||||||||||||||
| Repayments of FHLB advances | (7,545,000) | (1,523,100) | (7,623) | |||||||||||||||||
| Receipts from federal funds purchased | 7,713,000 | 2,730,001 | — | |||||||||||||||||
| Repayments of federal funds purchased | (7,713,000) | (2,730,001) | — | |||||||||||||||||
| Receipts from Bank Term Funding Program | 565,000 | — | — | |||||||||||||||||
| Distributions to noncontrolling shareholders | (4,463) | (504) | — | |||||||||||||||||
| Cash dividend | (36,742) | (35,746) | (24,242) | |||||||||||||||||
| Issuance of common stock and exercise of common stock options | 3,298 | 3,179 | 1,522 | |||||||||||||||||
| Redemption of senior and subordinated debt | (30,000) | — | (100,000) | |||||||||||||||||
| Repurchase of common shares | (54,647) | (200,083) | (13,268) | |||||||||||||||||
| Net cash provided by (used in) financing activities | $ | 344,900 | $ | (1,039,168) | $ | 1,244,924 | ||||||||||||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | $ | 255,642 | $ | (695,681) | $ | (121,796) | ||||||||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 837,258 | 1,532,939 | 1,654,735 | |||||||||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 1,092,900 | $ | 837,258 | $ | 1,532,939 | ||||||||||||||
| Supplemental disclosure of cash flow information: | ||||||||||||||||||||
| Cash paid for interest during the period | $ | 209,909 | $ | 36,487 | $ | 23,434 | ||||||||||||||
| Cash paid for income taxes, net | 99,136 | 58,148 | 40,691 | |||||||||||||||||
| Non-cash information: | ||||||||||||||||||||
| Loans transferred to other real estate owned | $ | 1,569 | $ | 630 | $ | 1,972 | ||||||||||||||
| Loans transferred to portfolio from held-for-sale at fair value | 96,312 | 97,848 | 72,621 | |||||||||||||||||
| Securities transferred to held-to-maturity from available-for-sale at fair value | — | 931,421 | — | |||||||||||||||||
| Available-for-sale securities purchased, not settled | — | — | 34,489 | |||||||||||||||||
| Receivable for bank-owned life insurance surrender proceeds | 4,731 | — | — | |||||||||||||||||
| Receivable for bank-owned life insurance death benefit proceeds | 742 | — | — | |||||||||||||||||
| Fair value of assets acquired, net of cash received | 7,993 | 4,713,544 | — | |||||||||||||||||
| Fair value of liabilities assumed | 4,993 | 4,379,273 | — | |||||||||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements
74
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
General
WSFS Financial Corporation (the Company or WSFS) is a savings and loan holding company organized under the laws of the State of Delaware. Substantially all of the Company's assets are held by its subsidiary, Wilmington Savings Fund Society, FSB (WSFS Bank or the Bank), is a federal savings bank organized under the laws of the United States (U.S.).
The Consolidated Financial Statements include the accounts of the Company, WSFS Bank, The Bryn Mawr Trust Company of Delaware (BMT-DE), Bryn Mawr Capital Management, LLC (BMCM), WSFS Wealth Management, LLC (Powdermill®), WSFS SPE Services, LLC, and 601 Perkasie, LLC. The Company also has three unconsolidated subsidiaries, WSFS Capital Trust III (the Trust), Royal Bancshares Capital Trust I, and Royal Bancshares Capital Trust II. WSFS Bank has two wholly-owned subsidiaries: Beneficial Equipment Finance Corporation (BEFC) and 1832 Holdings, Inc., and one majority-owned subsidiary, NewLane Finance Company (NewLane Finance®).
Overview
Founded in 1832, the Bank is one of the ten oldest bank and trust companies continuously operating under the same name in the U.S. The Company provides residential and commercial mortgage, commercial and consumer lending services, as well as retail deposit and treasury management services. The Company's core banking business is commercial lending funded primarily by customer-generated deposits. In addition, the Company offers a variety of wealth management and trust services to individual, corporate and institutional clients. The Federal Deposit Insurance Corporation (FDIC) insures the Company's customers’ deposits to their legal maximums. The Company serves its Customers primarily from 114 offices located in Pennsylvania (57), Delaware (40), New Jersey (14), Florida (1), Nevada (1) and Virginia (1), its ATM network, website at www.wsfsbank.com, and mobile app. Information on the Company's website is not incorporated by reference into this Annual Report on Form 10-K.
The Company's leasing business is conducted by NewLane Finance®. NewLane Finance® originates small business leases and provides commercial financing to businesses nationwide, targeting various equipment categories including technology, software, office, medical, veterinary and other areas. In addition, NewLane Finance® offers captive insurance through its subsidiary, Prime Protect.
Basis of Presentation
The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the U.S. (GAAP). In preparing the Consolidated Financial Statements, the Company is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Although the Company's estimates contemplate current conditions and how it expects them to change in the future, it is reasonably possible that actual conditions in 2024 could be worse than anticipated in those estimates, which could materially affect its results of operations and financial condition. The accounting for the allowance for credit losses (including loans and leases held for investment, investment securities available-for-sale and held-to-maturity), lending related commitments, goodwill, intangible assets, post-retirement benefit obligations, the fair value of financial instruments, and income taxes are subject to significant estimates. Among other effects, changes to these estimates could result in future impairments of investment securities, goodwill and intangible assets, the establishment of additional allowance and lending-related commitment reserves, changes in the fair value of financial instruments, as well as increased post-retirement benefits and income tax expense.
All significant intercompany accounts and transactions were eliminated in consolidation.
75
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES
Cash, Cash Equivalents and Restricted Cash
For purposes of reporting cash flows, cash, cash equivalents and restricted cash include cash, cash in non-owned ATMs, amounts due from banks, federal funds sold and securities purchased under agreements to resell and cash collateral held for derivatives, including a financial derivative related to the sale of certain Visa Class B shares.
Debt Securities
Debt securities mostly include mortgage-backed securities (MBS), municipal bonds, and U.S. government and agency securities and are classified into one of the following three categories and accounted for as follows:
•Securities purchased with the intent of selling them in the near future are classified as “trading” and reported at fair value, with unrealized gains and losses included in earnings.
•Securities purchased with the positive intent and ability to hold to maturity are classified as “held to maturity” and reported at amortized cost.
•Securities not classified as either trading or held to maturity are classified as “available-for-sale” and reported at fair value, with unrealized gains and losses excluded from earnings and reported, net of tax, as a separate component of stockholders’ equity in accumulated other comprehensive income (loss).
Realized gains and losses are determined using the specific identification method and included in Security gains, net on the Consolidated Statements of Income. All sales are made without recourse.
The fair value of debt securities is primarily obtained from third-party pricing services. Implicit in the valuation of MBS are estimated prepayments based on historical and current market conditions.
Premiums and discounts on MBS collateralized by residential 1-4 family loans are recognized in interest income using a level yield method over the period to expected maturity. Premiums and discounts on all other securities are recognized on a straight-line basis over the period to expected maturity, with the exception of premiums on callable debt securities, which are recognized over the period to the earliest call date.
A debt security is placed on nonaccrual status at the time any principal or interest payments are contractually past due 90 days or more. Interest accrued but not received for a security placed on nonaccrual status is reversed against interest income.
The Company's investment portfolio is reviewed each quarter for indications of potential credit losses. Refer to the respective held-to-maturity and available-for-sale debt securities sections for the allowance for credit loss policies for each portfolio.
Allowance for Credit Losses - Held-to-Maturity Debt Securities
The Company follows Accounting Standards Codification (ASC) 326-20, Financial Instruments - Credit Loss - Measured at Amortized Cost, to measure expected credit losses on held-to-maturity debt securities on a collective basis by security investment grade. The estimate of expected credit losses considers historical credit loss information adjusted by a security's credit rating.
The Company classifies the held-to-maturity debt securities into the following major security types: mortgage backed securities, state and political subdivisions, and foreign bonds. These securities are highly rated with a history of no credit losses, and are assigned ratings based on the most recent data from ratings agencies depending on the availability of data for the security. Credit ratings of held-to-maturity debt securities, which are a significant input in calculating the expected credit loss, are reviewed on a quarterly basis.
Accrued interest receivable on held-to-maturity debt securities is excluded from the estimate of credit losses and is included in Accrued interest receivable on the Consolidated Statements of Financial Condition.
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Allowance for Credit Losses - Available-for-Sale Debt Securities
The Company follows ASC 326-30, Financial Instruments - Credit Loss - Available-for-Sale Debt Securities, which provides guidance related to the recognition of and expanded disclosure requirements for expected credit losses on available-for-sale debt securities. For available-for-sale debt securities in an unrealized loss position, the Company first evaluates whether it intends to sell, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criterion is met, the security's amortized cost basis is reduced to fair value and recognized as a reduction to Noninterest income in the Consolidated Statements of Income.
For debt securities available-for-sale in which the Company does not intend to sell, or it is not likely the security would be required to be sold before recovery, it evaluates whether a decline in fair value has resulted from credit losses or other adverse factors, such as a change in the security's credit rating. In assessing whether a credit loss exists, the Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance is recorded, limited to the fair value of the security.
The Company performs these analyses on a quarterly basis to review the conditions and risks associated with the individual securities. Credit losses on an impaired security is measured using the present value of expected future cash flows. Any impairment not recorded through an allowance for credit loss is included in other comprehensive income (loss), net of the tax effect. The Company is required to use its judgment in determining impairment in certain circumstances.
For additional detail regarding debt securities, see Note 5.
Equity Investments
The Company has equity investments in certain strategic partnerships that are accounted for in accordance with both ASC 321-10, Investments - Equity Securities and ASC 323-10, Investments - Equity Method and Joint Ventures. Our equity investments are recorded in Other investments on the Consolidated Statements of Financial Condition.
Equity investments recorded in accordance with ASC 740, Income Taxes (ASC 740), which321-10 are classified into one of the following two categories and accounted for as follows:
•Investments with a readily determinable fair value are reported at fair value, with unrealized gains and losses included in earnings. Any dividends received are recorded in interest income.
•Investments without a readily determinable fair value are reported at cost less impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. Any dividends received are recorded in interest income.
For equity investments without readily determinable fair values, when an orderly transaction for the identical or similar investment of the same issuer is identified, the Company uses valuation techniques permitted under ASC 820, Fair Value Measurement, to evaluate the observed transaction(s) and adjust the carrying value.
ASC 321-10 also provides impairment accounting guidance for equity investments without readily determinable fair values. The qualitative assessment to determine whether impairment exists requires the recordinguse of deferredthe Company's judgment. If, after completing the qualitative assessment, the Company concludes an equity investment without a readily determinable fair value is impaired, a loss for the difference between the equity investment’s carrying value and its fair value may be recognized as a reduction to noninterest income taxes thatin the Consolidated Statements of Income.
Equity investments recorded in accordance with ASC 323-10 are initially recorded at cost based on the Company’s percentage ownership in the investee. Subsequently, the carrying amount of the investment is adjusted to reflect the net tax effectsrecognition of temporary differencesthe Company’s proportionate share of income or loss of the investee based on the investee’s earnings for the reporting period, recorded on a one-quarter lag.
The Company assesses its equity method investments for impairment using ASC 323-10 guidance. The qualitative assessment to determine whether impairment exists requires the use of the Company’s judgment. If, after completing the qualitative assessment, the Company concludes an equity method investment is impaired, a loss for the difference between the equity investment’s carrying amounts of assetsvalue and liabilities for financial reporting purposes and the amounts used for income tax purposes. We consider our accounting policiesits fair value may be recognized in Unrealized gains on deferred taxes to be critical because we regularly assess the need for valuation allowancesequity investments, net on deferred income tax assets that may result from, among other things, limitations imposed by Internal Revenue Code and uncertainties, including the timing of settlement and realization of these differences. A valuation allowance was not required as of December 31, 2017. See Note 14 to the Consolidated Financial Statements for further information.
For additional detail regarding equity securities, see Note 5.
77
Loans and leases
Loans and leases held for investment are recorded at amortized cost, net of allowance for credit losses. Amortized cost is the needamount at which a financial asset is originated or acquired, adjusted for the amortization of premium and discount, net deferred fees or costs, collection of cash, and write-offs. Interest income on loans is recognized using the level yield method. Loan origination fees, commitment fees and direct loan origination costs are deferred and recognized over the life of the related loans using a level yield method over the period to maturity.
Past Due and Nonaccrual Loans
Past due loans are defined as loans contractually past due 90 days or more as to principal or interest payments. Past due loans 90 days or more that remain in accrual status are considered well secured and in the process of collection.
Nonaccruing loans are those on which the accrual of interest has ceased. Loans are placed on nonaccrual status immediately if, in the opinion of the Company, collection is doubtful, or when principal or interest is past due 90 days or more and the loan is not well secured and in the process of collection. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed and charged against interest income. In addition, the amortization of net deferred loan fees is suspended when a loan is placed on nonaccrual status. Subsequent cash receipts are applied either to the outstanding principal balance or recorded as interest income, depending on the Company’s assessment of the ultimate collectability of principal and interest. Loans are returned to accrual status when the Company assesses that the borrower has the ability to make estimatesall principal and interest payments in accordance with the terms of the loan (i.e., a consistent repayment record, generally six consecutive payments, has been demonstrated).
For loans greater than 90 days past due, unless loans are well-secured and collection is imminent, their respective reserves are generally charged off once the loss has been confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged off.
A loan, for which the terms have been modified in the current reporting period in the form of principal forgiveness, an interest rate reduction, an other than-insignificant payment delay, or a term extension to a borrower experiencing financial difficulty, is considered a troubled loan. The assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.
Principal balances are generally not forgiven when a loan is modified as a troubled loan. Nonaccruing troubled loans remain in nonaccrual status until there has been a period of sustained repayment performance demonstrated and repayment is reasonably assured. Since the effect of most troubled loans are already included in the Company’s estimate of expected credit losses, a change to the allowance for credit losses is generally not recorded upon modification.
For additional detail regarding past due and nonaccrual loans, see Note 7.
Allowance for Credit Losses - Loans and Leases
The Company establishes its allowance in accordance with guidance provided in ASC 326, Financial Instruments - Credit Losses. The allowance for credit losses includes quantitative and qualitative factors that comprise the Company's current estimate of expected credit losses, including the Company's portfolio mix and segmentation, modeling methodology, historical loss experience, relevant available information from internal and external sources relating to qualitative adjustment factors, prepayment speeds and reasonable and supportable forecasts about future economic conditions.
The Company's portfolio segments, established based on similar risk characteristics and loss behaviors, are:
•Commercial Loans and Leases: Commercial and industrial - real estate secured, commercial and industrial - non-real estate secured, owner-occupied commercial, commercial mortgages, construction and commercial small business leases, and
•Residential and Consumer Loans: Residential mortgage, equity secured lines and loans, installment loans, unsecured lines of credit, originated education loans and previously acquired education loans.
Expected credit losses are net of expected recoveries and estimated over the contractual term, adjusted for expected prepayments. The contractual term excludes any extensions, renewals and modifications unless they are not unconditionally cancellable. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Expected prepayments are based on historical experience and considers adjustments for current and future economic conditions.
78
The allowance includes two primary components: (i) an allowance established on loans which share similar risk characteristics collectively evaluated for credit losses (collective basis) and (ii) an allowance established on loans which do not share similar risk characteristics with any loan segment and are individually evaluated for credit losses (individual basis).
Loans that share similar risk characteristics are collectively reviewed for credit loss and are evaluated based on historical loss experience, adjusted for current economic conditions and future economic forecasts. Estimated losses are determined differently for commercial and residential and consumer loans, and each commercial segment is further segmented by internally assessed risk ratings.
The Company uses a single scenario third-party economic forecast to adjust the calculated historical loss rates of the portfolio segments to incorporate the effects of matters that are inherently uncertain. See Note 17current and future economic conditions. The Company's economic forecast considers the general health of the economy, the interest rate environment, real estate pricing and market risk. The Company's forecast extends out 6 quarters (the forecast period) and reverts to the historical loss rates on a straight-line basis over 4 quarters (the reversion period) as it believes this to be reasonable and supportable in the current environment. The economic forecast and reversion periods will be evaluated periodically by the Company and updated as appropriate.
The historical loss rates for commercial loans are estimated by determining the probability of default (PD) and expected loss given default (LGD) and are applied to the loans' exposure at default. The probability of default is calculated based on the historical rate of migration to an event of credit loss during the look-back period. The historical loss rates for consumer loans are calculated based on average net loss rates over the same look-back period. The current look-back period is 52 quarters which ensures historical loss rates are adequately considering losses within a full credit cycle.
Loans that do not share similar risk characteristics with any loan segments are evaluated on an individual basis. These loans, which may include troubled loans, are not included in the collective basis evaluation. When it is probable the Company will not collect all principal and interest due according to their contractual terms, which is assessed based on the credit characteristics of the loan and/or payment status, these loans are individually reviewed and measured for potential credit loss.
The amount of the potential credit loss is measured using any of the following three methods: (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the fair value of collateral if the loan is collateral dependent; or (iii) the loan’s observable market price. If the measured fair value of the loan is less than the amortized cost basis of the loan, an allowance for credit loss is recorded.
For collateral dependent loans, the expected credit losses at the individual asset level are the difference between the collateral's fair value (less cost to sell) and the amortized cost.
Qualitative adjustment factors consider various internal and external conditions which are allocated among loan segments and take into consideration:
•Current underwriting policies, staffing and portfolio concentrations,
•Risk rating accuracy and credit administration,
•Internal risk emergence (including internal trends of delinquency, and criticized loans by segment),
•Economic forecasts and conditions - locally and nationally (including market trends impacting collateral values), which is separate from or in addition to the third-party economic forecast described above, and
•Competitive environment, as it could impact loan structure and underwriting.
These factors are based on their relative standing compared to the period in which historical losses are used in quantitative reserve estimates and current directional trends, and reasonable and supportable forecasts. Qualitative factors can add to or subtract from quantitative reserves.
The Company's loan officers and risk managers meet at least quarterly to discuss and review the conditions and risks associated with individual problem loans. In addition, various regulatory agencies periodically review the Company's loan ratings and allowance for credit losses and the Bank's internal loan review department performs recurring loan reviews.
Accrued interest receivable on loans is excluded from the estimate of credit losses and is included in Accrued interest receivable on the unaudited Consolidated Statements of Financial Statements.Condition.
For additional detail regarding the allowance for credit losses and the provision for credit losses, see Note 7.
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Unfunded Lending Commitments
For unfunded lending commitments, the Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the probability of default and utilization rate at default to calculate expected credit losses on commitments expected to be funded based on historical losses.
The allowance for credit losses for off-balance sheet exposures is included in Other liabilities on the Consolidated Statements of Financial Condition and the provision for credit losses for off-balance sheet exposure is included in Loan workout and other credit costs on the Consolidated Statements of Income.
For additional detail regarding unfunded lending commitments, see Note 17.
Loans Held for Sale
Mortgage loans held for sale are recorded at fair value on a loan level basis, using pricing information obtained from secondary markets and brokers and applied to loans with similar interest rates and maturities.
Other loans held for sale are carried at the lower of amortized cost or estimated fair value. The estimated fair value is based on pricing information from secondary markets and brokers, when available, or a discounted cash flow analysis when market information is unavailable.
Other Real Estate Owned
Upon initial receipt, other real estate owned (OREO) is recorded at the estimated fair value less costs to sell. Costs subsequently incurred to improve the assets are capitalized, provided that the resultant carrying value does not exceed the estimated fair value less costs to sell. Costs related to holding or disposing of the assets are charged to expense as incurred. The Company periodically evaluates OREO for impairment and write-down the value of the asset when declines in fair value below the carrying value are identified. Loan workout and OREO expenses include costs of holding and operating the assets, net gains or losses on sales of the assets and provisions for losses to reduce such assets to the estimated fair values less costs to sell.
For additional detail regarding other real estate owned, see Note 7.
Premises, Equipment and Software
Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense are computed on a straight-line basis over the estimated useful lives of the assets or, for leasehold improvements, over the terms of the related lease or effective useful lives of the assets, whichever is less. In general, computer equipment, furniture and equipment and building renovations are depreciated over three, five and ten years, respectively. Software, which includes purchased or externally hosted software is recorded in Other assets and is amortized on a straight-line basis over the lesser of the contract term or estimated useful life of the software.
Maintenance and repairs are expensed as incurred, while costs of major replacements, improvements and additions are capitalized.
Premises and equipment acquired in business combinations are initially recorded at fair value and subsequently carried at cost less accumulated depreciation and amortization. Assets to be disposed of are recorded at the lower of the carrying amount or fair value less costs to sell.
For additional detail regarding premises and equipment, see Note 8.
Change in Interest Rate (Basis Points) | December 31, 2017 | December 31, 2016 | ||||||
% Change in Net Interest Margin (1) | Economic Value of Equity (2) | % Change in Net Interest Margin (1) | Economic Value of Equity (2) | |||||
| 300 | 7% | 16.16% | 3% | 14.04% | ||||
| 200 | 4% | 16.16% | 2% | 14.09% | ||||
| 100 | 2% | 15.96% | < 1% | 14.00% | ||||
| — | — % | 15.63% | — % | 13.80% | ||||
| (100 | ) | (4)% | 14.69% | (1)% | 13.08% | |||
-200 (3) | NMF | NMF | NMF | NMF | ||||
-300 (3) | NMF | NMF | NMF | NMF | ||||
CONSOLIDATED STATEMENTS OF INCOMEFINANCIAL CONDITION
| December 31, | ||||||||||||||
| (Dollars in thousands, except per share and share data) | 2023 | 2022 | ||||||||||||
| Assets: | ||||||||||||||
| Cash and due from banks | $ | 629,310 | $ | 332,961 | ||||||||||
| Cash in non-owned ATMs | 458,889 | 499,017 | ||||||||||||
| Interest-bearing deposits in other banks including collateral (restricted cash) of $4,270 at December 31, 2023 and $4,650 at December 31, 2022 | 4,701 | 5,280 | ||||||||||||
| Total cash, cash equivalents, and restricted cash | 1,092,900 | 837,258 | ||||||||||||
| Investment securities, available for sale (amortized cost of $4,504,342 at December 31, 2023 and $4,834,550 at December 31, 2022) | 3,846,537 | 4,093,060 | ||||||||||||
| Investment securities, held to maturity, net of allowance for credit losses of $8 at December 31, 2023 and $10 at December 31, 2022 (fair value $985,931 at December 31, 2023 and $1,040,104 at December 31, 2022) | 1,058,557 | 1,111,619 | ||||||||||||
| Other investments | 17,434 | 26,120 | ||||||||||||
| Loans held for sale at fair value | 29,268 | 42,985 | ||||||||||||
| Loans and leases, net of allowance of $186,126 at December 31, 2023 and $151,861 at December 31, 2022 | 12,583,202 | 11,759,992 | ||||||||||||
| Bank-owned life insurance | 42,762 | 101,935 | ||||||||||||
| Stock in Federal Home Loan Bank of Pittsburgh, at cost | 15,398 | 24,116 | ||||||||||||
| Other real estate owned | 1,569 | 833 | ||||||||||||
| Accrued interest receivable | 85,979 | 74,448 | ||||||||||||
| Premises and equipment | 104,484 | 115,603 | ||||||||||||
| Goodwill | 885,898 | 883,637 | ||||||||||||
| Intangible assets | 118,662 | 128,595 | ||||||||||||
| Other assets | 712,022 | 714,554 | ||||||||||||
| Total assets | $ | 20,594,672 | $ | 19,914,755 | ||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||
| Liabilities: | ||||||||||||||
| Deposits: | ||||||||||||||
| Noninterest-bearing | $ | 4,917,297 | $ | 5,739,647 | ||||||||||
| Interest-bearing demand | 11,556,789 | 10,463,922 | ||||||||||||
| Total deposits | 16,474,086 | 16,203,569 | ||||||||||||
| Federal Home Loan Bank advances | — | 350,000 | ||||||||||||
| Trust preferred borrowings | 90,638 | 90,442 | ||||||||||||
| Senior and subordinated debt | 218,400 | 248,169 | ||||||||||||
| Other borrowed funds | 586,038 | 38,283 | ||||||||||||
| Accrued interest payable | 46,684 | 5,174 | ||||||||||||
| Other liabilities | 709,011 | 777,232 | ||||||||||||
| Total liabilities | 18,124,857 | 17,712,869 | ||||||||||||
| Stockholders’ Equity: | ||||||||||||||
| Common stock 0.01 par value, shares authorized of 90,000,000; shares issued of 76,095,094 at December 31, 2023 and 75,921,997 at December 31, 2022 | 761 | 759 | ||||||||||||
| Capital in excess of par value | 1,984,746 | 1,974,210 | ||||||||||||
| Accumulated other comprehensive loss | (593,991) | (675,844) | ||||||||||||
| Retained earnings | 1,643,657 | 1,411,243 | ||||||||||||
| Treasury stock at cost, 15,557,263 shares at December 31, 2023 and 14,310,085 shares at December 31, 2022 | (557,537) | (505,255) | ||||||||||||
| Total stockholders’ equity of WSFS | 2,477,636 | 2,205,113 | ||||||||||||
| Noncontrolling interest | (7,821) | (3,227) | ||||||||||||
| Total stockholders’ equity | 2,469,815 | 2,201,886 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 20,594,672 | $ | 19,914,755 | ||||||||||
| Year Ended December 31, | ||||||||||||
| (Dollars in thousands, except per share data) | 2017 | 2016 | 2015 | |||||||||
| Interest Income: | ||||||||||||
| Interest and fees on loans | $ | 229,147 | $ | 194,345 | $ | 162,519 | ||||||
| Interest on mortgage-backed securities | 19,308 | 15,754 | 14,173 | |||||||||
| Interest and dividends on investment securities | ||||||||||||
| Taxable | 137 | 321 | 241 | |||||||||
| Tax-exempt | 4,511 | 4,551 | 3,431 | |||||||||
| Other interest income | 1,623 | 1,607 | 2,212 | |||||||||
| 254,726 | 216,578 | 182,576 | ||||||||||
| Interest Expense: | ||||||||||||
| Interest on deposits | 14,904 | 9,421 | 7,165 | |||||||||
| Interest on Federal Home Loan Bank advances | 8,263 | 4,707 | 3,008 | |||||||||
| Interest on federal funds purchased and securities sold under agreements to repurchase | 972 | 606 | 360 | |||||||||
| Interest on trust preferred borrowings | 1,940 | 1,622 | 1,362 | |||||||||
| Interest on senior debt | 7,228 | 6,356 | 3,766 | |||||||||
| Interest on other borrowings | 148 | 121 | 115 | |||||||||
| 33,455 | 22,833 | 15,776 | ||||||||||
| Net interest income | 221,271 | 193,745 | 166,800 | |||||||||
| Provision for loan losses | 10,964 | 12,986 | 7,790 | |||||||||
| Net interest income after provision for loan losses | 210,307 | 180,759 | 159,010 | |||||||||
| Noninterest Income: | ||||||||||||
| Credit/debit card and ATM income | 36,116 | 29,899 | 25,702 | |||||||||
| Deposit service charges | 18,318 | 17,734 | 16,684 | |||||||||
| Wealth management income | 35,103 | 25,691 | 21,884 | |||||||||
| Mortgage banking activities, net | 6,293 | 7,434 | 5,896 | |||||||||
| Security gains, net | 1,984 | 2,369 | 1,478 | |||||||||
| Loan fee income | 2,218 | 2,066 | 1,834 | |||||||||
| Bank owned life insurance income | 1,545 | 919 | 776 | |||||||||
| Other income | 23,067 | 18,949 | 16,002 | |||||||||
| 124,644 | 105,061 | 90,256 | ||||||||||
| Noninterest Expense: | ||||||||||||
| Salaries, benefits and other compensation | 114,376 | 95,983 | 83,908 | |||||||||
| Occupancy expense | 19,409 | 16,646 | 15,121 | |||||||||
| Equipment expense | 12,564 | 10,368 | 8,448 | |||||||||
| Data processing and operations expenses | 6,779 | 6,275 | 5,949 | |||||||||
| Professional fees | 8,597 | 9,142 | 7,737 | |||||||||
| FDIC expenses | 2,216 | 2,606 | 2,853 | |||||||||
| Loan workout and OREO expenses | 1,820 | 1,681 | 1,108 | |||||||||
| Marketing expense | 3,083 | 3,020 | 3,002 | |||||||||
| Corporate development expense | 878 | 8,529 | 7,620 | |||||||||
| Early extinguishment of debt costs | 695 | — | 651 | |||||||||
| Provision for legal settlement | 12,000 | — | — | |||||||||
| Fraud loss | 2,844 | — | — | |||||||||
| Other operating expense | 41,200 | 34,416 | 29,063 | |||||||||
| 226,461 | 188,666 | 165,460 | ||||||||||
| Income before taxes | 108,490 | 97,154 | 83,806 | |||||||||
| Income tax provision | 58,246 | 33,074 | 30,273 | |||||||||
| Net income | $ | 50,244 | $ | 64,080 | $ | 53,533 | ||||||
| Basic | $ | 1.60 | $ | 2.12 | $ | 1.88 | ||||||
| Diluted | $ | 1.56 | $ | 2.06 | $ | 1.85 | ||||||
The accompanying notes are an integral part of these Consolidated Financial Statements
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMECHANGES IN STOCKHOLDERS’ EQUITY
| (Dollars in thousands, except per share and share amounts) | Shares | Common Stock | Capital in Excess of Par Value | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | Total Stockholders’ Equity of WSFS | Non-controlling Interest | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 57,575,783 | $ | 576 | $ | 1,053,022 | $ | 56,007 | $ | 977,414 | $ | (295,293) | $ | 1,791,726 | $ | (2,246) | $ | 1,789,480 | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 271,442 | — | 271,442 | 163 | 271,605 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | (93,775) | — | — | (93,775) | — | (93,775) | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividend, $0.51 per share | — | — | — | — | (24,242) | — | (24,242) | — | (24,242) | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock including proceeds from exercise of common stock options | 119,893 | 1 | 1,521 | — | — | — | 1,522 | — | 1,522 | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 5,694 | — | — | — | 5,694 | — | 5,694 | |||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock (1) | — | — | (1,240) | — | — | (12,028) | (13,268) | — | (13,268) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | 57,695,676 | $ | 577 | $ | 1,058,997 | $ | (37,768) | $ | 1,224,614 | $ | (307,321) | $ | 1,939,099 | $ | (2,083) | $ | 1,937,016 | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 222,375 | — | 222,375 | 273 | 222,648 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | (638,076) | — | — | (638,076) | — | (638,076) | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividend, $0.56 per share | — | — | — | — | (35,746) | — | (35,746) | — | (35,746) | |||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling shareholders | — | — | — | — | — | — | — | (504) | (504) | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock including proceeds from exercise of common stock options | 109,473 | 1 | 3,178 | — | — | — | 3,179 | — | 3,179 | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in acquisition of BMT | 18,116,848 | 181 | 907,835 | — | — | — | 908,016 | — | 908,016 | |||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest assumed in acquisition | — | — | — | — | — | — | — | (913) | (913) | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 6,349 | — | — | — | 6,349 | — | 6,349 | |||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock (1) | — | — | (2,149) | — | — | (197,934) | (200,083) | — | (200,083) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | 75,921,997 | $ | 759 | $ | 1,974,210 | $ | (675,844) | $ | 1,411,243 | $ | (505,255) | $ | 2,205,113 | $ | (3,227) | $ | 2,201,886 | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 269,156 | — | 269,156 | (131) | 269,025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | 81,853 | — | — | 81,853 | — | 81,853 | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividend, $0.60 per share | — | — | — | — | (36,742) | — | (36,742) | — | (36,742) | |||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling shareholders | — | — | — | — | — | — | — | (4,463) | (4,463) | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock including proceeds from exercise of common stock options | 173,097 | 2 | 3,296 | — | — | — | 3,298 | — | 3,298 | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 9,605 | — | — | — | 9,605 | — | 9,605 | |||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock (1) | — | — | (2,365) | — | — | (52,282) | (54,647) | — | (54,647) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | 76,095,094 | $ | 761 | $ | 1,984,746 | $ | (593,991) | $ | 1,643,657 | $ | (557,537) | $ | 2,477,636 | $ | (7,821) | $ | 2,469,815 | |||||||||||||||||||||||||||||||||||||||
| Year Ended December 31, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
| (Dollars in thousands) | ||||||||||||
| Net Income | $ | 50,244 | $ | 64,080 | $ | 53,533 | ||||||
| Other comprehensive income: | ||||||||||||
| Net change in unrealized gains (losses) on investment securities available for sale | ||||||||||||
| Net unrealized gains (losses) arising during the period, net of tax expense (benefit) of $1,813, ($2,968), and ($868), respectively | 3,073 | (4,838 | ) | (1,417 | ) | |||||||
| Less: reclassification adjustment for net gains on sales realized in net income, net of tax expense of $704, $900, and $562, respectively | (1,280 | ) | (1,469 | ) | (916 | ) | ||||||
| 1,793 | (6,307 | ) | (2,333 | ) | ||||||||
| Net change in securities held to maturity | ||||||||||||
| Amortization of unrealized gain on securities reclassified to held-to-maturity, net of tax expense of $241, $248, and $234, respectively | (394 | ) | (403 | ) | (412 | ) | ||||||
| (394 | ) | (403 | ) | (412 | ) | |||||||
| Net change in unfunded pension liability | ||||||||||||
| Change in unfunded pension liability related to unrealized (loss) gain, prior service cost and transition obligation, net of tax (benefit) expense of ($56), $103, and ($37), respectively | (90 | ) | 169 | (59 | ) | |||||||
| (90 | ) | 169 | (59 | ) | ||||||||
| Net change in cash flow hedge | ||||||||||||
| Net unrealized (loss) arising during the period, net of tax (benefit) of ($113), ($1,086), and $0, respectively | (184 | ) | (1,772 | ) | — | |||||||
| (184 | ) | (1,772 | ) | — | ||||||||
| Total other comprehensive (loss) income | 1,125 | (8,313 | ) | (2,804 | ) | |||||||
| Total comprehensive income | $ | 51,369 | $ | 55,767 | $ | 50,729 | ||||||
(1)Repurchase of common stock for the years ended December 31, 2023, 2022 and 2021 included 1,247,178, 4,151,117 and 267,309 shares repurchased, respectively, in connection with the Company's share buyback program approved by the Board of Directors, and 45,489, 113,039 and 31,188 shares withheld, respectively, to cover tax liabilities.
The accompanying notes are an integral part of these Consolidated Financial Statements
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CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | |||||||||||||||||
| Operating activities: | ||||||||||||||||||||
| Net income | $ | 269,025 | $ | 222,648 | $ | 271,605 | ||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||
| Provision for (recovery of) credit losses | 88,071 | 48,089 | (117,087) | |||||||||||||||||
| Depreciation of premises and equipment, net | 17,508 | 24,152 | 15,410 | |||||||||||||||||
| Accretion of fees, premiums and discounts, net | (27,376) | (28,378) | (38,257) | |||||||||||||||||
| Amortization of intangible assets | 15,527 | 18,401 | 10,583 | |||||||||||||||||
| Amortization of right of use lease asset | 15,567 | 17,990 | 11,844 | |||||||||||||||||
| Decrease in operating lease liability | (12,417) | (16,291) | (11,941) | |||||||||||||||||
| Income from mortgage banking activities, net | (4,799) | (7,271) | (23,216) | |||||||||||||||||
| Gain on sale of securities, net | — | — | (331) | |||||||||||||||||
| Loss (gain) on sale of other real estate owned and valuation adjustments, net | 195 | (221) | (385) | |||||||||||||||||
| Stock-based compensation expense | 9,605 | 6,349 | 5,694 | |||||||||||||||||
| Unrealized gains on equity investments, net | (329) | (5,980) | (5,141) | |||||||||||||||||
| Realized (gain) loss on sale of equity investment, net | (9,493) | — | 706 | |||||||||||||||||
| Deferred income tax (benefit) expense | (5,397) | (4,005) | 39,838 | |||||||||||||||||
| (Increase) decrease in accrued interest receivable | (11,531) | (22,151) | 2,739 | |||||||||||||||||
| Increase in other assets | (2,185) | (58,852) | (46,378) | |||||||||||||||||
| Origination of loans held-for-sale | (280,826) | (527,684) | (971,863) | |||||||||||||||||
| Proceeds from sales of loans held-for-sale | 198,920 | 501,186 | 991,411 | |||||||||||||||||
| Increase (decrease) in accrued interest payable | 41,510 | 1,196 | (714) | |||||||||||||||||
| (Decrease) increase in other liabilities | (60,781) | 315,065 | (4,807) | |||||||||||||||||
| Decrease (increase) in value of bank-owned life insurance | (2,053) | (1,311) | (1,048) | |||||||||||||||||
| Increase in capitalized interest, net | (1,738) | (2,078) | (3,014) | |||||||||||||||||
| Net cash provided by operating activities | $ | 237,003 | $ | 480,854 | $ | 125,648 | ||||||||||||||
| Investing activities: | ||||||||||||||||||||
| Purchases of investment securities held to maturity | $ | — | $ | (120,868) | $ | — | ||||||||||||||
| Repayments, maturities and calls of investment securities held to maturity | 72,966 | 66,186 | 20,365 | |||||||||||||||||
| Sale of investment securities available-for-sale | — | — | 14,051 | |||||||||||||||||
| Purchases of investment securities available-for-sale | (27,689) | (1,218,022) | (3,490,596) | |||||||||||||||||
| Repayments of investment securities available-for-sale | 354,783 | 1,015,603 | 697,480 | |||||||||||||||||
| Proceeds from bank-owned life insurance death benefit | 3,772 | 1,437 | — | |||||||||||||||||
| Proceeds from bank-owned life insurance surrender | 51,981 | — | — | |||||||||||||||||
| Net proceeds from sale of equity investments | 17,946 | — | 4,899 | |||||||||||||||||
| Net cash (paid for) from business combinations | (3,000) | 573,745 | — | |||||||||||||||||
| Net (increase) decrease in loans and leases | (486,819) | (41,324) | 1,453,471 | |||||||||||||||||
| Purchases of loans held for investment | (313,363) | (393,159) | (188,076) | |||||||||||||||||
| Purchases of FHLB stock | (134,279) | (51,518) | (625) | |||||||||||||||||
| Redemption of FHLB stock | 142,997 | 36,207 | 323 | |||||||||||||||||
| Sales of assets acquired through foreclosure, net | 833 | 1,964 | 2,489 | |||||||||||||||||
| Sale of premise and equipment | 17 | 1,191 | 427 | |||||||||||||||||
| Investment in premises and equipment, net | (6,406) | (8,809) | (6,576) | |||||||||||||||||
| Net cash used in investing activities | $ | (326,261) | $ | (137,367) | $ | (1,492,368) | ||||||||||||||
(continued on following page)
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CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
| Year Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | |||||||||||||||||
| Financing activities: | ||||||||||||||||||||
| Net (decrease) increase in demand and saving deposits | $ | (358,115) | $ | (1,123,468) | $ | 1,760,031 | ||||||||||||||
| Increase (decrease) in time deposits | 681,484 | (94,251) | (169,871) | |||||||||||||||||
| (Decrease) increase in brokered deposits | (70,915) | 61,705 | (202,625) | |||||||||||||||||
| Receipts from FHLB advances | 7,195,000 | 1,873,100 | 1,000 | |||||||||||||||||
| Repayments of FHLB advances | (7,545,000) | (1,523,100) | (7,623) | |||||||||||||||||
| Receipts from federal funds purchased | 7,713,000 | 2,730,001 | — | |||||||||||||||||
| Repayments of federal funds purchased | (7,713,000) | (2,730,001) | — | |||||||||||||||||
| Receipts from Bank Term Funding Program | 565,000 | — | — | |||||||||||||||||
| Distributions to noncontrolling shareholders | (4,463) | (504) | — | |||||||||||||||||
| Cash dividend | (36,742) | (35,746) | (24,242) | |||||||||||||||||
| Issuance of common stock and exercise of common stock options | 3,298 | 3,179 | 1,522 | |||||||||||||||||
| Redemption of senior and subordinated debt | (30,000) | — | (100,000) | |||||||||||||||||
| Repurchase of common shares | (54,647) | (200,083) | (13,268) | |||||||||||||||||
| Net cash provided by (used in) financing activities | $ | 344,900 | $ | (1,039,168) | $ | 1,244,924 | ||||||||||||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | $ | 255,642 | $ | (695,681) | $ | (121,796) | ||||||||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 837,258 | 1,532,939 | 1,654,735 | |||||||||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 1,092,900 | $ | 837,258 | $ | 1,532,939 | ||||||||||||||
| Supplemental disclosure of cash flow information: | ||||||||||||||||||||
| Cash paid for interest during the period | $ | 209,909 | $ | 36,487 | $ | 23,434 | ||||||||||||||
| Cash paid for income taxes, net | 99,136 | 58,148 | 40,691 | |||||||||||||||||
| Non-cash information: | ||||||||||||||||||||
| Loans transferred to other real estate owned | $ | 1,569 | $ | 630 | $ | 1,972 | ||||||||||||||
| Loans transferred to portfolio from held-for-sale at fair value | 96,312 | 97,848 | 72,621 | |||||||||||||||||
| Securities transferred to held-to-maturity from available-for-sale at fair value | — | 931,421 | — | |||||||||||||||||
| Available-for-sale securities purchased, not settled | — | — | 34,489 | |||||||||||||||||
| Receivable for bank-owned life insurance surrender proceeds | 4,731 | — | — | |||||||||||||||||
| Receivable for bank-owned life insurance death benefit proceeds | 742 | — | — | |||||||||||||||||
| Fair value of assets acquired, net of cash received | 7,993 | 4,713,544 | — | |||||||||||||||||
| Fair value of liabilities assumed | 4,993 | 4,379,273 | — | |||||||||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
General
WSFS Financial Corporation (the Company or WSFS) is a savings and loan holding company organized under the laws of the State of Delaware. Substantially all of the Company's assets are held by its subsidiary, Wilmington Savings Fund Society, FSB (WSFS Bank or the Bank), is a federal savings bank organized under the laws of the United States (U.S.).
The Consolidated Financial Statements include the accounts of the Company, WSFS Bank, The Bryn Mawr Trust Company of Delaware (BMT-DE), Bryn Mawr Capital Management, LLC (BMCM), WSFS Wealth Management, LLC (Powdermill®), WSFS SPE Services, LLC, and 601 Perkasie, LLC. The Company also has three unconsolidated subsidiaries, WSFS Capital Trust III (the Trust), Royal Bancshares Capital Trust I, and Royal Bancshares Capital Trust II. WSFS Bank has two wholly-owned subsidiaries: Beneficial Equipment Finance Corporation (BEFC) and 1832 Holdings, Inc., and one majority-owned subsidiary, NewLane Finance Company (NewLane Finance®).
Overview
Founded in 1832, the Bank is one of the ten oldest bank and trust companies continuously operating under the same name in the U.S. The Company provides residential and commercial mortgage, commercial and consumer lending services, as well as retail deposit and treasury management services. The Company's core banking business is commercial lending funded primarily by customer-generated deposits. In addition, the Company offers a variety of wealth management and trust services to individual, corporate and institutional clients. The Federal Deposit Insurance Corporation (FDIC) insures the Company's customers’ deposits to their legal maximums. The Company serves its Customers primarily from 114 offices located in Pennsylvania (57), Delaware (40), New Jersey (14), Florida (1), Nevada (1) and Virginia (1), its ATM network, website at www.wsfsbank.com, and mobile app. Information on the Company's website is not incorporated by reference into this Annual Report on Form 10-K.
The Company's leasing business is conducted by NewLane Finance®. NewLane Finance® originates small business leases and provides commercial financing to businesses nationwide, targeting various equipment categories including technology, software, office, medical, veterinary and other areas. In addition, NewLane Finance® offers captive insurance through its subsidiary, Prime Protect.
Basis of Presentation
The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the U.S. (GAAP). In preparing the Consolidated Financial Statements, the Company is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Although the Company's estimates contemplate current conditions and how it expects them to change in the future, it is reasonably possible that actual conditions in 2024 could be worse than anticipated in those estimates, which could materially affect its results of operations and financial condition. The accounting for the allowance for credit losses (including loans and leases held for investment, investment securities available-for-sale and held-to-maturity), lending related commitments, goodwill, intangible assets, post-retirement benefit obligations, the fair value of financial instruments, and income taxes are subject to significant estimates. Among other effects, changes to these estimates could result in future impairments of investment securities, goodwill and intangible assets, the establishment of additional allowance and lending-related commitment reserves, changes in the fair value of financial instruments, as well as increased post-retirement benefits and income tax expense.
All significant intercompany accounts and transactions were eliminated in consolidation.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES
Cash, Cash Equivalents and Restricted Cash
For purposes of reporting cash flows, cash, cash equivalents and restricted cash include cash, cash in non-owned ATMs, amounts due from banks, federal funds sold and securities purchased under agreements to resell and cash collateral held for derivatives, including a financial derivative related to the sale of certain Visa Class B shares.
Debt Securities
Debt securities mostly include mortgage-backed securities (MBS), municipal bonds, and U.S. government and agency securities and are classified into one of the following three categories and accounted for as follows:
•Securities purchased with the intent of selling them in the near future are classified as “trading” and reported at fair value, with unrealized gains and losses included in earnings.
•Securities purchased with the positive intent and ability to hold to maturity are classified as “held to maturity” and reported at amortized cost.
•Securities not classified as either trading or held to maturity are classified as “available-for-sale” and reported at fair value, with unrealized gains and losses excluded from earnings and reported, net of tax, as a separate component of stockholders’ equity in accumulated other comprehensive income (loss).
Realized gains and losses are determined using the specific identification method and included in Security gains, net on the Consolidated Statements of Income. All sales are made without recourse.
The fair value of debt securities is primarily obtained from third-party pricing services. Implicit in the valuation of MBS are estimated prepayments based on historical and current market conditions.
Premiums and discounts on MBS collateralized by residential 1-4 family loans are recognized in interest income using a level yield method over the period to expected maturity. Premiums and discounts on all other securities are recognized on a straight-line basis over the period to expected maturity, with the exception of premiums on callable debt securities, which are recognized over the period to the earliest call date.
A debt security is placed on nonaccrual status at the time any principal or interest payments are contractually past due 90 days or more. Interest accrued but not received for a security placed on nonaccrual status is reversed against interest income.
