WSFS FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

~~WSFS FINANCIAL CORPORATION~~Delaware

22-2866913

~~(Exact name of registrant as specified in its charter)~~

~~Delaware~~

~~22-2866913~~

(State or other jurisdiction of Incorporation or organization)

(I.R.S. Employer Identification Number)

~~500 Delaware Avenue,~~

~~Wilmington,~~

~~Delaware~~

~~19801~~

~~(Address of principal executive offices)~~

~~(Zip Code)~~

~~(302)~~

~~792-6000~~

~~(Registrant’s telephone number, including area code)~~

~~Not Applicable~~

~~(Former name or former address, if changed since last report)~~

500 Delaware Ave,

Wilmington, Delaware, 19801

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (302) 792-6000

Not Applicable

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

WSFS

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

~~Large accelerated filer~~

~~Accelerated filer~~

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Number of shares outstanding of the issuer's common stock, as of the latest practicable date: ~~52,988,084~~50,660,203 shares as of ~~August 2, 2019.~~

July 31, 2020.

WSFS FINANCIAL CORPORATION

FORM 10-Q

TABLE OF CONTENTS

PART I. Financial Information

Page

Item 1.

Financial Statements (Unaudited)

Consolidated Statements of (Loss) Income for the Three and Six Months EndedJune 30, ~~2019~~2020 and ~~2018~~2019

Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months EndedJune 30, ~~2019~~2020 and ~~2018~~2019

Consolidated Statements of Financial Condition as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019

Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months EndedJune 30, ~~2019~~2020 and ~~2018~~2019

Consolidated Statements of Cash Flows for the ~~Three and~~ Six Months EndedJune 30, ~~2019~~2020 and ~~2018~~2019

Notes to the Consolidated Financial Statements for the Three and Six Months EndedJune 30, ~~2019~~2020

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

5660

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

7176

Item 4.

Controls and Procedures

7176

PART II. Other Information

Item 1.

Item 1A.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

7278

Item 3.

Defaults upon Senior Securities

7379

Item 4.

Mine Safety Disclosures

Item 5.

Item 6.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, 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:

~~those related to~~ •difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the markets in which the Company operates and in which its loans are concentrated, including ~~the effects of~~possible declines in housing markets, an increase in unemployment levels and slowdowns in economic ~~growth;~~growth, including as a result of the novel coronavirus, or COVID-19, pandemic;

•possible additional loan losses and impairment of the collectability of loans, particularly as a result of the COVID-19 pandemic and the policies and programs implemented by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, including its automatic loan forbearance provisions and our Paycheck Protection Program (PPP) lending activities;

•the economic and financial impact of federal, state and local emergency orders and other actions taken in response to the COVID-19 pandemic;

•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;

~~possible additional loan losses and impairment in the collectability of loans;~~

•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;

•the credit risk associated with the substantial amount of commercial real estate, construction and land development and commercial and industrial loans in ~~our~~the 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 (the Dodd-Frank Act), the Economic Growth, Regulatory Relief and Consumer Protection Act (which amended the Dodd-Frank Act) (the Economic Growth Act) and the rules and regulations issued in accordance therewith 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)~~standards and the effect of the transition to the Current Expected Credit Losses (CECL) methodology for allowances and related adjustments), including ~~our~~its 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;~~organizations, and the uncertainty of the short- and long-term impacts of such changes;

•any impairments of the Company's goodwill or other intangible assets;

•conditions in the financial markets, including the destabilized economic environment caused by the COVID-19 pandemic, that may limit the Company’s access to additional funding to meet its liquidity needs;

~~impairment~~•the intention of the ~~Company’s goodwill or other intangible assets;~~United Kingdom's Financial Conduct Authority (FCA) to cease support of London Inter-Bank Offered Rate (LIBOR) and the transition to an alternative reference interest rate;


•	~~failure of the financial and operational controls of the Company’s Cash Connect~~^® ~~division;~~

the success of the Company's growth plans, including its plans to grow the commercial small business leasing portfolio and residential mortgage, small business and Small Business Administration (SBA) portfolios following the acquisition of Beneficial Bancorp, Inc. (Beneficial);

•the successful integration of ~~past and future~~ acquisitions;

•the Company’s ability to fully realize the cost savings and other benefits of its acquisitions, manage risks related to business disruption following those acquisitions, and post-acquisition ~~customer~~Customer acceptance of the Company’s products and services and related ~~customer~~Customer disintermediation;

Table of Contents

•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 operational controls of the Company’s Cash Connect^® division;

•adverse judgments or other resolution of pending and future legal proceedings, and cost incurred in defending such proceedings;

•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 failures or cybersecurity incidents or other breaches of the Company’s network ~~security;~~security, particularly given widespread remote working arrangements;

•the Company’s ability to recruit and retain key employees;

•the effects of problems encountered by other financial institutions that adversely affect the Company or the banking industry generally;

•the effects of weather and natural disasters such as floods, droughts, wind, tornadoes and hurricanes as well as effects from geopolitical instability 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 ~~customers~~Customers and loan origination or sales volumes;

•possible changes in the speed of prepayments of mortgage-backed securities due to changes in the interest rate environment, particularly as a result of the COVID-19 pandemic, 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;

~~the effects of~~ •any reputation, credit, interest rate, market, operational, litigation, legal, liquidity, regulatory and compliance risk resulting from developments related to any of the risks discussed above; and

~~the costs associated with resolving any problem loans, litigation and the effects of~~ •other risks and uncertainties, including those discussed in ~~the Company’s Form 10-K for the year ended December 31, 2018 and~~ other documents filed by the Company with the Securities and Exchange Commission (SEC) from time to time.