The Company's investment portfolio is reviewed each quarter for indications of potential credit losses. Refer to the respective held-to-maturity and available-for-sale debt securities sections for the allowance for credit loss policies for each portfolio.
Allowance for Credit Losses - Held-to-Maturity Debt Securities
The Company follows Accounting Standards Codification (ASC) 326-20, Financial Instruments - Credit Loss - Measured at Amortized Cost, to measure expected credit losses on held-to-maturity debt securities on a collective basis by security investment grade. The estimate of expected credit losses considers historical credit loss information adjusted by a security's credit rating.
The Company classifies the held-to-maturity debt securities into the following major security types: mortgage backed securities, state and political subdivisions, and foreign bonds. These securities are highly rated with a history of no credit losses, and are assigned ratings based on the most recent data from ratings agencies depending on the availability of data for the security. Credit ratings of held-to-maturity debt securities, which are a significant input in calculating the expected credit loss, are reviewed on a quarterly basis.
Accrued interest receivable on held-to-maturity debt securities is excluded from the estimate of credit losses and is included in Accrued interest receivable on the Consolidated Statements of Financial Condition.
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Allowance for Credit Losses - Available-for-Sale Debt Securities
The Company follows ASC 326-30, Financial Instruments - Credit Loss - Available-for-Sale Debt Securities, which provides guidance related to the recognition of and expanded disclosure requirements for expected credit losses on available-for-sale debt securities. For available-for-sale debt securities in an unrealized loss position, the Company first evaluates whether it intends to sell, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criterion is met, the security's amortized cost basis is reduced to fair value and recognized as a reduction to Noninterest income in the Consolidated Statements of Income.
For debt securities available-for-sale in which the Company does not intend to sell, or it is not likely the security would be required to be sold before recovery, it evaluates whether a decline in fair value has resulted from credit losses or other adverse factors, such as a change in the security's credit rating. In assessing whether a credit loss exists, the Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance is recorded, limited to the fair value of the security.
The Company performs these analyses on a quarterly basis to review the conditions and risks associated with the individual securities. Credit losses on an impaired security is measured using the present value of expected future cash flows. Any impairment not recorded through an allowance for credit loss is included in other comprehensive income (loss), net of the tax effect. The Company is required to use its judgment in determining impairment in certain circumstances.
For additional detail regarding debt securities, see Note 5.
Equity Investments
The Company has equity investments in certain strategic partnerships that are accounted for in accordance with both ASC 321-10, Investments - Equity Securities and ASC 323-10, Investments - Equity Method and Joint Ventures. Our equity investments are recorded in Other investments on the Consolidated Statements of Financial Condition.
Equity investments recorded in accordance with ASC 321-10 are classified into one of the following two categories and accounted for as follows:
•Investments with a readily determinable fair value are reported at fair value, with unrealized gains and losses included in earnings. Any dividends received are recorded in interest income.
•Investments without a readily determinable fair value are reported at cost less impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. Any dividends received are recorded in interest income.
For equity investments without readily determinable fair values, when an orderly transaction for the identical or similar investment of the same issuer is identified, the Company uses valuation techniques permitted under ASC 820, Fair Value Measurement, to evaluate the observed transaction(s) and adjust the carrying value.
ASC 321-10 also provides impairment accounting guidance for equity investments without readily determinable fair values. The qualitative assessment to determine whether impairment exists requires the use of the Company's judgment. If, after completing the qualitative assessment, the Company concludes an equity investment without a readily determinable fair value is impaired, a loss for the difference between the equity investment’s carrying value and its fair value may be recognized as a reduction to noninterest income in the Consolidated Statements of Income.
Equity investments recorded in accordance with ASC 323-10 are initially recorded at cost based on the Company’s percentage ownership in the investee. Subsequently, the carrying amount of the investment is adjusted to reflect the recognition of the Company’s proportionate share of income or loss of the investee based on the investee’s earnings for the reporting period, recorded on a one-quarter lag.
The Company assesses its equity method investments for impairment using ASC 323-10 guidance. The qualitative assessment to determine whether impairment exists requires the use of the Company’s judgment. If, after completing the qualitative assessment, the Company concludes an equity method investment is impaired, a loss for the difference between the equity investment’s carrying value and its fair value may be recognized in Unrealized gains on equity investments, net on the Consolidated Statements of Income. After an impairment charge is recorded, the new cost basis cannot be subsequently written up to a higher value as a result of increases in fair value.
For additional detail regarding equity securities, see Note 5.
77
Loans and leases
Loans and leases held for investment are recorded at amortized cost, net of allowance for credit losses. Amortized cost is the amount at which a financial asset is originated or acquired, adjusted for the amortization of premium and discount, net deferred fees or costs, collection of cash, and write-offs. Interest income on loans is recognized using the level yield method. Loan origination fees, commitment fees and direct loan origination costs are deferred and recognized over the life of the related loans using a level yield method over the period to maturity.
Past Due and Nonaccrual Loans
Past due loans are defined as loans contractually past due 90 days or more as to principal or interest payments. Past due loans 90 days or more that remain in accrual status are considered well secured and in the process of collection.
Nonaccruing loans are those on which the accrual of interest has ceased. Loans are placed on nonaccrual status immediately if, in the opinion of the Company, collection is doubtful, or when principal or interest is past due 90 days or more and the loan is not well secured and in the process of collection. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed and charged against interest income. In addition, the amortization of net deferred loan fees is suspended when a loan is placed on nonaccrual status. Subsequent cash receipts are applied either to the outstanding principal balance or recorded as interest income, depending on the Company’s assessment of the ultimate collectability of principal and interest. Loans are returned to accrual status when the Company assesses that the borrower has the ability to make all principal and interest payments in accordance with the terms of the loan (i.e., a consistent repayment record, generally six consecutive payments, has been demonstrated).
For loans greater than 90 days past due, unless loans are well-secured and collection is imminent, their respective reserves are generally charged off once the loss has been confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged off.
A loan, for which the terms have been modified in the current reporting period in the form of principal forgiveness, an interest rate reduction, an other than-insignificant payment delay, or a term extension to a borrower experiencing financial difficulty, is considered a troubled loan. The assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.
Principal balances are generally not forgiven when a loan is modified as a troubled loan. Nonaccruing troubled loans remain in nonaccrual status until there has been a period of sustained repayment performance demonstrated and repayment is reasonably assured. Since the effect of most troubled loans are already included in the Company’s estimate of expected credit losses, a change to the allowance for credit losses is generally not recorded upon modification.
For additional detail regarding past due and nonaccrual loans, see Note 7.
Allowance for Credit Losses - Loans and Leases
The Company establishes its allowance in accordance with guidance provided in ASC 326, Financial Instruments - Credit Losses. The allowance for credit losses includes quantitative and qualitative factors that comprise the Company's current estimate of expected credit losses, including the Company's portfolio mix and segmentation, modeling methodology, historical loss experience, relevant available information from internal and external sources relating to qualitative adjustment factors, prepayment speeds and reasonable and supportable forecasts about future economic conditions.
The Company's portfolio segments, established based on similar risk characteristics and loss behaviors, are:
•Commercial Loans and Leases: Commercial and industrial - real estate secured, commercial and industrial - non-real estate secured, owner-occupied commercial, commercial mortgages, construction and commercial small business leases, and
•Residential and Consumer Loans: Residential mortgage, equity secured lines and loans, installment loans, unsecured lines of credit, originated education loans and previously acquired education loans.
Expected credit losses are net of expected recoveries and estimated over the contractual term, adjusted for expected prepayments. The contractual term excludes any extensions, renewals and modifications unless they are not unconditionally cancellable. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Expected prepayments are based on historical experience and considers adjustments for current and future economic conditions.
78
The allowance includes two primary components: (i) an allowance established on loans which share similar risk characteristics collectively evaluated for credit losses (collective basis) and (ii) an allowance established on loans which do not share similar risk characteristics with any loan segment and are individually evaluated for credit losses (individual basis).
Loans that share similar risk characteristics are collectively reviewed for credit loss and are evaluated based on historical loss experience, adjusted for current economic conditions and future economic forecasts. Estimated losses are determined differently for commercial and residential and consumer loans, and each commercial segment is further segmented by internally assessed risk ratings.
The Company uses a single scenario third-party economic forecast to adjust the calculated historical loss rates of the portfolio segments to incorporate the effects of current and future economic conditions. The Company's economic forecast considers the general health of the economy, the interest rate environment, real estate pricing and market risk. The Company's forecast extends out 6 quarters (the forecast period) and reverts to the historical loss rates on a straight-line basis over 4 quarters (the reversion period) as it believes this to be reasonable and supportable in the current environment. The economic forecast and reversion periods will be evaluated periodically by the Company and updated as appropriate.
The historical loss rates for commercial loans are estimated by determining the probability of default (PD) and expected loss given default (LGD) and are applied to the loans' exposure at default. The probability of default is calculated based on the historical rate of migration to an event of credit loss during the look-back period. The historical loss rates for consumer loans are calculated based on average net loss rates over the same look-back period. The current look-back period is 52 quarters which ensures historical loss rates are adequately considering losses within a full credit cycle.
Loans that do not share similar risk characteristics with any loan segments are evaluated on an individual basis. These loans, which may include troubled loans, are not included in the collective basis evaluation. When it is probable the Company will not collect all principal and interest due according to their contractual terms, which is assessed based on the credit characteristics of the loan and/or payment status, these loans are individually reviewed and measured for potential credit loss.
The amount of the potential credit loss is measured using any of the following three methods: (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the fair value of collateral if the loan is collateral dependent; or (iii) the loan’s observable market price. If the measured fair value of the loan is less than the amortized cost basis of the loan, an allowance for credit loss is recorded.
For collateral dependent loans, the expected credit losses at the individual asset level are the difference between the collateral's fair value (less cost to sell) and the amortized cost.
Qualitative adjustment factors consider various internal and external conditions which are allocated among loan segments and take into consideration:
•Current underwriting policies, staffing and portfolio concentrations,
•Risk rating accuracy and credit administration,
•Internal risk emergence (including internal trends of delinquency, and criticized loans by segment),
•Economic forecasts and conditions - locally and nationally (including market trends impacting collateral values), which is separate from or in addition to the third-party economic forecast described above, and
•Competitive environment, as it could impact loan structure and underwriting.
These factors are based on their relative standing compared to the period in which historical losses are used in quantitative reserve estimates and current directional trends, and reasonable and supportable forecasts. Qualitative factors can add to or subtract from quantitative reserves.
The Company's loan officers and risk managers meet at least quarterly to discuss and review the conditions and risks associated with individual problem loans. In addition, various regulatory agencies periodically review the Company's loan ratings and allowance for credit losses and the Bank's internal loan review department performs recurring loan reviews.
Accrued interest receivable on loans is excluded from the estimate of credit losses and is included in Accrued interest receivable on the unaudited Consolidated Statements of Financial Condition.
For additional detail regarding the allowance for credit losses and the provision for credit losses, see Note 7.
79
Unfunded Lending Commitments
For unfunded lending commitments, the Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the probability of default and utilization rate at default to calculate expected credit losses on commitments expected to be funded based on historical losses.
The allowance for credit losses for off-balance sheet exposures is included in Other liabilities on the Consolidated Statements of Financial Condition and the provision for credit losses for off-balance sheet exposure is included in Loan workout and other credit costs on the Consolidated Statements of Income.
For additional detail regarding unfunded lending commitments, see Note 17.
Loans Held for Sale
Mortgage loans held for sale are recorded at fair value on a loan level basis, using pricing information obtained from secondary markets and brokers and applied to loans with similar interest rates and maturities.
Other loans held for sale are carried at the lower of amortized cost or estimated fair value. The estimated fair value is based on pricing information from secondary markets and brokers, when available, or a discounted cash flow analysis when market information is unavailable.
Other Real Estate Owned
Upon initial receipt, other real estate owned (OREO) is recorded at the estimated fair value less costs to sell. Costs subsequently incurred to improve the assets are capitalized, provided that the resultant carrying value does not exceed the estimated fair value less costs to sell. Costs related to holding or disposing of the assets are charged to expense as incurred. The Company periodically evaluates OREO for impairment and write-down the value of the asset when declines in fair value below the carrying value are identified. Loan workout and OREO expenses include costs of holding and operating the assets, net gains or losses on sales of the assets and provisions for losses to reduce such assets to the estimated fair values less costs to sell.
For additional detail regarding other real estate owned, see Note 7.
Premises, Equipment and Software
Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense are computed on a straight-line basis over the estimated useful lives of the assets or, for leasehold improvements, over the terms of the related lease or effective useful lives of the assets, whichever is less. In general, computer equipment, furniture and equipment and building renovations are depreciated over three, five and ten years, respectively. Software, which includes purchased or externally hosted software is recorded in Other assets and is amortized on a straight-line basis over the lesser of the contract term or estimated useful life of the software.
Maintenance and repairs are expensed as incurred, while costs of major replacements, improvements and additions are capitalized.
Premises and equipment acquired in business combinations are initially recorded at fair value and subsequently carried at cost less accumulated depreciation and amortization. Assets to be disposed of are recorded at the lower of the carrying amount or fair value less costs to sell.
For additional detail regarding premises and equipment, see Note 8.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
| December 31, | ||||||||||||||
| (Dollars in thousands, except per share and share data) | 2023 | 2022 | ||||||||||||
| Assets: | ||||||||||||||
| Cash and due from banks | $ | 629,310 | $ | 332,961 | ||||||||||
| Cash in non-owned ATMs | 458,889 | 499,017 | ||||||||||||
| Interest-bearing deposits in other banks including collateral (restricted cash) of $4,270 at December 31, 2023 and $4,650 at December 31, 2022 | 4,701 | 5,280 | ||||||||||||
| Total cash, cash equivalents, and restricted cash | 1,092,900 | 837,258 | ||||||||||||
| Investment securities, available for sale (amortized cost of $4,504,342 at December 31, 2023 and $4,834,550 at December 31, 2022) | 3,846,537 | 4,093,060 | ||||||||||||
| Investment securities, held to maturity, net of allowance for credit losses of $8 at December 31, 2023 and $10 at December 31, 2022 (fair value $985,931 at December 31, 2023 and $1,040,104 at December 31, 2022) | 1,058,557 | 1,111,619 | ||||||||||||
| Other investments | 17,434 | 26,120 | ||||||||||||
| Loans held for sale at fair value | 29,268 | 42,985 | ||||||||||||
| Loans and leases, net of allowance of $186,126 at December 31, 2023 and $151,861 at December 31, 2022 | 12,583,202 | 11,759,992 | ||||||||||||
| Bank-owned life insurance | 42,762 | 101,935 | ||||||||||||
| Stock in Federal Home Loan Bank of Pittsburgh, at cost | 15,398 | 24,116 | ||||||||||||
| Other real estate owned | 1,569 | 833 | ||||||||||||
| Accrued interest receivable | 85,979 | 74,448 | ||||||||||||
| Premises and equipment | 104,484 | 115,603 | ||||||||||||
| Goodwill | 885,898 | 883,637 | ||||||||||||
| Intangible assets | 118,662 | 128,595 | ||||||||||||
| Other assets | 712,022 | 714,554 | ||||||||||||
| Total assets | $ | 20,594,672 | $ | 19,914,755 | ||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||
| Liabilities: | ||||||||||||||
| Deposits: | ||||||||||||||
| Noninterest-bearing | $ | 4,917,297 | $ | 5,739,647 | ||||||||||
| Interest-bearing demand | 11,556,789 | 10,463,922 | ||||||||||||
| Total deposits | 16,474,086 | 16,203,569 | ||||||||||||
| Federal Home Loan Bank advances | — | 350,000 | ||||||||||||
| Trust preferred borrowings | 90,638 | 90,442 | ||||||||||||
| Senior and subordinated debt | 218,400 | 248,169 | ||||||||||||
| Other borrowed funds | 586,038 | 38,283 | ||||||||||||
| Accrued interest payable | 46,684 | 5,174 | ||||||||||||
| Other liabilities | 709,011 | 777,232 | ||||||||||||
| Total liabilities | 18,124,857 | 17,712,869 | ||||||||||||
| Stockholders’ Equity: | ||||||||||||||
| Common stock 0.01 par value, shares authorized of 90,000,000; shares issued of 76,095,094 at December 31, 2023 and 75,921,997 at December 31, 2022 | 761 | 759 | ||||||||||||
| Capital in excess of par value | 1,984,746 | 1,974,210 | ||||||||||||
| Accumulated other comprehensive loss | (593,991) | (675,844) | ||||||||||||
| Retained earnings | 1,643,657 | 1,411,243 | ||||||||||||
| Treasury stock at cost, 15,557,263 shares at December 31, 2023 and 14,310,085 shares at December 31, 2022 | (557,537) | (505,255) | ||||||||||||
| Total stockholders’ equity of WSFS | 2,477,636 | 2,205,113 | ||||||||||||
| Noncontrolling interest | (7,821) | (3,227) | ||||||||||||
| Total stockholders’ equity | 2,469,815 | 2,201,886 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 20,594,672 | $ | 19,914,755 | ||||||||||
| December 31, | 2017 | 2016 | ||||||
| (Dollars in thousands, except per share and share data) | ||||||||
| Assets: | ||||||||
| Cash and due from banks | $ | 122,141 | $ | 119,929 | ||||
| Cash in non-owned ATMs | 598,117 | 698,454 | ||||||
| Interest-bearing deposits in other banks | 3,608 | 3,540 | ||||||
| Total cash and cash equivalents | 723,866 | 821,923 | ||||||
| Investment securities, available for sale (book value $848,434 and $807,761 at December 31, 2017 and 2016, respectively) | 838,122 | 794,543 | ||||||
| Investment securities, held to maturity, at cost (fair value $162,853 and $163,232 at December 31, 2017 and 2016, respectively) | 161,186 | 164,346 | ||||||
| Loans held for sale at fair value | 31,055 | 54,782 | ||||||
| Loans, net of allowance for loan losses of $40,599 and $39,751 at December 31, 2017 and 2016, respectively | 4,776,318 | 4,444,375 | ||||||
| Bank-owned life insurance | 102,958 | 101,425 | ||||||
| Stock in Federal Home Loan Bank of Pittsburgh, at cost | 31,284 | 38,248 | ||||||
| Other real estate owned | 2,503 | 3,591 | ||||||
| Accrued interest receivable | 19,405 | 17,027 | ||||||
| Premises and equipment | 47,983 | 48,871 | ||||||
| Goodwill | 166,007 | 167,539 | ||||||
| Intangible assets | 22,437 | 23,708 | ||||||
| Other assets | 76,416 | 84,892 | ||||||
| Total assets | $ | 6,999,540 | $ | 6,765,270 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Deposits: | ||||||||
| Noninterest-bearing demand | $ | 1,420,760 | $ | 1,266,306 | ||||
| Interest-bearing demand | 1,071,512 | 935,333 | ||||||
| Money market | 1,347,146 | 1,257,520 | ||||||
| Savings | 549,744 | 547,293 | ||||||
| Time | 330,137 | 332,624 | ||||||
| Jumbo certificates of deposit — customer | 298,934 | 260,560 | ||||||
| Total customer deposits | 5,018,233 | 4,599,636 | ||||||
| Brokered deposits | 229,371 | 138,802 | ||||||
| Total deposits | 5,247,604 | 4,738,438 | ||||||
| Federal funds purchased and securities sold under agreements to repurchase | 28,000 | 130,000 | ||||||
| Federal Home Loan Bank advances | 710,001 | 854,236 | ||||||
| Trust preferred borrowings | 67,011 | 67,011 | ||||||
| Senior debt | 98,171 | 152,050 | ||||||
| Other borrowed funds | 34,623 | 64,150 | ||||||
| Accrued interest payable | 1,037 | 1,151 | ||||||
| Other liabilities | 88,748 | 70,898 | ||||||
| Total liabilities | 6,275,195 | 6,077,934 | ||||||
| Stockholders’ Equity: | ||||||||
| Common stock $0.01 par value, 65,000,000 shares authorized; 56,279,527 and 55,995,219 issued at December 31, 2017 and 2016, respectively | 563 | 580 | ||||||
| Capital in excess of par value | 336,271 | 329,457 | ||||||
| Accumulated other comprehensive loss | (8,152 | ) | (7,617 | ) | ||||
| Retained earnings | 669,557 | 627,078 | ||||||
| Treasury stock at cost, 24,861,145 and 24,605,145 shares at December 31, 2017 and 2016, respectively | (273,894 | ) | (262,162 | ) | ||||
| Total stockholders’ equity | 724,345 | 687,336 | ||||||
| Total liabilities and stockholders’ equity | $ | 6,999,540 | $ | 6,765,270 | ||||
The accompanying notes are an integral part of these Consolidated Financial Statements
71
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| (Dollars in thousands, except per share and share amounts) | Shares | Common Stock | Capital in Excess of Par Value | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | Total Stockholders’ Equity of WSFS | Non-controlling Interest | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 57,575,783 | $ | 576 | $ | 1,053,022 | $ | 56,007 | $ | 977,414 | $ | (295,293) | $ | 1,791,726 | $ | (2,246) | $ | 1,789,480 | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 271,442 | — | 271,442 | 163 | 271,605 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | (93,775) | — | — | (93,775) | — | (93,775) | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividend, $0.51 per share | — | — | — | — | (24,242) | — | (24,242) | — | (24,242) | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock including proceeds from exercise of common stock options | 119,893 | 1 | 1,521 | — | — | — | 1,522 | — | 1,522 | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 5,694 | — | — | — | 5,694 | — | 5,694 | |||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock (1) | — | — | (1,240) | — | — | (12,028) | (13,268) | — | (13,268) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | 57,695,676 | $ | 577 | $ | 1,058,997 | $ | (37,768) | $ | 1,224,614 | $ | (307,321) | $ | 1,939,099 | $ | (2,083) | $ | 1,937,016 | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 222,375 | — | 222,375 | 273 | 222,648 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | (638,076) | — | — | (638,076) | — | (638,076) | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividend, $0.56 per share | — | — | — | — | (35,746) | — | (35,746) | — | (35,746) | |||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling shareholders | — | — | — | — | — | — | — | (504) | (504) | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock including proceeds from exercise of common stock options | 109,473 | 1 | 3,178 | — | — | — | 3,179 | — | 3,179 | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock in acquisition of BMT | 18,116,848 | 181 | 907,835 | — | — | — | 908,016 | — | 908,016 | |||||||||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest assumed in acquisition | — | — | — | — | — | — | — | (913) | (913) | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 6,349 | — | — | — | 6,349 | — | 6,349 | |||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock (1) | — | — | (2,149) | — | — | (197,934) | (200,083) | — | (200,083) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | 75,921,997 | $ | 759 | $ | 1,974,210 | $ | (675,844) | $ | 1,411,243 | $ | (505,255) | $ | 2,205,113 | $ | (3,227) | $ | 2,201,886 | |||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | 269,156 | — | 269,156 | (131) | 269,025 | |||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | 81,853 | — | — | 81,853 | — | 81,853 | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash dividend, $0.60 per share | — | — | — | — | (36,742) | — | (36,742) | — | (36,742) | |||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling shareholders | — | — | — | — | — | — | — | (4,463) | (4,463) | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock including proceeds from exercise of common stock options | 173,097 | 2 | 3,296 | — | — | — | 3,298 | — | 3,298 | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | 9,605 | — | — | — | 9,605 | — | 9,605 | |||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock (1) | — | — | (2,365) | — | — | (52,282) | (54,647) | — | (54,647) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | 76,095,094 | $ | 761 | $ | 1,984,746 | $ | (593,991) | $ | 1,643,657 | $ | (557,537) | $ | 2,477,636 | $ | (7,821) | $ | 2,469,815 | |||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands, except per share and share amounts) | Shares | Common Stock | Capital in Excess of Par Value | Accumulated Other Comprehensive (Loss) Income | Retained Earnings | Treasury Stock | Total Stockholders’ Equity | ||||||||||||||||||||
| Balance, December 31, 2014 | 55,697,124 | $ | 557 | $ | 201,130 | $ | 3,500 | $ | 523,099 | $ | (239,235 | ) | $ | 489,051 | |||||||||||||
| Net income | — | — | — | — | 53,533 | — | 53,533 | ||||||||||||||||||||
| Other comprehensive loss | — | — | — | (2,804 | ) | — | — | (2,804 | ) | ||||||||||||||||||
| Cash dividend, $0.21 per share | — | — | — | — | (6,002 | ) | — | (6,002 | ) | ||||||||||||||||||
| Issuance of common stock including proceeds from exercise of common stock options | 248,121 | 3 | 4,047 | — | — | — | 4,050 | ||||||||||||||||||||
| Stock-based compensation expense | — | — | 2,957 | — | — | — | 2,957 | ||||||||||||||||||||
| Acquisition of Alliance | — | — | 48,301 | — | — | 23,044 | 71,345 | ||||||||||||||||||||
| Repurchases of common stock, 1,152,233 shares | — | — | — | — | — | (31,659 | ) | (31,659 | ) | ||||||||||||||||||
| Balance, December 31, 2015 | 55,945,245 | $ | 560 | $ | 256,435 | $ | 696 | $ | 570,630 | $ | (247,850 | ) | $ | 580,471 | |||||||||||||
| Net income | — | — | — | — | 64,080 | — | 64,080 | ||||||||||||||||||||
| Other comprehensive loss | — | — | — | (8,313 | ) | — | — | (8,313 | ) | ||||||||||||||||||
| Cash dividend, $0.25 per share | — | — | — | — | (7,632 | ) | — | (7,632 | ) | ||||||||||||||||||
| Issuance of common stock including proceeds from exercise of common stock options | 265,853 | 2 | 1,898 | — | — | — | 1,900 | ||||||||||||||||||||
| Stock-based compensation expense | — | — | 2,790 | — | — | — | 2,790 | ||||||||||||||||||||
| Acquisition of Penn Liberty | 1,806,748 | 18 | 68,334 | — | — | — | 68,352 | ||||||||||||||||||||
| Repurchase of common stock, 449,371 shares | — | — | — | — | — | (14,312 | ) | (14,312 | ) | ||||||||||||||||||
Treasury share adjustment (1) | (2,022,627 | ) | — | — | — | — | — | ||||||||||||||||||||
| Balance, December 31, 2016 | 55,995,219 | $ | 580 | $ | 329,457 | $ | (7,617 | ) | $ | 627,078 | $ | (262,162 | ) | $ | 687,336 | ||||||||||||
| Net income | — | — | — | — | 50,244 | — | 50,244 | ||||||||||||||||||||
| Other comprehensive income | — | — | — | 1,125 | — | — | 1,125 | ||||||||||||||||||||
| Cash dividend, $0.30 per share | — | — | — | — | (9,425 | ) | — | (9,425 | ) | ||||||||||||||||||
| Reclassification due to the adoption of ASU No. 2018-02 | — | — | — | (1,660 | ) | 1,660 | — | — | |||||||||||||||||||
| Issuance of common stock including proceeds from exercise of common stock options | 284,308 | 3 | 3,418 | — | — | — | 3,421 | ||||||||||||||||||||
| Stock-based compensation expense | — | — | 3,396 | — | — | — | 3,396 | ||||||||||||||||||||
| Repurchase of common stock, 255,000 shares | — | (20 | ) | — | — | — | (11,732 | ) | (11,752 | ) | |||||||||||||||||
| Balance, December 31, 2017 | 56,279,527 | $ | 563 | $ | 336,271 | $ | (8,152 | ) | $ | 669,557 | $ | (273,894 | ) | $ | 724,345 | ||||||||||||
| Year Ended December 31, | ||||||||||||
| (Dollars in thousands) | 2017 | 2016 | 2015 | |||||||||
| Operating activities: | ||||||||||||
| Net income | $ | 50,244 | $ | 64,080 | $ | 53,533 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Provision for loan losses | 10,964 | 12,986 | 7,790 | |||||||||
| Depreciation of premises and equipment | 8,557 | 7,477 | 6,333 | |||||||||
| Amortization of fees and discounts, net | 19,082 | 19,626 | 18,490 | |||||||||
| Amortization of intangible assets | 3,078 | 2,438 | 1,847 | |||||||||
| Increase in accrued interest receivable | (2,378 | ) | (2,009 | ) | (1,334 | ) | ||||||
| (Increase) decrease in other assets | (2,517 | ) | 443 | (1,643 | ) | |||||||
| Origination of loans held for sale | (354,659 | ) | (366,859 | ) | (573,703 | ) | ||||||
| Proceeds from sales of loans held for sale | 369,986 | 346,895 | 563,588 | |||||||||
| Gain on mortgage banking activity, net | (6,293 | ) | (7,434 | ) | (5,896 | ) | ||||||
| Gain on sale of securities, net | (1,984 | ) | (2,369 | ) | (1,478 | ) | ||||||
| Debt extinguishment costs | 695 | — | — | |||||||||
| Stock-based compensation expense | 3,396 | 3,046 | 4,095 | |||||||||
| (Decrease) increase in accrued interest payable | (114 | ) | 350 | (203 | ) | |||||||
| Increase in other liabilities | 7,353 | 3,709 | 6,502 | |||||||||
| Loss on sale of OREO and valuation adjustments, net | 217 | 313 | 319 | |||||||||
| Provision for legal settlement | 12,000 | — | — | |||||||||
| Increase in value of bank-owned life insurance | (1,130 | ) | (2,551 | ) | (776 | ) | ||||||
| Deferred income tax expense | 17,899 | 5,370 | 2,231 | |||||||||
| Increase in capitalized interest, net | (4,228 | ) | (5,331 | ) | (5,518 | ) | ||||||
| Net cash provided by operating activities | 130,168 | 80,180 | 74,177 | |||||||||
| Investing activities: | ||||||||||||
| Maturities and calls of investment securities | 1,230 | 2,890 | 5,551 | |||||||||
| Sales of investment securities available for sale | 457,046 | 201,580 | 192,933 | |||||||||
| BOLI - cash return of capital | 371 | — | — | |||||||||
| Purchases of investment securities available for sale | (696,581 | ) | (371,590 | ) | (277,963 | ) | ||||||
| Repayments of investment securities available for sale | 197,765 | 85,200 | 100,485 | |||||||||
| Purchases of investment securities held to maturity | — | (3,329 | ) | (48,184 | ) | |||||||
| Net cash for business combinations | — | 39,794 | 40,863 | |||||||||
| Net increase in loans | (343,858 | ) | (217,572 | ) | (275,162 | ) | ||||||
| Purchases of VISA Class B stock | (10,072 | ) | (387 | ) | (3,589 | ) | ||||||
| Purchases of stock of Federal Home Loan Bank of Pittsburgh | (160,089 | ) | (88,176 | ) | (66,955 | ) | ||||||
| Redemptions of stock of Federal Home Loan Bank of Pittsburgh | 167,053 | 80,447 | 59,714 | |||||||||
| Sales of OREO, net | 6,077 | 4,423 | 4,828 | |||||||||
| Investment in premises and equipment, net | (7,728 | ) | (9,873 | ) | (8,362 | ) | ||||||
| Net cash used for investing activities | (388,786 | ) | (276,593 | ) | (275,841 | ) | ||||||
| Year Ended December 31, | ||||||||||||
| (Dollars in thousands) | 2017 | 2016 | 2015 | |||||||||
| Financing Activities: | ||||||||||||
| Net increase in demand and savings deposits | $ | 353,521 | $ | 272,544 | $ | 159,587 | ||||||
| Decrease in time deposits | 35,887 | (51,416 | ) | (103,710 | ) | |||||||
| (Decrease) increase in brokered deposits | 90,482 | (17,928 | ) | (30,228 | ) | |||||||
| (Decrease) increase in loan payable | (338 | ) | (370 | ) | 61 | |||||||
| Repayment of securities sold under agreement to repurchase | — | — | (25,000 | ) | ||||||||
| Receipts from federal funds purchased and securities sold under agreement to repurchase | 23,008,000 | 27,702,620 | 31,887,100 | |||||||||
| Repayments of federal funds purchased and securities sold under agreement to repurchase | (23,110,000 | ) | (27,700,820 | ) | (31,862,125 | ) | ||||||
| Receipts from FHLB advances | 143,852,751 | 121,977,563 | 63,310,841 | |||||||||
| Repayments of FHLB advances | (143,996,986 | ) | (121,792,841 | ) | (63,047,221 | ) | ||||||
| Repayment of long-term debt | — | (10,000 | ) | — | ||||||||
| Dividends paid | (9,425 | ) | (7,632 | ) | (6,002 | ) | ||||||
| Issuance of common stock and exercise of common stock options | 3,421 | 1,900 | 3,160 | |||||||||
| Repayment of senior debt | (55,000 | ) | — | — | ||||||||
| Issuance of senior debt | — | 97,849 | — | |||||||||
| Buy back of common stock | (11,752 | ) | (14,312 | ) | (31,659 | ) | ||||||
| Net cash provided by (used for) financing activities | 160,561 | 457,157 | 254,804 | |||||||||
| Increase in cash and cash equivalents | (98,057 | ) | 260,744 | 53,140 | ||||||||
| Cash and cash equivalents at beginning of year | 821,923 | 561,179 | 508,039 | |||||||||
| Cash and cash equivalents at end of year | $ | 723,866 | $ | 821,923 | $ | 561,179 | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||||||
| Cash paid in interest during the year | $ | 33,569 | $ | 22,483 | $ | 15,978 | ||||||
| Cash paid for income taxes, net | 31,441 | 24,825 | 23,404 | |||||||||
| Loans transferred to OREO | 5,206 | 2,251 | 3,725 | |||||||||
| Loans transferred to portfolio from held-for-sale at fair value | 13,142 | 12,919 | (1,499 | ) | ||||||||
| Fair value of assets acquired, net of cash received | — | 534,375 | 340,238 | |||||||||
| Fair value of liabilities assumed | — | 589,632 | 346,181 | |||||||||
| Reissuance of treasury stock for acquisitions, net | — | — | 71,345 | |||||||||
| Non-cash goodwill adjustments, net | (1,532 | ) | 2,112 | 136 | ||||||||
common stock for the years ended December 31, 2023, 2022 and 2021 included 1,247,178, 4,151,117 and 267,309 shares repurchased, respectively, in connection with the Company's share buyback program approved by the Board of Directors, and 45,489, 113,039 and 31,188 shares withheld, respectively, to cover tax liabilities.
The accompanying notes are an integral part of these Consolidated Financial Statements
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CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | |||||||||||||||||
| Operating activities: | ||||||||||||||||||||
| Net income | $ | 269,025 | $ | 222,648 | $ | 271,605 | ||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||
| Provision for (recovery of) credit losses | 88,071 | 48,089 | (117,087) | |||||||||||||||||
| Depreciation of premises and equipment, net | 17,508 | 24,152 | 15,410 | |||||||||||||||||
| Accretion of fees, premiums and discounts, net | (27,376) | (28,378) | (38,257) | |||||||||||||||||
| Amortization of intangible assets | 15,527 | 18,401 | 10,583 | |||||||||||||||||
| Amortization of right of use lease asset | 15,567 | 17,990 | 11,844 | |||||||||||||||||
| Decrease in operating lease liability | (12,417) | (16,291) | (11,941) | |||||||||||||||||
| Income from mortgage banking activities, net | (4,799) | (7,271) | (23,216) | |||||||||||||||||
| Gain on sale of securities, net | — | — | (331) | |||||||||||||||||
| Loss (gain) on sale of other real estate owned and valuation adjustments, net | 195 | (221) | (385) | |||||||||||||||||
| Stock-based compensation expense | 9,605 | 6,349 | 5,694 | |||||||||||||||||
| Unrealized gains on equity investments, net | (329) | (5,980) | (5,141) | |||||||||||||||||
| Realized (gain) loss on sale of equity investment, net | (9,493) | — | 706 | |||||||||||||||||
| Deferred income tax (benefit) expense | (5,397) | (4,005) | 39,838 | |||||||||||||||||
| (Increase) decrease in accrued interest receivable | (11,531) | (22,151) | 2,739 | |||||||||||||||||
| Increase in other assets | (2,185) | (58,852) | (46,378) | |||||||||||||||||
| Origination of loans held-for-sale | (280,826) | (527,684) | (971,863) | |||||||||||||||||
| Proceeds from sales of loans held-for-sale | 198,920 | 501,186 | 991,411 | |||||||||||||||||
| Increase (decrease) in accrued interest payable | 41,510 | 1,196 | (714) | |||||||||||||||||
| (Decrease) increase in other liabilities | (60,781) | 315,065 | (4,807) | |||||||||||||||||
| Decrease (increase) in value of bank-owned life insurance | (2,053) | (1,311) | (1,048) | |||||||||||||||||
| Increase in capitalized interest, net | (1,738) | (2,078) | (3,014) | |||||||||||||||||
| Net cash provided by operating activities | $ | 237,003 | $ | 480,854 | $ | 125,648 | ||||||||||||||
| Investing activities: | ||||||||||||||||||||
| Purchases of investment securities held to maturity | $ | — | $ | (120,868) | $ | — | ||||||||||||||
| Repayments, maturities and calls of investment securities held to maturity | 72,966 | 66,186 | 20,365 | |||||||||||||||||
| Sale of investment securities available-for-sale | — | — | 14,051 | |||||||||||||||||
| Purchases of investment securities available-for-sale | (27,689) | (1,218,022) | (3,490,596) | |||||||||||||||||
| Repayments of investment securities available-for-sale | 354,783 | 1,015,603 | 697,480 | |||||||||||||||||
| Proceeds from bank-owned life insurance death benefit | 3,772 | 1,437 | — | |||||||||||||||||
| Proceeds from bank-owned life insurance surrender | 51,981 | — | — | |||||||||||||||||
| Net proceeds from sale of equity investments | 17,946 | — | 4,899 | |||||||||||||||||
| Net cash (paid for) from business combinations | (3,000) | 573,745 | — | |||||||||||||||||
| Net (increase) decrease in loans and leases | (486,819) | (41,324) | 1,453,471 | |||||||||||||||||
| Purchases of loans held for investment | (313,363) | (393,159) | (188,076) | |||||||||||||||||
| Purchases of FHLB stock | (134,279) | (51,518) | (625) | |||||||||||||||||
| Redemption of FHLB stock | 142,997 | 36,207 | 323 | |||||||||||||||||
| Sales of assets acquired through foreclosure, net | 833 | 1,964 | 2,489 | |||||||||||||||||
| Sale of premise and equipment | 17 | 1,191 | 427 | |||||||||||||||||
| Investment in premises and equipment, net | (6,406) | (8,809) | (6,576) | |||||||||||||||||
| Net cash used in investing activities | $ | (326,261) | $ | (137,367) | $ | (1,492,368) | ||||||||||||||
(continued on following page)
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CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
| Year Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | |||||||||||||||||
| Financing activities: | ||||||||||||||||||||
| Net (decrease) increase in demand and saving deposits | $ | (358,115) | $ | (1,123,468) | $ | 1,760,031 | ||||||||||||||
| Increase (decrease) in time deposits | 681,484 | (94,251) | (169,871) | |||||||||||||||||
| (Decrease) increase in brokered deposits | (70,915) | 61,705 | (202,625) | |||||||||||||||||
| Receipts from FHLB advances | 7,195,000 | 1,873,100 | 1,000 | |||||||||||||||||
| Repayments of FHLB advances | (7,545,000) | (1,523,100) | (7,623) | |||||||||||||||||
| Receipts from federal funds purchased | 7,713,000 | 2,730,001 | — | |||||||||||||||||
| Repayments of federal funds purchased | (7,713,000) | (2,730,001) | — | |||||||||||||||||
| Receipts from Bank Term Funding Program | 565,000 | — | — | |||||||||||||||||
| Distributions to noncontrolling shareholders | (4,463) | (504) | — | |||||||||||||||||
| Cash dividend | (36,742) | (35,746) | (24,242) | |||||||||||||||||
| Issuance of common stock and exercise of common stock options | 3,298 | 3,179 | 1,522 | |||||||||||||||||
| Redemption of senior and subordinated debt | (30,000) | — | (100,000) | |||||||||||||||||
| Repurchase of common shares | (54,647) | (200,083) | (13,268) | |||||||||||||||||
| Net cash provided by (used in) financing activities | $ | 344,900 | $ | (1,039,168) | $ | 1,244,924 | ||||||||||||||
| Increase (decrease) in cash, cash equivalents, and restricted cash | $ | 255,642 | $ | (695,681) | $ | (121,796) | ||||||||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 837,258 | 1,532,939 | 1,654,735 | |||||||||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 1,092,900 | $ | 837,258 | $ | 1,532,939 | ||||||||||||||
| Supplemental disclosure of cash flow information: | ||||||||||||||||||||
| Cash paid for interest during the period | $ | 209,909 | $ | 36,487 | $ | 23,434 | ||||||||||||||
| Cash paid for income taxes, net | 99,136 | 58,148 | 40,691 | |||||||||||||||||
| Non-cash information: | ||||||||||||||||||||
| Loans transferred to other real estate owned | $ | 1,569 | $ | 630 | $ | 1,972 | ||||||||||||||
| Loans transferred to portfolio from held-for-sale at fair value | 96,312 | 97,848 | 72,621 | |||||||||||||||||
| Securities transferred to held-to-maturity from available-for-sale at fair value | — | 931,421 | — | |||||||||||||||||
| Available-for-sale securities purchased, not settled | — | — | 34,489 | |||||||||||||||||
| Receivable for bank-owned life insurance surrender proceeds | 4,731 | — | — | |||||||||||||||||
| Receivable for bank-owned life insurance death benefit proceeds | 742 | — | — | |||||||||||||||||
| Fair value of assets acquired, net of cash received | 7,993 | 4,713,544 | — | |||||||||||||||||
| Fair value of liabilities assumed | 4,993 | 4,379,273 | — | |||||||||||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARYBASIS OF SIGNIFICANT ACCOUNTING POLICIESPRESENTATION
WSFS Financial Corporation (the Company or as a consolidated institution, WSFS, we, our or us)WSFS) is a savings and loan holding company organized under the laws of the State of Delaware. Substantially all of our assetthe Company's assets are held by ourits subsidiary, Wilmington Savings Fund Society, FSB (WSFS Bank or the Bank), is a federal savings bank organized under the laws of the U.S. United States (U.S.).
The Consolidated Financial Statements include the accounts of the Company, WSFS Bank, The Bryn Mawr Trust Company of Delaware (BMT-DE), Bryn Mawr Capital Management, LLC (BMCM), WSFS Wealth Management, LLC (Powdermill®), WSFS SPE Services, LLC, and 601 Perkasie, LLC. The Company also has three unconsolidated subsidiaries, WSFS Capital Trust III (the Trust), Royal Bancshares Capital Trust I, and Royal Bancshares Capital Trust II. WSFS Bank has two wholly-owned subsidiaries: Beneficial Equipment Finance Corporation (BEFC) and 1832 Holdings, Inc., and one majority-owned subsidiary, NewLane Finance Company (NewLane Finance®).
Overview
Founded in 1832, the Bank is one of the ten oldest bank and trust companies continuously operating under the same name in the United States (U.S.). We provideU.S. The Company provides residential and commercial real estate,mortgage, commercial and consumer lending services, as well as retail deposit and cashtreasury management services. OurThe Company's core banking business is commercial lending funded primarily with customer deposits and borrowings.by customer-generated deposits. In addition, we offerthe Company offers a variety of wealth management and trust services to personalindividual, corporate and corporate customers.institutional clients. The Federal Deposit Insurance Corporation (FDIC) insures ourthe Company's customers’ deposits to their legal maximums. We serve our customersThe Company serves its Customers primarily from our 76114 offices located in Pennsylvania (57), Delaware (46)(40), Pennsylvania (28)New Jersey (14), VirginiaFlorida (1), and Nevada (1) and through ourVirginia (1), its ATM network, website at www.wsfsbank.com., and mobile app. Information on ourthe Company's website is not incorporated by reference into this Annual Report on Form 10-K.
The Company's leasing business is conducted by NewLane Finance®. NewLane Finance® originates small business leases and provides commercial financing to businesses nationwide, targeting various equipment categories including technology, software, office, medical, veterinary and other areas. In addition, NewLane Finance® offers captive insurance through its subsidiary, Prime Protect.
Basis of Presentation
The Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the U.S. (GAAP). In preparing the Consolidated Financial Statements, we arethe Company is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Although ourthe Company's estimates contemplate current conditions and how we expectit expects them to change in the future, it is reasonably possible that actual conditions in 20182024 could be worse than anticipated in those estimates, which could materially affect ourits results of operations and financial condition. The accounting for the allowance for loancredit losses (including loans and reservesleases held for investment, investment securities available-for-sale and held-to-maturity), lending related commitments, business combinations, goodwill, intangible assets, post-retirement benefit obligations, the fair value of financial instruments, and income taxes and other than temporary impairment (OTTI) isare subject to significant estimates. Among other effects, changes to these estimates could result in future impairments of investment securities, goodwill and intangible assets, andthe establishment of theadditional allowance and lending related commitmentslending-related commitment reserves, changes in the fair value of financial instruments, as well as increased post-retirement benefits and income tax expense.
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SIGNIFICANT ACCOUNTING POLICIES
Cash, and Cash Equivalents and Restricted Cash
For purposes of reporting cash flows, cash, and cash equivalents and restricted cash include cash, cash in non-owned ATMs, amounts due from banks, federal funds sold and securities purchased under agreements to resell.resell and cash collateral held for derivatives, including a financial derivative related to the sale of certain Visa Class B shares.
Debt and Equity Securities
•Securities purchased with the intent of selling them in the near future are classified as “trading” and reported at fair value, with unrealized gains and losses included in earnings.
•Securities purchased with the positive intentionintent and ability to hold to maturity are classified as “held to maturity” and reported at amortized cost.
Realized gains and equitylosses are determined using the specific identification method and included in Security gains, net on the Consolidated Statements of Income. All sales are made without recourse.
The fair value of debt securities include mortgage-backed securities (MBS), municipal bonds, U.S. governmentis primarily obtained from third-party pricing services. Implicit in the valuation of MBS are estimated prepayments based on historical and agency securities and certain equity securities. current market conditions.
Premiums and discounts on MBS collateralized by residential 1-4 family loans are recognized in interest income using a level yield method over the period to expected maturity. Premiums and discounts on all other securities are recognized on a straight linestraight-line basis over the period to expected maturity. maturity, with the exception of premiums on callable debt securities, which are recognized over the period to the earliest call date.
A debt security is placed on nonaccrual status at the time any principal or interest payments are contractually past due 90 days or more. Interest accrued but not received for a security placed on nonaccrual status is reversed against interest income.
The fair valueCompany's investment portfolio is reviewed each quarter for indications of potential credit losses. Refer to the respective held-to-maturity and available-for-sale debt securities sections for the allowance for credit loss policies for each portfolio.
Allowance for Credit Losses - Held-to-Maturity Debt Securities
The Company follows Accounting Standards Codification (ASC) 326-20, Financial Instruments - Credit Loss - Measured at Amortized Cost, to measure expected credit losses on held-to-maturity debt securities on a collective basis by security investment grade. The estimate of expected credit losses considers historical credit loss information adjusted by a security's credit rating.
The Company classifies the held-to-maturity debt securities into the following major security types: mortgage backed securities, state and equitypolitical subdivisions, and foreign bonds. These securities are highly rated with a history of no credit losses, and are assigned ratings based on the most recent data from ratings agencies depending on the availability of data for the security. Credit ratings of held-to-maturity debt securities, which are a significant input in calculating the expected credit loss, are reviewed on a quarterly basis.
Accrued interest receivable on held-to-maturity debt securities is primarily obtainedexcluded from third-party pricing services. Implicitthe estimate of credit losses and is included in Accrued interest receivable on the valuationConsolidated Statements of MBS are estimated prepayments based on historical and current market conditions.Financial Condition.
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Allowance for Credit Losses - Available-for-Sale Debt Securities
The Company follows ASC 320-10 “Investments326-30, Financial Instruments - Credit Loss - Available-for-Sale Debt and Equity Securities,” that which provides guidance related to accounting forthe recognition of other-than-temporary impairment for debt securities and expandsexpanded disclosure requirements for other-than-temporarilyexpected credit losses on available-for-sale debt securities. For available-for-sale debt securities in an unrealized loss position, the Company first evaluates whether it intends to sell, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criterion is met, the security's amortized cost basis is reduced to fair value and recognized as a reduction to Noninterest income in the Consolidated Statements of Income.
For debt securities available-for-sale in which the Company does not intend to sell, or it is not likely the security would be required to be sold before recovery, it evaluates whether a decline in fair value has resulted from credit losses or other adverse factors, such as a change in the security's credit rating. In assessing whether a credit loss exists, the Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance is recorded, limited to the fair value of the security.
The Company performs these analyses on a quarterly basis to review the conditions and risks associated with the individual securities. Credit losses on an impaired debt and equity securities. When we conclude an investment security is measured using the present value of expected future cash flows. Any impairment not recorded through an allowance for credit loss is included in other than temporarilycomprehensive income (loss), net of the tax effect. The Company is required to use its judgment in determining impairment in certain circumstances.
For additional detail regarding debt securities, see Note 5.
Equity Investments
The Company has equity investments in certain strategic partnerships that are accounted for in accordance with both ASC 321-10, Investments - Equity Securities and ASC 323-10, Investments - Equity Method and Joint Ventures. Our equity investments are recorded in Other investments on the Consolidated Statements of Financial Condition.
Equity investments recorded in accordance with ASC 321-10 are classified into one of the following two categories and accounted for as follows:
•Investments with a readily determinable fair value are reported at fair value, with unrealized gains and losses included in earnings. Any dividends received are recorded in interest income.
•Investments without a readily determinable fair value are reported at cost less impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. Any dividends received are recorded in interest income.
For equity investments without readily determinable fair values, when an orderly transaction for the identical or similar investment of the same issuer is identified, the Company uses valuation techniques permitted under ASC 820, Fair Value Measurement, to evaluate the observed transaction(s) and adjust the carrying value.
ASC 321-10 also provides impairment accounting guidance for equity investments without readily determinable fair values. The qualitative assessment to determine whether impairment exists requires the use of the Company's judgment. If, after completing the qualitative assessment, the Company concludes an equity investment without a readily determinable fair value is impaired, a loss for the difference between the investment security’sequity investment’s carrying value and its fair value may be recognized as a reduction to noninterest income in the Consolidated Statements of Income. For an investment
Equity investments recorded in a debt security, if we intend to sellaccordance with ASC 323-10 are initially recorded at cost based on the Company’s percentage ownership in the investee. Subsequently, the carrying amount of the investment securityis adjusted to reflect the recognition of the Company’s proportionate share of income or itloss of the investee based on the investee’s earnings for the reporting period, recorded on a one-quarter lag.
The Company assesses its equity method investments for impairment using ASC 323-10 guidance. The qualitative assessment to determine whether impairment exists requires the use of the Company’s judgment. If, after completing the qualitative assessment, the Company concludes an equity method investment is more likely than not that we will be required to sell it before recovery, an OTTI write-down is recognized in earnings equal toimpaired, a loss for the entire difference between the security’s amortized cost basisequity investment’s carrying value and its fair value. If we do not intend to sell the investment security and conclude that it is not more likely than not we will be required to sell the security before recovering the carrying value which may be maturity, the OTTI charge is separated into “credit” and “other” components. The “other” component of the OTTI is includedrecognized in other comprehensive income/loss,Unrealized gains on equity investments, net of the tax effect, and the “credit” component of the OTTI is included as a reduction to noninterest income in on the Consolidated Statements of Income. We are requiredAfter an impairment charge is recorded, the new cost basis cannot be subsequently written up to use our judgment to determine impairmenta higher value as a result of increases in certain circumstances. The specific identification method is used to determine realized gains and losses on sales of investment and mortgage-backed securities. All sales are made without recourse.fair value.
For additional detail regarding debt and equity securities, see Note 4.5.
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Loans and leases
Loans and leases held for investment are statedrecorded at amortized cost, net of allowance for credit losses. Amortized cost is the amount at which a financial asset is originated or acquired, adjusted for the amortization of premium and discount, net deferred fees or costs, collection of cash, and costs.write-offs. Interest income on loans is recognized using the level yield method. Loan origination fees, commitment fees and direct loan origination costs are deferred and recognized over the life of the related loans using a level yield method over the period to maturity.
Past Due and Nonaccrual Loans
Past due loans are defined as loans contractually past due 90 days or more as to principal or interest payments but whichpayments. Past due loans 90 days or more that remain in accrual status because they are considered well secured and in the process of collection.
Nonaccruing loans are those on which the accrual of interest has ceased. Loans are placed on nonaccrual status immediately if, in the opinion of management,the Company, collection is doubtful, or when principal or interest is past due 90 days or more and the loan is not well secured and in the process of collection. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed and charged against interest income. In addition, the amortization of net deferred loan fees is suspended when a loan is placed on nonaccrual status. Subsequent cash receipts are applied either to the outstanding principal balance or recorded as interest income, depending on management’sthe Company’s assessment of the ultimate collectability of principal and interest. Loans are returned to an accrual status when we assessthe Company assesses that the borrower has the ability to make all principal and interest payments in accordance with the terms of the loan (i.e. including, a consistent repayment record, generally six consecutive payments, has been demonstrated).
For loans greater than 90 days past due, unless loans are well-secured and collection is imminent, their respective reserves are generally charged off once the loss has been confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged off and expected to be charged off.
A loan, for which the terms have been modified in the current reporting period in the form of principal forgiveness, an interest rate reduction, an other than-insignificant payment delay, or a term extension to a borrower experiencing financial difficulty, is considered a troubled loan. The assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.
Principal balances are generally not forgiven when a loan is modified as a troubled loan. Nonaccruing troubled loans remain in nonaccrual status until there has been a period of sustained repayment performance demonstrated and repayment is reasonably assured. Since the effect of most troubled loans are already included in the Company’s estimate of expected credit losses, a change to the allowance for credit losses is generally not recorded upon modification.
For additional detail regarding past due and nonaccrual loans, see Note 6.7.
Allowance for LoanCredit Losses - Loans and Leases
The Company's portfolio segments, established based on similar risk characteristics and loss behaviors, are:
•Commercial Loans and Leases: Commercial and industrial - real estate secured, commercial and industrial - non-real estate secured, owner-occupied commercial, commercial mortgages, construction and commercial small business leases, and
•Residential and Consumer Loans: Residential mortgage, equity secured lines and loans, installment loans, unsecured lines of credit, originated education loans and previously acquired education loans.
Expected credit losses are net of expected recoveries and estimated over the contractual term, adjusted for expected prepayments. The contractual term excludes any extensions, renewals and modifications unless they are not unconditionally cancellable. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Expected prepayments are based on historical experience and considers adjustments for current and future economic conditions.
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The allowance includes two primary components: (i) an allowance established on loans which share similar risk characteristics collectively evaluated for impairment (general allowance),credit losses (collective basis) and (ii) an allowance established on loans which do not share similar risk characteristics with any loan segment and are individually evaluated for impairment (specific allowance)credit losses (individual basis). In addition, we also maintain an allowance
Loans that share similar risk characteristics are collectively reviewed for acquired loans.credit loss and are evaluated based on historical loss experience, adjusted for current economic conditions and future economic forecasts. Estimated losses are determined differently for commercial and residential and consumer loans, and each commercial segment is further segmented by internally assessed risk ratings.
The Company uses a single scenario third-party economic forecast to adjust the calculated historical loss rates of the portfolio segments to incorporate the effects of current and future economic conditions. The Company's economic forecast considers the general allowancehealth of the economy, the interest rate environment, real estate pricing and market risk. The Company's forecast extends out 6 quarters (the forecast period) and reverts to the historical loss rates on a straight-line basis over 4 quarters (the reversion period) as it believes this to be reasonable and supportable in the current environment. The economic forecast and reversion periods will be evaluated periodically by the Company and updated as appropriate.
The historical loss rates for commercial loans are estimated by determining the probability of default (PD) and expected loss given default (LGD) and are applied to the loans' exposure at default. The probability of default is calculated based on the historical rate of migration to an event of credit loss during the look-back period. The historical loss rates for consumer loans are calculated based on average net loss rates over the same look-back period. The current look-back period is 52 quarters which ensures historical loss rates are adequately considering losses within a pooledfull credit cycle.
Loans that do not share similar risk characteristics with any loan basis using both quantitative and qualitative factors in accordance with ASC 450. The specific allowance is calculatedsegments are evaluated on an individual loanbasis. These loans, which may include troubled loans, are not included in the collective basis when collectability ofevaluation. When it is probable the Company will not collect all contractually due principal and interest due according to their contractual terms, which is no longer believed to be probable. This calculationassessed based on the credit characteristics of the loan and/or payment status, these loans are individually reviewed and measured for potential credit loss.
The amount of the potential credit loss is in accordance with ASC 310-10. Lastly,measured using any of the allowance related to acquired loans is calculated whenfollowing three methods: (i) there was deterioration in credit quality subsequent to acquisition for loans accounted for under ASC 310-30, and (ii) the inherent losses in the loans exceed the remaining credit discount recorded at the time of acquisition for loans accounted for under ASC 310-20.
For collateral dependent loans, the expected credit losses at the individual asset level are the difference between the collateral's fair value (less cost to borrowers facing financial difficulty.sell) and the amortized cost.
Qualitative adjustment factors consider various internal and external conditions which are allocated among loan segments and take into consideration:
•Current underwriting policies, staffing and portfolio concentrations,
•Risk rating accuracy and credit administration,
•Internal risk emergence (including internal trends of delinquency, and criticized loans by segment),
•Economic forecasts and conditions - locally and nationally (including market trends impacting collateral values), which is separate from or in addition to the third-party economic forecast described above, and
•Competitive environment, as it could impact loan structure and underwriting.
These factors are based on their relative standing compared to the period in which historical losses are used in quantitative reserve estimates and current directional trends, and reasonable and supportable forecasts. Qualitative factors can add to or subtract from quantitative reserves.
The Company's loan officers and risk managers meet at least quarterly to discuss and review the conditions and risks associated with individual problem loans. In addition, various regulatory agencies periodically review the Company's loan ratings and allowance for credit losses and the Bank's internal loan review department performs recurring loan reviews.
Accrued interest receivable on loans is excluded from the estimate of credit losses and is included in Accrued interest receivable on the unaudited Consolidated Statements of Financial Condition.
For additional detail regarding the allowance for loancredit losses and the provision for loancredit losses, see Note 6.7.
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For unfunded lending commitments, the Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the probability of default and utilization rate at default to calculate expected credit losses on commitments expected to be funded based on historical losses.
The allowance for credit losses for off-balance sheet exposures is included in Other liabilities on the Consolidated Statements of Financial Condition and the provision for credit losses for off-balance sheet exposure is included in Loan workout and other credit costs on the Consolidated Statements of Income.
For additional detail regarding unfunded lending commitments, see Note 17.
Loans Held for Sale
Mortgage loans held for sale are recorded at fair value on a loan level basis. The mortgage loans held for sale are based uponbasis, using pricing information obtained from secondary markets and brokers and applied to loans with similar interest rates and maturities.
Other Real Estate Owned
Upon initial receipt, other real estate owned (OREO) is recorded at the lower of the recorded investment in the loans orestimated fair value less estimated disposal costs.costs to sell. Costs subsequently incurred to improve the assets are included in the carrying valuecapitalized, provided that the resultant carrying value does not exceed the estimated fair value less estimated disposal costs.costs to sell. Costs relatingrelated to holding or disposing of the assets are charged to expense in the current period. Weas incurred. The Company periodically evaluates OREO for impairment and write-down the value of the assetsasset when declines in fair value below the carrying value are identified. Loan workout and OREO expenses include costs of holding and operating the assets, net gains or losses on sales of the assets and provisions for losses to reduce such assets to the estimated fair valuevalues less estimated disposal costs. During 2017, we recorded $0.3 million in charges (including write-downs and net losses on sales of assets) relatedcosts to other real estate owned (OREO) compared to $0.1 million and $0.3 million during 2016 and 2015, respectively. As of December 31, 2017, we had $2.9 million in residential real estate loans in process of foreclosure.sell.
For additional detail regarding other real estate owned, see Note 6.7.
Premises, Equipment and EquipmentSoftware
Premises and equipment are stated at cost less accumulated depreciation and amortization. Costs of major replacements, improvementsDepreciation and additionsamortization expense are capitalized. Depreciation expense is computed on a straight-line basis over the estimated useful lives of the assets or, for leasehold improvements, over the effective lifeterms of the related lease if less thanor effective useful lives of the estimated useful life.assets, whichever is less. In general, computer equipment, furniture and equipment and building renovations are depreciated over three, five and ten years, respectively. Software, which includes purchased or externally hosted software is recorded in Other assets and is amortized on a straight-line basis over the lesser of the contract term or estimated useful life of the software.
Maintenance and repairs are expensed as incurred, while costs of major replacements, improvements and additions are capitalized.
Premises and equipment acquired in business combinations are initially recorded at fair value and subsequently carried at cost less accumulated depreciation and amortization. Assets to be disposed of are recorded at the lower of the carrying amount or fair value less costs to sell.
For additional detail regarding the provision for premises and equipment, see Note 8.
Goodwill and Intangible Assets
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Goodwill is not amortized, andrather it is subject to periodic impairment testing. We reviewThe Company reviews goodwill for impairment annually on October 1 and more frequently if events and circumstances indicate that the fair value of a reporting unit is less than its carrying value.
Other intangible assets with finite lives are established through acquisitions and amortized over their estimated useful lives. We reviewThe Company reviews other intangible assets with finite lives for impairment if events and circumstances indicate that the carrying value may not be recoverable.
For additional information regarding our goodwill and intangible assets, see Notes 2Note 10.
Leases
The Company accounts for its leases in accordance with ASC 842 - Leases. Most leases are recognized on the balance sheet by recording a right-of-use asset and 9.
As a lessee, the Company enters into operating leases for certain bank branches, office space, and office equipment. The right-of-use assets and lease liabilities are initially recognized based on the net present value of the remaining lease payments which include renewal options where the Company is reasonably certain they will be exercised. The net present value is determined using the incremental collateralized borrowing rate at commencement date. The right-of-use asset is measured at the amount of the lease liability adjusted for any prepaid rent, lease incentives and initial direct costs incurred. The right-of-use asset and lease liability is amortized over the individual lease terms. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
As a lessor, the Company provides direct financing to customers through the Company's equipment and small-business leasing business. Direct financing leases are recorded at the aggregate of minimum lease payments net of unamortized deferred lease origination fees and costs and unearned income. Interest income on direct financing leases is recognized over the term of the lease. Origination fees and costs are deferred, and the net amount is amortized to interest income over the estimated life of the lease. For additional information regarding leases, see Note 9.
Derivative Financial Instruments
The Company accounts for derivatives in accordance with ASC 815, Derivatives and Hedging. Derivatives are recognized as a liabilityeither assets or liabilities at fair value in the Consolidated StatementStatements of Financial Condition.Condition with changes in fair value recorded to earnings or accumulated other comprehensive income, as appropriate. At the inception of a derivative contract, the Company designates the derivative as a hedging or non-hedging instrument. To qualify for hedge accounting, derivatives must be highly effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the derivative contract. For fair value hedges, changes to the fair value are recorded in earnings, while for cash flow hedges, fair value changes are recorded in accumulated other comprehensive income and subsequently reclassified into earnings in the period that the hedged forecast transaction affects earnings. The securities underlying the agreementsineffective portion of a hedge’s change in fair value is recognized in earnings immediately. For derivatives not designated as hedges, adjustments to fair value are assets. Generally, federal funds are purchased for periods ranging up to 90 days.
recorded through earnings. For additional detail regarding the Federal funds purchased and securities sold under agreements to repurchase,derivatives, see Note 11.
19.
Income Taxes
The provision for income taxes includes federal, state and local income taxes currently payable and those deferred due to temporary differences between the financial statement basis and tax basis of assets and liabilities.
A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold are derecognized in the first subsequent financial reporting period in which that threshold is no longer met. ASC 740 also provides guidance on the accounting for and disclosure of unrecognized tax benefits, interest and penalties.
For additional detail regarding income taxes, see Note 14.15.
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Securities Sold Under Agreements to Repurchase
The Company enters into sales of securities under agreements to repurchase which are treated as financings, with the obligation to repurchase securities sold reflected as a liability in the Consolidated Statements of Financial Condition. The securities underlying the agreements are assets. For additional detail regarding the securities sold under agreements to repurchase, see Note 12.
Stock-Based Compensation
Stock-based compensation is accounted for in accordance with FASB ASC 718, Stock Compensation. Compensation expense relating to all share-based payments is recognized on a straight-line basis, over the applicable vesting period.
For additional detail regarding stock-based compensation, see Note 15.16.
| December 31, 2016 | December 31, 2015 | |||||||||||||||||||||||
| (Dollars in thousands) | As originally reported | Adjustments | As revised | As originally reported | Adjustments | As revised | ||||||||||||||||||
| Noninterest income - Other income | $ | 16,243 | $ | 2,706 | $ | 18,949 | $ | 14,001 | $ | 2,001 | $ | 16,002 | ||||||||||||
| Noninterest expense - Other operating expense | 31,710 | 2,706 | 34,416 | 27,062 | 2,001 | 29,063 | ||||||||||||||||||
ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures:In February 2016,March 2022, the FASB issued ASU No. 2016-02, Leases2022-02, Financial Instruments – Credit Losses (Topic 842). This ASU revises326): Troubled Debt Restructurings and Vintage Disclosures. The guidance eliminates the accounting related to lessee accounting. Under the new guidance lessees will be required to recognizefor troubled debt restructurings by creditors (ASC 310-40) while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a lease liability and a right-of-use asset for all leases.borrower is experiencing financial difficulty. The new lease guidance also simplifiesrequires that an entity disclose current-period write-offs by year of origination for financing receivables and net investments in leases within the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. ASU 2016-02 is effective for the first interim period within annual periods beginning after December 15, 2018, with early adoption permitted. Adoption using the modified retrospective transition approach is required for leases existing at, or entered into after, the beginningscope of the earliest comparative period presented in the financial statements.Topic 326. The Company does not plan to early adoptadopted this guidance and is currently in the process of identifying our complete lease population as defined by this guidance. The Company is also evaluating our internal systems, accounting policies, processes and related internal controls for potential impacts. To date, our preliminary review suggests that adoption will result in additional assets and liabilities on our Consolidated Statement of Financial Condition which may require modification of the Company's internal systems, accounting policies, processes and related internal controls to allow for the calculation of the lease liability and right-of-use asset as required by this guidance. The Company will adopt this guidanceprospectively on January 1, 2019.2023. For further details on the impact of the adoption and accounting policies, see updated Significant Accounting Policies, as described above, and troubled loans disclosures in Note 7 - Allowance for Credit Losses and Credit Quality Information.
Accounting Guidance Pending Adoption as of December 31, 2023
ASU No. 2023-01, Leases (Topic 842:) Common Control Agreements: In June 2016,March 2023, the FASB issued ASU 2016-13, Financial Instruments - Credit LossesNo. 2023-01, Leases (Topic 326). ASU 2016-13 replaces842) Common Control Agreements. The amendment clarifies the incurred loss impairment methodology in current GAAPaccounting for leasehold improvements associated with an expected credit loss methodology and requires consideration of a broader range of informationcommon control leases by allowing the lessee to determine credit loss estimates. Financial assets measured at amortized cost will be presented atamortize the net amount expected to be collected by using an allowance for credit losses. Purchased credit impaired loans will receive an allowance account atleasehold improvements over the acquisition date that represents a componentuseful life of the purchase price allocation. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses, with such allowance limited tocommon control group’s use of the amount by which fair value is below amortized cost. Thisunderlying asset, regardless of the lease term. The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years.2023. Early adoption is permitted. Adoption is required on a modified retrospective basis, consistent with the Company's adoption of Topic 842. The Company does not planexpect this update to early adopt this guidance and is evaluatinghave a material impact on the impact of this guidance on its Consolidated Financial Statements, internal systems, accounting policies, processesStatements.
ASU No. 2023-02, Investments—Equity Method and related internal controls.Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method: In March 2023, The Company has developed a cross-functional team from Finance, Credit and IT to lead the implementation efforts. Our preliminary review of this guidance suggests that adoption may materially increase the allowance for loan losses and decrease capital levels; however, the extent of these impacts will depend on the asset quality of the portfolio and significant estimates and judgments made by management at the time of adoption. The Company will adopt this guidance on January 1, 2020.
ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures:In January 2017,November 2023, the FASB issued ASU 2017-01, Business Combinations2023-07, Segment Reporting (Topic 805)280): Clarifying the Definition of a Business. ASU 2017-01 provides a new, two-step framework for determining whether a transaction is accounted for as an acquisition (or disposal) of assets or a business.Improvements to Reportable Segment Disclosures. The first step is evaluating whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the transaction is not considered a business. Also, in orderamendments are intended to be considered a business, the transaction would need to include an input and a substantive processimprove reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that together significantly contributeare regularly provided to the ability to create outputs.chief operating decision maker and included within each reported measure of segment profit or loss. The guidance isamendments are effective for public entities in annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted for transactions that have not been reported in financial statements that have been issued or been made available for issuance. The Company does not expect the application of this guidance to have any impact on its Consolidated Financial Statements.
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ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures:In February 2017,December 2023, the FASB issued ASU No. 2017-05, Clarifying the Scope2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments further enhance income tax disclosures, primarily through standardization and disaggregation of Asset Derecognition Guidancerate reconciliation categories and Accountingincome taxes paid by jurisdiction. The amendments are effective for Partial Sales of Nonfinancial Assets. ASU 2017-05 provides clarification of the scope of ASC 610-20. Specifically, the new guidance clarifies that ASC 610-20 applies to nonfinancial assets which do not meet the definition of a business or not-for-profit activity. Further, the new guidance clarifies that a financial asset is within the scope of ASC 610-20 if it meets the definition of an in-substance nonfinancial asset which is defined as a financial asset promised to a counterparty in a contract where substantially all of the assets promised are nonfinancial. Finally, the new guidance clarifies that each distinct nonfinancial asset and in-substance nonfinancial asset should be derecognized when the counterparty obtains control of it. The guidance is effective in annual and interim reporting periods in fiscal years beginning after December 15, 2017. Early application is permitted for all entities, but not before annual reporting periods beginning after December 15, 2016. The Company will adopt this standard on a modified retrospective basis and the application of this guidance will not have an impact on its Consolidated Financial Statements.
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3. NONINTEREST INCOME
Credit/debit card and ATM income
The following table presents the components of credit/debit card and ATM income:
| Twelve Months Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | |||||||||||||||||
| Bailment fees | $ | 40,096 | $ | 21,173 | $ | 12,940 | ||||||||||||||
| Interchange fees | 15,684 | 15,506 | 13,520 | |||||||||||||||||
| Other card and ATM fees | 3,938 | 3,409 | 3,019 | |||||||||||||||||
| Total credit/debit card and ATM income | $ | 59,718 | $ | 40,088 | $ | 29,479 | ||||||||||||||
Credit/debit card and ATM income is composed of bailment fees, interchange fees, and other card and ATM fees. Bailment fees are earned from bailment arrangements with customers. Bailment arrangements are legal relationships in which property is delivered to another party without a transfer of ownership. The party who transferred the property (the bailor) retains ownership interest of the property. In the event that the bailee files for bankruptcy protection, the property is not included in the bailee's assets. The bailee pays an agreed-upon fee for the use of the bailor's property in exchange for the bailor allowing use of the assets at the bailee's site. Bailment fees are earned from cash that is made available for customers' use at an offsite location, such as cash located in an ATM at a customer's place of business. These fees are typically indexed to a market interest rate. This revenue stream generates fee income through monthly billing for bailment services.
Credit/debit card and ATM income also includes interchange fees. Interchange fees are paid by a merchant's bank to a bank that issued a debit or credit card used in a transaction to compensate the issuing bank for the value and benefit the merchant receives from accepting electronic payments. These revenue streams generate fee income at the time a transaction occurs and are recorded as revenue at the time of the transaction.
Investment management and fiduciary income
The following table presents the components of investment management and fiduciary income:
| Twelve Months Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | |||||||||||||||||
| Trust fees | $ | 89,396 | $ | 79,472 | $ | 43,725 | ||||||||||||||
| Wealth management and advisory fees | 41,654 | 42,136 | 18,623 | |||||||||||||||||
| Total investment management and fiduciary income | $ | 131,050 | $ | 121,608 | $ | 62,348 | ||||||||||||||
Investment management and fiduciary income is composed of trust fees and wealth management and advisory fees. Trust fees are based on revenue earned from custody, escrow, trustee and trustee related services on structured finance transactions; indenture trustee, administrative agent and collateral agent services to individuals, institutions and corporations; commercial domicile and independent director services; and investment and trustee services to families and individuals. Most fees are flat fees, except for a portion of personal and corporate trustee fees where the Company earns a percentage on the assets under management or assets held within a trust. This revenue stream primarily generates fee income through monthly, quarterly and annual billings for services provided.
Wealth management and advisory fees consists of fees from Bryn Mawr Trust®, BMCM, Powdermill®, and WSFS Wealth® Investments. Wealth management and advisory fees are based on revenue earned from services including asset management, financial planning, family office, and brokerage. The fees are based on the market value of assets, are assessed as a flat fee, or are brokerage commissions. This revenue stream primarily generates fee income through monthly, quarterly and annual billings for the services.
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Deposit service charges
The following table presents the components of deposit service charges:
| Twelve Months Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | |||||||||||||||||
| Service fees | $ | 17,182 | $ | 16,019 | $ | 14,220 | ||||||||||||||
| Return and overdraft fees | 7,127 | 7,651 | 6,789 | |||||||||||||||||
| Other deposit service fees | 1,084 | 814 | 1,081 | |||||||||||||||||
| Total deposit service charges | $ | 25,393 | $ | 24,484 | $ | 22,090 | ||||||||||||||
Deposit service charges includes revenue earned from core deposit products, certificates of deposit, and brokered deposits. The Company generates fee revenues from deposit service charges primarily through service charges and overdraft fees. Service charges consist primarily of monthly account maintenance fees, treasury management fees, foreign ATM fees and other maintenance fees. All of these revenue streams generate fee income through service charges for monthly account maintenance and similar items, transfer fees, late fees, overlimit fees, and stop payment fees. Revenue is recorded at the time of the transaction.
Other income
The following table presents the components of other income:
| Twelve Months Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | |||||||||||||||||
| Managed service fees | $ | 20,503 | $ | 17,991 | $ | 16,425 | ||||||||||||||
| Currency preparation | 5,429 | 4,120 | 4,064 | |||||||||||||||||
| ATM loss protection | 2,651 | 2,627 | 2,522 | |||||||||||||||||
| Capital markets revenue | 11,847 | 7,859 | — | |||||||||||||||||
Miscellaneous products and services(1) | 8,299 | 20,027 | 11,786 | |||||||||||||||||
| Total other income | $ | 48,729 | $ | 52,624 | $ | 34,797 | ||||||||||||||
(1)Includes commissions income from BMTIA in 2022. The BMTIA business was sold during the second quarter of 2022.
Other income consists of managed service fees, which are primarily courier fees related to treasury management, currency preparation, ATM loss protection, capital markets revenue, and other miscellaneous products and services offered by the Bank. These fees are primarily generated through monthly billings or at the time of the transaction. Capital markets revenue consists of fees related to interest rate swaps, risk participation agreements, foreign exchange contracts, letters of credit, and trade finance products and services offered by the Bank.
Arrangements with multiple performance obligations
The Company's contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers.
Practical expedients and exemptions
The Company does not expectdisclose the applicationvalue of this guidance to have a material impact on its Consolidated Financial Statements.
See Note 21 for further information about the disaggregation of the debt security. If the call option is not exercised at the earliest call date, the guidance requires the debt security's effective yield to be reset based on the contractual payment termsnoninterest income by segment.
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| (Dollars in thousands) | Fair Value | ||
| Consideration Transferred: | |||
| Common shares issued (1,806,748), including replacement equity awards | $ | 68,352 | |
| Cash paid to Penn Liberty stock and option holders | 40,549 | ||
| Value of consideration | 108,901 | ||
| Assets acquired: | |||
| Cash and due from banks | 102,301 | ||
| Investment securities | 627 | ||
| Loans | 483,203 | ||
| Premises and equipment | 6,817 | ||
| Deferred income taxes | 6,542 | ||
| Bank owned life insurance | 8,666 | ||
| Core deposit intangible | 2,882 | ||
| Other real estate owned | 996 | ||
| Other assets | 12,085 | ||
| Total assets | 624,119 | ||
| Liabilities assumed: | |||
| Deposits | 568,706 | ||
| Other borrowings | 10,000 | ||
| Other liabilities | 3,738 | ||
| Total liabilities | 582,444 | ||
| Net assets acquired: | 41,675 | ||
| Goodwill resulting from acquisition of Penn Liberty | $ | 67,226 | |
| (Dollars in thousands) | Fair Value | ||
| Goodwill resulting from the acquisition of Penn Liberty as of December 31, 2016 | $ | 68,814 | |
| Effects of adjustments to: | |||
| Deferred income taxes | 880 | ||
| Loans | 279 | ||
| Other assets | (1,440 | ) | |
| Other liabilities | (1,307 | ) | |
| Adjusted goodwill resulting from the acquisition of Penn Liberty as of December 31, 2017 | $ | 67,226 | |
The following table shows the computation of basic and diluted earnings per share:
| (Dollars and shares in thousands, except per share data) | 2023 | 2022 | 2021 | ||||||||||||||
| Numerator: | |||||||||||||||||
| Net income attributable to WSFS | $ | 269,156 | $ | 222,375 | $ | 271,442 | |||||||||||
| Denominator: | |||||||||||||||||
| Weighted average basic shares | 61,108 | 63,453 | 47,539 | ||||||||||||||
| Dilutive potential common shares | 113 | 206 | 164 | ||||||||||||||
| Weighted average fully diluted shares | 61,221 | 63,659 | 47,703 | ||||||||||||||
| Earnings per share: | |||||||||||||||||
| Basic | $ | 4.40 | $ | 3.50 | $ | 5.71 | |||||||||||
| Diluted | $ | 4.40 | $ | 3.49 | $ | 5.69 | |||||||||||
| Outstanding common stock equivalents having no dilutive effect | 14 | 9 | 1 | ||||||||||||||
| (Amounts in thousands, except per share data) | 2017 | 2016 | 2015 | ||||||||
| Numerator: | |||||||||||
| Net income | $ | 50,244 | $ | 64,080 | $ | 53,533 | |||||
| Denominator: | |||||||||||
| Denominator for basic earnings per share - weighted average shares | 31,419 | 30,276 | 28,435 | ||||||||
| Effect of dilutive employee stock options and restricted stock | 884 | 809 | 508 | ||||||||
| Denominator for diluted earnings per share - adjusted weighted average shares and assumed exercised | 32,303 | 31,086 | 28,943 | ||||||||
| Earnings per share: | |||||||||||
| Basic | $ | 1.60 | $ | 2.12 | $ | 1.88 | |||||
Diluted (1) | $ | 1.56 | $ | 2.06 | $ | 1.85 | |||||
| Outstanding common stock equivalents having no dilutive effect | 2 | 18 | 83 | ||||||||
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The following tables detail the amortized cost, allowance for credit losses and the estimated fair value of ourthe Company's investments in available-for-sale and held-to-maturity investment securities:debt securities. None of the Company's investments in debt securities are classified as trading.
| December 31, 2023 | |||||||||||||||||||||||||||||
| (Dollars in thousands) | Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Allowance for Credit Losses | Fair Value | ||||||||||||||||||||||||
| Available-for-Sale Debt Securities | |||||||||||||||||||||||||||||
| Collateralized mortgage obligation (CMO) | $ | 560,952 | $ | — | $ | 96,333 | $ | — | $ | 464,619 | |||||||||||||||||||
| Fannie Mae (FNMA) mortgage-backed securities (MBS) | 3,544,762 | 162 | 502,574 | — | 3,042,350 | ||||||||||||||||||||||||
| Freddie Mac (FHLMC) MBS | 126,856 | — | 11,324 | — | 115,532 | ||||||||||||||||||||||||
| Ginnie Mae (GNMA) MBS | 46,333 | 6 | 2,999 | — | 43,340 | ||||||||||||||||||||||||
| Government-sponsored enterprises (GSE) agency notes | 225,439 | — | 44,743 | — | 180,696 | ||||||||||||||||||||||||
| $ | 4,504,342 | $ | 168 | $ | 657,973 | $ | — | $ | 3,846,537 | ||||||||||||||||||||
Held-to-Maturity Debt Securities(1) | |||||||||||||||||||||||||||||
| FNMA MBS | $ | 872,653 | $ | — | $ | 74,332 | $ | — | $ | 798,321 | |||||||||||||||||||
| State and political subdivisions | 185,912 | 2,665 | 959 | 8 | 187,610 | ||||||||||||||||||||||||
| $ | 1,058,565 | $ | 2,665 | $ | 75,291 | $ | 8 | $ | 985,931 | ||||||||||||||||||||
(1)Held-to-maturity securities transferred from available-for-sale are included in held-to-maturity at amortized cost basis at the time of transfer. The amortized cost of transferred held-to-maturity securities included net unrealized losses of $120.4 million at December 31, 2023, which are offset in Accumulated other comprehensive loss. At the time of transfer, there was no allowance for credit loss on the available-for-sale securities. Subsequent to transfer, the securities were evaluated for credit loss.
| December 31, 2022 | |||||||||||||||||||||||||||||
| (Dollars in thousands) | Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Allowance for Credit Losses | Fair Value | ||||||||||||||||||||||||
| Available-for-Sale Debt Securities | |||||||||||||||||||||||||||||
| CMO | $ | 608,834 | $ | — | $ | 102,454 | $ | — | $ | 506,380 | |||||||||||||||||||
| FNMA MBS | 3,823,036 | — | 572,778 | — | 3,250,258 | ||||||||||||||||||||||||
| FHLMC MBS | 135,554 | — | 13,555 | — | 121,999 | ||||||||||||||||||||||||
| GNMA MBS | 39,116 | — | 2,978 | — | 36,138 | ||||||||||||||||||||||||
| GSE agency notes | 228,010 | — | 49,725 | — | 178,285 | ||||||||||||||||||||||||
| $ | 4,834,550 | $ | — | $ | 741,490 | $ | — | $ | 4,093,060 | ||||||||||||||||||||
Held-to-Maturity Debt Securities(1) | |||||||||||||||||||||||||||||
| FNMA MBS | $ | 909,498 | $ | — | $ | 68,677 | $ | — | $ | 840,821 | |||||||||||||||||||
| State and political subdivisions | 201,631 | 532 | 3,372 | 10 | 198,781 | ||||||||||||||||||||||||
| Foreign bonds | 500 | 2 | — | — | 502 | ||||||||||||||||||||||||
| $ | 1,111,629 | $ | 534 | $ | 72,049 | $ | 10 | $ | 1,040,104 | ||||||||||||||||||||
(1)Held-to–maturity securities transferred from available-for-sale are included in held-to-maturity at amortized cost basis at the time of transfer. The amortized cost of transferred held-to-maturity securities included net unrealized losses of $142.8 million at December 31, 2022, which are offset in Accumulated other comprehensive loss. At the time of transfer, there was no allowance for credit loss on the available-for-sale securities. Subsequent to transfer, the securities were evaluated for credit loss.
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| (Dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||
| Available-for-sale securities: | |||||||||||||||
| December 31, 2017 | |||||||||||||||
| CMO | $ | 250,592 | $ | 88 | $ | 4,141 | $ | 246,539 | |||||||
| FNMA MBS | 479,218 | 941 | 6,172 | 473,987 | |||||||||||
| FHLMC MBS | 88,681 | 118 | 924 | 87,875 | |||||||||||
| GNMA MBS | 29,300 | 209 | 411 | 29,098 | |||||||||||
| Other investments | 643 | — | 20 | 623 | |||||||||||
| $ | 848,434 | $ | 1,356 | $ | 11,668 | $ | 838,122 | ||||||||
| December 31, 2016 | |||||||||||||||
| GSE | $ | 35,061 | $ | 9 | $ | 60 | $ | 35,010 | |||||||
| CMO | 264,607 | 566 | 3,957 | 261,216 | |||||||||||
| FNMA MBS | 414,218 | 950 | 9,404 | 405,764 | |||||||||||
| FHLMC MBS | 64,709 | 135 | 1,330 | 63,514 | |||||||||||
| GNMA MBS | 28,540 | 303 | 427 | 28,416 | |||||||||||
| Other investments | 626 | — | 3 | 623 | |||||||||||
| $ | 807,761 | $ | 1,963 | $ | 15,181 | $ | 794,543 | ||||||||
| (Dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||
Held-to-Maturity Securities :(1) | |||||||||||||||
| December 31, 2017 | |||||||||||||||
| State and political subdivisions | $ | 161,186 | $ | 1,758 | $ | 91 | $ | 162,853 | |||||||
| December 31, 2016 | |||||||||||||||
| State and political subdivisions | $ | 164,346 | $ | 271 | $ | 1,385 | $ | 163,232 | |||||||
The scheduled maturities of investmentavailable-for-sale debt securities available for sale and held to maturity at December 31, 20172023 and December 31, 20162022 are presented in the table below:
| Available-for-Sale | |||||||||||
| (Dollars in thousands) | Amortized Cost | Fair Value | |||||||||
December 31, 2023 (1) | |||||||||||
| Within one year | $ | — | $ | — | |||||||
| After one year but within five years | 86,224 | 82,387 | |||||||||
| After five years but within ten years | 569,956 | 485,593 | |||||||||
| After ten years | 3,848,162 | 3,278,557 | |||||||||
| $ | 4,504,342 | $ | 3,846,537 | ||||||||
December 31, 2022 (1) | |||||||||||
| Within one year | $ | — | $ | — | |||||||
| After one year but within five years | 83,014 | 77,499 | |||||||||
| After five years but within ten years | 465,777 | 398,607 | |||||||||
| After ten years | 4,285,759 | 3,616,954 | |||||||||
| $ | 4,834,550 | $ | 4,093,060 | ||||||||
(1)Actual maturities could differ from contractual maturities.
| Available for Sale | |||||||
| (Dollars in thousands) | Amortized Cost | Fair Value | |||||
2017 (1) (2) | |||||||
| Within one year | $ | — | $ | — | |||
| After one year but within five years | 20,051 | 19,825 | |||||
| After five years but within ten years | 179,812 | 175,583 | |||||
| After ten years | 647,928 | 642,091 | |||||
| $ | 847,791 | $ | 837,499 | ||||
2016 (1) | |||||||
| Within one year | $ | 16,009 | $ | 16,017 | |||
| After one year but within five years | 19,052 | 18,992 | |||||
| After five years but within ten years | 276,635 | 270,300 | |||||
| After ten years | 495,439 | 488,611 | |||||
| $ | 807,135 | $ | 793,920 | ||||
| Held to Maturity | |||||||
| (Dollars in thousands) | Amortized Cost | Fair Value | |||||
2017 (1) | |||||||
| Within one year | $ | 322 | $ | 320 | |||
| After one year but within five years | 5,895 | 5,894 | |||||
| After five years but within ten years | 18,751 | 18,873 | |||||
| After ten years | 136,218 | 137,766 | |||||
| $ | 161,186 | $ | 162,853 | ||||
2016 (1) | |||||||
| Within one year | $ | — | $ | — | |||
| After one year but within five years | 6,168 | 6,162 | |||||
| After five years but within ten years | 8,882 | 8,870 | |||||
| After ten years | 149,296 | 148,200 | |||||
| $ | 164,346 | $ | 163,232 | ||||
As of December 31, 2023, substantially all of the Company’s available-for-sale investment securities were mortgage-backed securities or collateral mortgage obligations which were issued or guaranteed by U.S. government-sponsored entities and agencies.
As of December 31, 2023 and December 31, 2022, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of shareholders’ equity.
The scheduled maturities of held-to-maturity debt securities at December 31, 2023 and December 31, 2022 are presented in the table below:
| Held-to-Maturity | |||||||||||
| (Dollars in thousands) | Amortized Cost | Fair Value | |||||||||
December 31, 2023 (1) | |||||||||||
| Within one year | $ | — | $ | — | |||||||
| After one year but within five years | 10,932 | 10,856 | |||||||||
| After five years but within ten years | 46,489 | 46,246 | |||||||||
| After ten years | 1,001,144 | 928,829 | |||||||||
| $ | 1,058,565 | $ | 985,931 | ||||||||
December 31, 2022 (1) | |||||||||||
| Within one year | $ | 731 | $ | 732 | |||||||
| After one year but within five years | 9,530 | 9,476 | |||||||||
| After five years but within ten years | 46,170 | 45,944 | |||||||||
| After ten years | 1,055,198 | 983,952 | |||||||||
| $ | 1,111,629 | $ | 1,040,104 | ||||||||
(1)Actual maturities could differ from contractual maturities.
MBS may have expected maturities that differ from their contractual maturities. These differences arise because borrowersissuers may have the right to call orsecurities and borrowers may have the right to prepay obligations with or without a prepayment penalty. The estimated weighted average duration of MBS was 5.8 years at December 31, 2023.
The held-to-maturity debt securities are not collateral-dependent securities as these are general obligation bonds issued by cities, states, counties, or other local and foreign governments.
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During the second quarter of 2022, the Company transferred investment securities with a book value of $1.1 billion from available-for-sale to held-to-maturity to mitigate the impact of the rising interest rate environment to Accumulated other comprehensive income (loss) in the Company's Consolidated Statement of Changes in Stockholders' Equity. The transfer occurred at a fair value totaling $931.4 million. The amortized cost of transferred held-to-maturity securities included net unrealized losses of $157.6 million at June 30, 2022, which are offset in Accumulated other comprehensive income (loss). No gains or losses on these securities were recognized at the time of transfer.
Investment securities with fair market values aggregating $688.2 million$3.3 billion and $562.5 million$2.8 billion were pledged as collateral for retail customerinvestment sweep repurchase agreements, municipal deposits, and other obligations as of December 31, 20172023 and 2016,December 31, 2022, respectively.
During 2017, we sold $457.0 millionthe years ended December 31, 2023 and December 31, 2022, the Company had no sales of investmentdebt securities categorized as available for sale,available-for-sale. During the year ended December 31, 2021, the Company sold $14.1 million of debt securities categorized as available-for-sale, resulting in realized gains of $2.1$0.3 million and realized losses of less than $0.1 million. During 2016, we sold $201.8 million of investment securities categorized as available for sale, resulting in realized gains of $2.4 million and less than $0.1 million ofno realized losses. The cost basis of all investment securities sales is based on the specific identification method. During 2015, we sold $192.8 million of investment securities categorized as available for sale, resulting in realized gains of $1.5 million and less than $0.1 million of realized losses. the cost basis of all investment securities sales is based on the specific identification method.
As of December 31, 2017,2023 and December 31, 2016, our investment2022, the Company's debt securities portfolio had remaining unamortized premiums of $14.1$56.9 million and $18.0$66.6 million, respectively, and unaccreted discounts of $1.3$20.9 million and $0.4$25.2 million, respectively.
For those investmentdebt securities within an unrealized losses,loss position and an allowance has not been recorded, the table below shows ourthe gross unrealized losses and fair value by investment category and length of time that individual debt securities were in a continuous unrealized loss position atDecember 31, 2017.2023.
| Duration of Unrealized Loss Position | |||||||||||||||||||||||
| Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||
(Dollars in thousands) Available-for-sale securities: | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | |||||||||||||||||
| CMO | $ | 146,726 | $ | 1,820 | $ | 77,149 | $ | 2,321 | $ | 223,875 | $ | 4,141 | |||||||||||
| FHLMC MBS | 204,921 | 1,479 | 126,342 | 4,693 | 331,263 | 6,172 | |||||||||||||||||
| FNMA MBS | 42,514 | 269 | 21,405 | 655 | 63,919 | 924 | |||||||||||||||||
| GNMA MBS | 4,615 | 56 | 14,782 | 355 | 19,397 | 411 | |||||||||||||||||
| Other investments | — | — | 624 | 20 | 624 | 20 | |||||||||||||||||
| Total temporarily impaired investments | $ | 398,776 | $ | 3,624 | $ | 240,302 | $ | 8,044 | $ | 639,078 | $ | 11,668 | |||||||||||
| Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||
(Dollars in thousands) Held-to-maturity securities | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | |||||||||||||||||
| State and political subdivisions | $ | 23,404 | $ | 59 | $ | 5,625 | $ | 32 | $ | 29,029 | $ | 91 | |||||||||||
| Total temporarily impaired investments | $ | 23,404 | $ | 59 | $ | 5,625 | $ | 32 | $ | 29,029 | $ | 91 | |||||||||||
| Duration of Unrealized Loss Position | |||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | |||||||||||||||||||||||||||||
| Available-for-sale debt securities: | |||||||||||||||||||||||||||||||||||
| CMO | $ | — | $ | — | $ | 464,619 | $ | 96,333 | $ | 464,619 | $ | 96,333 | |||||||||||||||||||||||
| FNMA MBS | 9,068 | 125 | 3,026,520 | 502,449 | 3,035,588 | 502,574 | |||||||||||||||||||||||||||||
| FHLMC MBS | — | — | 115,525 | 11,324 | 115,525 | 11,324 | |||||||||||||||||||||||||||||
| GNMA MBS | 10,543 | 217 | 31,681 | 2,782 | 42,224 | 2,999 | |||||||||||||||||||||||||||||
| GSE agency notes | — | — | 180,696 | 44,743 | 180,696 | 44,743 | |||||||||||||||||||||||||||||
| $ | 19,611 | $ | 342 | $ | 3,819,041 | $ | 657,631 | $ | 3,838,652 | $ | 657,973 | ||||||||||||||||||||||||
For those investmentdebt securities within an unrealized losses,loss position and an allowance has not been recorded, the table below shows ourthe gross unrealized losses and fair value by investment category and length of time that individual debt securities were in a continuous unrealized loss position at December 31, 2016.2022.
| Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||
| (Dollars in thousands) | Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||
| Available-for-sale securities: | Value | Loss | Value | Loss | Value | Loss | |||||||||||||||||
| GSE | $ | 21,996 | $ | 60 | $ | — | $ | — | $ | 21,996 | $ | 60 | |||||||||||
| CMO | 160,572 | 3,867 | 4,654 | 90 | 165,226 | 3,957 | |||||||||||||||||
| FNMA MBS | 50,878 | 1,330 | — | — | 50,878 | 1,330 | |||||||||||||||||
| FHLMC MBS | 300,403 | 9,404 | — | — | 300,403 | 9,404 | |||||||||||||||||
| GNMA MBS | 16,480 | 427 | — | — | 16,480 | 427 | |||||||||||||||||
| Other investments | 623 | 3 | — | — | 623 | 3 | |||||||||||||||||
| Total temporarily impaired investments | $ | 550,952 | $ | 15,091 | $ | 4,654 | $ | 90 | $ | 555,606 | $ | 15,181 | |||||||||||
| Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||
| (Dollars in thousands) | Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||
| Held-to-maturity securities | Value | Loss | Value | Loss | Value | Loss | |||||||||||||||||
| State and political subdivisions | $ | 112,642 | $ | 1,374 | $ | 695 | $ | 11 | $ | 113,337 | $ | 1,385 | |||||||||||
| Total temporarily impaired investments | $ | 112,642 | $ | 1,374 | $ | 695 | $ | 11 | $ | 113,337 | $ | 1,385 | |||||||||||
| Duration of Unrealized Loss Position | |||||||||||||||||||||||||||||||||||
| Less than 12 months | 12 months or longer | Total | |||||||||||||||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | Value | Loss | Value | Loss | Value | Loss | |||||||||||||||||||||||||||||
| Available-for-sale debt securities: | |||||||||||||||||||||||||||||||||||
| CMO | $ | 158,449 | $ | 13,855 | $ | 347,931 | $ | 88,599 | $ | 506,380 | $ | 102,454 | |||||||||||||||||||||||
| FNMA MBS | 1,237,560 | 145,752 | 2,012,698 | 427,026 | 3,250,258 | 572,778 | |||||||||||||||||||||||||||||
| FHLMC MBS | 102,321 | 9,268 | 19,671 | 4,287 | 121,992 | 13,555 | |||||||||||||||||||||||||||||
| GNMA MBS | 32,076 | 2,265 | 4,030 | 713 | 36,106 | 2,978 | |||||||||||||||||||||||||||||
| GSE agency notes | — | — | 178,285 | 49,725 | 178,285 | 49,725 | |||||||||||||||||||||||||||||
| $ | 1,530,406 | $ | 171,140 | $ | 2,562,615 | $ | 570,350 | $ | 4,093,021 | $ | 741,490 | ||||||||||||||||||||||||
At December 31, 2017, we owned investment2023, available-for-sale debt securities totaling $668.1 million for which the amortized cost basis exceeded fair value.value totaled $3.8 billion. Total unrealized losses on these securities were $11.8$658.0 million at December 31, 2017.2023. The temporary impairmentCompany does not have the intent to sell, nor is it more likely than not it will be required to sell these securities before it is able to recover the amortized cost basis. The unrealized losses are the result of changes in market interest rates subsequent to purchase, not credit loss, as these are highly rated agency securities with no expected credit loss, in the purchaseevent of the securities. Our investmenta default. As a result, there is no allowance for credit losses recorded for available-for-sale debt securities as of December 31, 2023.
89
At December 31, 2023 and December 31, 2022, held-to-maturity debt securities had an amortized cost basis of $1.1 billion. The held-to-maturity debt security portfolio is reviewed each quarter for indicationsprimarily consists of other than temporary impairment. This review includes analyzing the lengthmortgage-backed securities which were issued or guaranteed by U.S. government-sponsored entities and agencies and highly rated municipal bonds. The Company monitors credit quality of time and the extent to which the fair value has been lower thanits debt securities through credit ratings.
The following table summarizes the amortized cost the financial condition and near-term prospects of the issuer, including any specific events which may influence the operationsdebt securities held-to-maturity as of the issuer and our intent and ability to hold the investment for a period of time sufficient to allow for full recovery of the unrealized loss. We evaluate our intent and ability to hold securities based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy and interest rate risk position. In addition, we do not have the intent to sell, nor is it more likely-than-not we will be required to sell these securities before we are able to recoverDecember 31, 2023, aggregated by credit quality indicator:
| (Dollars in thousands) | FNMA MBS | State and political subdivisions | ||||||||||||||||||
| A+ rated or higher | $ | — | $ | 185,912 | ||||||||||||||||
| Not rated | 872,653 | — | ||||||||||||||||||
| Ending balance | $ | 872,653 | $ | 185,912 | ||||||||||||||||
The following table summarizes the amortized cost basis.of debt securities held-to-maturity as of December 31, 2022, aggregated by credit quality indicator:
| (Dollars in thousands) | FNMA MBS | State and political subdivisions | Foreign bonds | |||||||||||||||||
| A+ rated or higher | $ | — | $ | 201,631 | $ | 500 | ||||||||||||||
| Not rated | 909,498 | — | — | |||||||||||||||||
| Ending balance | $ | 909,498 | $ | 201,631 | $ | 500 | ||||||||||||||
The Company reviewed its held-to-maturity debt securities withby major security type for potential credit losses. There was no activity in the exceptionallowance for credit losses for FNMA MBS and foreign bond debt securities for the twelve months ended December 31, 2023 and 2022. The following table presents the activity in the allowance for credit losses for state and political subdivisions debt securities for the twelve months ended December 31, 2023 and 2022:
| Twelve months ended December 31, | ||||||||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | ||||||||||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||
| Beginning balance | $ | 10 | $ | 4 | ||||||||||||||||||||||
| Provision for credit losses | (2) | 6 | ||||||||||||||||||||||||
| Ending balance | $ | 8 | $ | 10 | ||||||||||||||||||||||
Accrued interest receivable of one having$3.7 million and $2.4 million as of December 31, 2023 and December 31, 2022, respectively, for held-to-maturity debt securities were excluded from the evaluation of allowance for credit losses. There were no nonaccrual or past due held-to-maturity debt securities as of December 31, 2023 and December 31, 2022.
Equity Investments
The Company had equity investments with a fair value of $0.8$17.4 million atand $26.1 million as of December 31, 2017,2023 and December 31, 2022, respectively.
During the year ended December 31, 2023, total net gains on equity investments of $9.8 million were AA- rated or betterrecorded, driven by a realized gain on the Company's investment in Spring EQ presented within Realized gain (loss) on sale of equity investment, net in the Consolidated Statements of Income. During the year ended December 31, 2023, the Company recognized $2.5 million of net gains related to our equity method investments within Other income on the Consolidated Statements of Income.
During the year ended December 31, 2022, total net gains on equity investments of $6.0 million were recorded, driven by an unrealized gain on the Company's investment in cred.ai presented within Unrealized gain on equity investment, net in the Consolidated Statements of Income. During the year ended December 31, 2022, the Company recognized $5.4 million of net gains related to our equity method investments within Other income on the Consolidated Statements of Income.
During the twelve months ended December 31, 2021, total net gains on equity investments of $4.4 million were recorded from the sale of the Company's investment in Social Finance, Inc. (SoFi) in July 2021. This included a net realized loss of $0.7 million which was recorded in Realized gain (loss) on sale of equity investment, net in the Consolidated Statements of Income at the time of purchase and remained investment grade at December 31, 2017. All securities were evaluated for OTTI at December 31, 2017 and 2016. The result of this evaluation showed no OTTI as of December 31, 2017 or 2016. The weighted average duration of MBS was 5.2 years at December 31, 2017.sale.
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6. LOANS AND LEASES
The following table details ourshows the Company's loan portfolio by category:
| December 31, | |||||||||||
| (Dollars in thousands) | 2023 | 2022 | |||||||||
| Commercial and industrial | $ | 2,540,070 | $ | 2,575,345 | |||||||
| Owner-occupied commercial | 1,886,087 | 1,809,582 | |||||||||
| Commercial mortgages | 3,801,180 | 3,351,084 | |||||||||
| Construction | 1,035,530 | 1,044,049 | |||||||||
| Commercial small business leases | 623,622 | 558,981 | |||||||||
Residential(1) | 870,705 | 761,882 | |||||||||
Consumer(2) | 2,012,134 | 1,810,930 | |||||||||
| 12,769,328 | 11,911,853 | ||||||||||
| Less: | |||||||||||
| Allowance for credit losses | 186,126 | 151,861 | |||||||||
| Net loans and leases | $ | 12,583,202 | $ | 11,759,992 | |||||||
| December 31, | |||||||
| (Dollars in thousands) | 2017 | 2016 | |||||
| Commercial and industrial | $ | 1,464,554 | $ | 1,287,731 | |||
| Owner-occupied commercial | 1,079,247 | 1,078,162 | |||||
| Commercial mortgages | 1,187,705 | 1,163,554 | |||||
| Construction | 281,608 | 222,712 | |||||
Residential(1) | 253,301 | 289,611 | |||||
| Consumer | 558,493 | 450,029 | |||||
| 4,824,908 | 4,491,799 | ||||||
| Less: | |||||||
| Deferred fees, net | 7,991 | 7,673 | |||||
| Allowance for loan losses | 40,599 | 39,751 | |||||
| Net loans | $ | 4,776,318 | $ | 4,444,375 | |||
(1)Includes reverse mortgages, at fair value of $19.8$2.8 million and $22.6$2.4 million at December 31, 20172023 and 2016, respectively.2022, respectively.
Accrued interest receivable on loans outstanding was $15.4$69.8 million and $13.0$59.3 million at December 31, 20172023 and 2016,2022, respectively.
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7. ALLOWANCE FOR CREDIT IMPAIRED LOANSLOSSES AND CREDIT QUALITY INFORMATION
| (Dollars in thousands) | Commercial and Industrial(1) | Owner- occupied Commercial | Commercial Mortgages | Construction | Residential(2) | Consumer(3) | Total | ||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | |||||||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | 59,394 | $ | 6,019 | $ | 21,473 | $ | 6,987 | $ | 4,668 | $ | 53,320 | $ | 151,861 | |||||||||||||||||||||||||||
| Charge-offs | (42,294) | (184) | (300) | (794) | (41) | (22,394) | (66,007) | ||||||||||||||||||||||||||||||||||
| Recoveries | 9,721 | 54 | 7 | 532 | 260 | 1,625 | 12,199 | ||||||||||||||||||||||||||||||||||
| Provision | 37,743 | 4,830 | 14,875 | 4,037 | 596 | 25,992 | 88,073 | ||||||||||||||||||||||||||||||||||
| Ending balance | $ | 64,564 | $ | 10,719 | $ | 36,055 | $ | 10,762 | $ | 5,483 | $ | 58,543 | $ | 186,126 | |||||||||||||||||||||||||||
| Period-end allowance allocated to: | |||||||||||||||||||||||||||||||||||||||||
| Loans evaluated on an individual basis | $ | 1,591 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 1,591 | |||||||||||||||||||||||||||
| Loans evaluated on a collective basis | 62,973 | 10,719 | 36,055 | 10,762 | 5,483 | 58,543 | 184,535 | ||||||||||||||||||||||||||||||||||
| Ending balance | $ | 64,564 | $ | 10,719 | $ | 36,055 | $ | 10,762 | $ | 5,483 | $ | 58,543 | $ | 186,126 | |||||||||||||||||||||||||||
| Period-end loan balances: | |||||||||||||||||||||||||||||||||||||||||
| Loans evaluated on an individual basis | $ | 19,221 | $ | 5,200 | $ | 22,295 | $ | 12,617 | $ | 5,876 | $ | 2,287 | $ | 67,496 | |||||||||||||||||||||||||||
| Loans evaluated on a collective basis | 3,144,471 | 1,880,887 | 3,778,885 | 1,022,913 | 862,019 | 2,009,847 | 12,699,022 | ||||||||||||||||||||||||||||||||||
| Ending balance | $ | 3,163,692 | $ | 1,886,087 | $ | 3,801,180 | $ | 1,035,530 | $ | 867,895 | $ | 2,012,134 | $ | 12,766,518 | |||||||||||||||||||||||||||
(1)Includes commercial small business leases.
(2)Period-end loan balance excludes reverse mortgages at the acquisition date is included in the determination of the fair value of the$2.8 million.
(3)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
| (Dollars in thousands) | Commercial and Industrial(1) | Owner- occupied Commercial | Commercial Mortgages | Construction | Residential(2) | Consumer(3) | Total | ||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | |||||||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | 49,967 | $ | 4,574 | $ | 11,623 | $ | 1,903 | $ | 3,352 | $ | 23,088 | $ | 94,507 | |||||||||||||||||||||||||||
| Initial allowance on acquired PCD loans | 22,614 | 595 | 2,684 | 71 | 61 | 78 | 26,103 | ||||||||||||||||||||||||||||||||||
| Charge-offs | (19,004) | (179) | (581) | — | (186) | (7,520) | (27,470) | ||||||||||||||||||||||||||||||||||
| Recoveries | 6,112 | 278 | 223 | 2,567 | 665 | 793 | 10,638 | ||||||||||||||||||||||||||||||||||
(Credit) provision(4) | (295) | 751 | 7,524 | 2,446 | 776 | 36,881 | 48,083 | ||||||||||||||||||||||||||||||||||
| Ending balance | $ | 59,394 | $ | 6,019 | $ | 21,473 | $ | 6,987 | $ | 4,668 | $ | 53,320 | $ | 151,861 | |||||||||||||||||||||||||||
| Period-end allowance allocated to: | |||||||||||||||||||||||||||||||||||||||||
| Loans evaluated on an individual basis | $ | 2,428 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 2,428 | |||||||||||||||||||||||||||
| Loans evaluated on a collective basis | 56,966 | 6,019 | 21,473 | 6,987 | 4,668 | 53,320 | 149,433 | ||||||||||||||||||||||||||||||||||
| Ending balance | $ | 59,394 | $ | 6,019 | $ | 21,473 | $ | 6,987 | $ | 4,668 | $ | 53,320 | $ | 151,861 | |||||||||||||||||||||||||||
| Period-end loan balances: | |||||||||||||||||||||||||||||||||||||||||
| Loans evaluated on an individual basis | $ | 17,572 | $ | 1,929 | $ | 6,369 | $ | 5,143 | $ | 7,680 | $ | 2,047 | $ | 40,740 | |||||||||||||||||||||||||||
| Loans evaluated on a collective basis | 3,116,754 | 1,807,653 | 3,344,715 | 1,038,906 | 751,785 | 1,808,883 | 11,868,696 | ||||||||||||||||||||||||||||||||||
| Ending balance | $ | 3,134,326 | $ | 1,809,582 | $ | 3,351,084 | $ | 1,044,049 | $ | 759,465 | $ | 1,810,930 | $ | 11,909,436 | |||||||||||||||||||||||||||
(1)Includes commercial small business leases.
(2)Period-end loan balance excludes reverse mortgages at fair value of $2.4 million.
(3)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
(4)Includes $23.5 million initial provision for credit losses on non-PCD loans.
92
| (Dollars in thousands) | Commercial and Industrial(1) | Owner- occupied Commercial | Commercial Mortgages | Construction | Residential(2) | Consumer(3) | Total | ||||||||||||||||||||||||||||||||||
| Year Ended December 31, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Allowance for loan and lease losses | |||||||||||||||||||||||||||||||||||||||||
| Beginning balance | $ | 150,875 | $ | 9,615 | $ | 31,071 | $ | 12,190 | $ | 6,893 | $ | 18,160 | $ | 228,804 | |||||||||||||||||||||||||||
| Charge-offs | (23,592) | (83) | (73) | (2,473) | — | (2,094) | (28,315) | ||||||||||||||||||||||||||||||||||
| Recoveries | 8,756 | 160 | 269 | — | 789 | 1,131 | 11,105 | ||||||||||||||||||||||||||||||||||
| (Credit) provision | (86,072) | (5,118) | (19,644) | (7,814) | (4,330) | 5,891 | (117,087) | ||||||||||||||||||||||||||||||||||
| Ending balance | $ | 49,967 | $ | 4,574 | $ | 11,623 | $ | 1,903 | $ | 3,352 | $ | 23,088 | $ | 94,507 | |||||||||||||||||||||||||||
| Period-end allowance allocated to: | |||||||||||||||||||||||||||||||||||||||||
| Loans evaluated on an individual basis | $ | 1 | $ | — | $ | 7 | $ | — | $ | — | $ | — | $ | 8 | |||||||||||||||||||||||||||
| Loans evaluated on a collective basis | 49,966 | 4,574 | 11,616 | 1,903 | 3,352 | 23,088 | 94,499 | ||||||||||||||||||||||||||||||||||
| Ending balance | $ | 49,967 | $ | 4,574 | $ | 11,623 | $ | 1,903 | $ | 3,352 | $ | 23,088 | $ | 94,507 | |||||||||||||||||||||||||||
| Period-end loan balances: | |||||||||||||||||||||||||||||||||||||||||
| Loans evaluated on an individual basis | $ | 8,363 | $ | 1,690 | $ | 3,764 | $ | — | $ | 5,000 | $ | 2,321 | $ | 21,138 | |||||||||||||||||||||||||||
| Loans evaluated on a collective basis | 2,261,956 | 1,340,017 | 1,877,746 | 687,213 | 537,733 | 1,156,252 | 7,860,917 | ||||||||||||||||||||||||||||||||||
| Ending balance | $ | 2,270,319 | $ | 1,341,707 | $ | 1,881,510 | $ | 687,213 | $ | 542,733 | $ | 1,158,573 | $ | 7,882,055 | |||||||||||||||||||||||||||
(1)Includes commercial small business leases and PPP loans.
(2)Period-end loan balance excludes reverse mortgages at fair value of $3.9 million.
(3)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
The following tables show nonaccrual and past due loans presented at amortized cost at the acquisition date. Updates to expected cash flows for acquired impaireddate indicated:
| December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 30–89 Days Past Due and Still Accruing | Greater Than 90 Days Past Due and Still Accruing | Total Past Due And Still Accruing | Accruing Current Balances | Nonaccrual Loans With No Allowance(1) | Nonaccrual Loans With An Allowance | Total Loans | ||||||||||||||||||||||||||||||||||
Commercial and industrial(2) | $ | 8,327 | $ | 1,065 | $ | 9,392 | $ | 3,135,087 | $ | 13,645 | $ | 5,568 | $ | 3,163,692 | |||||||||||||||||||||||||||
| Owner-occupied commercial | 1,786 | 487 | 2,273 | 1,878,952 | 4,862 | — | 1,886,087 | ||||||||||||||||||||||||||||||||||
| Commercial mortgages | 1,190 | — | 1,190 | 3,777,698 | 22,292 | — | 3,801,180 | ||||||||||||||||||||||||||||||||||
| Construction | — | — | — | 1,022,913 | 12,617 | — | 1,035,530 | ||||||||||||||||||||||||||||||||||
Residential(3) | 9,261 | — | 9,261 | 856,055 | 2,579 | — | 867,895 | ||||||||||||||||||||||||||||||||||
Consumer(4) | 15,249 | 10,032 | 25,281 | 1,984,407 | 2,446 | — | 2,012,134 | ||||||||||||||||||||||||||||||||||
Total(4) | $ | 35,813 | $ | 11,584 | $ | 47,397 | $ | 12,655,112 | $ | 58,441 | $ | 5,568 | $ | 12,766,518 | |||||||||||||||||||||||||||
| % of Total Loans | 0.28 | % | 0.09 | % | 0.37 | % | 99.13 | % | 0.46 | % | 0.04 | % | 100.00 | % | |||||||||||||||||||||||||||
(1)Excludes nonaccruing loans accounted for under ASC 310-30 since acquisition has resulted in a provision for loan lossesheld-for-sale.
(2)Includes commercial small business leases.
(3)Residential accruing current balances exclude reverse mortgages at fair value of $0.4$2.8 million.
(4)Includes $14.5 million and $0.5 million in 2017 and 2016, respectively, due to changes in the amount and timing of expected cash flows subsequent to acquisition.delinquent, but still accruing, U.S. government-guaranteed student loans that carry little risk of credit loss.
| December 31, 2022 | |||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 30–89 Days Past Due and Still Accruing | Greater Than 90 Days Past Due and Still Accruing | Total Past Due And Still Accruing | Accruing Current Balances | Nonaccrual Loans(1) | Total Loans | |||||||||||||||||||||||||||||
Commercial and industrial(2) | $ | 10,767 | $ | 311 | $ | 11,078 | $ | 3,116,478 | $ | 6,770 | $ | 3,134,326 | |||||||||||||||||||||||
| Owner-occupied commercial | 3,500 | 474 | 3,974 | 1,805,222 | 386 | 1,809,582 | |||||||||||||||||||||||||||||
| Commercial mortgages | 2,137 | 237 | 2,374 | 3,343,551 | 5,159 | 3,351,084 | |||||||||||||||||||||||||||||
| Construction | — | — | — | 1,038,906 | 5,143 | 1,044,049 | |||||||||||||||||||||||||||||
Residential(3) | 2,563 | — | 2,563 | 753,703 | 3,199 | 759,465 | |||||||||||||||||||||||||||||
Consumer(4) | 12,263 | 15,513 | 27,776 | 1,781,009 | 2,145 | 1,810,930 | |||||||||||||||||||||||||||||
Total(4) | $ | 31,230 | $ | 16,535 | $ | 47,765 | $ | 11,838,869 | $ | 22,802 | $ | 11,909,436 | |||||||||||||||||||||||
| % of Total Loans | 0.26 | % | 0.14 | % | 0.40 | % | 99.41 | % | 0.19 | % | 100.00 | % | |||||||||||||||||||||||
| (Dollars in thousands) | Penn Liberty(1) | Alliance(1) | First National Bank of Wyoming (FNBW)(1) | Total | |||||||||||
Contractually required principal and interest at acquisition (2) | $ | 16,499 | $ | 27,469 | $ | 27,086 | $ | 71,054 | |||||||
| Contractual cash flows not expected to be collected (nonaccretable difference) | 3,125 | 2,377 | 7,956 | 13,458 | |||||||||||
| Expected cash flows at acquisition | 13,374 | 25,092 | 19,130 | 57,596 | |||||||||||
| Interest component of expected cash flows (accretable yield) | 670 | 2,334 | 1,790 | 4,794 | |||||||||||
| Fair value of acquired loans accounted for under FASB ASC 310-30 | $ | 12,704 | $ | 22,758 | $ | 17,340 | $ | 52,802 | |||||||
(2)Includes commercial small business leases.
(3)Residential accruing current balances exclude reverse mortgages at fair value of $2.4 million.
(4)Includes $21.1 million of delinquent, but still accruing, U.S. government-guaranteed student loans that carry little risk of credit loss.
93
| (Dollars in thousands) | December 31, 2017 | December 31, 2016 | |||||
| Outstanding principal balance | $ | 27,034 | $ | 41,574 | |||
| Carrying amount | 21,295 | 33,104 | |||||
| Allowance for loan losses | 358 | 510 | |||||
The following table presents the changes in accretable yield on all acquired credit impairedamortized cost basis of nonaccruing collateral-dependent loans for the years indicated:
| (Dollars in thousands) | Accretable Yield | ||
| Balance at December 31, 2015 | $ | 4,764 | |
| Addition from Penn Liberty | 1,473 | ||
| Accretion | (2,731 | ) | |
| Reclassification from nonaccretable difference | 2,352 | ||
| Additions/adjustments | (701 | ) | |
| Disposals | (7 | ) | |
| Balance at December 31, 2016 | $ | 5,150 | |
| Accretion | (2,636 | ) | |
| Reclassification from nonaccretable difference | 2,015 | ||
| Additions/adjustments | (1,149 | ) | |
| Disposals | (345 | ) | |
| Balance at December 31, 2017 | $ | 3,035 | |
| (Dollars in thousands) | Commercial | Owner- occupied Commercial | Commercial Mortgages | Construction | Residential | Consumer | Total | ||||||||||||||||||||
| Year Ended December 31, 2017 | |||||||||||||||||||||||||||
| Allowance for loan losses | |||||||||||||||||||||||||||
| Beginning balance | $ | 13,339 | $ | 6,588 | $ | 8,915 | $ | 2,838 | $ | 2,059 | $ | 6,012 | $ | 39,751 | |||||||||||||
| Charge-offs | (5,008 | ) | (296 | ) | (4,612 | ) | (574 | ) | (168 | ) | (3,184 | ) | (13,842 | ) | |||||||||||||
| Recoveries | 1,355 | 127 | 255 | 306 | 178 | 1,505 | 3,726 | ||||||||||||||||||||
| Provision (credit) for loan losses | 6,972 | (1,098 | ) | 1,160 | 222 | (300 | ) | 3,572 | 10,528 | ||||||||||||||||||
| Provision for acquired loans | 74 | 101 | 173 | 69 | 29 | (10 | ) | 436 | |||||||||||||||||||
| Ending balance | $ | 16,732 | $ | 5,422 | $ | 5,891 | $ | 2,861 | $ | 1,798 | $ | 7,895 | $ | 40,599 | |||||||||||||
| Period-end allowance allocated to: | |||||||||||||||||||||||||||
| Loans individually evaluated for impairment | $ | 3,687 | $ | — | $ | 18 | $ | — | $ | 760 | $ | 193 | $ | 4,658 | |||||||||||||
| Loans collectively evaluated for impairment | 12,871 | 5,410 | 5,779 | 2,828 | 1,002 | 7,693 | 35,583 | ||||||||||||||||||||
| Acquired loans evaluated for impairment | 174 | 12 | 94 | 33 | 36 | 9 | 358 | ||||||||||||||||||||
| Ending balance | $ | 16,732 | $ | 5,422 | $ | 5,891 | $ | 2,861 | $ | 1,798 | $ | 7,895 | $ | 40,599 | |||||||||||||
Loans individually evaluated for impairment(2) | $ | 19,196 | $ | 3,655 | $ | 6,076 | $ | 6,022 | $ | 13,778 | $ | 7,588 | $ | 56,315 | |||||||||||||
| Loans collectively evaluated for impairment | 1,324,636 | 933,352 | 983,400 | 258,887 | 146,621 | 514,713 | 4,161,609 | ||||||||||||||||||||
| Acquired nonimpaired loans | 116,566 | 136,437 | 188,505 | 15,759 | 72,304 | 35,945 | 565,516 | ||||||||||||||||||||
| Acquired impaired loans | 4,156 | 5,803 | 9,724 | 940 | 784 | 247 | 21,654 | ||||||||||||||||||||
Ending balance(3) | $ | 1,464,554 | $ | 1,079,247 | $ | 1,187,705 | $ | 281,608 | $ | 233,487 | $ | 558,493 | $ | 4,805,094 | |||||||||||||
| (Dollars in thousands) | Commercial | Owner- occupied Commercial | Commercial Mortgages | Construction | Residential | Consumer | Complexity Risk (1) | Total | |||||||||||||||||||||||
| Year Ended December 31, 2016 | |||||||||||||||||||||||||||||||
| Allowance for loan losses | |||||||||||||||||||||||||||||||
| Beginning balance | $ | 11,156 | $ | 6,670 | $ | 6,487 | $ | 3,521 | $ | 2,281 | $ | 5,964 | $ | 1,010 | $ | 37,089 | |||||||||||||||
| Charge-offs | (5,052 | ) | (1,556 | ) | (422 | ) | (57 | ) | (88 | ) | (6,152 | ) | — | (13,327 | ) | ||||||||||||||||
| Recoveries | 594 | 117 | 322 | 484 | 254 | 1,232 | — | 3,003 | |||||||||||||||||||||||
| Provision (credit) for loan losses | 6,260 | 1,163 | 2,466 | (1,117 | ) | (422 | ) | 4,989 | (1,010 | ) | 12,329 | ||||||||||||||||||||
| Provision for acquired loans | 381 | 194 | 62 | 7 | 34 | (21 | ) | — | 657 | ||||||||||||||||||||||
| Ending balance | $ | 13,339 | $ | 6,588 | $ | 8,915 | $ | 2,838 | $ | 2,059 | $ | 6,012 | $ | — | $ | 39,751 | |||||||||||||||
| Period-end allowance allocated to: | |||||||||||||||||||||||||||||||
| Loans individually evaluated for impairment | $ | 322 | $ | — | $ | 1,247 | $ | 217 | $ | 911 | $ | 198 | $ | — | $ | 2,895 | |||||||||||||||
| Loans collectively evaluated for impairment | 12,834 | 6,573 | 7,482 | 2,535 | 1,125 | 5,797 | — | 36,346 | |||||||||||||||||||||||
| Acquired loans evaluated for impairment | 183 | 15 | 186 | 86 | 23 | 17 | — | 510 | |||||||||||||||||||||||
| Ending balance | $ | 13,339 | $ | 6,588 | $ | 8,915 | $ | 2,838 | $ | 2,059 | $ | 6,012 | $ | — | $ | 39,751 | |||||||||||||||
| Period-end loan balances evaluated for: | |||||||||||||||||||||||||||||||
Loans individually evaluated for impairment(2) | $ | 2,266 | $ | 2,078 | $ | 9,898 | $ | 1,419 | $ | 13,547 | $ | 7,863 | $ | — | $ | 37,071 | |||||||||||||||
| Loans collectively evaluated for impairment | 1,120,193 | 899,590 | 921,333 | 189,468 | 157,738 | 386,146 | — | 3,674,468 | |||||||||||||||||||||||
| Acquired nonimpaired loans | 159,089 | 164,372 | 221,937 | 28,131 | 94,883 | 55,651 | — | 724,063 | |||||||||||||||||||||||
| Acquired impaired loans | 6,183 | 12,122 | 10,386 | 3,694 | 860 | 369 | — | 33,614 | |||||||||||||||||||||||
Ending balance(3) | $ | 1,287,731 | $ | 1,078,162 | $ | 1,163,554 | $ | 222,712 | $ | 267,028 | $ | 450,029 | $ | — | $ | 4,469,216 | |||||||||||||||
| (Dollars in thousands) | Commercial | Owner- occupied Commercial | Commercial Mortgages | Construction | Residential | Consumer | Complexity Risk (1) | Total | |||||||||||||||||||||||
| Year Ended December 31, 2015 | |||||||||||||||||||||||||||||||
| Allowance for loan losses | |||||||||||||||||||||||||||||||
| Beginning balance | $ | 12,837 | $ | 6,643 | $ | 7,266 | $ | 2,596 | $ | 2,523 | $ | 6,041 | $ | 1,520 | $ | 39,426 | |||||||||||||||
| Charge-offs | (6,303 | ) | (738 | ) | (1,135 | ) | (146 | ) | (548 | ) | (3,225 | ) | — | (12,095 | ) | ||||||||||||||||
| Recoveries | 301 | 77 | 222 | 185 | 226 | 957 | — | 1,968 | |||||||||||||||||||||||
| Provision (credit) for loan losses | 4,241 | 665 | (67 | ) | 852 | 76 | 2,183 | (510 | ) | 7,440 | |||||||||||||||||||||
| Provision for acquired loans | 80 | 23 | 201 | 34 | 4 | 8 | — | 350 | |||||||||||||||||||||||
| Ending balance | $ | 11,156 | $ | 6,670 | $ | 6,487 | $ | 3,521 | $ | 2,281 | $ | 5,964 | $ | 1,010 | $ | 37,089 | |||||||||||||||
| Period-end allowance allocated to: | |||||||||||||||||||||||||||||||
| Loans individually evaluated for impairment | $ | 1,164 | $ | — | $ | — | $ | 211 | $ | 918 | $ | 199 | $ | — | $ | 2,492 | |||||||||||||||
| Loans collectively evaluated for impairment | 9,988 | 6,648 | 6,384 | 3,310 | 1,360 | 5,765 | 1,010 | 34,465 | |||||||||||||||||||||||
| Acquired loans evaluated for impairment | 4 | 22 | 103 | — | 3 | — | — | 132 | |||||||||||||||||||||||
| Ending balance | $ | 11,156 | $ | 6,670 | $ | 6,487 | $ | 3,521 | $ | 2,281 | $ | 5,964 | $ | 1,010 | $ | 37,089 | |||||||||||||||
| Period-end loan balances evaluated for: | |||||||||||||||||||||||||||||||
Loans individually evaluated for impairment(2) | $ | 5,680 | $ | 1,090 | $ | 3,411 | $ | 1,419 | $ | 15,548 | $ | 7,664 | $ | — | $ | 34,812 | |||||||||||||||
| Loans collectively evaluated for impairment | 930,346 | 820,911 | 869,359 | 213,801 | 166,252 | 335,323 | — | 3,335,992 | |||||||||||||||||||||||
| Acquired nonimpaired loans | 112,586 | 53,954 | 83,415 | 27,009 | 76,929 | 17,255 | — | 371,148 | |||||||||||||||||||||||
| Acquired impaired loans | 12,985 | 4,688 | 10,513 | 3,544 | 950 | 7 | — | 32,687 | |||||||||||||||||||||||
Ending balance(3) | $ | 1,061,597 | $ | 880,643 | $ | 966,698 | $ | 245,773 | $ | 259,679 | $ | 360,249 | $ | — | $ | 3,774,639 | |||||||||||||||
| December 31, 2017 | |||||||||||||||||||||||||||||||
| (Dollars in thousands) | 30–59 Days Past Due and Still Accruing | 60–89 Days Past Due and Still Accruing | Greater Than 90 Days Past Due and Still Accruing | Total Past Due And Still Accruing | Accruing Current Balances | Acquired Impaired Loans | Nonaccrual Loans | Total Loans | |||||||||||||||||||||||
| Commercial | $ | 1,050 | $ | — | $ | — | $ | 1,050 | $ | 1,440,291 | $ | 4,156 | $ | 19,057 | $ | 1,464,554 | |||||||||||||||
| Owner-occupied commercial | 2,069 | 233 | — | 2,302 | 1,067,488 | 5,803 | 3,654 | 1,079,247 | |||||||||||||||||||||||
| Commercial mortgages | 320 | 90 | — | 410 | 1,171,701 | 9,724 | 5,870 | 1,187,705 | |||||||||||||||||||||||
| Construction | — | — | — | — | 278,864 | 940 | 1,804 | 281,608 | |||||||||||||||||||||||
| Residential | 2,058 | 731 | 356 | 3,145 | 225,434 | 784 | 4,124 | 233,487 | |||||||||||||||||||||||
| Consumer | 1,117 | 463 | 105 | 1,685 | 554,634 | 247 | 1,927 | 558,493 | |||||||||||||||||||||||
Total (1) (2) | $ | 6,614 | $ | 1,517 | $ | 461 | $ | 8,592 | $ | 4,738,412 | $ | 21,654 | $ | 36,436 | $ | 4,805,094 | |||||||||||||||
| % of Total Loans | 0.14 | % | 0.03 | % | 0.01 | % | 0.18 | % | 98.61 | % | 0.45 | % | 0.76 | % | 100.00 | % | |||||||||||||||
| December 31, 2016 | |||||||||||||||||||||||||||||||
| (Dollars in thousands) | 30–59 Days Past Due and Still Accruing | 60–89 Days Past Due and Still Accruing | Greater Than 90 Days Past Due and Still Accruing | Total Past Due And Still Accruing | Accruing Current Balances | Acquired Impaired Loans | Nonaccrual Loans | Total Loans | |||||||||||||||||||||||
| Commercial | $ | 1,507 | $ | 278 | $ | — | $ | 1,785 | $ | 1,277,748 | $ | 6,183 | $ | 2,015 | $ | 1,287,731 | |||||||||||||||
| Owner-occupied commercial | 116 | 540 | — | 656 | 1,063,306 | 12,122 | 2,078 | 1,078,162 | |||||||||||||||||||||||
| Commercial mortgages | 167 | — | — | 167 | 1,143,180 | 10,386 | 9,821 | 1,163,554 | |||||||||||||||||||||||
| Construction | 132 | — | — | 132 | 218,886 | 3,694 | — | 222,712 | |||||||||||||||||||||||
| Residential | 3,176 | 638 | 153 | 3,967 | 257,234 | 860 | 4,967 | 267,028 | |||||||||||||||||||||||
| Consumer | 392 | 346 | 285 | 1,023 | 444,642 | 369 | 3,995 | 450,029 | |||||||||||||||||||||||
Total (1) (2) | $ | 5,490 | $ | 1,802 | $ | 438 | $ | 7,730 | $ | 4,404,996 | $ | 33,614 | $ | 22,876 | $ | 4,469,216 | |||||||||||||||
| % of Total Loans | 0.12 | % | 0.04 | % | 0.01 | % | 0.17 | % | 98.57 | % | 0.75 | % | 0.51 | % | 100.00 | % | |||||||||||||||
| December 31, 2023 | December 31, 2022 | |||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Property | Equipment and other | Property | Equipment and other | ||||||||||||||||||||||||||||||||||
Commercial and industrial(1)(2) | $ | 17,230 | $ | 1,983 | $ | 3,848 | $ | 2,922 | ||||||||||||||||||||||||||||||
| Owner-occupied commercial | 4,862 | — | 386 | — | ||||||||||||||||||||||||||||||||||
| Commercial mortgages | 22,292 | — | 5,159 | — | ||||||||||||||||||||||||||||||||||
| Construction | 12,617 | — | 5,143 | — | ||||||||||||||||||||||||||||||||||
Residential(3) | 2,579 | — | 3,199 | — | ||||||||||||||||||||||||||||||||||
Consumer(4) | 2,446 | — | 2,145 | — | ||||||||||||||||||||||||||||||||||
| Total | $ | 62,026 | $ | 1,983 | $ | 19,880 | $ | 2,922 | ||||||||||||||||||||||||||||||
(1)Includes commercial small business leases.
| December 31, 2017 | |||||||||||||||||||||||
| (Dollars in thousands) | Ending Loan Balances | Loans with No Related Reserve (1) | Loan with Related Reserve | Related Reserve | Contractual Principal Balance | Average Loan Balances | |||||||||||||||||
| Commercial | $ | 20,842 | $ | 3,422 | $ | 17,420 | $ | 3,861 | $ | 23,815 | $ | 15,072 | |||||||||||
| Owner-occupied commercial | 5,374 | 3,654 | 1,720 | 12 | 5,717 | 5,827 | |||||||||||||||||
| Commercial mortgages | 7,598 | 4,487 | 3,111 | 112 | 16,658 | 12,630 | |||||||||||||||||
| Construction | 6,292 | 6,023 | 269 | 33 | 6,800 | 4,523 | |||||||||||||||||
| Residential | 14,181 | 8,282 | 5,899 | 796 | 17,015 | 14,533 | |||||||||||||||||
| Consumer | 7,819 | 6,304 | 1,515 | 203 | 8,977 | 8,158 | |||||||||||||||||
Total (1)(2) | $ | 62,106 | $ | 32,172 | $ | 29,934 | $ | 5,017 | $ | 78,982 | $ | 60,743 | |||||||||||
(2)Excludes nonaccruing loans held-for-sale.
(3)Excludes reverse mortgages at fair value.
| December 31, 2016 | |||||||||||||||||||||||
| (Dollars in thousands) | Ending Loan Balances | Loans with No Related Reserve (1) | Loan with Related Reserve | Related Reserve | Contractual Principal Balance | Average Loan Balances | |||||||||||||||||
| Commercial | $ | 4,250 | $ | 1,395 | $ | 2,855 | $ | 505 | $ | 5,572 | $ | 5,053 | |||||||||||
| Owner-occupied commercial | 4,650 | 2,078 | 2,572 | 15 | 5,129 | 3,339 | |||||||||||||||||
| Commercial mortgages | 15,065 | 4,348 | 10,717 | 1,433 | 20,716 | 7,323 | |||||||||||||||||
| Construction | 3,662 | — | 3,662 | 303 | 3,972 | 2,376 | |||||||||||||||||
| Residential | 14,256 | 7,122 | 7,134 | 934 | 17,298 | 15,083 | |||||||||||||||||
| Consumer | 8,021 | 6,561 | 1,460 | 215 | 11,978 | 7,910 | |||||||||||||||||
Total (1)(2) | $ | 49,904 | $ | 21,504 | $ | 28,400 | $ | 3,405 | $ | 64,665 | $ | 41,084 | |||||||||||
As of December 31, 2017,2023, there were 3331 residential loans and 9 commercial loans in the process of foreclosure. The total outstanding balance on the loans was $3.2 million and $1.1 million, respectively. As of December 31, 2022, there were 45 residential loans and 8 commercial loans in the process of foreclosure. The total outstanding balance on the loans was $2.9$6.7 million and $6.0$1.6 million, respectively. As of December 31, 2016, thereLoan workout and OREO expenses recognized were 29 residential loans$0.6 million in 2023, $0.4 million in 2022, and 7 commercial loans$1.5 million in the process of foreclosure. The total outstanding balance2021. Loan workout and OREO expenses are included in Loan workout and other credit costs on the loans was $3.7 million and $3.6 million, respectively.
Credit Quality Indicators
Below is a description of each of ourthe risk ratings for all commercial loans:
•Pass. These borrowers currently show no indication of deterioration or potential problems and their loans are considered fully collectible
collectible.•Special Mention. Borrowers These borrowers have potential weaknesses that deserve management’s close attention. Borrowers in this category may be experiencing adverse operating trends, for example, declining revenues or margins, high leverage, tight liquidity, or increasing inventory without increasing sales. These adverse trends can have a potential negative effect on the borrower’s repayment capacity. These assets are not adversely classified and do not expose the Bank to significant risk that would warrant a more severe rating. Borrowers in this category may also be experiencing significant management problems, pending litigation, or other structural credit weaknesses.
•Substandard or Lower. BorrowersThese borrowers have well-defined weaknesses that require extensive oversight by management. Borrowers in this category may exhibit one or more of the following: inadequate debt service coverage, unprofitable operations, insufficient liquidity, high leverage, and weak or inadequate capitalization. Relationships in this category are not adequately protected by the sound financial worth and paying capacity of the obligor or the collateral pledged on the loan, if any. A distinct possibility exists that the Bank will sustain some loss if the deficiencies are not corrected.
Residential and Consumer Loans
The residential and consumer loan portfolios are monitored on an ongoing basis using delinquency information and loan type as credit quality indicators. These credit quality indicators are assessed in the aggregate in these relatively homogeneous portfolios. Loans that are greater than 90 days past due are generally considered nonperforming and placed on nonaccrual status.
94
The following tables providetable provides an analysis of loans by portfolio segment based on the credit quality indicators used to determine the Allowanceallowance for Loan Loss.credit losses as of December 31, 2023.
Term Loans Amortized Cost Basis by Origination Year(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Revolving loans amortized cost basis | Revolving loans converted to term | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial(2): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | 977,196 | $ | 682,680 | $ | 283,771 | $ | 251,848 | $ | 105,933 | $ | 395,601 | $ | 8,785 | $ | 237,786 | $ | 2,943,600 | ||||||||||||||||||||||||||||||||||||||
| Special mention | 7,209 | 11,860 | 2,804 | 463 | 735 | 743 | — | 1,649 | 25,463 | |||||||||||||||||||||||||||||||||||||||||||||||
Substandard or Lower(3) | 72,993 | 54,024 | 5,951 | 10,224 | 22,046 | 17,906 | — | 11,485 | 194,629 | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | 1,057,398 | $ | 748,564 | $ | 292,526 | $ | 262,535 | $ | 128,714 | $ | 414,250 | $ | 8,785 | $ | 250,920 | $ | 3,163,692 | |||||||||||||||||||||||||||||||||||||||
| Current-period gross writeoffs | $ | 1,528 | $ | 7,818 | $ | 9,661 | $ | 3,201 | $ | 8,302 | $ | 11,784 | $ | — | $ | — | $ | 42,294 | ||||||||||||||||||||||||||||||||||||||
| Owner-occupied commercial: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | 346,908 | $ | 264,895 | $ | 251,262 | $ | 212,365 | $ | 194,153 | $ | 313,801 | $ | — | $ | 178,150 | $ | 1,761,534 | ||||||||||||||||||||||||||||||||||||||
| Special mention | 2,885 | 3,115 | 5,419 | 1,105 | 11,002 | 5,559 | — | 1,393 | 30,478 | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard or Lower | 996 | 18,865 | 11,109 | 6,787 | 8,019 | 35,330 | — | 12,969 | 94,075 | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | 350,789 | $ | 286,875 | $ | 267,790 | $ | 220,257 | $ | 213,174 | $ | 354,690 | $ | — | $ | 192,512 | $ | 1,886,087 | |||||||||||||||||||||||||||||||||||||||
| Current-period gross writeoffs | $ | — | $ | — | $ | — | $ | — | $ | 184 | $ | — | $ | — | $ | — | $ | 184 | ||||||||||||||||||||||||||||||||||||||
| Commercial mortgages: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | 847,137 | $ | 464,895 | $ | 526,280 | $ | 465,354 | $ | 486,855 | $ | 619,448 | $ | — | $ | 290,083 | $ | 3,700,052 | ||||||||||||||||||||||||||||||||||||||
| Special mention | 20,632 | — | 67 | 1,837 | 10,666 | — | — | — | 33,202 | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard or Lower | 9,862 | 1,153 | 1,047 | 13,837 | 14,352 | 12,212 | — | 15,463 | 67,926 | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | 877,631 | $ | 466,048 | $ | 527,394 | $ | 481,028 | $ | 511,873 | $ | 631,660 | $ | — | $ | 305,546 | $ | 3,801,180 | |||||||||||||||||||||||||||||||||||||||
| Current-period gross writeoffs | $ | — | $ | 83 | $ | — | $ | 217 | $ | — | $ | — | $ | — | $ | — | $ | 300 | ||||||||||||||||||||||||||||||||||||||
| Construction: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | 429,055 | $ | 319,958 | $ | 111,333 | $ | 3,030 | $ | 388 | $ | 7,016 | $ | — | $ | 87,741 | $ | 958,521 | ||||||||||||||||||||||||||||||||||||||
| Special mention | 28,718 | 19,769 | 8,227 | — | — | — | — | — | 56,714 | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard or Lower | 5,698 | — | 3,308 | 8,598 | 2,134 | — | — | 557 | 20,295 | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | 463,471 | $ | 339,727 | $ | 122,868 | $ | 11,628 | $ | 2,522 | $ | 7,016 | $ | — | $ | 88,298 | $ | 1,035,530 | |||||||||||||||||||||||||||||||||||||||
| Current-period gross writeoffs | $ | — | $ | — | $ | 794 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 794 | ||||||||||||||||||||||||||||||||||||||
Residential(4): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | $ | 188,644 | $ | 67,358 | $ | 102,982 | $ | 57,273 | $ | 33,499 | $ | 412,099 | $ | — | $ | — | $ | 861,855 | ||||||||||||||||||||||||||||||||||||||
| Nonperforming | — | 170 | 713 | 486 | 1,251 | 3,420 | — | — | 6,040 | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | 188,644 | $ | 67,528 | $ | 103,695 | $ | 57,759 | $ | 34,750 | $ | 415,519 | $ | — | $ | — | $ | 867,895 | |||||||||||||||||||||||||||||||||||||||
| Current-period gross writeoffs | $ | 33 | $ | — | $ | — | $ | — | $ | — | $ | 8 | $ | — | $ | — | $ | 41 | ||||||||||||||||||||||||||||||||||||||
Consumer(5): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | $ | 391,580 | $ | 568,919 | $ | 153,930 | $ | 104,248 | $ | 44,996 | $ | 245,849 | $ | 494,663 | $ | 5,662 | $ | 2,009,847 | ||||||||||||||||||||||||||||||||||||||
| Nonperforming | — | — | 135 | 352 | 176 | 30 | 1,362 | 232 | 2,287 | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | 391,580 | $ | 568,919 | $ | 154,065 | $ | 104,600 | $ | 45,172 | $ | 245,879 | $ | 496,025 | $ | 5,894 | $ | 2,012,134 | |||||||||||||||||||||||||||||||||||||||
| Current-period gross writeoffs | $ | 1,790 | $ | 15,227 | $ | 4,411 | $ | 313 | $ | 198 | $ | 455 | $ | — | $ | — | $ | 22,394 | ||||||||||||||||||||||||||||||||||||||
(1)Origination date represent the most recent underwriting of the loan which includes new relationships, renewals and extensions.
(2)Includes commercial small business leases.
(3)Excludes nonacrruing loans held-for-sale.
(4)Excludes reverse mortgages at fair value.
(5)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
95
| December 31, 2017 | ||||||||||||||||||||||
| (Dollars in thousands) | Commercial | Owner-occupied Commercial | Commercial Mortgages | Construction | Total Commercial (1) | |||||||||||||||||
| Amount | % | |||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||
| Special mention | $ | 22,789 | $ | 16,783 | $ | — | $ | — | $ | 39,572 | ||||||||||||
| Substandard: | ||||||||||||||||||||||
| Accrual | 34,332 | 19,386 | 1,967 | 4,965 | 60,650 | |||||||||||||||||
| Nonaccrual | 15,370 | 3,654 | 5,852 | 1,804 | 26,680 | |||||||||||||||||
| Doubtful/nonaccrual | 3,687 | — | 18 | — | 3,705 | |||||||||||||||||
| Total Special Mention and Substandard | 76,178 | 39,823 | 7,837 | 6,769 | 130,607 | 3 | % | |||||||||||||||
| Acquired impaired | 4,156 | 5,803 | 9,724 | 940 | 20,623 | 1 | % | |||||||||||||||
| Pass | 1,384,220 | 1,033,621 | 1,170,144 | 273,899 | 3,861,884 | 96 | % | |||||||||||||||
| Total | $ | 1,464,554 | $ | 1,079,247 | $ | 1,187,705 | $ | 281,608 | $ | 4,013,114 | 100 | % | ||||||||||
The following table provides an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for credit losses as of December 31, 2022.
| Term Loans Amortized Cost Basis by Origination Year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2020 | 2019 | 2018 | Prior | Revolving loans amortized cost basis | Revolving loans converted to term | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial(1): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | 1,123,803 | $ | 501,761 | $ | 387,225 | $ | 211,310 | $ | 153,713 | $ | 276,588 | $ | 8,099 | $ | 250,486 | $ | 2,912,985 | ||||||||||||||||||||||||||||||||||||||
| Special mention | 28,672 | 27,689 | 7,585 | 9,451 | 347 | 1,010 | — | 2,596 | 77,350 | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard or Lower | 32,362 | 16,162 | 6,943 | 37,534 | 37,133 | 6,768 | — | 7,089 | 143,991 | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | 1,184,837 | $ | 545,612 | $ | 401,753 | $ | 258,295 | $ | 191,193 | $ | 284,366 | $ | 8,099 | $ | 260,171 | $ | 3,134,326 | |||||||||||||||||||||||||||||||||||||||
| Owner-occupied commercial: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | 280,898 | $ | 325,388 | $ | 258,177 | $ | 226,717 | $ | 106,390 | $ | 363,420 | $ | — | $ | 132,942 | $ | 1,693,932 | ||||||||||||||||||||||||||||||||||||||
| Special mention | 17,376 | — | — | — | — | 2,166 | — | 3,351 | 22,893 | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard or Lower | 2,981 | 1,500 | 23,284 | 4,401 | 11,864 | 35,311 | — | 13,416 | 92,757 | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | 301,255 | $ | 326,888 | $ | 281,461 | $ | 231,118 | $ | 118,254 | $ | 400,897 | $ | — | $ | 149,709 | $ | 1,809,582 | |||||||||||||||||||||||||||||||||||||||
| Commercial mortgages: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | 516,783 | $ | 600,226 | $ | 526,312 | $ | 549,788 | $ | 276,414 | $ | 594,024 | $ | — | $ | 210,550 | $ | 3,274,097 | ||||||||||||||||||||||||||||||||||||||
| Special mention | 1,450 | 75 | 3,848 | 6,121 | 9,596 | 32,014 | — | — | 53,104 | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard or Lower | 1,861 | 1,210 | 12,552 | 2,909 | 3,573 | 1,209 | — | 569 | 23,883 | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | 520,094 | $ | 601,511 | $ | 542,712 | $ | 558,818 | $ | 289,583 | $ | 627,247 | $ | — | $ | 211,119 | $ | 3,351,084 | |||||||||||||||||||||||||||||||||||||||
| Construction: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | 448,581 | $ | 299,619 | $ | 115,667 | $ | 9,319 | $ | 26,553 | $ | 7,539 | $ | — | $ | 122,116 | $ | 1,029,394 | ||||||||||||||||||||||||||||||||||||||
| Special mention | — | — | — | — | — | — | — | 581 | 581 | |||||||||||||||||||||||||||||||||||||||||||||||
| Substandard or Lower | — | 4,200 | 8,930 | 183 | — | — | — | 761 | 14,074 | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | 448,581 | $ | 303,819 | $ | 124,597 | $ | 9,502 | $ | 26,553 | $ | 7,539 | $ | — | $ | 123,458 | $ | 1,044,049 | |||||||||||||||||||||||||||||||||||||||
Residential(2): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | $ | 64,500 | $ | 110,508 | $ | 60,625 | $ | 36,118 | $ | 45,859 | $ | 434,175 | $ | — | $ | — | $ | 751,785 | ||||||||||||||||||||||||||||||||||||||
| Nonperforming | — | 729 | 502 | 999 | 1,218 | 4,232 | — | — | 7,680 | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | 64,500 | $ | 111,237 | $ | 61,127 | $ | 37,117 | $ | 47,077 | $ | 438,407 | $ | — | $ | — | $ | 759,465 | |||||||||||||||||||||||||||||||||||||||
Consumer(3): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Risk Rating | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | $ | 595,158 | $ | 195,397 | $ | 126,456 | $ | 54,449 | $ | 220,039 | $ | 71,478 | $ | 540,308 | $ | 5,232 | $ | 1,808,517 | ||||||||||||||||||||||||||||||||||||||
| Nonperforming | — | — | 350 | — | 479 | — | 1,255 | 329 | 2,413 | |||||||||||||||||||||||||||||||||||||||||||||||
| $ | 595,158 | $ | 195,397 | $ | 126,806 | $ | 54,449 | $ | 220,518 | $ | 71,478 | $ | 541,563 | $ | 5,561 | $ | 1,810,930 | |||||||||||||||||||||||||||||||||||||||
(1)Includes commercial small business leases.
(2)Excludes reverse mortgages at fair value.
(3)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
96
| December 31, 2016 | ||||||||||||||||||||||
| Commercial | Owner-occupied Commercial | Commercial Mortgages | Construction | Total Commercial (1) | ||||||||||||||||||
| (Dollars in thousands) | Amount | % | ||||||||||||||||||||
| Risk Rating: | ||||||||||||||||||||||
| Special mention | $ | 17,630 | $ | 11,419 | $ | 34,198 | $ | — | $ | 63,247 | ||||||||||||
| Substandard: | ||||||||||||||||||||||
| Accrual | 45,067 | 19,871 | 239 | 2,193 | 67,370 | |||||||||||||||||
| Nonaccrual | 1,693 | 2,078 | 8,574 | — | 12,345 | |||||||||||||||||
| Doubtful/nonaccrual | 322 | — | 1,247 | — | 1,569 | |||||||||||||||||
| Total special mention and substandard | 64,712 | 33,368 | 44,258 | 2,193 | 144,531 | 4 | % | |||||||||||||||
| Acquired impaired | 6,183 | 12,122 | 10,386 | 3,694 | 32,385 | 1 | % | |||||||||||||||
| Pass | 1,216,836 | 1,032,672 | 1,108,910 | 216,825 | 3,575,243 | 95 | % | |||||||||||||||
| Total | $ | 1,287,731 | $ | 1,078,162 | $ | 1,163,554 | $ | 222,712 | $ | 3,752,159 | 100 | % | ||||||||||
The following table shows the amortized cost basis at the end of the reporting period of troubled loans, disaggregated by portfolio segment and type of modification granted.
| December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Term Extension | More-Than-Insignificant Payment Delay | Combination- Term Extension and Payment Delay | Combination- Term Extension and Interest Rate Reduction | Combination - Payment Delay and Interest Rate Reduction | Total | % of Total Loan Category | |||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial(1)(2) | $ | 44,123 | $ | 10,523 | $ | 5,568 | $ | 27 | $ | — | $ | 60,241 | 1.90 | % | ||||||||||||||||||||||||||||||||||||||||||
| Owner-occupied commercial | 66 | — | — | 138 | — | 204 | 0.01 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgages | 9,386 | — | — | — | — | 9,386 | 0.25 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Construction | 15,411 | — | — | — | — | 15,411 | 1.49 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Residential | 561 | 216 | — | — | — | 777 | 0.09 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer(3) | 1,782 | 1,937 | 5,092 | 156 | 194 | 9,161 | 0.46 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 71,329 | $ | 12,676 | $ | 10,660 | $ | 321 | $ | 194 | $ | 95,180 | 0.75 | % | ||||||||||||||||||||||||||||||||||||||||||
(1)Includes commercial small business leases.
(2)Excludes troubled loan held-for-sale.
(3)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
The following table describes the financial effect of the modifications made to troubled loans as of December 31, 2023:
Term Extension(1) | Interest Rate Reduction(2) | More-Than-Insignificant Payment Delay(3) | ||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial(4) | 1.34 | 4.00% | 0.13% | |||||||||||||||||||||||||||||||||||||||||
| Owner-occupied commercial | 0.95 | 2.59 | — | |||||||||||||||||||||||||||||||||||||||||
| Commercial mortgages | 1.33 | — | — | |||||||||||||||||||||||||||||||||||||||||
| Construction | 1.00 | — | — | |||||||||||||||||||||||||||||||||||||||||
| Residential | 20.18 | — | — | |||||||||||||||||||||||||||||||||||||||||
| Consumer | 3.08 | 2.65 | 0.06 | |||||||||||||||||||||||||||||||||||||||||
(1)Represents the weighted-average increase in the life of modified loans measured in years, which reduces monthly payment amounts for borrowers.
(2)Represents the weighted-average decrease in the contractual interest rate on the modified loans.
(3)Represents the percentage of loans deferred over the total loan portfolio excluding reverse mortgages at fair value.
(4)Excludes troubled loan held-for-sale.
As of December 31, 2023, the Company had commitments to extend credit of $18.4 million to borrowers experiencing financial difficulty whose terms had been modified.
Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.
97
Total Residential and Consumer(1) | |||||||||||||||||||||||||||||
| Residential | Consumer | 2017 | 2016 | ||||||||||||||||||||||||||
| (Dollars in thousands) | 2017 | 2016 | 2017 | 2016 | Amount | Percent | Amount | Percent | |||||||||||||||||||||
Nonperforming (2) | $ | 13,778 | $ | 13,547 | $ | 7,588 | $ | 7,863 | $ | 21,366 | 3 | % | $ | 21,410 | 3 | % | |||||||||||||
| Acquired impaired loans | 784 | 860 | 247 | 369 | 1,031 | — | % | 1,229 | — | % | |||||||||||||||||||
| Performing | 218,925 | 252,621 | 550,658 | 441,797 | 769,583 | 97 | % | 694,418 | 97 | % | |||||||||||||||||||
| Total | $ | 233,487 | $ | 267,028 | $ | 558,493 | $ | 450,029 | $ | 791,980 | 100 | % | $ | 717,057 | 100 | % | |||||||||||||
| More-Than-Insignificant Payment Delay | Combination Term Extension & Payment Delay | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | $ | — | $ | 5,568 | $ | 5,568 | ||||||||||||||||||||||||||||||||||||||||||||
| Consumer | 98 | — | 98 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 98 | $ | 5,568 | $ | 5,666 | ||||||||||||||||||||||||||||||||||||||||||||
The Company closely monitors the performance of troubled loans to understand the effectiveness of its modification efforts. The following table shows the performance of loans that have been modified in the last 12 months:
| December 31, 2023 | ||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 30-89 Days Past Due and Still Accruing | 90+ Days Past Due and Still Accruing | Accruing Current Balances | Nonaccrual Loans | Total | |||||||||||||||||||||||||||
Commercial and industrial(1)(2) | $ | 21 | $ | 293 | $ | 53,989 | $ | 5,938 | $ | 60,241 | ||||||||||||||||||||||
| Owner-occupied commercial | — | — | — | 204 | 204 | |||||||||||||||||||||||||||
| Commercial mortgages | — | — | 9,386 | — | 9,386 | |||||||||||||||||||||||||||
| Construction | — | — | 15,411 | — | 15,411 | |||||||||||||||||||||||||||
| Residential | — | — | 607 | 170 | 777 | |||||||||||||||||||||||||||
Consumer(3) | 1,021 | 205 | 7,539 | 396 | 9,161 | |||||||||||||||||||||||||||
| Total | $ | 1,042 | $ | 498 | $ | 86,932 | $ | 6,708 | $ | 95,180 | ||||||||||||||||||||||
(1)Includes commercial small business leases.
(2)Excludes troubled loan held-for-sale.
(3)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
Troubled Debt Restructurings (TDR)
The following table presents the balance of TDRs as of the indicated dates:date:
| (Dollars in thousands) | December 31, 2022 | ||||||||||
| Performing TDRs | $ | 19,737 | |||||||||
| Nonperforming TDRs | 2,006 | ||||||||||
| Total TDRs | $ | 21,743 | |||||||||
| (Dollars in thousands) | December 31, 2017 | December 31, 2016 | |||||
| Performing TDRs | $ | 20,061 | $ | 14,336 | |||
| Nonperforming TDRs | 9,627 | 8,451 | |||||
| Total TDRs | $ | 29,688 | $ | 22,787 | |||
Approximately $1.0 million and $1.3$0.6 million in related reserves have been established for these loans at December 31, 2017 and December 31, 2016, respectively.
2022.
The following tables present information regarding the types of loan modifications made and the balances of loans modified as TDRs during the yearsyear ended and December 31, 20172022:
| December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contractual payment reduction | Maturity date extension | Discharged in bankruptcy | Other (1) | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | 1 | 2 | — | 2 | 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner-occupied commercial | — | 1 | — | — | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial mortgages | — | 1 | — | — | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction | — | 1 | — | — | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential | 1 | — | 1 | 1 | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer | 151 | 48 | 8 | 3 | 210 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | 153 | 53 | 9 | 6 | 221 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Other includes interest rate reduction, forbearance, and 2016:interest only payments.
98
| December 31, 2017 | December 31, 2016 | ||||||||||||||||||||||||||||
Contractual payment reduction | Maturity date extension | Discharged in bankruptcy | Other (1) | Total | Contractual payment reduction | Maturity date extension | Discharged in bankruptcy | Other (1) | Total | ||||||||||||||||||||
| Commercial | 1 | 4 | — | — | 5 | — | 2 | — | 1 | 3 | |||||||||||||||||||
| Owner-occupied commercial | — | 1 | — | — | 1 | — | — | — | — | — | |||||||||||||||||||
| Commercial mortgages | — | 1 | — | — | 1 | — | 2 | — | — | 2 | |||||||||||||||||||
| Construction | — | 5 | — | 1 | 6 | — | — | — | — | — | |||||||||||||||||||
| Residential | 2 | 1 | 5 | 1 | 9 | — | — | 1 | 7 | 8 | |||||||||||||||||||
| Consumer | 1 | 4 | 12 | 8 | 25 | 12 | — | 2 | — | 14 | |||||||||||||||||||
| 4 | 16 | 17 | 10 | 47 | 12 | 4 | 3 | 8 | 27 | ||||||||||||||||||||
| Year Ended December 31, | |||||||||||||||||||||||
| (Dollars in thousands) | 2022 | ||||||||||||||||||||||
Pre Modification | Post Modification | ||||||||||||||||||||||
| Commercial | $ | 1,067 | $ | 1,067 | |||||||||||||||||||
| Owner-occupied commercial | 2,087 | 2,087 | |||||||||||||||||||||
| Commercial mortgages | 2,380 | 2,380 | |||||||||||||||||||||
| Residential | 302 | 302 | |||||||||||||||||||||
| Consumer | 4,178 | 4,178 | |||||||||||||||||||||
Total(1)(2) | $ | 10,014 | $ | 10,014 | |||||||||||||||||||
| Year Ended December 31, | |||||||||||||||
| (Dollars in thousands) | 2017 | 2016 | |||||||||||||
Pre Modification | Post Modification | Pre Modification | Post Modification | ||||||||||||
| Commercial | $ | 954 | $ | 954 | $ | 1,407 | $ | 1,407 | |||||||
| Owner-occupied commercial | 3,071 | 3,071 | — | — | |||||||||||
| Commercial mortgages | 183 | 183 | 1,111 | 1,111 | |||||||||||
| Construction | 6,054 | 6,054 | — | — | |||||||||||
| Residential | 1,652 | 1,652 | 2,754 | 2,754 | |||||||||||
| Consumer | 2,498 | 2,498 | 873 | 873 | |||||||||||
| $ | 14,412 | $ | 14,412 | $ | 6,145 | $ | 6,145 | ||||||||
(2)The TDRs set forth in the table above increased our allowance fordid not occur as a result of the loan losses by less than $0.1 million through allocation of a related reserve, and resulted in charge-offs of $0.4 million.forbearance program under the CARES Act.
8. PREMISES AND EQUIPMENT
The following table shows the components of premises and equipment, at cost, are summarized by major classifications:
| December 31, | |||||||||||
| (Dollars in thousands) | 2023 | 2022 | |||||||||
| Land | $ | 33,919 | $ | 33,932 | |||||||
| Buildings | 49,262 | 49,406 | |||||||||
| Leasehold improvements | 70,431 | 77,845 | |||||||||
| Furniture and equipment | 57,555 | 55,284 | |||||||||
| Gross premises and equipment | 211,167 | 216,467 | |||||||||
| Less: Accumulated depreciation | 106,683 | 100,864 | |||||||||
| Net premises and equipment | $ | 104,484 | $ | 115,603 | |||||||
| December 31, | |||||||
| (Dollars in thousands) | 2017 | 2016 | |||||
| Land | $ | 2,758 | $ | 2,916 | |||
| Buildings | 6,155 | 7,391 | |||||
| Leasehold improvements | 48,573 | 44,493 | |||||
| Furniture and equipment | 44,968 | 40,099 | |||||
| 102,454 | �� | 94,899 | |||||
| Less: Accumulated depreciation | 54,471 | 46,028 | |||||
| $ | 47,983 | $ | 48,871 | ||||
100
9. LEASES
As a lessee, the Company enters into leases for its bank branches, corporate offices, and certain premises including some withequipment. As a lessor, the Company primarily provides financing through its equipment leasing business.
Lessee
The Company's ongoing leases have remaining lease terms of less than one year to 22 years, which includes renewal options that are exercised at its discretion. The Company's lease terms to calculate the lease liability and operateright-of-use asset include options to extend the lease when it is reasonably certain that the Company will exercise the option. The lease liability and right-of-use asset is included in Other liabilities and Other assets, respectively, in the Consolidated Statement of Financial Condition. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized on a straight-line basis over the lease term. Operating lease expense is included in Occupancy expense in the Consolidated Statement of Income. The Company accounts for lease components separately from nonlease components and subleases certain real estate to third parties.
The components of the Company's ongoing operating lease cost were as follows:
| Twelve months ended | ||||||||||||||||||||||||||
| (Dollars in thousands) | December 31, 2023 | December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Operating lease cost (1) | $ | 18,972 | $ | 20,123 | $ | 18,564 | ||||||||||||||||||||
| Sublease income | (161) | (280) | (365) | |||||||||||||||||||||||
| Net lease cost | $ | 18,811 | $ | 19,843 | $ | 18,199 | ||||||||||||||||||||
(1)Includes variable lease cost and short-term lease cost.
Supplemental balance sheet information related to operating leases was as follows:
| (Dollars in thousands) | December 31, 2023 | December 31, 2022 | ||||||||||||||||||
| Right-of-use assets | $ | 130,601 | $ | 138,182 | ||||||||||||||||
| Lease liabilities | $ | 151,596 | $ | 158,269 | ||||||||||||||||
| Lease term and discount rate of operating leases | ||||||||||||||||||||
| Weighted average remaining lease term (in years) | 13.01 | 17.91 | ||||||||||||||||||
| Weighted average discount rate | 5.20 | % | 4.25 | % | ||||||||||||||||
Maturities of operating lease liabilities were as follows:
| (Dollars in thousands) | December 31, 2023 | |||||||
| 2023 | $ | 17,730 | ||||||
| 2024 | 17,494 | |||||||
| 2025 | 16,656 | |||||||
| 2026 | 15,281 | |||||||
| 2027 | 15,282 | |||||||
| After 2027 | 128,885 | |||||||
| Total lease payments | 211,328 | |||||||
| Less: Interest | (59,732) | |||||||
| Present value of lease liabilities | $ | 151,596 | ||||||
101
Supplemental cash flow information related to leases was as follows:
| Twelve months ended | ||||||||||||||||||||
| (Dollars in thousands) | December 31, 2023 | December 31, 2022 | December 31, 2021 | |||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||||||
| Operating cash flows from operating leases | $ | 19,104 | $ | 20,987 | $ | 17,834 | ||||||||||||||
| Right of use assets obtained in exchange for new operating lease liabilities (non-cash) | — | 13,707 | — | |||||||||||||||||
As of December 31, 2023, the Company had not entered into any material leases that have not yet commenced.
Lessor Equipment Leasing
The Company provides equipment under noncancelableand small business lease financing through its leasing subsidiary, NewLane Finance®. Interest income from direct financing leases with terms ranging primarily from 1 year to 25 years. Thesewhere the Company is a lessor is recognized in Interest and fees on loans and leases on the Consolidated Statements of Income. The allowance for credit losses on finance leases are accountedincluded within Provision for (recovery of) credit losses on the Consolidated Statements of Income.
The components of direct finance lease income are summarized in the table below:
| Twelve months ended | ||||||||||||||||||||
| (Dollars in thousands) | December 31, 2023 | December 31, 2022 | December 31, 2021 | |||||||||||||||||
| Direct financing leases: | ||||||||||||||||||||
| Interest income on lease receivable | $ | 53,572 | $ | 42,542 | $ | 21,947 | ||||||||||||||
| Amortization of deferred fees and costs | (6,301) | (3,718) | (1,963) | |||||||||||||||||
| Total direct financing lease income | $ | 47,271 | $ | 38,824 | $ | 19,984 | ||||||||||||||
Equipment leasing receivables relate to direct financing leases. The composition of the net investment in direct financing leases was as operating leases. Accordingly, lease costs are expensed as incurred in accordance with FASB ASC 840-20 Operating Leases. Rent expense was $13.0 million in 2017, $11.5 million in 2016 and $9.9 million in 2015. follows:
| (Dollars in thousands) | December 31, 2023 | December 31, 2022 | ||||||||||||
| Lease receivables | $ | 721,338 | $ | 642,369 | ||||||||||
| Unearned income | (114,341) | (95,683) | ||||||||||||
| Deferred fees and costs | 16,625 | 12,295 | ||||||||||||
| Net investment in direct financing leases | $ | 623,622 | $ | 558,981 | ||||||||||
Future minimum cashlease payments under theseto be received for direct financing leases at December 31, 2017 arewere as follows:
| (Dollars in thousands) | December 31, 2023 | |||||||
| 2023 | $ | 230,902 | ||||||
| 2024 | 195,576 | |||||||
| 2025 | 147,645 | |||||||
| 2026 | 94,239 | |||||||
| 2027 | 44,019 | |||||||
| After 2027 | 8,957 | |||||||
| Total lease payments | $ | 721,338 | ||||||
102
| (Dollars in thousands) | |||
| 2018 | $ | 10,636 | |
| 2019 | 10,466 | ||
| 2020 | 10,398 | ||
| 2021 | 10,052 | ||
| 2022 | 10,115 | ||
| Thereafter | 159,788 | ||
| Total future minimum lease payments | $ | 211,455 | |
In accordance with FASB ASC 805, Business Combinations (ASC(ASC 805) and FASB ASC 350, Intangibles - Goodwill and Other (ASC(ASC 350), all assets acquired and liabilities assumed in purchase acquisitions, including goodwill, indefinite-lived intangibles and other intangibles are recorded at fair value.
WSFS performs its annual goodwill impairment test on October 1 or more frequently if events and mitigating events. If, after assessing the totality of events or circumstances an entity determines it is not more likely than notindicate that the fair value of a reporting unit is less than its carrying amount, performing the two-step process is not required. The entity has the option to bypass thevalue. Between annual tests, management performs a qualitative assessment step for any reporting unit in any period and proceed directly to the first stepreview of goodwill quarterly as part of the existing two-step process. The entity can resume performing the qualitative assessment in any subsequent period.
The following table shows the allocation of goodwill to ourthe reportable operating segments for purposes of goodwill impairment testing:
(Dollars in thousands) | WSFS Bank | Wealth Management | Consolidated Company | ||||||||||||||||||||
| December 31, 2021 | $ | 452,629 | $ | 20,199 | $ | 472,828 | |||||||||||||||||
| Goodwill from business combinations | 297,646 | 116,691 | 414,337 | ||||||||||||||||||||
| Goodwill adjustments | 3,311 | (6,839) | (3,528) | ||||||||||||||||||||
| December 31, 2022 | 753,586 | 130,051 | 883,637 | ||||||||||||||||||||
Goodwill from business combinations(1) | — | 2,261 | 2,261 | ||||||||||||||||||||
| December 31, 2023 | $ | 753,586 | $ | 132,312 | $ | 885,898 | |||||||||||||||||
| (Dollars in thousands) | WSFS Bank | Cash Connect | Wealth Management | Consolidated Company | |||||||||||
| December 31, 2015 | $ | 80,078 | $ | — | $ | 5,134 | $ | 85,212 | |||||||
| Goodwill from business combinations | 65,206 | — | 15,009 | 80,215 | |||||||||||
| Remeasurement adjustments | 2,112 | — | — | 2,112 | |||||||||||
| December 31, 2016 | 147,396 | — | 20,143 | 167,539 | |||||||||||
| Goodwill from business combinations | — | — | — | — | |||||||||||
| Remeasurement adjustments | (1,588 | ) | — | 56 | (1,532 | ) | |||||||||
| December 31, 2017 | $ | 145,808 | $ | — | $ | 20,199 | $ | 166,007 | |||||||
ASC 350 also requires that an acquired intangible asset be separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the asset can be sold, transferred, licensed, rented or exchanged, regardless of the acquirer’s intent to do so.
The following table summarizes ourthe Company's intangible assets:
| (Dollars in thousands) | Gross Intangible Assets | Accumulated Amortization | Net Intangible Assets | Amortization Period | |||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
| Core deposits | $ | 104,751 | $ | (50,754) | $ | 53,997 | 10 years | ||||||||||||||||
| Customer relationships | 73,880 | (18,153) | 55,727 | 7-15 years | |||||||||||||||||||
| Tradename | 2,900 | — | 2,900 | indefinite | |||||||||||||||||||
Loan servicing rights(1) | 12,613 | (6,575) | 6,038 | 10-25 years | |||||||||||||||||||
| Total intangible assets | $ | 194,144 | $ | (75,482) | $ | 118,662 | |||||||||||||||||
| December 31, 2022 | |||||||||||||||||||||||
| Core deposits | $ | 104,751 | $ | (40,443) | $ | 64,308 | 10 years | ||||||||||||||||
| Customer relationships | 68,281 | (12,937) | 55,344 | 7-15 years | |||||||||||||||||||
| Non-compete agreements | 200 | (200) | — | 1 year | |||||||||||||||||||
| Tradename | 2,900 | — | 2,900 | indefinite | |||||||||||||||||||
Loan servicing rights(2) | 11,118 | (5,075) | 6,043 | 10-25 years | |||||||||||||||||||
| Total intangible assets | $ | 187,250 | $ | (58,655) | $ | 128,595 | |||||||||||||||||
(1)Includes impairment losses of less than $0.1 million for the year ended December 31, 2023.
| (Dollars in thousands) | Gross Intangible Assets | Accumulated Amortization | Net Intangible Assets | Amortization Period | |||||||||
| December 31, 2017 | |||||||||||||
| Core deposits | $ | 10,658 | $ | (4,263 | ) | $ | 6,395 | 10 years | |||||
| Customer relationships | 17,561 | (4,214 | ) | 13,347 | 7-15 years | ||||||||
| Non-compete agreements | 221 | (57 | ) | 164 | 5 years | ||||||||
| Loan servicing rights | 2,132 | (1,191 | ) | 941 | 10-30 years | ||||||||
| Favorable lease asset | 1,932 | (342 | ) | 1,590 | 10 months-18 years | ||||||||
| Total other intangible assets | $ | 32,504 | $ | (10,067 | ) | $ | 22,437 | ||||||
| December 31, 2016 | |||||||||||||
| Core deposits | $ | 13,128 | $ | (5,630 | ) | $ | 7,498 | 10 years | |||||
| Customer relationships | 17,561 | (2,612 | ) | 14,949 | 7-15 years | ||||||||
| Non-compete agreements | 1,006 | (728 | ) | 278 | 6 months- 5 years | ||||||||
| Loan servicing rights | 1,708 | (1,067 | ) | 641 | 10-30 years | ||||||||
| Favorable lease asset | 458 | (116 | ) | 342 | 10 months-15 years | ||||||||
| Total other intangible assets | $ | 33,861 | $ | (10,153 | ) | $ | 23,708 | ||||||
103
The following presents the estimated amortization expense of intangibles:
| (Dollars in thousands) | Amortization of Intangibles | ||||
| 2024 | $ | 16,913 | |||
| 2025 | 16,548 | ||||
| 2026 | 15,845 | ||||
| 2027 | 15,385 | ||||
| 2028 | 14,567 | ||||
| Thereafter | 36,504 | ||||
| Total | $ | 115,762 | |||
Servicing Assets
| (Dollars in thousands) | Amortization of Intangibles | ||
| 2018 | $ | 2,986 | |
| 2019 | 2,918 | ||
| 2020 | 2,722 | ||
| 2021 | 2,396 | ||
| 2022 | 2,334 | ||
| Thereafter | 9,081 | ||
| Total | $ | 22,437 | |
The value of the Company's mortgage servicing rights was $1.7 million and $2.1 million at December 31, 2023 and 2022, respectively, and the value of its SBA loan servicing rights was $4.3 million and $4.0 million at December 31, 2023 and 2022, respectively. Changes in the value of these servicing rights resulted in impairment losses of less than $0.1 million during 2023 and impairment losses of $0.3 million during 2022. Revenues from originating, marketing and servicing mortgage loans as well as valuation adjustments related to capitalized mortgage servicing rights are included in Mortgage Banking Activities, Net in the Consolidated Statements of Income and revenues from the Company's SBA loan servicing rights are included in Loan fee income, in the Consolidated Statements of Income.
Besides the impairment on loan servicing rights noted above, there was no impairment of other intangible assets as of December 31, 20172023 or 2016.2022. Changing economic conditions that may adversely affect ourthe Company's performance and stock price could result in impairment, which could adversely affect earnings in the future.
104
The following table is a summary of the Company's deposits by category, includingcategory:
| December 31, | ||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | ||||||||||||
| Noninterest-bearing: | ||||||||||||||
| Noninterest-bearing demand | $ | 4,917,297 | $ | 5,739,647 | ||||||||||
| Total noninterest-bearing | $ | 4,917,297 | $ | 5,739,647 | ||||||||||
| Interest-bearing: | ||||||||||||||
| Interest-bearing demand | $ | 2,935,530 | $ | 3,346,682 | ||||||||||
| Savings | 1,610,143 | 2,161,858 | ||||||||||||
| Money market | 5,175,123 | 3,730,778 | ||||||||||||
| Customer time deposits | 1,784,317 | 1,102,013 | ||||||||||||
| Brokered deposits | 51,676 | 122,591 | ||||||||||||
| Total interest-bearing | $ | 11,556,789 | $ | 10,463,922 | ||||||||||
| Total deposits | $ | 16,474,086 | $ | 16,203,569 | ||||||||||
The following table is a summary of the remaining time to maturity for customer time deposits:
| December 31, | ||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | ||||||||||||
| Certificates of deposit (not jumbo): | ||||||||||||||
| Less than one year | $ | 1,391,157 | $ | 712,582 | ||||||||||
| One year to two years | 47,336 | 163,260 | ||||||||||||
| Two years to three years | 14,375 | 21,740 | ||||||||||||
| Three years to four years | 9,207 | 11,303 | ||||||||||||
| Over four years | 10,166 | 10,378 | ||||||||||||
| Total certificates of deposit (not jumbo) | $ | 1,472,241 | $ | 919,263 | ||||||||||
Jumbo certificates of deposit (1) | ||||||||||||||
| Less than one year | $ | 305,511 | $ | 151,406 | ||||||||||
| One year to two years | 4,486 | 26,215 | ||||||||||||
| Two years to three years | 662 | 3,732 | ||||||||||||
| Three years to four years | 689 | 690 | ||||||||||||
| Over four years | 728 | 707 | ||||||||||||
| Total jumbo certificates of deposit | $ | 312,076 | $ | 182,750 | ||||||||||
| Total certificates of deposit | $ | 1,784,317 | $ | 1,102,013 | ||||||||||
(1)Represents certificates of deposit balances in excess of $250 thousand from individuals, businesses and municipalities.
| December 31, | |||||||
| (Dollars in thousands) | 2017 | 2016 | |||||
| Money market and demand: | |||||||
| Noninterest-bearing demand | $ | 1,420,760 | $ | 1,266,306 | |||
| Interest-bearing demand | 1,071,512 | 935,333 | |||||
| Money market | 1,347,146 | 1,257,520 | |||||
| Total money market and demand | 3,839,418 | 3,459,159 | |||||
| Savings | 549,744 | 547,293 | |||||
| Customer certificates of deposit by maturity: | |||||||
| Less than one year | 167,757 | 192,320 | |||||
| One year to two years | 103,192 | 74,165 | |||||
| Two years to three years | 46,827 | 32,687 | |||||
| Three years to four years | 5,962 | 24,919 | |||||
| Over four years | 6,399 | 8,533 | |||||
| Total customer time certificates | 330,137 | 332,624 | |||||
| Jumbo certificates of deposit, by maturity: | |||||||
| Less than one year | 166,348 | 174,981 | |||||
| One year to two years | 94,905 | 43,037 | |||||
| Two years to three years | 30,400 | 20,655 | |||||
| Three years to four years | 3,512 | 17,005 | |||||
| Over four years | 3,769 | 4,882 | |||||
| Total jumbo certificates of deposit | 298,934 | 260,560 | |||||
| Total customer deposits | 5,018,233 | 4,599,636 | |||||
| Brokered deposits less than one year | 229,371 | 138,802 | |||||
| Total deposits | $ | 5,247,604 | $ | 4,738,438 | |||
| Year Ended December 31, | |||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | ||||||||||||||
| Interest-bearing demand | $ | 26,671 | $ | 7,441 | $ | 2,262 | |||||||||||
| Money market | 122,168 | 13,536 | 3,218 | ||||||||||||||
| Savings | 5,733 | 965 | 586 | ||||||||||||||
| Time deposits | 45,184 | 5,626 | 7,332 | ||||||||||||||
| Total customer interest expense | $ | 199,756 | $ | 27,568 | $ | 13,398 | |||||||||||
| Brokered deposits | 10,064 | 613 | 1,525 | ||||||||||||||
| Total interest expense on deposits | $ | 209,820 | $ | 28,181 | $ | 14,923 | |||||||||||
105
| (Dollars in thousands) | |||||||||||
| Year ended December 31, | 2017 | 2016 | 2015 | ||||||||
| Interest-bearing demand | $ | 2,211 | $ | 1,119 | $ | 666 | |||||
| Money market | 4,690 | 3,343 | 2,466 | ||||||||
| Savings | 1,017 | 655 | 289 | ||||||||
| Time deposits | 4,806 | 3,303 | 3,057 | ||||||||
| Total customer interest expense | 12,724 | 8,420 | 6,478 | ||||||||
| Brokered deposits | 2,180 | 1,001 | 687 | ||||||||
| Total interest expense on deposits | $ | 14,904 | $ | 9,421 | $ | 7,165 | |||||
The following is a summary of borrowed funds by type, at or for the twelve months ended:
| (Dollars in thousands) | Balance at End of Period | Weighted Average Interest Rate | Maximum Outstanding at Month End During the Period | Average Amount Outstanding During the Year | Weighted Average Interest Rate During the Year | ||||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||
| Federal funds purchased | $ | — | — | % | $ | 130,000 | $ | 33,195 | 5.04 | % | |||||||||||||||||||
| FHLB advances | — | — | 800,000 | 103,268 | 5.18 | ||||||||||||||||||||||||
| Trust preferred borrowings | 90,638 | 7.51 | 90,638 | 90,534 | 7.44 | ||||||||||||||||||||||||
| Senior and subordinated debt | 218,400 | 4.34 | 248,189 | 221,975 | 4.42 | ||||||||||||||||||||||||
| Other borrowed funds | 586,038 | 0.28 | 739,346 | 409,002 | 4.41 | ||||||||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||||||||||||
| Federal funds purchased | $ | — | — | % | $ | — | $ | 11,603 | 3.82 | % | |||||||||||||||||||
| FHLB advances | 350,000 | 4.46 | 350,000 | 12,841 | 4.19 | ||||||||||||||||||||||||
| Trust preferred borrowings | 90,442 | 6.63 | 90,442 | 90,337 | 3.85 | ||||||||||||||||||||||||
| Senior debt | 248,169 | 4.51 | 248,566 | 248,389 | 3.32 | ||||||||||||||||||||||||
| Other borrowed funds | 38,283 | 0.10 | 38,283 | 35,473 | 0.10 | ||||||||||||||||||||||||
| (Dollars in thousands) | Balance at End of Period | Weighted Average Interest Rate | Maximum Outstanding at Month End During the Period | Average Amount Outstanding During the Year | Weighted Average Interest Rate During the Year | ||||||||||||
| December 31, 2017 | |||||||||||||||||
| FHLB advances | $ | 710,001 | 1.51 | % | $ | 924,518 | $ | 716,962 | 1.15 | % | |||||||
| Federal funds purchased and securities sold under agreements to repurchase | 28,000 | 1.54 | 135,000 | 87,438 | 1.11 | ||||||||||||
| Trust preferred borrowings | 67,011 | 3.25 | 67,011 | 67,011 | 2.89 | ||||||||||||
| Senior debt | 98,171 | 5.12 | 155,000 | 134,136 | 4.38 | ||||||||||||
| Other borrowed funds | 34,623 | 0.09 | 97,984 | 43,514 | 0.09 | ||||||||||||
| December 31, 2016 | |||||||||||||||||
| FHLB advances | $ | 854,236 | 0.78 | % | $ | 886,767 | $ | 735,975 | 0.67 | % | |||||||
| Federal funds purchased and securities sold under agreements to repurchase | 130,000 | 0.79 | 130,000 | 112,150 | 0.54 | ||||||||||||
| Trust preferred borrowings | 67,011 | 2.66 | 67,011 | 67,011 | 2.42 | ||||||||||||
| Senior debt | 155,000 | 5.12 | 155,000 | 110,191 | 3.82 | ||||||||||||
| Other borrowed funds | 64,150 | 0.09 | 64,150 | 21,335 | 0.09 | ||||||||||||
Federal Home Loan Bank Advances
| (Dollars in thousands) | Amount | Weighted Average Rate | ||||
| 2018 | $ | 681,536 | 1.51 | % | ||
| 2019 | 3,000 | 1.51 | ||||
| 2020 | 25,465 | 1.62 | ||||
| $ | 710,001 | 1.51 | % | |||
Pursuant to collateral agreements with the FHLB, advances are secured by qualifying loan collateral, qualifying fixed-income securities, FHLB stock and an interest-bearing demand deposit account with the FHLB.
As a member of the FHLB, we arethe Company is required to purchase and hold shares of capital stock in the FHLB in an amount at least equal to 0.10% of our member asset value plus 4.00% of advances outstanding. We wereand was in compliance with this requirement with a stock investment in FHLB of $31.3$15.4 million at December 31, 20172023 and $38.2$24.1 million at December 31, 2016.2022. This stock is carried on the accompanying Consolidated Statements of Financial Condition at cost, which approximates liquidation value.
The decrease in FHLB stock was due to the decrease in FHLB advances outstanding. WeCompany received dividends on ourits stock investment in FHLB of $1.6$1.1 million and $0.3 million for the years ended December 31, 20172023 and 2016,2022, respectively. For additional information regarding FHLB Stock, see Note 17.18.
Trust Preferred Borrowings
In 2005, wethe Trust issued $67.0 million of aggregate principal amount of Pooled Floating Rate Securities at a variable interest rate of 177 basis points over the three-month LIBOR rate.rate with a scheduled maturity of June 1, 2035. The reference rate on these securities was updated to three-month term SOFR upon the discontinuation of LIBOR on June 30th, 2023. These securities are currently callable and have a maturity date of June 1, 2035.
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The rights of holders of common securities of the RBC Trusts are subordinate to the write-offrights of unamortized debt issuance coststhe holders of capital securities only in connectionthe event of a default; otherwise, the common securities’ economic and voting rights are pari passu with this redemption.the capital securities. The capital and common securities of the RBC Trusts are subject to mandatory redemption upon the maturity or call of the junior subordinated debentures held by each. Unless earlier dissolved, the RBC Trusts will dissolve on December 15, 2034. The junior subordinated debentures are the sole assets of Trusts, mature on December 15, 2034, and may be called at par by the Company any time. The Company records its investments in the RBC Trusts’ common securities of $0.4 million each as investments in unconsolidated entities and records dividend income upon declaration by Trust I and Trust II.
Federal Funds Purchased and Securities Sold Under Agreements to Repurchase
During 2023 and 2022, the Company purchased federal funds as a short-term funding source. The Company had no securities sold under agreements to repurchase at December 31, 2023 and December 31, 2022.
Senior and Subordinated Debt
On June 13, 2016, the Company issued $100$100.0 million of the 2016 senior notes. The 2016 senior notes mature on June 15,due 2026 and have(the 2026 Notes). The 2026 Notes had a fixed coupon rate of 4.50% from issuance to but excluding June 15, 2021 and a variable coupon rate of three month LIBOR plus 3.30% from June 15, 2021 until maturity. The 2016 senior notes may be2026 Notes were redeemed beginning on June 15, 2021 at 100% of principal plus accrued and unpaid interest using cash on hand.
On December 3, 2020, the Company issued $150.0 million of senior notes due 2030 (the 2030 Notes). The 2030 Notes mature on December 15, 2030 and have a fixed coupon rate of 2.75% from issuance until December 15, 2025 and a variable coupon rate equal to the three-month term SOFR, reset quarterly, plus 2.485% from December 15, 2025 until maturity. The 2030 Notes may be redeemed beginning December 15, 2025 at 100% of principal plus accrued and unpaid interest. The remaining net proceeds will befrom the issuance of the 2030 Notes are being used for general corporate purposes.purposes, including, but not limited to, financing organic growth, acquisitions, repurchases of common stock, and redemption of outstanding indebtedness. The carrying value of the 2030 Notes, inclusive of deferred issuance costs, was $148.4 million as of December 31, 2023 and $148.2 million as of December 31, 2022.
The Company assumed $30.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2025 (the 2025 Notes) from Bryn Mawr Bank Corporation, which were issued in a private placement to institutional accredited investors on August 6, 2015. Effective February 15, 2023, the Company redeemed all remaining outstanding principal amount of the 2025 Notes. The 2025 Notes bore interest at a variable rate that reset quarterly to a level equal to the then-current three-month LIBOR plus an issuance spread of 3.068%.
The Company assumed $70.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2027 (the 2027 Notes) from Bryn Mawr Bank Corporation, which were issued by Bryn Mawr Bank Corporation in an underwritten public offering on December 13, 2017. The 2027 Notes mature on December 15, 2027, and had a fixed annual interest of 4.25% until and including December 14, 2022, and currently bear interest at a variable rate of 7.70%. The variable rate will reset quarterly to a level equal to the three-month term SOFR rate plus 2.31% until December 15, 2027, or any early redemption date. The carrying value of the 2027 Notes was $70.0 million as of December 31, 2023 and December 31, 2022.
Other Borrowed Funds
Included in other borrowed funds are collateralized borrowings of $34.6$586.0 million and $64.1$38.3 million at December 31, 20172023 and 2016,2022, respectively, primarily consisting of Bank Term Funding Program (BTFP) borrowings of $565.0 million borrowed in 2023 as well as outstanding retail repurchase agreements, contractual arrangements under which portions of certain securities are sold overnight to retail customers under agreements to repurchase. Such borrowings were collateralized by mortgage-backed securities. The average rates on these borrowings were 0.09% at both December 31, 2017 and 2016.
Borrower in Custody
The BankCompany had $222.8 million$2.1 billion and $275.1 million$0.7 billion of loans and securities pledged to the Federal Reserve of Philadelphia (FRB) at December 31, 20172023 and December 31, 2016,2022, respectively. The BankCompany borrowed $565.0 million from the FRB during 2023. The Company did not borrow funds from the FRB during 2017 or 2016.2022.
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Savings associations such as the Bank are subject to regulatory capital requirements administered by various banking regulators. Failure to meet minimum capital requirements could result in certain actions by regulators that could have a material effect on the Company’s Consolidated Financial Statements. In July 2013, the Federal Reserve Board approved final rules (the “U.S. Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations. The U.S. Basel III Capital Rules substantially revise the risk-basedRisk-based capital requirements applicable to bank holding companies and depository institutions.
As of December 31, 20172023 and 2016,2022, the Bank was in compliance with regulatory capital requirements and exceeded the amounts requiredlevels necessary for the Bank to be considered “well capitalized”“well-capitalized” as defined in the regulations.
The following table presents the capital position of the Bank and the Company as of December 31, 20172023 and 2016:2022:
Consolidated Bank Capital | For Capital Adequacy Purposes | To Be Well-Capitalized Under Prompt Corrective Action Provisions | ||||||||||||||||||
| (Dollars in thousands) | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||
| As of December 31, 2017 | ||||||||||||||||||||
| Total Capital (to risk-weighted assets) | ||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | $ | 695,739 | 12.08 | % | $ | 460,639 | 8.00 | % | $ | 575,799 | 10.00 | % | ||||||||
| WSFS Financial Corporation | 659,376 | 11.41 | 462,195 | 8.00 | 577,743 | 10.00 | ||||||||||||||
| Tier 1 Capital (to risk-weighted assets) | ||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | 654,308 | 11.36 | 345,480 | 6.00 | 460,639 | 8.00 | ||||||||||||||
| WSFS Financial Corporation | 617,945 | 10.70 | 346,646 | 6.00 | 462,195 | 8.00 | ||||||||||||||
Common Equity Tier 1 Capital (to risk-weighted assets) | ||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | 654,308 | 11.36 | 259,110 | 4.50 | 374,270 | 6.50 | ||||||||||||||
| WSFS Financial Corporation | 552,982 | 9.57 | 259,984 | 4.50 | 375,533 | 6.50 | ||||||||||||||
| Tier 1 Leverage Capital | ||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | 654,308 | 9.73 | 269,008 | 4.00 | 336,260 | 5.00 | ||||||||||||||
| WSFS Financial Corporation | 617,945 | 9.15 | 270,249 | 4.00 | 337,812 | 5.00 | ||||||||||||||
| December 31, 2016 | ||||||||||||||||||||
| Total Capital (to risk-weighted assets) | ||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | $ | 663,892 | 11.93 | % | $ | 445,376 | 8.00 | % | $ | 556,720 | 10.00 | % | ||||||||
| WSFS Financial Corporation | 624,440 | 11.20 | 446,001 | 8.00 | 557,501 | 10.00 | ||||||||||||||
| Tier 1 Capital (to risk-weighted assets) | ||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | 623,167 | 11.19 | 334,032 | 6.00 | 445,376 | 8.00 | ||||||||||||||
| WSFS Financial Corporation | 583,715 | 10.47 | 334,501 | 6.00 | 446,001 | 8.00 | ||||||||||||||
Common Equity Tier 1 Capital (to risk-weighted assets) | ||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | 623,167 | 11.19 | 250,524 | 4.50 | 361,868 | 6.50 | ||||||||||||||
| WSFS Financial Corporation | 518,856 | 9.31 | 250,875 | 4.50 | 362,376 | 6.50 | ||||||||||||||
| Tier 1 Leverage Capital | ||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | 623,167 | 9.66 | 257,957 | 4.00 | 322,446 | 5.00 | ||||||||||||||
| WSFS Financial Corporation | 583,715 | 9.02 | 258,767 | 4.00 | 323,459 | 5.00 | ||||||||||||||
Consolidated Capital | Minimum For Capital Adequacy Purposes | To Be Well-Capitalized Under Prompt Corrective Action Provisions | |||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Total Capital (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | $ | 2,382,514 | 14.96 | % | $ | 1,273,856 | 8.00 | % | $ | 1,592,320 | 10.00 | % | |||||||||||||||||||||||
| WSFS Financial Corporation | 2,426,577 | 15.23 | 1,274,611 | 8.00 | 1,593,264 | 10.00 | |||||||||||||||||||||||||||||
| Tier 1 Capital (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | 2,184,193 | 13.72 | 955,392 | 6.00 | 1,273,856 | 8.00 | |||||||||||||||||||||||||||||
| WSFS Financial Corporation | 2,098,403 | 13.17 | 955,958 | 6.00 | 1,274,611 | 8.00 | |||||||||||||||||||||||||||||
Common Equity Tier 1 Capital (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | 2,184,193 | 13.72 | 716,544 | 4.50 | 1,035,008 | 6.50 | |||||||||||||||||||||||||||||
| WSFS Financial Corporation | 2,098,403 | 13.17 | 716,969 | 4.50 | 1,035,621 | 6.50 | |||||||||||||||||||||||||||||
| Tier 1 Leverage Capital | |||||||||||||||||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | 2,184,193 | 10.92 | 800,021 | 4.00 | 1,000,026 | 5.00 | |||||||||||||||||||||||||||||
| WSFS Financial Corporation | 2,098,403 | 10.48 | 800,934 | 4.00 | 1,001,168 | 5.00 | |||||||||||||||||||||||||||||
| December 31, 2022 | |||||||||||||||||||||||||||||||||||
| Total Capital (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | $ | 2,157,846 | 13.84 | % | $ | 1,246,886 | 8.00 | % | $ | 1,558,608 | 10.00 | % | |||||||||||||||||||||||
| WSFS Financial Corporation | 2,219,920 | 14.20 | 1,250,689 | 8.00 | 1,563,361 | 10.00 | |||||||||||||||||||||||||||||
| Tier 1 Capital (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | 2,003,779 | 12.86 | 935,165 | 6.00 | 1,246,886 | 8.00 | |||||||||||||||||||||||||||||
| WSFS Financial Corporation | 1,910,195 | 12.22 | 938,017 | 6.00 | 1,250,689 | 8.00 | |||||||||||||||||||||||||||||
Common Equity Tier 1 Capital (to risk-weighted assets) | |||||||||||||||||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | 2,003,779 | 12.86 | 701,373 | 4.50 | 1,013,095 | 6.50 | |||||||||||||||||||||||||||||
| WSFS Financial Corporation | 1,910,195 | 12.22 | 703,512 | 4.50 | 1,016,185 | 6.50 | |||||||||||||||||||||||||||||
| Tier 1 Leverage Capital | |||||||||||||||||||||||||||||||||||
| Wilmington Savings Fund Society, FSB | 2,003,779 | 10.29 | 779,288 | 4.00 | 974,110 | 5.00 | |||||||||||||||||||||||||||||
| WSFS Financial Corporation | 1,910,195 | 9.79 | 780,333 | 4.00 | 975,416 | 5.00 | |||||||||||||||||||||||||||||
The Holding Company
As of December 31, 2017, our2023, the Company's capital structure includes one class of stock, $0.01 par common stock outstanding with each share having equal voting rights.
In 2005, WSFS Capitalthe Trust III, our unconsolidated subsidiary, issued Pooled Floating Rate Securities at a variable interest rate of 177 basis points over the three-month LIBOR rate with a scheduled maturity of June 1, 2035. The reference rate on these securities was updated to three-month term SOFR upon the discontinuation of LIBOR on June 30th, 2023. The par value of these securities is $2.0 million and the aggregate principal is $67.0 million. The proceeds from the issue were invested in Junior Subordinated Debentures issued by the Company issued. These securities are treated as borrowings with interest included in interest expense on the Consolidated Statements of Income.Company. At December 31, 2017,2023, the coupon rate of the WSFS Capital Trust III securities was 3.25%7.41%. The effective rate will vary due to fluctuations in interest rates.
108
Royal Bancshares Capital Trust I (Trust I) and Royal Bancshares Capital Trust II (Trust II) (collectively, the RBC Trusts), which were acquired from Bryn Mawr Bank Corporation, were utilized for the sole purpose of issuing and selling capital securities representing preferred beneficial interests. Although WSFS owns an aggregate of $0.8 million of the common securities of Trust I and Trust II, the RBC Trusts are not consolidated into the Bank,Company’s Consolidated Financial Statements as the Company is not deemed to be the primary beneficiary of these entities. Inclusive of the fair value marks, WSFS assumed junior subordinated debentures to the RBC Trusts with a current carrying value of$11.8 million each, totaling $23.6 million. The junior subordinated debentures incur interest at a coupon rate of 7.80% as of December 31, 2023. The rate resets quarterly based on three-month term SOFR plus 2.41%.
These securities are treated as borrowings with interest included in Interest on trust preferred borrowings on the Consolidated Statements of Income and included in Trust Preferred Securities preferred borrowings in the Consolidated Statements of Financial Condition.
The Trust preferred borrowings qualify as Tier 2 capital. The Trust preferred borrowings issued in 2005 qualify aswere previously Tier 1 capital.capital, but migrated to Tier 2 capital following the acquisition of Bryn Mawr Bank Corporation and impacts of 12 C.F.R. § 217.300(c)(2)(i). The Bank is prohibited from paying any dividend or making any other capital distribution if, after making the distribution, the Bank would be undercapitalizedunder-capitalized within the meaning of the Prompt Corrective Action regulations.
At December 31, 2017, $37.32023, $197.3 million in cash remains at the holding company to support the parent company’s needs.
Pursuant to federal laws and regulations, ourthe Company's ability to engage in transactions with affiliated corporations, including the loan of funds to, or guarantee of the indebtedness of, an affiliate, is limited.
109
Associate 401(k) Savings Plan
Certain subsidiaries of ours maintain a qualified plan in which Associates may participate. Participants in the plan may elect to direct a portion of their wages into investment accounts that include professionally managed mutual and money market funds and our Common Stock.the Company's common stock. Generally, the principal and related earnings are tax deferred until withdrawn. We matchThe Company matches a portion of the Associates’ contributions. As a result, ourthe Company's total cash contributions to the plan on behalf of ourits Associates resulted in an expense of $3.6$10.1 million, $3.1$9.1 million, and $2.6$7.0 million for 2017, 2016,2023, 2022, and 2015,2021, respectively.
All contributions are invested in accordance with the Associates’ selection of investments. If Associates do not designate how discretionary contributions are to be invested, 100% is invested in target-date fund that corresponds with the participant’s age. Associates may generally make transfers to various other investment vehicles within the plan. The plan’s yearly activity includes net sales of 156,000, 36,00014,000, 8,000 and 25,00033,000 shares of our Common Stockthe Company's common stock in 2017, 20162023, 2022 and 2015 respectively and net purchases of 83,000 shares in 2017.2021 respectively. There were no purchases in 2016 and 2015.2023, 2022 or 2021.
Postretirement Medical Benefits
ASC 715 requires that we recognizethe Company recognizes the funded status of ourits defined benefit postretirement plan in ourthe statement of financial condition, with a corresponding adjustment to accumulated other comprehensive income (loss) income,, net of tax. The adjustment to accumulated other comprehensive income (loss) income at adoption represented the net unrecognized actuarial losses and unrecognized transition obligation remaining from the initial adoption of ASC 715, all of which were previously netted against the plan’s funded status in ourthe statement of financial condition pursuant to the provisions of ASC 715. These amounts will be subsequently recognized as net periodic pension costs pursuant to ourthe Company's historical accounting policy for amortizing such amounts. Further, actuarial gains and losses that arise in subsequent periods, and are not recognized as net periodic pension cost in the same periods, will be recognized as a component of other comprehensive income.income (loss). Those amounts will be subsequently recognized as a component of net periodic pension cost on the same basis as the amounts recognized in accumulated other comprehensive income (loss) at adoption of ASC 715.
110
The following disclosures relating to postretirement medical benefits were measured at December 31:
| (Dollars in thousands) | 2023 | 2022 | 2021 | ||||||||||||||
| Change in benefit obligation: | |||||||||||||||||
| Benefit obligation at beginning of year | $ | 1,331 | $ | 2,138 | $ | 2,288 | |||||||||||
| Service cost | 33 | 52 | 67 | ||||||||||||||
| Interest cost | 65 | 51 | 54 | ||||||||||||||
| Actuarial gain | (68) | (833) | (216) | ||||||||||||||
| Benefits paid | (50) | (77) | (55) | ||||||||||||||
| Benefit obligation at end of year | $ | 1,311 | $ | 1,331 | $ | 2,138 | |||||||||||
| Change in plan assets: | |||||||||||||||||
| Fair value of plan assets at beginning of year | $ | — | $ | — | $ | — | |||||||||||
| Employer contributions | 50 | 77 | 55 | ||||||||||||||
| Benefits paid | (50) | (77) | (55) | ||||||||||||||
| Fair value of plan assets at end of year | $ | — | $ | — | $ | — | |||||||||||
| Unfunded status | $ | (1,311) | $ | (1,331) | $ | (2,138) | |||||||||||
Amounts recognized in accumulated other comprehensive income(1): | |||||||||||||||||
| Net prior service credit | $ | 207 | $ | 283 | $ | 359 | |||||||||||
| Net gain | 1,263 | 1,625 | 607 | ||||||||||||||
| Net amount recognized | $ | 1,470 | $ | 1,908 | $ | 966 | |||||||||||
| Components of net periodic (benefit) cost: | |||||||||||||||||
| Service cost | $ | 33 | $ | 52 | $ | 67 | |||||||||||
| Interest cost | 65 | 51 | 54 | ||||||||||||||
| Amortization of prior service cost | (76) | (76) | (76) | ||||||||||||||
| Net gain recognition | (160) | (84) | (20) | ||||||||||||||
| Net periodic (benefit) cost | $ | (138) | $ | (57) | $ | 25 | |||||||||||
| Assumption used to determine net periodic benefit cost: | |||||||||||||||||
| Discount rate | 5.00 | % | 2.80 | % | 2.40 | % | |||||||||||
| Assumption used to value the Accumulated Postretirement Benefit Obligation (APBO): | |||||||||||||||||
| Discount rate | 5.30 | % | 5.00 | % | 2.70 | % | |||||||||||
| (Dollars in thousands) | 2017 | 2016 | 2015 | ||||||||
| Change in benefit obligation: | |||||||||||
| Benefit obligation at beginning of year | $ | 1,764 | $ | 1,805 | $ | 2,266 | |||||
| Service cost | 53 | 58 | 59 | ||||||||
| Interest cost | 71 | 76 | 89 | ||||||||
| Actuarial gain | 207 | (68 | ) | (502 | ) | ||||||
| Benefits paid | (105 | ) | (107 | ) | (107 | ) | |||||
| Benefit obligation at end of year | $ | 1,990 | $ | 1,764 | $ | 1,805 | |||||
| Change in plan assets: | |||||||||||
| Fair value of plan assets at beginning of year | $ | — | $ | — | $ | — | |||||
| Employer contributions | 105 | 107 | 107 | ||||||||
| Benefits paid | (105 | ) | (107 | ) | (107 | ) | |||||
| Fair value of plan assets at end of year | $ | — | $ | — | $ | — | |||||
| Funded status: | |||||||||||
| Unfunded status | $ | (1,990 | ) | $ | (1,764 | ) | $ | (1,805 | ) | ||
| Total (income) recognized in other comprehensive income | (1,348 | ) | (1,701 | ) | (1,271 | ) | |||||
| Net amount recognized | $ | (3,338 | ) | $ | (3,465 | ) | $ | (3,076 | ) | ||
| Components of net periodic benefit cost: | |||||||||||
| Service cost | $ | 53 | $ | 58 | $ | 59 | |||||
| Interest cost | 71 | 76 | 89 | ||||||||
| Amortization of transition obligation | (76 | ) | (76 | ) | (76 | ) | |||||
| Net (gain) loss recognition | (70 | ) | 505 | (20 | ) | ||||||
| Net periodic benefit cost | $ | (22 | ) | $ | 563 | $ | 52 | ||||
| Assumption used to determine net periodic benefit cost: | |||||||||||
| Discount rate | 4.10 | % | 4.25 | % | 4.00 | % | |||||
| Assumption used to value the Accumulated Postretirement Benefit Obligation (APBO): | |||||||||||
| Discount rate | 3.60 | % | 4.10 | % | 4.25 | % | |||||
Estimated future benefit payments:
The following table shows the expected future payments for the next 10 years:
| (Dollars in thousands) | |||||
| During 2024 | $ | 52 | |||
| During 2025 | 57 | ||||
| During 2026 | 60 | ||||
| During 2027 | 63 | ||||
| During 2028 | 67 | ||||
| During 2029 through 2033 | 402 | ||||
| $ | 701 | ||||
| (Dollars in thousands) | |||
| During 2018 | $ | 68 | |
| During 2019 | 69 | ||
| During 2020 | 69 | ||
| During 2021 | 70 | ||
| During 2022 | 72 | ||
| During 2023 through 2027 | 439 | ||
| $ | 787 | ||
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2008.
The following disclosures relating to AllianceBeneficial pension benefits and other postretirement benefit plans were measured at December 31:31, 2023:
| 2023 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Pension Benefits | Other Postretirement Benefits | Pension Benefits | Other Postretirement Benefits | Pension Benefits | Other Postretirement Benefits | ||||||||||||||||||||||||||||||||
| Change in benefit obligation: | ||||||||||||||||||||||||||||||||||||||
| Benefit obligation at beginning of year | $ | 75,151 | $ | 13,894 | $ | 104,695 | $ | 18,105 | $ | 112,283 | $ | 19,302 | ||||||||||||||||||||||||||
| Service cost | — | 14 | — | 33 | — | 39 | ||||||||||||||||||||||||||||||||
| Interest cost | 3,700 | 659 | 2,425 | 383 | 2,100 | 309 | ||||||||||||||||||||||||||||||||
| Plan participants' contributions | — | 63 | — | 55 | — | 68 | ||||||||||||||||||||||||||||||||
| Amendments | — | — | — | — | (83) | — | ||||||||||||||||||||||||||||||||
| Actuarial loss (gain) | 1,604 | 256 | (26,233) | (3,346) | (4,420) | (442) | ||||||||||||||||||||||||||||||||
| Benefits paid | (4,336) | (1,415) | (5,736) | (1,336) | (5,185) | (1,171) | ||||||||||||||||||||||||||||||||
| Benefit obligation at end of year | $ | 76,119 | $ | 13,471 | $ | 75,151 | $ | 13,894 | $ | 104,695 | $ | 18,105 | ||||||||||||||||||||||||||
| Change in plan assets: | ||||||||||||||||||||||||||||||||||||||
| Fair value of plan assets at beginning of year | $ | 79,287 | $ | — | $ | 108,242 | $ | — | $ | 111,129 | $ | — | ||||||||||||||||||||||||||
| Actual return on Plan Assets | 7,499 | — | (22,867) | — | 2,734 | — | ||||||||||||||||||||||||||||||||
| Employer contribution | 240 | 1,352 | 225 | 1,281 | 308 | 1,103 | ||||||||||||||||||||||||||||||||
| Participants' contributions | — | 63 | — | 55 | — | 68 | ||||||||||||||||||||||||||||||||
| Settlements | — | — | — | — | (83) | — | ||||||||||||||||||||||||||||||||
| Benefits paid | (4,336) | (1,415) | (5,736) | (1,336) | (5,185) | (1,171) | ||||||||||||||||||||||||||||||||
| Administrative expenses | (600) | — | (577) | — | (661) | — | ||||||||||||||||||||||||||||||||
| Fair value of plan assets at end of year | $ | 82,090 | $ | — | $ | 79,287 | $ | — | $ | 108,242 | $ | — | ||||||||||||||||||||||||||
| Funded (unfunded) status | $ | 5,971 | $ | (13,471) | $ | 4,136 | $ | (13,894) | $ | 3,547 | $ | (18,105) | ||||||||||||||||||||||||||
Amounts recognized in accumulated other comprehensive income(1): | ||||||||||||||||||||||||||||||||||||||
| Net loss (gain) | $ | 9,920 | $ | (2,612) | $ | 10,658 | $ | (3,259) | $ | 6,882 | $ | 87 | ||||||||||||||||||||||||||
| Components of net periodic (benefit) cost: | ||||||||||||||||||||||||||||||||||||||
| Service cost | $ | — | $ | 14 | $ | — | $ | 33 | $ | — | $ | 39 | ||||||||||||||||||||||||||
| Interest cost | 3,700 | 659 | 2,425 | 383 | 2,100 | 309 | ||||||||||||||||||||||||||||||||
| Expected return on plan assets | (4,793) | — | (6,586) | — | (6,783) | — | ||||||||||||||||||||||||||||||||
| Net loss (gain) recognition | 281 | (392) | 16 | — | 27 | (11) | ||||||||||||||||||||||||||||||||
| Net periodic (benefit) cost | $ | (812) | $ | 281 | $ | (4,145) | $ | 416 | $ | (4,656) | $ | 337 | ||||||||||||||||||||||||||
(1)Before tax effects
112
| (Dollars in thousands) | 2017 | 2016 | |||||
| Change in benefit obligation: | |||||||
| Benefit obligation at beginning of year | $ | 7,517 | $ | 7,148 | |||
| Interest cost | 297 | 301 | |||||
| Disbursements | (407 | ) | (374 | ) | |||
| Actuarial loss | 446 | 442 | |||||
| Benefit obligation at end of year | $ | 7,853 | $ | 7,517 | |||
| Change in plan assets: | |||||||
| Fair value of plan assets at beginning of year | $ | 7,504 | $ | 7,397 | |||
| Actual return on Plan Assets | 1,314 | 518 | |||||
| Benefits paid | (407 | ) | (374 | ) | |||
| Administrative Expenses | (33 | ) | (37 | ) | |||
| Fair value of plan assets at end of year | $ | 8,378 | $ | 7,504 | |||
| Funded status: | |||||||
| Unfunded status | $ | (7,853 | ) | $ | (7,517 | ) | |
| Total loss (income) recognized in other comprehensive income | 8,378 | 7,504 | |||||
| Net amount recognized | $ | 525 | $ | (13 | ) | ||
| Components of net periodic benefit cost: | |||||||
| Service cost | $ | 40 | $ | 40 | |||
| Interest cost | 297 | 301 | |||||
| Expected return on plan assets | (548 | ) | (541 | ) | |||
| Net gain recognition | (170 | ) | (157 | ) | |||
| Net periodic benefit cost | $ | (381 | ) | $ | (357 | ) | |
| Assumptions used to value the Accumulated Postretirement Benefit Obligation (APBO): | |||||||
| Discount rate for Net Periodic Benefit Cost | 4.00 | % | 4.00 | % | |||
| Salary Scale for Net Periodic Benefit Cost | N/A | N/A | |||||
| Expected Return on Plan Assets | 7.50 | % | 7.50 | % | |||
| Discount rate for Disclosure Obligations | 3.60 | % | 4.00 | % | |||
| Salary Scale for Disclosure Obligations | N/A | N/A | |||||
| Consolidated Pension Plan | 2023 | 2022 | 2021 | |||||||||||||||||
| Discount rate for net periodic benefit cost | 5.24 | % | 2.82 | % | 2.50 | % | ||||||||||||||
| Expected return on plan assets | 6.25 | % | 6.25 | % | 6.25 | % | ||||||||||||||
| Discount rate for disclosure obligations | 5.01 | % | 5.24 | % | 2.82 | % | ||||||||||||||
| Beneficial Bank Other Postretirement | ||||||||||||||||||||
| Discount rate for net periodic benefit cost | 5.18 | % | 2.69 | % | 2.32 | % | ||||||||||||||
| Discount rate for disclosure obligations | 4.96 | % | 5.18 | % | 2.70 | % | ||||||||||||||
| FMS Other Postretirement | ||||||||||||||||||||
| Discount rate for net periodic benefit cost | 4.93 | % | 2.07 | % | 1.47 | % | ||||||||||||||
| Discount rate for disclosure obligations | 4.73 | % | 4.93 | % | 2.07 | % | ||||||||||||||
| Split-Dollar Plan | ||||||||||||||||||||
| Discount rate for net periodic benefit cost | 4.92 | % | 2.05 | % | 1.44 | % | ||||||||||||||
| Discount rate for disclosure obligations | 4.73 | % | 4.92 | % | 2.04 | % | ||||||||||||||
Estimated future benefit payments:
The following table shows the expected future payments for the next 10 years:
| (Dollars in thousands) | Pension Benefits | Other Postretirement Benefits | |||||||||
| During 2024 | $ | 5,999 | $ | 1,079 | |||||||
| During 2025 | 4,794 | 1,134 | |||||||||
| During 2026 | 5,354 | 1,150 | |||||||||
| During 2027 | 5,707 | 1,147 | |||||||||
| During 2028 | 5,038 | 1,139 | |||||||||
| During 2029 through 2033 | 26,480 | 5,176 | |||||||||
| $ | 53,372 | $ | 10,825 | ||||||||
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| (Dollars in thousands) | |||
| During 2018 | $ | 400 | |
| During 2019 | 317 | ||
| During 2020 | 316 | ||
| During 2021 | 432 | ||
| During 2022 | 324 | ||
| During 2023 through 2027 | 2,811 | ||
| $ | 4,600 | ||
| Category Used for Fair Value Measurement | ||||||||||||||||||||||||||||||||
| December 31, 2023 | ||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Level 1 | Level 2 | Level 3 | Total | Percent | |||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
| Mutual Funds: | ||||||||||||||||||||||||||||||||
| Large cap | $ | 3,215 | $ | — | $ | — | $ | 3,215 | 3.9 | % | ||||||||||||||||||||||
| International | 5,839 | — | — | 5,839 | 7.1 | |||||||||||||||||||||||||||
| Global Managed Volatility | 5,177 | — | — | 5,177 | 6.3 | |||||||||||||||||||||||||||
| U.S. Managed Volatility | 1,932 | — | — | 1,932 | 2.4 | |||||||||||||||||||||||||||
| Fixed Income | 54,878 | — | — | 54,878 | 66.9 | |||||||||||||||||||||||||||
| U.S. Government Agencies | — | 10,743 | — | 10,743 | 13.1 | |||||||||||||||||||||||||||
| Pooled separate accounts | 98 | — | — | 98 | 0.1 | |||||||||||||||||||||||||||
| Accrued Income | 208 | — | — | 208 | 0.2 | |||||||||||||||||||||||||||
| Total | $ | 71,347 | $ | 10,743 | $ | — | $ | 82,090 | 100.0 | % | ||||||||||||||||||||||
| Category Used for Fair Value Measurement | ||||||||||||||||||||||||||||||||
| December 31, 2022 | ||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Level 1 | Level 2 | Level 3 | Total | Percent | |||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
| Mutual Funds: | ||||||||||||||||||||||||||||||||
| Large cap | $ | 3,721 | $ | — | $ | — | $ | 3,721 | 4.7 | % | ||||||||||||||||||||||
| International | 6,651 | — | — | 6,651 | 8.4 | |||||||||||||||||||||||||||
| Global Managed Volatility | 5,901 | — | — | 5,901 | 7.4 | |||||||||||||||||||||||||||
| U.S. Managed Volatility | 2,216 | — | — | 2,216 | 2.8 | |||||||||||||||||||||||||||
| Fixed Income | 43,255 | — | — | 43,255 | 54.6 | |||||||||||||||||||||||||||
| U.S. Government Agencies | — | 17,259 | — | 17,259 | 21.8 | |||||||||||||||||||||||||||
| Pooled Separate Accounts | 123 | — | — | 123 | 0.2 | |||||||||||||||||||||||||||
| Accrued Income | 161 | — | — | 161 | 0.1 | |||||||||||||||||||||||||||
| Total | $ | 62,028 | $ | 17,259 | $ | — | $ | 79,287 | 100.0 | % | ||||||||||||||||||||||
As of December 31, 2023, pension and postretirement plan assets were comprised of investments in equity mutual funds, fixed income mutual funds, and pooled separate accounts. The Bank’s consolidated pension plan investment policy provides that assets are to be managed over a long-term investment horizon to ensure that the chances and duration of investment losses are carefully weighed against the long-term potential for asset appreciation. The primary objective of managing a plan’s assets is to improve the plan’s funded status. A secondary financial objective is, where possible, to minimize pension expense volatility. The Company’s pension plan allocates assets based on the plan’s funded status to risk management and return enhancement asset classes. The risk management class is comprised of a long duration fixed income fund while the return enhancement class consists of equity and other fixed income funds. Asset allocation ranges are generally 40% to 80% for risk management and 20% to 60% for return enhancement when the funded status is less than 110%, and 50% to 90% in risk management and 10% to 50% for return enhancement when the funded status reaches 110%, subject to the discretion of the Company. Also, a small portion is maintained in cash reserves when appropriate.
The Company has four additional plans which are no longer being provided to current Associates: (1) a Supplemental Pension Plan with a corresponding liability of $0.7$0.2 million and $0.8$0.3 million for December 31, 20172023 and 20162022 respectively; (2) an Early Retirement Window Plan with a corresponding liability of $0.1 million and $0.2 million for both December 31, 20172023 and 2016 respectively;2022; (3) a Director’s Plan with a corresponding asset of less than $0.1 million for December 31, 2017 and 2016; (4) a Supplemental Executive Retirement Plan with a corresponding liability of $1.5 million and $1.8$1.3 million for both December 31, 20172023 and 2016 respectively,2022, and; (5)(4) a Post-Retirement Medical Plan with a corresponding liability of $0.1 million for both December 31, 20172023 and 2016.2022.
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The Company and its subsidiaries file a consolidated federal income tax return and separate state income tax returns. OurThe Company's income tax provision consists of the following:
| Year ended December 31, | |||||||||||
| (Dollars in thousands) | 2017 | 2016 | 2015 | ||||||||
| Current income taxes: | |||||||||||
| Federal taxes | $ | 36,005 | $ | 23,857 | $ | 24,237 | |||||
| State and local taxes | 4,342 | 3,847 | 3,805 | ||||||||
| Deferred income taxes: | |||||||||||
| Federal taxes | 17,899 | 5,135 | 2,283 | ||||||||
| State and local taxes | — | 235 | (52 | ) | |||||||
| Total | $ | 58,246 | $ | 33,074 | $ | 30,273 | |||||
| Year ended December 31, | |||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | ||||||||||||||
| Current income taxes: | |||||||||||||||||
| Federal taxes | $ | 81,674 | $ | 63,203 | $ | 32,836 | |||||||||||
| State and local taxes | 19,968 | 18,763 | 13,421 | ||||||||||||||
| Deferred income taxes: | |||||||||||||||||
| Federal taxes | (5,331) | (4,094) | 37,251 | ||||||||||||||
| State and local taxes | (66) | 89 | 2,587 | ||||||||||||||
| Total | $ | 96,245 | $ | 77,961 | $ | 86,095 | |||||||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following is a summary of the significant components of ourthe Company's deferred tax assets and liabilities as of December 31, 20172023 and 2016:2022:
| (Dollars in thousands) | 2023 | 2022 | |||||||||
| Deferred tax assets: | |||||||||||
| Allowance for credit losses | $ | 40,518 | $ | 33,323 | |||||||
| Purchase accounting adjustments—loans | 10,285 | 13,807 | |||||||||
| Reserves and other accruals | 25,093 | 23,189 | |||||||||
| Investments | 763 | 1,579 | |||||||||
| Net operating losses | 2,725 | 3,315 | |||||||||
| Derivatives | 2,806 | 3,521 | |||||||||
| Lease liabilities | 31,835 | 33,236 | |||||||||
| Unrealized losses on available-for-sale securities | 186,775 | 212,222 | |||||||||
Other(1) | 659 | 1,360 | |||||||||
| Total deferred tax assets | $ | 301,459 | $ | 325,552 | |||||||
| Deferred tax liabilities: | |||||||||||
| Accelerated depreciation | (5,790) | (5,994) | |||||||||
| Right of use assets | (27,426) | (28,859) | |||||||||
| Intangibles | (33,675) | (35,610) | |||||||||
Other(2) | (4,306) | (4,333) | |||||||||
| Total deferred tax liabilities | (71,197) | (74,796) | |||||||||
| Net deferred tax asset | $ | 230,262 | $ | 250,756 | |||||||
(1)Other deferred tax assets includes deferred gains, tax credits, and reverse mortgages in 2023 and 2022, and employee benefit plans in 2022.
| (Dollars in thousands) | 2017 | 2016 | |||||
| Deferred tax assets: | |||||||
| Unrealized losses on available-for-sale securities | $ | 2,084 | $ | 4,170 | |||
| Allowance for loan losses | 8,526 | 13,913 | |||||
| Purchase accounting adjustments—loans | 3,487 | 8,339 | |||||
| Reserves and other accruals | 9,194 | 14,010 | |||||
| Provision for legal settlement | 2,520 | — | |||||
| Deferred gains | 589 | 1,109 | |||||
| Net operating losses | 188 | 352 | |||||
| Derivatives | 757 | 1,086 | |||||
| Reverse mortgages | 606 | 2,262 | |||||
| Total deferred tax assets | $ | 27,951 | $ | 45,241 | |||
| Deferred tax liabilities: | |||||||
| Bad debt recapture | $ | — | $ | (545 | ) | ||
| Accelerated depreciation | (778 | ) | (1,049 | ) | |||
| Other | (326 | ) | (497 | ) | |||
| Bank-owned life insurance | (5,387 | ) | — | ||||
| Deferred loan costs | (989 | ) | (1,079 | ) | |||
| Intangibles | (3,826 | ) | (5,946 | ) | |||
| Total deferred tax liabilities | (11,306 | ) | (9,116 | ) | |||
| Net deferred tax asset | $ | 16,645 | $ | 36,125 | |||
(2)Other deferred tax liabilities includes deferred loan costs, derivatives and partnership investments in 2023 and 2022, and employee benefit plans in 2023.
Included in the table above is the effect of certain temporary differences for which noare deferred tax expense or benefit was recognized. In 2017,taxes recorded in accumulated other comprehensive income (loss). At December 31, 2023, such items consisted primarily of $2.1deferred tax assets of $186.8 million of unrealized losses on certain investments in debt and equity securities accounted for under ASC 320 along with $0.3and $1.5 million of unrealized gainslosses related to postretirement benefit obligations accounted for under ASC 715 and $0.8715. At December 31, 2022, the deferred tax assets consisted primarily of $212.2 million of unrealized losses on derivatives accounted for under ASC 815. In 2016, they consisted primarily of $4.2 million of unrealized lossesgains on certain investments in debt securities and equity securities along with $0.3$1.5 million of unrealized losses related to postretirement benefit obligations and $1.1 million of unrealized losses on derivatives.obligations.
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Based on ourthe Company's history of prior earnings and ourits expectations of the future, it is anticipated that operating income and the reversal pattern of ourits temporary differences will, more likely than not, be sufficient to realize a net deferred tax asset of $16.6$230.3 million at December 31, 2017.
The Company has $13.0 million during the measurement period. Penn Liberty did not have any federal or stateof remaining Federal net operating loss (NOL) carryovers,losses (NOLs). Such NOLs expire beginning in 2030 and, had $0.1due to Internal Revenue Service (IRS) limitations, $2.8 million are being utilized each year. Accordingly, the Company fully expects to utilize all of these NOLs. The Company has no state NOLs. Finally, the Company has $0.5 million of alternative minimum tax credit carryoverscredits that have now beenno expiration date and are fully utilized. We expectexpected to utilize all tax attributes acquired from Penn Liberty. See Note 2 for further information.
A reconciliation showing the differences between ourthe Company's effective tax rate and the U.S. Federal statutory tax rate is as follows:
| Year ended December 31, | |||||||||||||||||
| Year Ended December 31, | 2023 | 2022 | 2021 | ||||||||||||||
| Statutory federal income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| State tax, net of federal tax benefit | 4.4 | 5.1 | 3.9 | ||||||||||||||
| Tax-exempt interest | (0.6) | (0.5) | (0.2) | ||||||||||||||
| Bank-owned life insurance income | (0.1) | — | (0.1) | ||||||||||||||
| Excess tax benefits from share-based compensation | — | — | (0.1) | ||||||||||||||
| Nondeductible acquisition costs | — | 0.1 | 0.2 | ||||||||||||||
| Federal tax credits, net of amortization | (0.5) | (0.4) | (0.5) | ||||||||||||||
| Nondeductible compensation | 0.1 | 0.2 | — | ||||||||||||||
| Nondeductible goodwill | — | 0.5 | — | ||||||||||||||
| Surrender of bank-owned life insurance policies | 1.9 | — | — | ||||||||||||||
| Other | 0.1 | (0.1) | (0.1) | ||||||||||||||
| Effective tax rate | 26.3 | % | 25.9 | % | 24.1 | % | |||||||||||
| Year ended December 31, | ||||||||
| Year Ended December 31, | 2017 | 2016 | 2015 | |||||
| Statutory federal income tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||
| State tax, net of federal tax benefit | 2.7 | 3.1 | 2.9 | |||||
| Adjustment to net deferred tax asset for enacted changes in tax laws and rates | 13.4 | — | — | |||||
| Nondeductible acquisition costs | — | 0.2 | 0.7 | |||||
| Tax-exempt interest | (1.9 | ) | (2.1 | ) | (1.9 | ) | ||
| Bank-owned life insurance income | (0.5 | ) | (0.3 | ) | (0.3 | ) | ||
| Excess tax benefits from share-based compensation | (2.0 | ) | (1.4 | ) | — | |||
| Surrender of bank-owned life insurance policies | 7.3 | — | — | |||||
| Federal tax credits, net of amortization | (0.3 | ) | (0.5 | ) | (0.5 | ) | ||
| Other | — | — | 0.2 | |||||
| Effective tax rate | 53.7 | % | 34.0 | % | 36.1 | % | ||
Based on recent changes in the interest rate environment lowering our yields on ourBank Owned Life Insurance (BOLI) policies and the termination of a stable value protection wrap policy, we surrendered $65.5 million of previously acquired BOLI policies. This resulted in a taxable gain of $22.6 million and corresponding income tax charge of $7.1 million
116
The amount of affordable housing tax credits, amortization and tax benefits recorded as income tax expense for the year ended December 31, 20172023 were $1.6$4.7 million, $1.7$3.9 million and $0.4$1.9 million respectively. The carrying value of the investment in affordable housing credits is $13.8$87.1 million at December 31, 2017,2023, compared to $15.4$69.0 million at December 31, 2016.2022.
117
16. STOCK-BASED COMPENSATION
Upon stockholder approval in 2018, the 2013 Incentive Plan (2013 Plan) was replaced by the 2018 Incentive Plan (2018 Plan). However, outstanding awards under the 2013 Plan remain in effect in accordance with their original terms. The 2018 Plan was amended in 2023 to increase the number of shares of Common Stock available for issuance. The 2018 Plan also includes 261,709 shares from the Bryn Mawr Incentive Plans.Plan and the Bryn Mawr Retainer Plan, which were assumed by the Company in connection with the acquisition of Bryn Mawr Bank Corporation. The number of shares reserved for issuance under the 2018 Plan is 6,261,709. The 2018 Plan will terminate on the tenth anniversary of its effective date, after which no awards may be granted. At December 31, 2023, 3,313,543 shares were available for future grants under the 2018 Plan.
During February 2022, the Board of Directors and the Leadership and Compensation Committee (the Committee) approved the Executive Leadership Team Incentive Plan (ELTIP), which provides for new cash and equity awards designed to recognize the rewards and efforts of the Company's executive leadership team for the Company's achievement of certain key measures of short-term success and the value of such success to the Company's longer-term performance. Awards under the ELTIP include short-term incentive (STI) cash bonus awards and long-term incentive (LTI) awards of RSUs and PSUs that will be issued under the Company's 2018 Incentive Plan. LTI awards under the ELTIP will be awarded to the CEO and Executive Vice Presidents that directly report to the CEO in the form of RSUs that vest in equal annual installments over a three-year service period, and PSUs that vest based on a service condition defined as the achievement of a three-year service period and a performance condition based on the Company's cumulative core ROA performance over a three-year period relative to the KBW Nasdaq Regional Bank Index (the KRX Index) for the same period.
Total stock-based compensation expense recognized was $3.7$10.0 million ($2.57.6 million after tax) for 2017, $3.02023, $9.0 million ($2.06.7 million after tax) for 2016,2022, and $3.2$6.3 million ($2.24.8 million after tax) for 2015.2021. As part of the expense calculation, the Company has elected to recognize forfeitures as they occur. Stock-based compensation expense related to awards granted to Associates is recorded in Salaries, benefits and other compensation; expense related to awards granted to directors and advisory board members is recorded in Other operating expense in ourthe Company's Consolidated Statements of Income.
Stock Options
Stock options are granted with an exercise price not less than the fair market value of our Common Stockthe Company's common stock on the date of the grant. With the exception of certain Non-Plan Stock Options (as defined below), allNo stock options were granted during 2023 or 2022. All stock options granted during 2017, 2016, and 20152021 vest in 25% per annum increments, start to become exercisable onein April of the year fromfollowing the year of grant, date and expire between five years and 7seven years from the grant date. We issue newNew shares are issued upon the exercise of options.
| 2017 | 2016 | 2015 | ||||||
| Expected term (in years) | 5.3 | 5.3 | 4.9 | |||||
| Volatility | 24.9 | % | 29.6 | % | 25.0 | % | ||
| Weighted-average risk-free interest rate | 1.95 | % | 1.25 | % | 1.54 | % | ||
| Dividend yield | 0.60 | % | 0.80 | % | 0.76 | % | ||
| 2021 | |||||||||||||||||
| Expected term (in years) | 5.5 | ||||||||||||||||
| Volatility | 23.9 | % | |||||||||||||||
| Weighted-average risk-free interest rate | 1.16 | % | |||||||||||||||
| Dividend yield | 1.33 | % | |||||||||||||||
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A summary of the status of our options (including Non-Plan Stock Options)option activity as of December 31, 2017,2023, and changes during the year the ended December 31, 2023, is presented below:
| 2017 | 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (Year) | Aggregate Intrinsic Value (In Thousands) | Shares | Weighted- Average Exercise Price | Weighted-Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (In Thousands) | |||||||||||||||||||||||||||||||||||||
| Stock Options: | ||||||||||||||||||||||||||||||||||||||||||||
| Outstanding at beginning of year | 1,547,980 | $ | 17.83 | 3.17 | $ | 44,153 | ||||||||||||||||||||||||||||||||||||||
| Plus: Granted | 45,134 | 47.05 | ||||||||||||||||||||||||||||||||||||||||||
| Outstanding at beginning of year | ||||||||||||||||||||||||||||||||||||||||||||
| Outstanding at beginning of year | ||||||||||||||||||||||||||||||||||||||||||||
| Less: Exercised | ||||||||||||||||||||||||||||||||||||||||||||
| Less: Exercised | ||||||||||||||||||||||||||||||||||||||||||||
| Less: Exercised | 250,975 | 16.44 | ||||||||||||||||||||||||||||||||||||||||||
| Forfeited | 3,033 | 13.68 | ||||||||||||||||||||||||||||||||||||||||||
| Forfeited | ||||||||||||||||||||||||||||||||||||||||||||
| Forfeited | ||||||||||||||||||||||||||||||||||||||||||||
| Expired | ||||||||||||||||||||||||||||||||||||||||||||
| Expired | ||||||||||||||||||||||||||||||||||||||||||||
| Expired | ||||||||||||||||||||||||||||||||||||||||||||
| Outstanding at end of year | ||||||||||||||||||||||||||||||||||||||||||||
| Outstanding at end of year | ||||||||||||||||||||||||||||||||||||||||||||
| Outstanding at end of year | 1,339,106 | 19.08 | 2.56 | 38,525 | ||||||||||||||||||||||||||||||||||||||||
| Nonvested at end of year | 389,134 | 1.69 | 9,574 | |||||||||||||||||||||||||||||||||||||||||
| Exercisable at end of year | 949,972 | 17.37 | 2.26 | 29,951 | ||||||||||||||||||||||||||||||||||||||||
The weighted-average fair value of options granted was $11.50$10.44 in 2017, $7.84 in 2016 and $5.73 in 2015.2021. The aggregate intrinsic value of options exercised was $7.5$0.5 million in 2017, $5.02023, $0.8 million in 2016,2022, and $3.0$1.9 million in 2015.2021.
The following table provides information about our nonvestedsummarizes the non-vested stock options outstanding atoption activity during the year the ended December 31, 2017:2023:
| 2023 | ||||||||||||||||||||||||||||||||||||||
| 2017 | ||||||||||||||||||||||||||||||||||||||
| Shares | Weighted- Average Exercise Price | Weighted- Average Grant Date Fair Value | ||||||||||||||||||||||||||||||||||||
| Shares | Shares | Weighted-Average Exercise Price | Weighted-Average Grant Date Fair Value | |||||||||||||||||||||||||||||||||||
| Stock Options: | ||||||||||||||||||||||||||||||||||||||
| Nonvested at beginning of period | 704,421 | $ | 19.08 | $ | 5.23 | |||||||||||||||||||||||||||||||||
| Plus: Granted | 45,134 | 47.05 | 11.50 | |||||||||||||||||||||||||||||||||||
| Nonvested at beginning of period | ||||||||||||||||||||||||||||||||||||||
| Nonvested at beginning of period | ||||||||||||||||||||||||||||||||||||||
| Less: Vested | ||||||||||||||||||||||||||||||||||||||
| Less: Vested | ||||||||||||||||||||||||||||||||||||||
| Less: Vested | 359,671 | 18.08 | 4.92 | |||||||||||||||||||||||||||||||||||
| Forfeited | 750 | 15.83 | 3.44 | |||||||||||||||||||||||||||||||||||
| Nonvested at end of period | 389,134 | 23.25 | 6.24 | |||||||||||||||||||||||||||||||||||
The total amount of unrecognized compensation cost related to nonvestednon-vested stock options as of December 31, 20172023 was $0.8$0.2 million. The weighted-average period over which the expense is expected to be recognized is 1.691.13 years. During 2017, we2023, the Company recognized $1.8$0.3 million of compensation expense related to these awards.
Restricted Stock and Restricted Stock Units
The weighted-average fair value of RSUs and RSAs granted was $47.05$47.68 in 2017, $29.942023, $49.24 in 2016,2022, and $26.13$45.64 in 2015.2021. The total amount of compensation cost to be recognized relating to nonvested restricted stock including performance awards,units as of December 31, 2017,2023 was $2.1$10.3 million. The weighted-average period over which the cost is expected to be recognized is 2.52.02 years. During 2017, we2023, the Company recognized $1.2$6.3 million of compensation costexpense related to these awards.
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The following table summarizes the Company’s RSAs and RSUs including performance awards, and changes during the year:
Units (in whole) | Weighted Average Grant-Date Fair Value per Unit | ||||||||||||||||||||||||
| Balance at December 31, 2016 | 135,592 | $ | 25.33 | ||||||||||||||||||||||
Units (in whole) | Units (in whole) | Weighted Average Grant-Date Fair Value per Unit | |||||||||||||||||||||||
| Balance at December 31, 2022 | |||||||||||||||||||||||||
| Plus: Granted | 36,573 | 47.05 | |||||||||||||||||||||||
| Less: Vested | 55,444 | 22.90 | |||||||||||||||||||||||
| Forfeited | 2,333 | 29.53 | |||||||||||||||||||||||
| Balance at December 31, 2017 | 114,388 | 35.54 | |||||||||||||||||||||||
| Balance at December 31, 2023 | |||||||||||||||||||||||||
The total fair value of RSUs and RSAs that vested was $1.2$5.1 million in 2017, $1.42023, $4.5 million in 2016,2022, and $1.3$1.9 million in 2015.2021.
Performance Stock Units
PSUs are granted at no cost to the recipient and vest based on both service and performance conditions. The service condition is defined as the achievement of a three-year service period between January 1, 2022 and December 31, 2024. The service condition can be waived at the discretion of the Committee. The performance condition is based on the Company's cumulative core ROA performance over a three-year period relative to the KRX Index for the same period. The actual number of shares that will vest at the end of the three-year period will be based on the core ROA performance over the three-year period relative to the KRX Index. If such performance is at the 25th percentile, 50th percentile, 75th percentile and 100th percentile, grantees will receive 25%, 50%, 75%, and 100% of their maximum award grant, respectively. The fair value of PSUs is equal to the fair value of the common stock on the date of grant. The expense related to PSUs granted to Associates is recognized in Salaries, benefits and other compensation on an accrual basis over the requisite service period if the performance condition is probable and the service condition is met.
Units (in whole) | Weighted Average Grant-Date Fair Value per Unit | ||||||||||
| Balance at December 31, 2022 | 95,520 | $ | 49.76 | ||||||||
| Plus: Granted | 97,519 | 49.69 | |||||||||
| Less: Forfeited | (35,291) | 49.73 | |||||||||
| Balance at December 31, 2023 | 157,748 | 49.72 | |||||||||
Integration Performance RSU Plan: In February 2019, the Board of Directors approved the Integration Performance RSU Plan (“the Integration Plan”), in which certain senior executives were granted awards based on the achievement of three defined goals measuring the success of the integration of Beneficial and execution of the Company's strategic goals over the five-year period ending 2023. The Plan provided for a three-year performance achievement period beginning in 2021 and ending in 2023. In February 2022, the Integration Plan was terminated. In connection with the termination of the Integration Plan, the portion of the related Integration Performance-Based RSU Awards (the Integration Awards) attributable to core ROA was terminated, the Gallup Q12 performance goal was met, and the Committee exercised its discretion under the Integration Plan to deem the Gallup CE3 performance goal met. Thus, 20% of the restricted stock units subject to the Integration Awards will performance vest and become subject to service-based vesting conditions. During 2023, the Company recognized $0.1 million of compensation expense related to these awards.
Beneficial Acquisition Success Plan: On December 10, 2020, the Board of Directors approved the Beneficial Acquisition Success Plan (the Success Plan) and granted 66,703 RSUs, vesting in equal installments over three years. The Success Plan was designed to recognize and reward the Company’s achievement of certain key measures of near-term success related to Beneficial and the efforts of the Company’s senior leaders and the value of such success to the Company’s longer term performance. The key measures of success related to Beneficial include acquisition economics, one-time acquisition costs, banking location integration and optimization, customer deposit retention, and cost synergies. During 2023, the Success Plan awards fully vested and the Company recognized $0.6 million of compensation expense related to these awards.
Awards from the Integration Plan and the Success Plan were issued under the Company’s 2018 Incentive Plan.
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17. COMMITMENTS AND CONTINGENCIES
| (Dollars in thousands) | ||||
| Year | Amount | |||
| 2018 | $ | 5,778 | ||
| 2019 | 5,643 | |||
| 2020 | 3,075 | |||
| 2021 | 519 | |||
| 2022 | 519 | |||
Legal Proceedings
In the ordinary course of business, we arethe Company is subject to legal actions that involve claims for monetary relief. See Note 2324 for additional information.
Financial Instruments With Off-Balance Sheet Risk
In the ordinary course of business, we arethe Company is a party to financial instruments with off-balance sheet risk, in the normal course of business primarily to meet the financing needs of ourits customers. To varying degrees, these financial instruments involve elements of credit risk that are not recognized in the Consolidated Statements of Financial Condition.
Exposure to loss for commitments to extend credit and standby letters of credit written is represented by the contractual amount of those instruments. WeThe Company generally requirerequires collateral to support such financial instruments in excess of the contractual amount of those instruments and use the same credit policies in making commitments as we doit does for on-balance sheet instruments.
The following represents a summary of off-balance sheet financial instruments at year-end:
| December 31, | |||||||||||
| (Dollars in thousands) | 2023 | 2022 | |||||||||
| Financial instruments with contract amounts which represent potential credit risk: | |||||||||||
| Construction loan commitments | $ | 725,591 | $ | 699,748 | |||||||
| Commercial mortgage loan commitments | 136,379 | 96,208 | |||||||||
| Commercial loan commitments | 1,717,924 | 863,566 | |||||||||
| Owner-occupied commercial commitments | 57,013 | 27,198 | |||||||||
| Commercial standby letters of credit | 107,031 | 101,888 | |||||||||
Residential loan commitments(1) | 11,797 | 4,032 | |||||||||
Consumer loan commitments(2) | 1,363,458 | 1,011,739 | |||||||||
| Total | $ | 4,119,193 | $ | 2,804,379 | |||||||
| December 31, | |||||||
| (Dollars in thousands) | 2017 | 2016 | |||||
| Financial instruments with contract amounts which represent potential credit risk: | |||||||
| Construction loan commitments | $ | 191,675 | $ | 189,940 | |||
| Commercial mortgage loan commitments | 32,346 | 25,821 | |||||
| Commercial loan commitments | 645,924 | 610,838 | |||||
| Commercial owner-occupied commitments | 55,545 | 55,205 | |||||
| Commercial standby letters of credit | 75,446 | 71,612 | |||||
| Residential mortgage loan commitments | 8,057 | 1,636 | |||||
| Consumer loan commitments | 296,010 | 259,501 | |||||
| Total | $ | 1,305,003 | $ | 1,214,553 | |||
(2)Consumer loan commitments of $633.8 million were secured by real estate.
Commitments provide for financing on predetermined terms as long as the customer continues to meet specific criteria. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. We evaluateThe Company evaluates each customer’s creditworthiness and obtain collateral based on ourits credit evaluation of the counterparty.
Secondary Market Loan Sales. Given the current interest rate environment, coupled with our desire not to hold these assets in our portfolio, we generally sell
The Company typically sells newly originated residential mortgage loans in the secondary market to mortgage loan aggregators and on a more limited basis, to GSEs, such as FHLMC, FNMA, and the FHLB. Loans held for sale are reflected on ourthe Consolidated Statements of Financial Condition at their fair value with changes in the value reflected in ourthe Consolidated Statements of Income. Gains and losses are recognized at the time of sale. WeThe Company periodically retainretains the servicing rights on residential mortgage loans sold which results in monthly service fee income. The mortgage servicing rights are included in Intangible assets in the Consolidated Statements of Financial Condition.Otherwise, we sellthe Company sells loans with servicing released on a nonrecourse basis. Rate-locked loan commitments that we intendthe Company intends to sell in the secondary market are accounted for as derivatives under ASC Topic 815, Derivatives and Hedging (ASC: (ASC 815).
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At December 31, 2017, there were 134 variable-rate to fixed-rate swap transactions between the third-party financial institutions2023 and our customers. The initial notional aggregate amount was approximately $561.8 million, with maturities ranging from under one year to ten years. The aggregate fair value of these swaps to the customers was a liability of $3.3 million as of December 31, 2017,2022, the allowance for credit losses of which 80 swaps, with a liabilityunfunded lending commitments was $12.1 million and $11.9 million, respectively. A provision expense for unfunded lending commitments of $5.4$0.2 million were in paying positions to a third party. We had no reserves forwas recognized during the swap guarantees as ofyear ended December 31, 2017.
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FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
ASC 820-10,Fair Value of Financial Assets and Liabilities
•Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.
•Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that are derived principally from or can be corroborated by observable market data by correlation or other means.
•Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
The following tables present financial instruments carried at fair value as of December 31, 20172023 and December 31, 20162022 by level in the valuation hierarchy (as described above):
| December 31, 2023 | ||||||||||||||||||||||||||
| (Dollars in thousands) | Quoted Prices in Active Markets for Identical Asset (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value | ||||||||||||||||||||||
| Assets measured at fair value on a recurring basis: | ||||||||||||||||||||||||||
| Available-for-sale securities: | ||||||||||||||||||||||||||
| CMO | $ | — | $ | 464,619 | $ | — | $ | 464,619 | ||||||||||||||||||
| FNMA MBS | — | 3,042,350 | — | 3,042,350 | ||||||||||||||||||||||
| FHLMC MBS | — | 115,532 | — | 115,532 | ||||||||||||||||||||||
| GNMA MBS | — | 43,340 | — | 43,340 | ||||||||||||||||||||||
| GSE agency notes | — | 180,696 | — | 180,696 | ||||||||||||||||||||||
| Other assets | — | 153,569 | 78 | 153,647 | ||||||||||||||||||||||
| Total assets measured at fair value on a recurring basis | $ | — | $ | 4,000,106 | $ | 78 | $ | 4,000,184 | ||||||||||||||||||
| Liabilities measured at fair value on a recurring basis: | ||||||||||||||||||||||||||
| Other liabilities | $ | — | $ | 137,616 | $ | 14,026 | $ | 151,642 | ||||||||||||||||||
| Assets measured at fair value on a nonrecurring basis: | ||||||||||||||||||||||||||
| Other investments | $ | — | $ | — | $ | 17,434 | $ | 17,434 | ||||||||||||||||||
| Other real estate owned | — | — | 1,569 | 1,569 | ||||||||||||||||||||||
| Loans held for sale | — | 29,268 | — | 29,268 | ||||||||||||||||||||||
| Total assets measured at fair value on a nonrecurring basis | $ | — | $ | 29,268 | $ | 19,003 | $ | 48,271 | ||||||||||||||||||
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| December 31, 2017 | |||||||||||||||
| (Dollars in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value | |||||||||||
| Assets measured at fair value on a recurring basis: | |||||||||||||||
| Available-for-sale securities: | |||||||||||||||
| CMO | $ | — | $ | 246,539 | $ | — | $ | 246,539 | |||||||
| FNMA MBS | — | 473,987 | — | 473,987 | |||||||||||
| FHLMC MBS | — | 87,875 | — | 87,875 | |||||||||||
| GNMA MBS | — | 29,098 | — | 29,098 | |||||||||||
| GSE | — | — | — | — | |||||||||||
| Other investments | 623 | — | — | 623 | |||||||||||
| Other assets | — | 747 | — | 747 | |||||||||||
| Total assets measured at fair value on a recurring basis | $ | 623 | $ | 838,246 | $ | — | $ | 838,869 | |||||||
| Liabilities measured at fair value on a recurring basis: | |||||||||||||||
| Other liabilities | $ | — | $ | 3,225 | $ | — | $ | 3,225 | |||||||
| Assets measured at fair value on a nonrecurring basis: | |||||||||||||||
| Other real estate owned | $ | — | $ | — | $ | 2,503 | $ | 2,503 | |||||||
| Loans held for sale | — | 31,055 | — | 31,055 | |||||||||||
| Impaired loans | — | — | 57,089 | 57,089 | |||||||||||
| Total assets measured at fair value on a nonrecurring basis | $ | — | $ | 31,055 | $ | 59,592 | $ | 90,647 | |||||||
| December 31, 2016 | ||||||||||||||||
| (Dollars in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value | ||||||||||||
| Assets measured at fair value on a recurring basis: | ||||||||||||||||
| Available-for-sale securities: | ||||||||||||||||
| CMO | $ | — | $ | 261,215 | $ | — | $ | 261,215 | ||||||||
| FNMA MBS | — | 405,764 | — | 405,764 | ||||||||||||
| FHLMC MBS | — | 63,515 | — | 63,515 | ||||||||||||
| GNMA MBS | — | 28,416 | — | 28,416 | ||||||||||||
| GSE | — | 35,010 | — | 35,010 | ||||||||||||
| Other investments | 623 | — | — | 623 | ||||||||||||
| Other assets | — | 1,508 | — | 1,508 | ||||||||||||
| Total assets measured at fair value on a recurring basis | $ | 623 | $ | 795,428 | $ | — | $ | 796,051 | ||||||||
| Liabilities measured at fair value on a recurring basis: | ||||||||||||||||
| Other liabilities | $ | — | $ | 3,380 | $ | — | $ | 3,380 | ||||||||
| Assets measured at fair value on a nonrecurring basis: | ||||||||||||||||
| Other real estate owned | $ | — | $ | — | $ | 3,591 | $ | 3,591 | ||||||||
| Loans held for sale | — | 54,782 | — | 54,782 | ||||||||||||
| Impaired loans | — | — | 46,499 | 46,499 | ||||||||||||
| Total assets measured at fair value on a nonrecurring basis | $ | — | $ | 54,782 | $ | 50,090 | $ | 104,872 | ||||||||
| December 31, 2022 | ||||||||||||||||||||||||||
| (Dollars in thousands) | Quoted Prices in Active Markets for Identical Asset (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value | ||||||||||||||||||||||
| Assets measured at fair value on a recurring basis: | ||||||||||||||||||||||||||
| Available-for-sale securities: | ||||||||||||||||||||||||||
| CMO | $ | — | $ | 506,380 | $ | — | $ | 506,380 | ||||||||||||||||||
| FNMA MBS | — | 3,250,258 | — | 3,250,258 | ||||||||||||||||||||||
| FHLMC MBS | — | 121,999 | — | 121,999 | ||||||||||||||||||||||
| GNMA MBS | — | 36,138 | — | 36,138 | ||||||||||||||||||||||
| GSE agency notes | — | 178,285 | — | 178,285 | ||||||||||||||||||||||
| Other assets | — | 156,912 | 81 | 156,993 | ||||||||||||||||||||||
| Total assets measured at fair value on a recurring basis | $ | — | $ | 4,249,972 | $ | 81 | $ | 4,250,053 | ||||||||||||||||||
| Liabilities measured at fair value on a recurring basis: | ||||||||||||||||||||||||||
| Other liabilities | $ | — | $ | 156,520 | $ | 17,102 | $ | 173,622 | ||||||||||||||||||
| Assets measured at fair value on a nonrecurring basis: | ||||||||||||||||||||||||||
| Other investments | $ | — | $ | — | $ | 26,120 | $ | 26,120 | ||||||||||||||||||
| Other real estate owned | — | — | 833 | 833 | ||||||||||||||||||||||
| Loans held for sale | — | 42,985 | — | 42,985 | ||||||||||||||||||||||
| Total assets measured at fair value on a nonrecurring basis | $ | — | $ | 42,985 | $ | 26,953 | $ | 69,938 | ||||||||||||||||||
Fair value is based uponon quoted market prices, where available. If such quoted market prices are not available, fair value is based uponon internally developed models or obtained from third parties that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include unobservable parameters. OurThe Company's valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While we believe ourthe Company believes its valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Available-for-sale securities
Other Assetsinvestments
Other assets includeinvestments includes equity investments without readily determinable fair values and equity method investments, which are categorized as Level 3. The Company’s equity investments without readily determinable fair values are held at cost, and are adjusted for any observable transactions during the fair value of derivativesreporting period and its equity method investments are initially recorded at cost based on the residential mortgage HFS loan pipeline. The derivatives representCompany’s percentage ownership in the amounts that would be requiredinvestee, and are adjusted to settle our derivative financial instruments atreflect the balance sheet date.
Other real estate owned
Other real estate owned consists of loan collateral which has been repossessed through foreclosure or other measures. Initially, foreclosed assets are recorded at the lower of the loan balance or fair value of the collateral less estimated selling costs. Subsequent to foreclosure, valuations are updated periodically and the assets may be marked down further, reflecting a new cost basis. The fair value of ourother real estate owned was estimated using Level 3 inputs based on appraisals obtained from third parties.
Loans held for sale
The fair value of our loans held for sale is based uponon estimates using Level 2 inputs. These inputs are based uponon pricing information obtained from secondary marketswholesale mortgage banks and brokers and applied to loans with similar interest rates and maturities.
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Other assets is determined based on the appraisals by qualified licensed appraisers hired by us. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, estimated costs to sell, and/or management’s expertise and knowledge of the client and the client’s business.
Other liabilities
Other liabilities include the fair value of interest rate products, derivatives on the residential mortgage held for sale loan pipeline, foreign exchange forward contracts, risk participation agreements, and $51.6 million at December 31, 2017derivative related to the sale of certain Visa Class B common shares. Valuation of interest rate products is obtained from an independent pricing service and December 31, 2016, respectively. Thealso from the derivative counterparty. Valuation of the derivative related to the residential mortgage held for sale loan pipeline is based on valuation allowance on impairedof the loans was $5.0 millionheld for sale portfolio as described above in Loans held for sale. Valuation of December 31, 2017foreign exchange forward contracts and $3.4 million asrisk participation agreements are obtained from an independent pricing service. Valuation of December 31, 2016.the derivative related to the sale of certain Visa Class B common shares is based on: (i) the agreed upon graduated fee structure; (ii) the length of time until the resolution of the Visa covered litigation; and (iii) the estimated impact of dilution in the conversion ratio of Class B shares resulting from changes in the Visa covered litigation.
The reported fair values of financial instruments are based on a variety of factors. In certain cases, fair values represent quoted market prices for identical or comparable instruments. In other cases, fair values have been estimated based on assumptions regarding the amount and timing of estimated future cash flows that are discounted to reflect current market rates and varying degrees of risk. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of period-end or that will be realized in the future.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash, and cash equivalents, and restricted cash
For cash and short-term investment securities, including due from banks, federal funds sold or purchased under agreements to resell and interest-bearing deposits with other banks, the carrying amount is a reasonable estimate of fair value.
Investment securities
Investment securities include debt securities classified as held-to-maturity or available-for-sale. Fair value is estimated using quoted prices for similar securities, which we obtainthe Company obtains from a third party vendor. We utilizeThe Company uses one of the largest providers of securities pricing to the industry and management periodically assesses the inputs used by this vendor to price the various types of securities owned by usthe Company to validate the vendor’s methodology.methodology as described above in available-for-sale securities.
Other investments
Other investments includes equity investments without readily determinable fair values (see discussion in “Fair Value of Financial Assets and Liabilities” section above).
Loans held for sale
Loans held for sale are carried at their fair value (see discussion earlier in this note)“Fair Value of Financial Assets and Liabilities” section above).
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Loans and leases are estimated for portfolios of loanssegregated by portfolio segments with similar financial characteristics. Loans are segregated by type: commercial, commercial mortgages, construction, residential mortgages and consumer. For loans that reprice frequently, the book value approximates fair value.characteristics (see Note 2). The fair values of other typesloans and leases, with the exception of loansreverse mortgages, are estimated by discounting expected cash flows using the current rates at which similar loans would be made to borrowers with comparable credit ratings and for similar remaining maturities. The fair values of reverse mortgages are based on the net present value of the expected cash flows using a discount rate specific to the reverse mortgages portfolio. The fair value of nonperforming loans is based on recent external appraisals of the underlying collateral.collateral, if the loan is collateral dependent. Estimated cash flows, discounted using a rate commensurate with current rates and the risk associated with the estimated cash flows, are utilizedused if appraisals are not available. This technique does not contemplate an exit price.
Stock in the Federal Home Loan Bank (FHLB) of Pittsburgh
The fair value of FHLB stock is assumed to be equal to its cost basis, since the stock is non-marketable but redeemable at its par value.
Accrued interest receivable
The carrying amounts of interest receivable approximate fair value.
Other assets
Other assets include among other items, other real estate owned (see discussion earlier in this note), derivative financial instruments and our investment in 359,744 shares of Visa Class B stock. Our derivative financial instruments include the interest rate lock commitments and forward sale commitments related to our mortgage banking activities. The fair values of the interest rate lock commitments and forward sale commitments represent the amounts that would be required to settle the derivative financial instrument at the balance sheet date.
Deposits
The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, money market and interest-bearing demand deposits, is assumed to be equal to the amount payable on demand. The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using rates currently offered for deposits with comparable remaining maturities.
Borrowed funds
Rates currently available to usthe Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.
Off-balance sheet instruments
The fair value of off-balance sheet instruments, including commitments to extend creditswap guarantees of $7.3 million and $10.4 million at December 31, 2023 and December 31, 2022, respectively, and standby letters of credit, approximates the recorded net deferred fee amounts, which are not significant.amounts. Because commitments to extend credit and letters of credit are generally not assignable by either usthe Company or the borrower, they only have value to usthe Company and the borrower. In determining the fair value of the swap guarantees, the Company assesses the underlying credit risk exposure for each borrower in a paying position to the third-party financial institution.
Accrued interest payable
The carrying amounts of interest payable approximate fair value.
Other liabilities
Other liabilities include the fair value of interest rate products, derivatives on the residential mortgage held for sale loan pipeline, foreign exchange forward contracts, risk participation agreements, and derivative related to the sale of certain Visa Class B common shares (see discussion in “Fair Value of Financial Assets and Liabilities” section above).
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Financial instruments measured at fair value using significant unobservable inputs (Level 3)
The following table provides a description of the valuation techniques and significant unobservable inputs for the Company's financial instruments classified as Level 3 as of December 31, 2023 and December 31, 2022:
| (Dollars in thousands) | December 31, 2023 | |||||||||||||||||||||||||
| Financial Instrument | Fair Value | Valuation Technique(s) | Unobservable Input | Range (Weighted Average) | ||||||||||||||||||||||
| Other investments | $ | 17,434 | Observed market comparable transactions | Period of observed transactions | December 2023 | |||||||||||||||||||||
| Other real estate owned | 1,569 | Fair market value of collateral | Costs to sell | 10.0%-20.0% (18.1%) | ||||||||||||||||||||||
| Other assets (Risk participation agreements purchased) | 78 | Credit Value Adjustment | CDS Spread and Loss Given Default (LGD) | CDS spread: 110 - 360 bps (195 bps) LGD: –% - 30% (30%) | ||||||||||||||||||||||
| Other liabilities (Risk participation agreements sold) | 3 | Credit Value Adjustment | CDS Spread and Loss Given Default (LGD) | CDS spread: 1 - 250 bps (95 bps) LGD: 30% | ||||||||||||||||||||||
| Other liabilities | 14,023 | Discounted cash flow | Timing of Visa litigation resolution | 1.00 - 4.75 years (3.06 years or 4Q 2025) | ||||||||||||||||||||||
| (Dollars in thousands) | December 31, 2022 | |||||||||||||||||||||||||
| Financial Instrument | Fair Value | Valuation Technique(s) | Unobservable Input | Range (Weighted Average) | ||||||||||||||||||||||
| Other investments | $ | 26,120 | Observed market comparable transactions | Period of observed transactions | May 2022 | |||||||||||||||||||||
| Other real estate owned | 833 | Fair market value of collateral | Costs to sell | 10.0% | ||||||||||||||||||||||
| Other assets (Risk participation agreements purchased) | 81 | Credit Value Adjustment | CDS Spread and Loss Given Default (LGD) | CDS spread: 110 - 250 bps (205 bps) LGD: –% - 30% (30%) | ||||||||||||||||||||||
| Other liabilities (Risk participation agreements sold) | 2 | Credit Value Adjustment | CDS Spread and Loss Given Default (LGD) | CDS spread: 1 - 250 bps (158 bps) LGD: 30% | ||||||||||||||||||||||
| Other liabilities (Financial derivative related to sales of certain Visa Class B shares) | 17,100 | Discounted cash flow | Timing of Visa litigation resolution | 1.00 - 5.75 years (3.61 years or 4Q 2025) | ||||||||||||||||||||||
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The book value and estimated fair value of ourthe Company's financial instruments are as follows:
| December 31, | |||||||||||||||||||||||||||||
Fair Value Measurement | 2023 | 2022 | |||||||||||||||||||||||||||
| (Dollars in thousands) | Book Value | Fair Value | Book Value | Fair Value | |||||||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||||||||
| Cash, cash equivalents and restricted cash | Level 1 | $ | 1,092,900 | $ | 1,092,900 | $ | 837,258 | $ | 837,258 | ||||||||||||||||||||
| Investment securities, available for sale | Level 2 | 3,846,537 | 3,846,537 | 4,093,060 | 4,093,060 | ||||||||||||||||||||||||
| Investment securities, held to maturity, net | Level 2 | 1,058,557 | 985,931 | 1,111,619 | 1,040,104 | ||||||||||||||||||||||||
| Other investments | Level 3 | 17,434 | 17,434 | 26,120 | 26,120 | ||||||||||||||||||||||||
| Loans, held for sale | Level 2 | 29,268 | 29,268 | 42,985 | 42,985 | ||||||||||||||||||||||||
Loans and leases, net(1) | Level 3 | 12,583,202 | 12,514,431 | 11,759,992 | 11,567,888 | ||||||||||||||||||||||||
| Stock in FHLB of Pittsburgh | Level 2 | 15,398 | 15,398 | 24,116 | 24,116 | ||||||||||||||||||||||||
| Accrued interest receivable | Level 2 | 85,979 | 85,979 | 74,448 | 74,448 | ||||||||||||||||||||||||
| Other assets | Levels 2, 3 | 153,647 | 153,647 | 156,993 | 156,993 | ||||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||||||||
| Deposits | Level 2 | $ | 16,474,086 | $ | 16,449,198 | $ | 16,203,569 | $ | 16,156,124 | ||||||||||||||||||||
| Borrowed funds | Level 2 | 895,076 | 912,760 | 726,894 | 709,014 | ||||||||||||||||||||||||
| Standby letters of credit | Level 3 | 814 | 814 | 739 | 739 | ||||||||||||||||||||||||
| Accrued interest payable | Level 2 | 46,684 | 46,684 | 5,174 | 5,174 | ||||||||||||||||||||||||
| Other liabilities | Levels 2, 3 | 151,642 | 151,642 | 173,622 | 173,622 | ||||||||||||||||||||||||
| December 31, | |||||||||||||||||
Fair Value Measurement | 2017 | 2016 | |||||||||||||||
| (Dollars in thousands) | Book Value | Fair Value | Book Value | Fair Value | |||||||||||||
| Financial assets: | |||||||||||||||||
| Cash and cash equivalents | Level 1 | $ | 723,866 | $ | 723,866 | $ | 821,923 | $ | 821,923 | ||||||||
| Investment securities available for sale | See previous table | 838,122 | 838,122 | 794,543 | 794,543 | ||||||||||||
| Investment securities held to maturity | Level 2 | 161,186 | 162,853 | 164,346 | 163,232 | ||||||||||||
| Loans, held for sale | See previous table | 31,055 | 31,055 | 54,782 | 54,782 | ||||||||||||
Loans, net (1) | Level 3(r) | 4,719,229 | 4,699,458 | 4,397,876 | 4,300,963 | ||||||||||||
| Impaired loans, net | Level 3 | 57,089 | 57,089 | 46,499 | 46,499 | ||||||||||||
| Stock in Federal Home Loan Bank of Pittsburgh | Level 2 | 31,284 | 31,284 | 38,248 | 38,248 | ||||||||||||
| Accrued interest receivable | Level 2 | 19,405 | 19,405 | 17,027 | 17,027 | ||||||||||||
| Other assets | Level 3 | 16,931 | 47,586 | 9,189 | 15,787 | ||||||||||||
| Financial liabilities: | |||||||||||||||||
| Deposits | Level 2 | $ | 5,247,604 | $ | 4,848,588 | $ | 4,738,438 | $ | 4,423,921 | ||||||||
| Borrowed funds | Level 2 | 937,806 | 937,605 | 1,267,447 | 1,264,170 | ||||||||||||
| Standby letters of credit | Level 3 | 603 | 603 | 468 | 468 | ||||||||||||
| Accrued interest payable | Level 2 | 1,037 | 1,037 | 1,151 | 1,151 | ||||||||||||
| Other liabilities | Level 2 | 3,188 | 3,188 | 3,380 | 3,380 | ||||||||||||
(1) Excludes impaired loans, net. | |||||||||||||||||
(r) In 2017, we reclassified Loans, net as “Level 3” for all periods presented. See Note 1 for further information. | |||||||||||||||||
At December 31, 20172023 and December 31, 2016 we2022 the Company had no commitments to extend credit measured at fair value.
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19. DERIVATIVE FINANCIAL INSTRUMENTS
Risk Management Objective of Using Derivatives
Fair Values of Derivative Instruments
The table below presents the fair value of our derivative financial instruments as well as their classificationlocation on the Consolidated Statements of Financial Condition as of December 31, 2017.2023.
| Fair Values of Derivative Instruments | ||||||||||||||||||||||||||
| (Dollars in thousands) | Count | Notional | Balance Sheet Location | Derivatives (Fair Value) | ||||||||||||||||||||||
| Derivatives designated as hedging instruments: | ||||||||||||||||||||||||||
| Interest rate products | 9 | $ | 750,000 | Other assets | $ | 15,578 | ||||||||||||||||||||
| Total | $ | 750,000 | $ | 15,578 | ||||||||||||||||||||||
| Derivatives not designated as hedging instruments: | ||||||||||||||||||||||||||
| Interest rate products | $ | 2,428,306 | Other assets | $ | 136,924 | |||||||||||||||||||||
| Interest rate products | 2,383,443 | Other liabilities | (136,924) | |||||||||||||||||||||||
| Interest rate lock commitments with customers | 34,651 | Other assets | 637 | |||||||||||||||||||||||
| Forward sale commitments | 1,000 | Other assets | 1 | |||||||||||||||||||||||
| Forward sale commitments | 37,348 | Other liabilities | (283) | |||||||||||||||||||||||
| FX forwards | 15,812 | Other assets | 429 | |||||||||||||||||||||||
| FX forwards | 13,064 | Other liabilities | (409) | |||||||||||||||||||||||
| Risk participation agreements sold | 103,648 | Other liabilities | (3) | |||||||||||||||||||||||
| Risk participation agreements purchased | 116,804 | Other assets | 78 | |||||||||||||||||||||||
| Financial derivative related to sales of certain Visa Class B shares | 113,177 | Other liabilities | (14,023) | |||||||||||||||||||||||
| Total derivatives | $ | 5,997,253 | $ | 2,005 | ||||||||||||||||||||||
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| Fair Values of Derivative Instruments | |||||||||
| December 31, 2017 | |||||||||
| (Dollars in thousands) | Notional | Balance Sheet Location | Fair Value | ||||||
| Derivatives designated as hedging instruments: | |||||||||
| Interest Rate Products | $ | 75,000 | Other Liabilities | $ | (3,172 | ) | |||
| Total | 75,000 | $ | (3,172 | ) | |||||
| Derivatives not designated as hedging instruments: | |||||||||
| Interest Rate Lock Commitment with Customers | $ | 44,079 | Other Assets | $ | 571 | ||||
| Interest Rate Lock Commitment with Customers | 8,992 | Other Liabilities | (23 | ) | |||||
| Forward Sale Commitments | 29,064 | Other Assets | 180 | ||||||
| Forward Sale Commitments | 19,192 | Other Liabilities | (47 | ) | |||||
| Total | 101,327 | 681 | |||||||
| Total derivatives | 176,327 | (2,491 | ) | ||||||
| Fair Values of Derivative Instruments | ||||||||||||||||||||||||||
| (Dollars in thousands) | Notional | Balance Sheet Location | Derivatives (Fair Value) | |||||||||||||||||||||||
| Derivatives not designated as hedging instruments: | ||||||||||||||||||||||||||
| Interest rate products | $ | 1,794,678 | Other assets | $ | 156,414 | |||||||||||||||||||||
| Interest rate products | 1,794,678 | Other liabilities | (156,414) | |||||||||||||||||||||||
| Interest rate lock commitments with customers | 24,673 | Other assets | 385 | |||||||||||||||||||||||
| Interest rate lock commitments with customers | 1,179 | Other liabilities | (7) | |||||||||||||||||||||||
| Forward sale commitments | 9,072 | Other assets | 75 | |||||||||||||||||||||||
| Forward sale commitments | 20,719 | Other liabilities | (54) | |||||||||||||||||||||||
| FX forwards | 4,177 | Other assets | 38 | |||||||||||||||||||||||
| FX forwards | 3,052 | Other liabilities | (45) | |||||||||||||||||||||||
| Risk participation agreements sold | 68,459 | Other liabilities | (2) | |||||||||||||||||||||||
| Risk participation agreements purchased | 87,168 | Other assets | 81 | |||||||||||||||||||||||
| Financial derivative related to sales of certain Visa Class B shares | 113,177 | Other liabilities | (17,100) | |||||||||||||||||||||||
| Total derivatives | $ | 3,921,032 | $ | (16,629) | ||||||||||||||||||||||
Effect of Derivative Instruments on the Income Statement
The table below presents the effect of the derivative financial instruments on the unaudited Consolidated Statements of Income for the years ended December 31, 2023 and December 31, 2022.
| Amount of Gain Recognized in OCI on Derivative (Effective Portion) | Location of Gain Reclassified from Accumulated OCI into Income (Effective Portion) | |||||||||||||||||||||||||
| (Dollars in thousands) | Year Ended December 31, | |||||||||||||||||||||||||
| Derivatives in Cash Flow Hedging Relationships | 2023 | 2022 | 2021 | |||||||||||||||||||||||
| Interest Rate Products | $ | 1,596 | $ | — | $ | — | Interest income | |||||||||||||||||||
| Total | $ | 1,596 | $ | — | $ | — | ||||||||||||||||||||
| Amount of (Loss) or Gain Recognized in Income | Location of Gain (Loss) Recognized in Income | |||||||||||||||||||||||||
| (Dollars in thousands) | Year Ended December 31, | |||||||||||||||||||||||||
| Derivatives Not Designated as a Hedging Instrument | 2023 | 2022 | 2021 | |||||||||||||||||||||||
| Interest rate products | $ | 10,294 | $ | 7,576 | $ | — | Other income | |||||||||||||||||||
| Interest rate lock commitments with customers | 274 | (2,072) | (6,218) | Mortgage banking activities, net | ||||||||||||||||||||||
| Forward sale commitments | 65 | 4,863 | 3,263 | Mortgage banking activities, net | ||||||||||||||||||||||
| FX forwards | 130 | 80 | — | Other income | ||||||||||||||||||||||
| Risk participation agreements | (5) | (195) | — | Other income | ||||||||||||||||||||||
| Total | $ | 10,758 | $ | 10,252 | $ | (2,955) | ||||||||||||||||||||
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Derivatives designated as hedging instruments:
Cash Flow Hedges of Interest Rate Risk
The effective portionCompany has agreements with certain derivative counterparties that contain a provision under which, if it defaults on any of changesits indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. The Company also has agreements with certain derivative counterparties that contain a provision where if it fails to maintain its status as a well-capitalized or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.
During 2023, the Company purchased nine interest rate floors at a premium of $14.7 million with an aggregate notional amount of $750.0 million to hedge variable cash flows associated with a variable rate loan pool through the fourth quarter of 2026. Changes to the fair value of derivatives designated and that qualify as cash flow hedges isare recorded in accumulated other comprehensive income (loss) income and is subsequently reclassified into earnings in the period that the hedged forecast transaction affects earnings. If the Company determines that a cash flow hedge is no longer highly effective, future changes in the fair value of the hedging instrument would be reported in earnings. As of December 31, 2023, the Company determined the cash flow hedges remain highly effective. During the year ended December 31, 2017, such2023, $1.2 million of amortization expense on the premium was reclassified into interest income. The Company does not expect any unrealized gains or losses related to cash flow hedges to be reclassified into earnings in the next twelve months.
In 2020, the Company terminated its three interest rate derivatives that were useddesignated as cash flow hedges for a net gain of $1.3 million, recognized in accumulated other comprehensive income (loss). Hedge accounting was discontinued, and the net gain in accumulated comprehensive income (loss) is reclassified into earnings when the transaction affects earnings. As the underlying hedged transaction continues to hedgebe probable, the variable cash flows associated with$1.3 million net gain will be recognized into earnings on a variable rate loan pool. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.straight-line basis over each derivative's original contract term. During the year ended December 31, 2017, we did not record any hedge ineffectiveness.
2022. As of December 31, 2017, the2023, this gain has been fully recognized and reclassified to interest income.
Derivatives not designated as hedging instruments:
Customer Derivatives – Interest Rate Swaps
The Company had three outstandingenters into interest rate derivativesswaps with a notional amount of $75 million that werecommercial loan customers wishing to manage interest rate risk. The Company then enters into corresponding swap agreements with swap dealer counterparties to economically hedge the exposure arising from these contracts. The interest rate swaps with both the customers and third parties are not designated as hedges under ASC 815, Derivatives and Hedging (ASC 815) and are marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by ASC 820. As of December 31, 2023, there were no fair value adjustments related to credit quality.
Derivative Financial Instruments from Mortgage Banking Activities
Derivative financial instruments related to mortgage banking activities are recorded at fair value and are not designated as accounting hedges. This includes commitments to originate certain fixed-rate residential loans to customers, also referred to as interest rate lock commitments. The Company may also enter into forward sale commitments to sell loans to investors at a cash flow hedges offixed price at a future date and trade asset-backed securities to mitigate interest rate risk.
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The Company enters into foreign exchange forward contracts (FX forwards) with customers to exchange one currency for another on an agreed date in the future at an agreed exchange rate. The Company then enters into corresponding FX forwards with swap dealer counterparties to economically hedge its exposure on the exchange rate component of the customer agreements. The FX forwards with both the customers and third parties are not designated as hedges under ASC 815 and are marked to market through earnings. Exposure to gains and losses on these contracts increase or decrease over their respective lives as currency exchange and interest rates fluctuate. As the FX forwards are structured to offset each other, changes to the underlying term structure of currency exchange rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by ASC 820. As of December 31, 2023, there were no fair value adjustments related to credit quality.
Risk Participation Agreements
The Company may enter into a risk participation agreement (RPA) with another institution as a means to assume a portion of the credit risk associated with a loan structure which includes a derivative instrument, in exchange for fee income commensurate with the risk assumed. This type of derivative is referred to as an “RPA sold.” In addition, in an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the Company has provided a loan structured with a derivative, the Company may purchase an RPA from an institution participating in the facility in exchange for a fee commensurate with the risk shared. This type of derivative is referred to as an “RPA purchased.”
The following are not included in the tables in Fair Values of Derivative Instruments:
Swap Guarantees
The Company entered into an agreement with one unrelated financial institution whereby that financial institution entered into interest rate derivative contracts (interest rate swap transactions) directly with customers referred to them by the Company. Under the terms of the agreements, those financial institutions have recourse to us for any exposure created under each swap transaction, only in the event that the customer defaults on the Income Statementswap agreement and the agreement is in a paying position to the third-party financial institution. This is a customary arrangement that allows us to provide access to interest rate swap transactions for our customers without creating the swap ourselves. These swap guarantees are accounted for as credit derivatives.
Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) | Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | ||||||||
| (Dollars in thousands) | Twelve Months Ended | ||||||||
| Derivatives in Cash Flow Hedging Relationships | 2017 | 2016 | |||||||
| Interest Rate Products | $ | 184 | $ | (2,890 | ) | Interest expense | |||
| Total | $ | 184 | $ | (2,890 | ) | ||||
| Amount of Gain or (Loss) Recognized in Income | Location of Gain or (Loss) recognized in income | ||||||||
| (Dollars in thousands) | Twelve Months Ended | ||||||||
| Derivatives Not Designated as a Hedging Instrument | 2017 | 2016 | |||||||
| Interest Rate Lock Commitments | 680 | — | Mortgage banking activity, net | ||||||
| Forward Sale Commitments | (986 | ) | — | Mortgage banking activity, net | |||||
| Total | (306 | ) | — | ||||||
Credit-risk-related Contingent Features
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20. RELATED PARTY TRANSACTIONS
In the ordinary course of business, from time to time we enterthe Company enters into transactions with related parties, including, but not limited to, ourits officers and directors. These transactions are made on substantially the same terms and conditions, including interest rates and collateral requirements, as those prevailing at the same time for comparable transactions with other customers. They do not, in the opinion of management, involve greater than normal credit risk or include other features unfavorable features.to the Company. Any related party loans exceeding $0.5 million require review and approval by the Board of Directors. There was one extension of credit to related parties exceeding $0.5 million originated during the year ended December 31, 2023 and no extensions of credit to related parties originated during the year ended December 31, 2022.
During 2023, all new loans and credit line advances to related parties were $4.0 million and repayments were $5.6 million. The outstanding balances of loans to related parties at December 31, 20172023 and 20162022 were $1.2$0.4 million and $1.3$3.9 million, respectively. Total deposits from related parties at December 31, 20172023 and 20162022 were $5.4$9.7 million and $3.6 million, respectively. During 2017, new loans and credit line advances to related parties totaled $0.6 million and repayments were $0.7$5.8 million.
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As defined in FASB ASC 280, Segment Reporting (ASC(ASC 280), an operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the enterprise’s chief operating decision makers to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. We evaluate segmentThe Company evaluates performance based on pretax ordinarynet income relative to resources used, and allocate resources based on these results. The accounting policies applicable to ourthe Company's segments are those that apply to ourits preparation of the accompanying Consolidated Financial Statements. Based on these criteria, we havethe Company has identified three segments: WSFS Bank, Cash Connect®Connect®, and Wealth Management. We evaluate segment performance based on pretax ordinary income relative to resources used, and allocate resources based on these results.
The WSFS Bank segment provides financial products to commercial and retailconsumer customers. RetailConsumer and Commercial Banking, Commercial Real Estate Lending and other banking business units are operating departments of WSFS.WSFS Bank. These departments share the same regulator,regulators, the same market, many of the same customers and provide similar products and services through the general infrastructure of the Bank. Because of the following and other reasons,Accordingly, these departments are not considered discrete segments and are appropriately aggregated withinin the WSFS Bank segment in accordance with ASC 280.segment.
The Company's Cash Connect®Connect® segment provides ATM vault cash, cashsmart safe and other cash logistics services in the U.S. through strategic partnerships with several of the largest networks, manufacturers and service providers in the ATM industry. Cash Connect® services non-bank and WSFS-branded ATMs and smart safes nationwide. The balance sheet category Cash in non-owned ATMs includes cash from which fee income is earned through bailment arrangements with customers of Cash Connect®Connect®.
The Wealth Management segment provides a broad array of fiduciary,planning and advisory services, investment management, trust services, and credit and deposit products to clients through six business lines. WSFS Wealth Investments provides insurance and brokerage products primarily to our retail banking clients. Cypress, a registered investment adviser whose primary market segment is high-net-worth individuals, offers a "balanced" investment style focused on preservation of capital and providing current income. West Capital, a registered investment adviser, is a fee-only wealth management firm which operates under a multi-family office philosophy and provides fully-customized solutions tailored to the unique needs of institutions and high-net-worth individuals. Christiana Trust provides fiduciary and investment services to personal trust clients, and trustee, agency, bankruptcy administration, custodial and commercial domicile services toindividual, corporate, and institutional clients. PowdermillBryn Mawr Trust® is our predominant Private Wealth Management brand, providing advisory, investment management and trustee services to institutions, affluent and high-net-worth individuals. Private Wealth Management, which includes Private Banking, serves high-net-worth clients and institutions by providing trustee and advisory services, financial planning, customized investment strategies, brokerage products such as annuities and customized banking services including credit and deposit products tailored to its clientele. Private Wealth Management includes businesses that operate under the bank’s charter, through a broker/dealer and as a registered investment advisor (RIA). It generates revenue through fee-only arrangements, net interest income and other fee-only services such as estate administration, trust tax planning and custody. Powdermill® is a multi-family office that specializesspecializing in providing unique, independent solutions to high-net-worth individuals, families and corporate executives through a coordinated, centralized approach. WSFS Private Banking serves high-net-worth clients by delivering credit and deposit products and partnering with other business units to deliver investment management
The Bryn Mawr Trust Company of Delaware provides personal trust and fiduciary productsservices to families and services.individuals across the U.S. and internationally. WSFS Institutional Services® provides trustee, agency, bankruptcy administration, custodial and commercial domicile services to institutional, corporate clients and special purpose vehicles.
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The following tables show segment results of operations for the years ended December 31, 2017, 2016,2023, 2022, and 2015 shown in the2021:
| Year Ended December 31, 2023 | |||||||||||||||||||||||
| (Dollars in thousands) | WSFS Bank | Cash Connect® | Wealth Management | Total | |||||||||||||||||||
| Statements of Income | |||||||||||||||||||||||
| External customer revenues: | |||||||||||||||||||||||
| Interest income | $ | 955,050 | $ | — | $ | 21,472 | $ | 976,522 | |||||||||||||||
| Noninterest income | 74,951 | 82,468 | 132,452 | 289,871 | |||||||||||||||||||
| Total external customer revenues | 1,030,001 | 82,468 | 153,924 | 1,266,393 | |||||||||||||||||||
| Inter-segment revenues: | |||||||||||||||||||||||
| Interest income | 28,202 | 1,384 | 98,895 | 128,481 | |||||||||||||||||||
| Noninterest income | 29,199 | 1,930 | 568 | 31,697 | |||||||||||||||||||
| Total inter-segment revenues | 57,401 | 3,314 | 99,463 | 160,178 | |||||||||||||||||||
| Total revenue | 1,087,402 | 85,782 | 253,387 | 1,426,571 | |||||||||||||||||||
| External customer expenses: | |||||||||||||||||||||||
| Interest expense | 221,713 | — | 29,706 | 251,419 | |||||||||||||||||||
| Noninterest expenses | 425,703 | 59,485 | 76,445 | 561,633 | |||||||||||||||||||
| Provision for credit losses | 87,529 | — | 542 | 88,071 | |||||||||||||||||||
| Total external customer expenses | 734,945 | 59,485 | 106,693 | 901,123 | |||||||||||||||||||
| Inter-segment expenses | |||||||||||||||||||||||
| Interest expense | 100,279 | 16,348 | 11,854 | 128,481 | |||||||||||||||||||
| Noninterest expenses | 2,498 | 5,714 | 23,485 | 31,697 | |||||||||||||||||||
| Total inter-segment expenses | 102,777 | 22,062 | 35,339 | 160,178 | |||||||||||||||||||
| Total expenses | 837,722 | 81,547 | 142,032 | 1,061,301 | |||||||||||||||||||
| Income before taxes | $ | 249,680 | $ | 4,235 | $ | 111,355 | $ | 365,270 | |||||||||||||||
| Income tax provision | 96,245 | ||||||||||||||||||||||
| Consolidated net income | $ | 269,025 | |||||||||||||||||||||
| Net income attributable to noncontrolling interest | (131) | ||||||||||||||||||||||
| Net income attributable to WSFS | $ | 269,156 | |||||||||||||||||||||
| Supplemental Information | |||||||||||||||||||||||
| Capital expenditures for the period ended | $ | 6,335 | $ | — | $ | 71 | $ | 6,406 | |||||||||||||||
135
| Year Ended December 31, 2022 | |||||||||||||||||||||||
| (Dollars in thousands) | WSFS Bank | Cash Connect® | Wealth Management | Total | |||||||||||||||||||
| Statements of Income | |||||||||||||||||||||||
| External customer revenues: | |||||||||||||||||||||||
| Interest income | $ | 690,780 | $ | — | $ | 13,035 | $ | 703,815 | |||||||||||||||
| Noninterest income | 79,800 | 55,519 | 124,815 | 260,134 | |||||||||||||||||||
| Total external customer revenues | 770,580 | 55,519 | 137,850 | 963,949 | |||||||||||||||||||
| Inter-segment revenues: | |||||||||||||||||||||||
| Interest income | 14,348 | 1,536 | 46,539 | 62,423 | |||||||||||||||||||
| Noninterest income | 27,534 | 1,610 | 654 | 29,798 | |||||||||||||||||||
| Total inter-segment revenues | 41,882 | 3,146 | 47,193 | 92,221 | |||||||||||||||||||
| Total revenue | 812,462 | 58,665 | 185,043 | 1,056,170 | |||||||||||||||||||
| External customer expenses: | |||||||||||||||||||||||
| Interest expense | 37,393 | — | 3,532 | 40,925 | |||||||||||||||||||
| Noninterest expenses | 465,999 | 36,777 | 71,550 | 574,326 | |||||||||||||||||||
| Provision for credit losses | 47,921 | — | 168 | 48,089 | |||||||||||||||||||
| Total external customer expenses | 551,313 | 36,777 | 75,250 | 663,340 | |||||||||||||||||||
| Inter-segment expenses | |||||||||||||||||||||||
| Interest expense | 48,075 | 9,831 | 4,517 | 62,423 | |||||||||||||||||||
| Noninterest expenses | 2,264 | 4,720 | 22,814 | 29,798 | |||||||||||||||||||
| Total inter-segment expenses | 50,339 | 14,551 | 27,331 | 92,221 | |||||||||||||||||||
| Total expenses | 601,652 | 51,328 | 102,581 | 755,561 | |||||||||||||||||||
| Income before taxes | $ | 210,810 | $ | 7,337 | $ | 82,462 | $ | 300,609 | |||||||||||||||
| Income tax provision | 77,961 | ||||||||||||||||||||||
| Consolidated net income | $ | 222,648 | |||||||||||||||||||||
| Net income attributable to noncontrolling interest | 273 | ||||||||||||||||||||||
| Net income attributable to WSFS | $ | 222,375 | |||||||||||||||||||||
| Supplemental Information | |||||||||||||||||||||||
| Capital expenditures for the period ended | $ | 8,793 | $ | 16 | $ | — | $ | 8,809 | |||||||||||||||
136
| Year Ended December 31, 2021 | |||||||||||||||||||||||
| (Dollars in thousands) | WSFS Bank | Cash Connect® | Wealth Management | Total | |||||||||||||||||||
| Statements of Income | |||||||||||||||||||||||
| External customer revenues: | |||||||||||||||||||||||
| Interest income | $ | 447,542 | $ | — | $ | 8,827 | $ | 456,369 | |||||||||||||||
| Noninterest income | 79,310 | 42,818 | 63,352 | 185,480 | |||||||||||||||||||
| Total external customer revenues | 526,852 | 42,818 | 72,179 | 641,849 | |||||||||||||||||||
| Inter-segment revenues: | |||||||||||||||||||||||
| Interest income | 3,460 | 1,088 | 12,002 | 16,550 | |||||||||||||||||||
| Noninterest income | 15,988 | 1,240 | 1,354 | 18,582 | |||||||||||||||||||
| Total inter-segment revenues | 19,448 | 2,328 | 13,356 | 35,132 | |||||||||||||||||||
| Total revenue | 546,300 | 45,146 | 85,535 | 676,981 | |||||||||||||||||||
| External customer expenses: | |||||||||||||||||||||||
| Interest expense | 22,058 | — | 662 | 22,720 | |||||||||||||||||||
| Noninterest expenses | 328,277 | 29,465 | 20,774 | 378,516 | |||||||||||||||||||
| Recovery of credit losses | (113,715) | — | (3,372) | (117,087) | |||||||||||||||||||
| Total external customer expenses | 236,620 | 29,465 | 18,064 | 284,149 | |||||||||||||||||||
| Inter-segment expenses | |||||||||||||||||||||||
| Interest expense | 13,090 | 856 | 2,604 | 16,550 | |||||||||||||||||||
| Noninterest expenses | 2,594 | 4,636 | 11,352 | 18,582 | |||||||||||||||||||
| Total inter-segment expenses | 15,684 | 5,492 | 13,956 | 35,132 | |||||||||||||||||||
| Total expenses | 252,304 | 34,957 | 32,020 | 319,281 | |||||||||||||||||||
| Income before taxes | $ | 293,996 | $ | 10,189 | $ | 53,515 | $ | 357,700 | |||||||||||||||
| Income tax provision | 86,095 | ||||||||||||||||||||||
| Consolidated net income | $ | 271,605 | |||||||||||||||||||||
| Net loss attributable to noncontrolling interest | 163 | ||||||||||||||||||||||
| Net income attributable to WSFS | $ | 271,442 | |||||||||||||||||||||
| Supplemental Information | |||||||||||||||||||||||
| Capital expenditures for the period ended | $ | 6,344 | $ | 232 | $ | — | $ | 6,576 | |||||||||||||||
The following table.
| Year Ended December 31, 2017 | |||||||||||||||
| (Dollars in thousands) | WSFS Bank | Cash Connect | Wealth Management | Total | |||||||||||
| External customer revenues: | |||||||||||||||
| Interest income | $ | 245,932 | $ | — | $ | 8,794 | $ | 254,726 | |||||||
| Noninterest income | 45,749 | 42,641 | 36,254 | 124,644 | |||||||||||
| Total external customer revenues | 291,681 | 42,641 | 45,048 | 379,370 | |||||||||||
| Inter-segment revenues: | |||||||||||||||
| Interest income | 9,567 | — | 9,012 | 18,579 | |||||||||||
| Noninterest income | 7,651 | 810 | 146 | 8,607 | |||||||||||
| Total inter-segment revenues | 17,218 | 810 | 9,158 | 27,186 | |||||||||||
| Total revenue | 308,899 | 43,451 | 54,206 | 406,556 | |||||||||||
| External customer expenses: | |||||||||||||||
| Interest expense | 32,249 | — | 1,206 | 33,455 | |||||||||||
| Noninterest expenses | 158,942 | 26,654 | 40,865 | 226,461 | |||||||||||
| Provision for loan losses | 10,527 | — | 437 | 10,964 | |||||||||||
| Total external customer expenses | 201,718 | 26,654 | 42,508 | 270,880 | |||||||||||
| Inter-segment expenses | |||||||||||||||
| Interest expense | 9,012 | 6,812 | 2,755 | 18,579 | |||||||||||
| Noninterest expenses | 956 | 2,603 | 5,048 | 8,607 | |||||||||||
| Total inter-segment expenses | 9,968 | 9,415 | 7,803 | 27,186 | |||||||||||
| Total expenses | 211,686 | 36,069 | 50,311 | 298,066 | |||||||||||
| Income before taxes | $ | 97,213 | $ | 7,382 | $ | 3,895 | $ | 108,490 | |||||||
| Provision for income taxes | 58,246 | ||||||||||||||
| Consolidated net income | $ | 50,244 | |||||||||||||
| Year Ended December 31, 2016 | |||||||||||||||
| (Dollars in thousands) | WSFS Bank | Cash Connect | Wealth Management | Total | |||||||||||
| External customer revenues: | |||||||||||||||
| Interest income | $ | 208,525 | $ | — | $ | 8,053 | $ | 216,578 | |||||||
| Noninterest income | 42,565 | 35,776 | (r) | 26,720 | 105,061 | ||||||||||
| Total external customer revenues | 251,090 | 35,776 | 34,773 | 321,639 | |||||||||||
| Inter-segment revenues: | |||||||||||||||
| Interest income | 4,963 | — | 7,150 | 12,113 | |||||||||||
| Noninterest income | 8,145 | 835 | 118 | 9,098 | |||||||||||
| Total inter-segment revenues | 13,108 | 835 | 7,268 | 21,211 | |||||||||||
| Total revenue | 264,198 | 36,611 | 42,041 | 342,850 | |||||||||||
| External customer expenses: | |||||||||||||||
| Interest expense | 22,028 | — | 805 | 22,833 | |||||||||||
| Noninterest expenses | 146,526 | 22,442 | (r) | 19,698 | 188,666 | ||||||||||
| Provision for loan losses | 9,370 | — | 3,616 | 12,986 | |||||||||||
| Total external customer expenses | 177,924 | 22,442 | 24,119 | 224,485 | |||||||||||
| Inter-segment expenses | |||||||||||||||
| Interest expense | 7,150 | 2,915 | 2,048 | 12,113 | |||||||||||
| Noninterest expenses | 953 | 2,799 | 5,346 | 9,098 | |||||||||||
| Total inter-segment expenses | 8,103 | 5,714 | 7,394 | 21,211 | |||||||||||
| Total expenses | 186,027 | 28,156 | 31,513 | 245,696 | |||||||||||
| Income before taxes | $ | 78,171 | $ | 8,455 | $ | 10,528 | $ | 97,154 | |||||||
| Provision for income taxes | 33,074 | ||||||||||||||
| Consolidated net income | $ | 64,080 | |||||||||||||
| December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | WSFS Bank | Cash Connect® | Wealth Management | Total | WSFS Bank | Cash Connect® | Wealth Management | Total | |||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 600,483 | $ | 443,431 | $ | 48,986 | $ | 1,092,900 | $ | 317,022 | $ | 476,850 | $ | 43,386 | $ | 837,258 | |||||||||||||||||||||||||||||||
| Goodwill | 753,586 | — | 132,312 | 885,898 | 753,586 | — | 130,051 | 883,637 | |||||||||||||||||||||||||||||||||||||||
| Other segment assets | 18,191,585 | 15,654 | 408,635 | 18,615,874 | 17,824,946 | 10,429 | 358,485 | 18,193,860 | |||||||||||||||||||||||||||||||||||||||
| Total segment assets | $ | 19,545,654 | $ | 459,085 | $ | 589,933 | $ | 20,594,672 | $ | 18,895,554 | $ | 487,279 | $ | 531,922 | $ | 19,914,755 | |||||||||||||||||||||||||||||||
137
| Year Ended December 31, 2015 | |||||||||||||||
| WSFS Bank | Cash Connect | Wealth Management | Total | ||||||||||||
| (Dollars in thousands) | |||||||||||||||
| External customer revenues: | |||||||||||||||
| Interest income | $ | 174,636 | $ | — | $ | 7,940 | $ | 182,576 | |||||||
| Noninterest income | 37,042 | 30,421 | (r) | 22,793 | 90,256 | ||||||||||
| Total external customer revenues | 211,678 | 30,421 | 30,733 | 272,832 | |||||||||||
| Inter-segment revenues: | |||||||||||||||
| Interest income | 3,507 | — | 6,678 | 10,185 | |||||||||||
| Noninterest income | 7,988 | 873 | 96 | 8,957 | |||||||||||
| Total inter-segment revenues | 11,495 | 873 | 6,774 | 19,142 | |||||||||||
| Total revenue | 223,173 | 31,294 | 37,507 | 291,974 | |||||||||||
| External customer expenses: | |||||||||||||||
| Interest expense | 15,155 | — | 621 | 15,776 | |||||||||||
| Noninterest expenses | 129,138 | 19,271 | (r) | 17,051 | 165,460 | ||||||||||
| Provision for loan losses | 7,476 | — | 314 | 7,790 | |||||||||||
| Total external customer expenses | 151,769 | 19,271 | 17,986 | 189,026 | |||||||||||
| Inter-segment expenses | |||||||||||||||
| Interest expense | 6,678 | 1,547 | 1,960 | 10,185 | |||||||||||
| Noninterest expenses | 969 | 2,612 | 5,376 | 8,957 | |||||||||||
| Total inter-segment expenses | 7,647 | 4,159 | 7,336 | 19,142 | |||||||||||
| Total expenses | 159,416 | 23,430 | 25,322 | 208,168 | |||||||||||
| Income before taxes | $ | 63,757 | $ | 7,864 | $ | 12,185 | $ | 83,806 | |||||||
| Provision for income taxes | 30,273 | ||||||||||||||
| Consolidated net income | $ | 53,533 | |||||||||||||
| December 31, | |||||||||||||||||||||||||||||||
| 2017 | 2016 | ||||||||||||||||||||||||||||||
| (Dollars in thousands) | WSFS Bank | Cash Connect | Wealth Management | Total | WSFS Bank | Cash Connect | Wealth Management | Total | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 104,530 | $ | 611,385 | $ | 7,951 | $ | 723,866 | $ | 100,893 | $ | 717,643 | $ | 3,387 | $ | 821,923 | |||||||||||||||
| Goodwill | 145,808 | — | 20,199 | 166,007 | 147,396 | — | 20,143 | 167,539 | |||||||||||||||||||||||
| Other segment assets | 5,882,910 | 6,078 | 220,679 | 6,109,667 | 5,545,611 | 3,533 | 226,664 | 5,775,808 | |||||||||||||||||||||||
| Total segment assets | $ | 6,133,248 | $ | 617,463 | $ | 248,829 | $ | 6,999,540 | $ | 5,793,900 | $ | 721,176 | $ | 250,194 | $ | 6,765,270 | |||||||||||||||
| Capital expenditures | $ | 8,197 | $ | 184 | $ | 613 | $ | 8,994 | $ | 18,625 | $ | 769 | $ | 26 | $ | 19,420 | |||||||||||||||
Condensed Statements of Income
| Year Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | |||||||||||||||||
| Income: | ||||||||||||||||||||
| Interest income | $ | 817 | $ | 374 | $ | 357 | ||||||||||||||
| Realized gain (loss) on sale of equity investment | 9,493 | — | (706) | |||||||||||||||||
| Unrealized gains on equity investments, net | 2,489 | 5,379 | 5,389 | |||||||||||||||||
| Other noninterest income | 98,067 | 251,382 | 4,759 | |||||||||||||||||
| 110,866 | 257,135 | 9,799 | ||||||||||||||||||
| Expense: | ||||||||||||||||||||
| Interest expense | 16,610 | 11,763 | 7,771 | |||||||||||||||||
| Other operating expense | 6,965 | 11,489 | 7,508 | |||||||||||||||||
| 23,575 | 23,252 | 15,279 | ||||||||||||||||||
| Income (loss) before equity in undistributed income of subsidiaries | 87,291 | 233,883 | (5,480) | |||||||||||||||||
| Equity in undistributed income (loss) of subsidiaries | 182,396 | (12,672) | 276,208 | |||||||||||||||||
| Income before taxes | 269,687 | 221,211 | 270,728 | |||||||||||||||||
| Income tax expense (benefit) | 531 | (1,164) | (714) | |||||||||||||||||
| Net income attributable to WSFS | $ | 269,156 | $ | 222,375 | $ | 271,442 | ||||||||||||||
Condensed Statements of Financial Condition
| December 31, | ||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | ||||||||||||
| Assets: | ||||||||||||||
| Cash and cash equivalents | $ | 197,270 | $ | 205,841 | ||||||||||
| Investment in subsidiaries | 2,585,151 | 2,320,474 | ||||||||||||
Investment in Trusts(1) | 2,785 | 2,785 | ||||||||||||
| Other assets | 5,869 | 16,944 | ||||||||||||
| Total assets | $ | 2,791,075 | $ | 2,546,044 | ||||||||||
| Liabilities: | ||||||||||||||
| Trust preferred borrowings | $ | 90,638 | $ | 90,442 | ||||||||||
| Senior and subordinated debt | 218,400 | 248,169 | ||||||||||||
| Accrued interest payable | 949 | 1,168 | ||||||||||||
| Other liabilities | 3,452 | 1,152 | ||||||||||||
| Total liabilities | 313,439 | 340,931 | ||||||||||||
| Stockholders’ equity: | ||||||||||||||
| Common stock | 761 | 759 | ||||||||||||
| Capital in excess of par value | 1,984,746 | 1,974,210 | ||||||||||||
| Accumulated other comprehensive loss | (593,991) | (675,844) | ||||||||||||
| Retained earnings | 1,643,657 | 1,411,243 | ||||||||||||
| Treasury stock | (557,537) | (505,255) | ||||||||||||
| Total stockholders’ equity of WSFS | 2,477,636 | 2,205,113 | ||||||||||||
| Total liabilities and stockholders’ equity of WSFS | $ | 2,791,075 | $ | 2,546,044 | ||||||||||
(1)Includes WSFS Capital Trust III, Royal Bancshares Capital Trust I, and Royal Bancshares Capital Trust II.
138
| December 31, | 2017 | 2016 | |||||
| (Dollars in thousands) | |||||||
| Assets: | |||||||
| Cash | $ | 37,344 | $ | 103,018 | |||
| Investment in subsidiaries | 833,763 | 795,676 | |||||
| Investment in Capital Trust III | 2,011 | 2,011 | |||||
| Other assets | 17,465 | 6,480 | |||||
| Total assets | $ | 890,583 | $ | 907,185 | |||
| Liabilities: | |||||||
| Trust preferred securities | $ | 67,011 | $ | 67,011 | |||
| Senior debt | 98,171 | 152,050 | |||||
| Interest payable | 388 | 642 | |||||
| Other liabilities | 668 | 146 | |||||
| Total liabilities | 166,238 | 219,849 | |||||
| Stockholders’ equity: | |||||||
| Common stock | 563 | 580 | |||||
| Capital in excess of par value | 336,271 | 329,457 | |||||
| Accumulated other comprehensive loss | (8,152 | ) | (7,617 | ) | |||
| Retained earnings | 669,557 | 627,078 | |||||
| Treasury stock | (273,894 | ) | (262,162 | ) | |||
| Total stockholders’ equity | 724,345 | 687,336 | |||||
| Total liabilities and stockholders’ equity | $ | 890,583 | $ | 907,185 | |||
| Year Ended December 31, | 2017 | 2016 | 2015 | ||||||||
| (Dollars in thousands) | |||||||||||
| Income: | |||||||||||
| Interest income | $ | 3,167 | $ | 3,402 | $ | 1,780 | |||||
| Noninterest income | 20,528 | 68,498 | 30,180 | ||||||||
| 23,695 | 71,900 | 31,960 | |||||||||
| Expenses: | |||||||||||
| Interest expense | 9,168 | 7,979 | 5,124 | ||||||||
| Other operating expenses | 996 | 747 | 233 | ||||||||
| 10,164 | 8,726 | 5,357 | |||||||||
| Income before equity in undistributed income of subsidiaries | 13,531 | 63,174 | 26,603 | ||||||||
| Equity in undistributed income/(loss) of subsidiaries | 35,722 | (779 | ) | 25,765 | |||||||
| Income before taxes | 49,253 | 62,395 | 52,368 | ||||||||
| Income tax benefit | 991 | 1,685 | 1,165 | ||||||||
| Net income allocable to common stockholders | $ | 50,244 | $ | 64,080 | $ | 53,533 | |||||
Condensed Statements of Cash Flows
| Year Ended December 31, | ||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | |||||||||||||||||
| Operating activities: | ||||||||||||||||||||
| Net income attributable to WSFS | $ | 269,156 | $ | 222,375 | $ | 271,442 | ||||||||||||||
| Adjustments to reconcile net income to net cash provided by (used for) operating activities: | ||||||||||||||||||||
| Equity in undistributed (income) loss of subsidiaries | (182,396) | 12,672 | (276,208) | |||||||||||||||||
| Realized (gain) loss on sale of equity investments | (9,493) | — | 706 | |||||||||||||||||
| Unrealized gains on equity investments | (2,489) | (5,379) | (5,389) | |||||||||||||||||
| Decrease in other assets | 31,254 | 2,569 | 10,910 | |||||||||||||||||
| Increase (decrease) in other liabilities | 3,488 | 812 | (6,690) | |||||||||||||||||
| Net cash provided by (used for) operating activities | $ | 109,520 | $ | 233,049 | $ | (5,229) | ||||||||||||||
| Investing activities: | ||||||||||||||||||||
| Net cash for business combinations | $ | — | $ | 101,734 | $ | — | ||||||||||||||
| Net cash provided by investing activities | $ | — | $ | 101,734 | $ | — | ||||||||||||||
| Financing activities: | ||||||||||||||||||||
| Issuance of common stock and exercise of common stock options | $ | 3,298 | $ | 3,179 | $ | 1,522 | ||||||||||||||
| Redemption of senior and subordinated debt | (30,000) | — | (100,000) | |||||||||||||||||
| Purchase of treasury stock | (54,647) | (200,083) | (13,268) | |||||||||||||||||
| Dividends paid | (36,742) | (35,746) | (24,242) | |||||||||||||||||
| Net cash used for financing activities | $ | (118,091) | $ | (232,650) | $ | (135,988) | ||||||||||||||
| Decrease (increase) in cash and cash equivalents | $ | (8,571) | $ | 102,133 | $ | (141,217) | ||||||||||||||
| Cash and cash equivalents at beginning of period | 205,841 | 103,708 | 244,925 | |||||||||||||||||
| Cash and cash equivalents at end of period | $ | 197,270 | $ | 205,841 | $ | 103,708 | ||||||||||||||
139
| Year Ended December 31, | 2017 | 2016 | 2015 | ||||||||
| (Dollars in thousands) | |||||||||||
Operating activities: | |||||||||||
| Net income | $ | 50,244 | $ | 64,080 | $ | 53,533 | |||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Equity in undistributed (income)/loss of subsidiaries | (35,722 | ) | 779 | (25,765 | ) | ||||||
| Decrease in other assets | 1,618 | 133 | 3,925 | ||||||||
| Increase in other liabilities | 1,422 | 655 | 405 | ||||||||
| Net cash provided by operating activities | 17,562 | 65,647 | 32,098 | ||||||||
Investing activities: | |||||||||||
| Payments for investment in and advances to subsidiaries | (1,360 | ) | (119 | ) | — | ||||||
| Sale or repayment of investments in and advances to subsidiaries | 1,066 | 1,220 | 1,213 | ||||||||
| Net cash from business combinations | — | (57,604 | ) | (23,096 | ) | ||||||
| Investment in non-marketable securities | (10,072 | ) | (387 | ) | (3,589 | ) | |||||
| Net cash used for investing activities | (10,366 | ) | (56,890 | ) | (25,472 | ) | |||||
Financing activities: | |||||||||||
| Repayment of long-term debt | — | (10,000 | ) | — | |||||||
| Issuance of common stock and exercise of common stock options | 3,307 | 1,900 | 3,160 | ||||||||
| Repayment of senior debt | (55,000 | ) | — | — | |||||||
| Issuance of senior debt | — | 97,849 | — | ||||||||
| Buy back of common stock | (11,752 | ) | (14,312 | ) | (31,659 | ) | |||||
| Cash dividends paid | (9,425 | ) | (7,632 | ) | (6,002 | ) | |||||
| Net cash (used for) provided by financing activities | (72,870 | ) | 67,805 | (34,501 | ) | ||||||
| (Decrease)/increase in cash | (65,674 | ) | 76,562 | (27,875 | ) | ||||||
| Cash at beginning of period | 103,018 | 26,456 | 54,331 | ||||||||
| Cash at end of period | $ | 37,344 | $ | 103,018 | $ | 26,456 | |||||
Accumulated other comprehensive income (loss) income includes unrealized gains and losses on available-for-sale investments, unrealized gains and losses on cash flow hedges, as well as unrecognized prior service costs, transition costs, and actuarial gains and losses on defined benefit pensionpost-retirement plans. Changes to accumulated other comprehensive income (loss) income are presented net of tax as a component of stockholders' equity. Amounts that are reclassified out of accumulated other comprehensive income (loss) income are recorded on the Consolidated Statement of Income either as a gain or loss.
Changes to accumulated other comprehensive income (loss) income by component are shown net of taxes in the following tables for the period indicated:
| (Dollars in thousands) | Net change in investment securities available for sale | Net change in investment securities held to maturity | Net change in defined benefit plan | Net change in fair value of derivatives used for cash flow hedges (1) | Net change in equity method investments | Total | |||||||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | 59,882 | $ | 276 | $ | (4,788) | $ | 646 | $ | (9) | $ | 56,007 | |||||||||||||||||||||||
| Other comprehensive (loss) income before reclassifications | (93,503) | — | 162 | — | 362 | (92,979) | |||||||||||||||||||||||||||||
| Less: Amounts reclassified from accumulated other comprehensive (loss) income | (252) | (101) | (65) | (378) | — | (796) | |||||||||||||||||||||||||||||
| Net current-period other comprehensive (loss) income | (93,755) | (101) | 97 | (378) | 362 | (93,775) | |||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | (33,873) | $ | 175 | $ | (4,691) | $ | 268 | 353 | $ | (37,768) | ||||||||||||||||||||||||
Other comprehensive (loss) income before reclassifications(2) | (529,660) | (119,769) | 318 | — | 213 | (648,898) | |||||||||||||||||||||||||||||
| Less: Amounts reclassified from accumulated other comprehensive income (loss) | — | 11,091 | (109) | (160) | — | 10,822 | |||||||||||||||||||||||||||||
| Net current-period other comprehensive (loss) income | (529,660) | (108,678) | 209 | (160) | 213 | (638,076) | |||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | (563,533) | $ | (108,503) | $ | (4,482) | $ | 108 | $ | 566 | $ | (675,844) | |||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | 63,601 | — | 132 | 1,596 | (85) | 65,244 | |||||||||||||||||||||||||||||
| Less: Amounts reclassified from accumulated other comprehensive income (loss) | — | 16,980 | (264) | (107) | — | 16,609 | |||||||||||||||||||||||||||||
| Net current-period other comprehensive income (loss) | 63,601 | 16,980 | (132) | 1,489 | (85) | 81,853 | |||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | (499,932) | $ | (91,523) | $ | (4,614) | $ | 1,597 | $ | 481 | $ | (593,991) | |||||||||||||||||||||||
(1)Includes amortization of net gain for cash flow hedges terminated as of April 1, 2020.
(2)Includes $119.8 million, net of tax, of unrealized losses on transferred investment securities from available-for-sale to held-to-maturity.
140
| (Dollars in thousands) | Net change in investment securities available for sale | Net change in securities held to maturity | Net change in defined benefit plan | Net change in fair value of derivatives used for cash flow hedge | Total | ||||||||||||||
| Balance, December 31, 2014 | $ | 446 | $ | 2,207 | $ | 847 | $ | — | $ | 3,500 | |||||||||
| Other comprehensive income before reclassifications | (1,417 | ) | — | — | — | (1,417 | ) | ||||||||||||
| Less: Amounts reclassified from accumulated other comprehensive loss | (916 | ) | (412 | ) | (59 | ) | — | (1,387 | ) | ||||||||||
| Net current-period other comprehensive loss | (2,333 | ) | (412 | ) | (59 | ) | — | (2,804 | ) | ||||||||||
| Balance, December 31, 2015 | $ | (1,887 | ) | $ | 1,795 | $ | 788 | $ | — | $ | 696 | ||||||||
| Other comprehensive loss before reclassifications | (4,838 | ) | — | — | (1,772 | ) | (6,610 | ) | |||||||||||
| Less: Amounts reclassified from accumulated other comprehensive loss | (1,469 | ) | (403 | ) | 169 | — | (1,703 | ) | |||||||||||
| Net current-period other comprehensive loss | (6,307 | ) | (403 | ) | 169 | (1,772 | ) | (8,313 | ) | ||||||||||
| Balance, December 31, 2016 | $ | (8,194 | ) | $ | 1,392 | $ | 957 | $ | (1,772 | ) | $ | (7,617 | ) | ||||||
| Other comprehensive income (loss) before reclassifications | 3,073 | — | — | (184 | ) | 2,889 | |||||||||||||
| Less: Amounts reclassified from accumulated other comprehensive income | (1,280 | ) | (394 | ) | (90 | ) | — | (1,764 | ) | ||||||||||
| Net current-period other comprehensive income | 1,793 | (394 | ) | (90 | ) | (184 | ) | 1,125 | |||||||||||
| Less: Reclassification due to the adoption of ASU No. 2018-02 | (1,441 | ) | 225 | (2 | ) | (442 | ) | (1,660 | ) | ||||||||||
| Balance, December 31, 2017 | $ | (7,842 | ) | $ | 1,223 | $ | 865 | $ | (2,398 | ) | $ | (8,152 | ) | ||||||
Components of other comprehensive income (loss) that impact the StatementConsolidated Statements of Income are presented in the table below.
| Twelve Months Ended December 31, | Affected line item in Consolidated Statements of Income | ||||||||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2021 | ||||||||||||||||||||
| Securities available-for-sale: | |||||||||||||||||||||||
| Realized gains on securities transactions | $ | — | $ | — | $ | (331) | Securities gains, net | ||||||||||||||||
| Income taxes | — | — | 79 | Income tax provision | |||||||||||||||||||
| Net of tax | $ | — | $ | — | $ | (252) | |||||||||||||||||
| Net unrealized holding losses (gains) on securities transferred between available-for-sale and held-to-maturity: | |||||||||||||||||||||||
| Amortization of net unrealized losses (gains) to income during the period | $ | 22,343 | $ | 14,593 | $ | (133) | Interest and dividends on investment securities | ||||||||||||||||
| Income taxes | (5,363) | (3,502) | 32 | Income tax provision | |||||||||||||||||||
| Net of tax | $ | 16,980 | $ | 11,091 | $ | (101) | |||||||||||||||||
| Amortization of defined benefit pension plan-related items: | |||||||||||||||||||||||
| Prior service (credits) costs | $ | (76) | $ | (76) | $ | (85) | |||||||||||||||||
| Actuarial gains | (271) | (68) | — | ||||||||||||||||||||
| Total before tax | $ | (347) | $ | (144) | $ | (85) | Salaries, benefits and other compensation | ||||||||||||||||
| Income taxes | 83 | 35 | 20 | Income tax provision | |||||||||||||||||||
| Net of tax | $ | (264) | $ | (109) | $ | (65) | |||||||||||||||||
| Net unrealized gains on terminated cash flow hedges: | |||||||||||||||||||||||
| Amortization of net unrealized gains to income during the period | $ | (141) | $ | (211) | $ | (497) | Interest and fees on loans and leases | ||||||||||||||||
| Income taxes | 34 | 51 | 119 | Income tax provision | |||||||||||||||||||
| Net of tax | $ | (107) | $ | (160) | $ | (378) | |||||||||||||||||
| Total reclassifications | $ | 16,609 | $ | 10,822 | $ | (796) | |||||||||||||||||
141
| Twelve Months Ended December 31, | Affected line item in Consolidated Statements of Income | ||||||||||||
| (Dollars in thousands) | 2017 | 2016 | 2015 | ||||||||||
| Securities available for sale: | |||||||||||||
| Realized gains on securities transactions | $ | (1,984 | ) | $ | (2,369 | ) | $ | (1,478 | ) | Securities gains, net | |||
| Income taxes | 704 | 900 | 562 | Income tax provision | |||||||||
| Net of tax | $ | (1,280 | ) | $ | (1,469 | ) | $ | (916 | ) | ||||
| Net unrealized holding gains on securities transferred between available-for-sale and held-to-maturity: | |||||||||||||
| Amortization of net unrealized gains to income during the period | $ | (635 | ) | $ | (651 | ) | $ | (646 | ) | Interest income on investment securities | |||
| Income taxes | 241 | 248 | 234 | Income tax provision | |||||||||
| Net of tax | $ | (394 | ) | $ | (403 | ) | $ | (412 | ) | ||||
| Amortization of Defined Benefit Pension Items: | |||||||||||||
| Prior service costs | $ | (76 | ) | $ | (76 | ) | $ | (76 | ) | ||||
| Transition obligation | — | — | — | ||||||||||
| Actuarial losses | (70 | ) | 348 | (20 | ) | ||||||||
| Total before tax | $ | (146 | ) | $ | 272 | $ | (96 | ) | Salaries, benefits and other compensation | ||||
| Income taxes | 56 | (103 | ) | 37 | Income tax provision | ||||||||
| Net of tax | $ | (90 | ) | $ | 169 | $ | (59 | ) | |||||
| Total reclassifications | $ | (1,764 | ) | $ | (1,703 | ) | $ | (1,387 | ) | ||||
In accordance with the current accounting standards for loss contingencies, we establishthe Company establishes reserves for litigation-related matters that arise in the ordinary course of ourits business activities when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss can be reasonably estimated. Litigation claims and proceedings of all types are subject to many uncertain factors that generally cannot be predicted with assurance. In addition, ourthe Company's defense of litigation claims may result in legal fees, which we expenseit expenses as incurred.
There were no material changes or additions to other significant pending legal or other proceedings involving usthe Company other than those arising out of routine operations.
| Three months ended | 12/31/2017 | 9/30/2017 | 6/30/2017 | 3/31/2017 | 12/31/2016 | 9/30/2016 | 6/30/2016 | 3/31/2016 | |||||||||||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||||||||||||||
| Interest income | $ | 66,556 | $ | 65,010 | $ | 62,334 | $ | 60,826 | $ | 59,692 | $ | 55,337 | $ | 51,503 | $ | 50,046 | |||||||||||||||
| Interest expense | 8,831 | 8,881 | 8,020 | 7,723 | 6,738 | 6,316 | 5,045 | 4,690 | |||||||||||||||||||||||
| Net interest income | 57,725 | 56,129 | 54,314 | 53,103 | 52,954 | 49,021 | 46,458 | 45,356 | |||||||||||||||||||||||
| Provision for loan losses | 4,063 | 2,896 | 1,843 | 2,162 | 5,124 | 5,828 | 1,254 | 780 | |||||||||||||||||||||||
| Net interest income after provision for loan losses | 53,662 | 53,233 | 52,471 | 50,941 | 47,830 | 43,193 | 45,204 | 44,576 | |||||||||||||||||||||||
| Noninterest income | 32,435 | 32,441 | 31,676 | 28,092 | 28,299 | 27,586 | 25,766 | 23,668 | |||||||||||||||||||||||
| Noninterest expenses | 68,065 | 54,163 | 52,727 | 51,506 | 48,949 | 51,234 | 44,685 | 43,797 | |||||||||||||||||||||||
| Income before taxes | 18,032 | 31,511 | 31,420 | 27,527 | 27,180 | 19,545 | 26,285 | 24,447 | |||||||||||||||||||||||
| Income tax provision | 27,864 | 10,942 | 10,850 | 8,590 | 9,070 | 6,823 | 8,504 | 8,677 | |||||||||||||||||||||||
| Net (loss) income | $ | (9,832 | ) | $ | 20,569 | $ | 20,570 | $ | 18,937 | $ | 18,110 | $ | 12,722 | $ | 17,781 | $ | 15,770 | ||||||||||||||
| Earnings per share: | |||||||||||||||||||||||||||||||
| Basic | $ | (0.31 | ) | $ | 0.65 | $ | 0.65 | $ | 0.60 | $ | 0.58 | $ | 0.42 | $ | 0.60 | $ | 0.53 | ||||||||||||||
| Diluted | $ | (0.31 | ) | $ | 0.64 | $ | 0.64 | $ | 0.59 | $ | 0.56 | $ | 0.41 | $ | 0.59 | $ | 0.52 | ||||||||||||||
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2017.2023. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Management’s Report on Internal Control Over Financial Reporting
To Our Stockholders:
Management of WSFS Financial Corporation (the “Corporation”)Corporation) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Corporation’s internal control over financial reporting is a process designed by, or under the supervision of, the Corporation’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Corporation’s financial statements for external purposes in accordance with generally accepted accounting principles.
Management assessed the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2017.2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). Based on this assessment, management has concluded that, as of December 31, 2017,2023, the Corporation’s internal control over financial reporting was effective based on those criteria.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
KPMG LLP, an independent registered public accounting firm, has audited the Corporation’s Consolidated Financial Statements as of and for the year ended December 31, 20172023 and the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2017,2023, as stated in their reports, which are included herein.
| /s/ Rodger Levenson | /s/ Arthur J. Bacci | ||||||||
| Rodger Levenson | Arthur J. Bacci | ||||||||
| Chairman, President and Chief Executive Officer | Executive Vice President, Chief Wealth Officer and | ||||||||
| Interim Chief Financial Officer | |||||||||
143
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
WSFS Financial Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited WSFS Financial Corporation and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB), the consolidated statements of financial condition of the Company as of December 31, 20172023 and 2016,December 31, 2022, the related consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2017,2023, and the related notes (collectively, the consolidated financial statements), and our report dated March 1, 2018February 29, 2024 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’sManagement's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
| /s/ KPMG LLP | ||||||||||||||||||
| Philadelphia, Pennsylvania | ||||||||||||||||||
144
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The Information required by this Item is incorporated herein by reference from the discussion responsive thereto under the headings “Directors“Corporate Governance—Biographies of Director Nominees,” “Corporate Governance—Other Continuing Directors,” “Executive Compensation—Executive Leadership Team,” “Security Ownership of Certain Beneficial Owners and Officers of WSFS Financial CorporationManagement,” "Executive Compensation—Executive Compensation Policies," “Corporate Governance-Committees” and Wilmington Savings Fund Society, FSB”"Board Structure and “Corporate Governance - Committees of the Board of Directors”Roles" in our definitive proxy statement for our annual meeting2024 Annual Meeting of stockholders to be held on April 26, 2018Stockholders to be filed with the Securities and Exchange Commission no later than 120 days after the close of the fiscal year covered by this Annual Report on Form 10-K (the Proxy Statement).
We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions. A copy of the Code of Ethics is posted on our website at www.wsfsbank.com.www.wsfsbank.com.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference from the discussion responsive thereto under the headings “Executive Compensation”Compensation Discussion and “CompensationAnalysis” and “Corporate Governance—Compensation of theour Board of Directors” in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
Security Ownership of Certain Beneficial Owners and Management
Information required by this Item is incorporated herein by reference from the discussion responsive thereto under the headings “Other Information Large Stockholders”“Security Ownership of Certain Beneficial Owners and Management” of the Proxy Statement.
Changes in Control
We know of no arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of the registrant.
Securities Authorized for Issuance Under Equity Compensation Plans
Information relating to securities authorized for issuance under the Company’s equity compensation plans is included in Part II of this Annual Report on Form 10‑K under “Item 5. Market“Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.”
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated herein by reference from the discussion responsive thereto under the heading “Directors“Transactions with Related Parties” and Officers of WSFS Financial Corporation“Our Director Nomination and Wilmington Savings Fund Society, FSB - Transactions with our Insiders”Selection Process—Independence” in the Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated herein by reference from the discussion responsive thereto under the heading “Committees of the Board of Directors - “Audit Matters—Audit Committee”Services” in the Proxy Statement.
145
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)Listed below are all financial statements and exhibits filed as part of this report, and which are herein incorporated by reference.
May 10, 2019.
| The Consolidated Statements of Financial Condition of WSFS Financial Corporation and | ||||||||
| 2 | Schedules omitted as they are not applicable. | |||||||
The following exhibits are incorporated by reference herein or annexed to this Annual Report on Form 10-K:
Exhibit Number | Description of Document | |||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| 4.4 | ||||||||
| 4.5 | ||||||||
| 4.6 | ||||||||
| 4.7 | ||||||||
| 4.8 | ||||||||
| 4.9 | ||||||||
| 4.11 | ||||||||
| 4.12 | ||||||||
| 4.13 | ||||||||
| 4.14 | ||||||||
146
Exhibit Number | Description of Document | |||||||
| 4.15 | ||||||||
| 4.16 | ||||||||
| 10.1 | ||||||||
| 10.4 | ||||||||
| 10.6 | ||||||||
| 10.8 | ||||||||
| 21 | ||||||||
| 23 | ||||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
| 32 | ||||||||
| 101.SCH | XBRL Schema Document | |||||||
| 101.CAL | XBRL Calculation Linkbase Document | |||||||
| XBRL Definition Linkbase Document ** | ||||||||
| 101.LAB | XBRL Labels Linkbase Document | |||||||
| 101.PRE | XBRL Presentation Linkbase Document | |||||||
| XBRL Instance Document ** | ||||||||
| 104 | The cover page of this Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024 is formatted in Inline XBRL. |
+ Filed herewith
*Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any document so furnished.
** Submitted as Exhibits 101 to this Annual Report on Form 10-K are documents formatted in XBRL (Extensible Business Reporting Language). Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability.
Exhibits 10.1 through 10.810.5 represent management contracts or compensatory plan arrangements.
ITEM 16. FORM 10-K SUMMARY
Not applicable.
147
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| WSFS FINANCIAL CORPORATION | |||||||||||||||||
| Date: | February 29, 2024 | BY: | /s/ Rodger Levenson | ||||||||||||||
| Chairman, President and Chief Executive Officer | |||||||||||||||||
148
| Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. | ||||||||||||||||||
| Date: | February 29, 2024 | BY: | /s/ Rodger Levenson | |||||||||||||||
| Chairman, President and Chief Executive Officer | ||||||||||||||||||
| Date: | BY: | /s/ Anat Bird | ||||||||||||||||
| Anat Bird | ||||||||||||||||||
| Director | ||||||||||||||||||
| Date: | BY: | /s/ Francis B. Brake | ||||||||||||||||
| Francis B. Brake | ||||||||||||||||||
| Director | ||||||||||||||||||
| Date: | February 29, 2024 | BY: | /s/ Karen Dougherty Buchholz | |||||||||||||||
| Karen Dougherty Buchholz | ||||||||||||||||||
| Director | ||||||||||||||||||
| Date: | BY: | |||||||||||||||||
| Diego F. Calderin | ||||||||||||||||||
| Director | ||||||||||||||||||
| Date: | February 29, 2024 | BY: | /s/ Jennifer W. Davis | |||||||||||||||
| Jennifer W. Davis | ||||||||||||||||||
| Director | ||||||||||||||||||
| Date: | February 29, 2024 | BY: | /s/ Michael J. Donahue | |||||||||||||||
| Michael J. Donahue | ||||||||||||||||||
| Director | ||||||||||||||||||
| Date: | February 29, 2024 | BY: | /s/ Eleuthère I. du Pont | |||||||||||||||
| Eleuthère I. du Pont | ||||||||||||||||||
| Director | ||||||||||||||||||
| Date: | February 29, 2024 | BY: | /s/ Nancy J. Foster | |||||||||||||||
| Date: | February 29, 2024 | BY: | ||||||||||||||||
| /s/ Christopher T. | ||||||||||||||||||
| Christopher T. | ||||||||||||||||||
| Director | ||||||||||||||||||
| Date: | February 29, 2024 | BY: | /s/ Lynn B. McKee | |||||||||||||||
| Date: | BY: | /s/ David G. Turner | ||||||||||||||||
| David G. Turner | ||||||||||||||||||
| Director | ||||||||||||||||||
149
| Date: | February 29, 2024 | BY: | /s/ Arthur J. Bacci | ||||||||||||
Executive Vice President, Chief Wealth Officer and Interim Chief Financial Officer | |||||||||||||||
| Date: | BY: | /s/ Charles K. Mosher | |||||||||||||
| Charles K. Mosher | |||||||||||||||
| Senior Vice President and | |||||||||||||||
150