~~We caution~~The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. The Company disclaims any duty to revise or update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company for any reason, except as specifically required by law.

As used in this Quarterly Report on Form 10-Q, the terms “WSFS”, “the Company”, “registrant”, “we”, “us”, and “our” mean WSFS Financial Corporation and its subsidiaries, on a consolidated basis, unless the context indicates otherwise.

Cash Connect^® is ~~our~~the Company's registered trademark. Any other trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.

Table of Contents

WSFS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF (LOSS) INCOME


													Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended June 30,					Six Months Ended June 30,							2020		2019		2020		2019
	2019			2018		2019			2018
(Dollars in thousands, except per share data)	(Unaudited)
(Dollars in thousands, except per share and share data)												(Dollars in thousands, except per share and share data)	(Unaudited)
Interest income:												Interest income:
Interest and fees on loans and leases	$	129,001		$	64,442	$	216,118		$	124,907		Interest and fees on loans and leases	$	112,260	$	129,001	$	231,462	$	216,118
Interest on mortgage-backed securities	12,229			6,190		22,695			11,589			Interest on mortgage-backed securities	12,549		12,229		25,768		22,695
Interest and dividends on investment securities:												Interest and dividends on investment securities:
Taxable	31			16		50			33			Taxable	102		31		117		50
Tax-exempt	999			1,092		2,024			2,195			Tax-exempt	907		999		1,818		2,024
Other interest income	643			411		1,593			1,040			Other interest income	65		643		573		1,593
	142,903			72,151		242,480			139,764				125,883		142,903		259,738		242,480
Interest expense:												Interest expense:
Interest on deposits	16,123			6,368		27,065			11,608			Interest on deposits	9,832		16,123		24,469		27,065
Interest on Federal Home Loan Bank advances	806			2,536		3,396			4,999			Interest on Federal Home Loan Bank advances	625		806		1,455		3,396
Interest on senior debt	1,180			1,180		2,359			2,359			Interest on senior debt	1,180		1,180		2,359		2,359
Interest on federal funds purchased	805			434		1,592			880			Interest on federal funds purchased	1		805		471		1,592
Interest on trust preferred borrowings	717			637		1,443			1,194			Interest on trust preferred borrowings	484		717		1,070		1,443
Interest on other borrowings	40			7		79			21			Interest on other borrowings	5		40		8		79
	19,671			11,162		35,934			21,061				12,127		19,671		29,832		35,934
Net interest income	123,232			60,989		206,546			118,703			Net interest income	113,756		123,232		229,906		206,546
Provision for loan losses	12,195			2,498		19,849			6,148
Net interest income after provision for loan losses	111,037			58,491		186,697			112,555
Provision for credit losses												Provision for credit losses	94,754		12,195		151,400		19,849
Net interest income after provision for credit losses												Net interest income after provision for credit losses	19,002		111,037		78,506		186,697
Noninterest income:												Noninterest income:
Credit/debit card and ATM income	13,677			10,709		25,192			20,514			Credit/debit card and ATM income	9,306		13,677		20,665		25,192
Investment management and fiduciary income	10,382			10,244		20,529			19,433			Investment management and fiduciary income	10,929		10,382		21,891		20,529
Deposit service charges	6,103			4,664		10,849			9,294			Deposit service charges	4,175		6,103		9,822		10,849
Mortgage banking activities, net	2,846			1,692		4,938			3,429			Mortgage banking activities, net	8,494		2,846		11,965		4,938
Loan fee income	650			567		1,535			1,166
Loan and lease fee income												Loan and lease fee income	1,097		650		2,216		1,535
Securities gains, net	63			—		78			21			Securities gains, net	1,908		63		2,601		78
Unrealized gains on equity investments	1,033			—		4,831			15,346
Unrealized (losses) gains on equity investments, net												Unrealized (losses) gains on equity investments, net	(11)		1,033		657		4,831
Realized gain on sale of equity investment												Realized gain on sale of equity investment	22,052		—		22,052		—
Bank owned life insurance income	383			—		600			232			Bank owned life insurance income	445		383		420		600
Other income	7,734			7,111		15,441			13,019			Other income	5,980		7,734		12,933		15,441
	42,871			34,987		83,993			82,454				64,375		42,871		105,222		83,993
Noninterest expense:												Noninterest expense:
Salaries, benefits and other compensation	48,550			30,944		84,755			60,797			Salaries, benefits and other compensation	48,757		48,550		94,103		84,755
Occupancy expense	8,810			5,008		15,177			10,256			Occupancy expense	8,296		8,810		15,962		15,177
Equipment expense	5,444			3,176		9,433			6,265			Equipment expense	5,759		5,444		10,723		9,433
Data processing and operations expenses	3,731			1,896		6,319			3,803			Data processing and operations expenses	3,061		3,731		6,139		6,319
Professional fees	2,915			2,320		4,787			4,045			Professional fees	4,423		2,915		9,023		4,787
Marketing expense	1,947			1,084		3,537			1,842			Marketing expense	1,215		1,947		2,166		3,537

FDIC expenses	1,042			515		1,662			1,114			FDIC expenses	305		1,042		251		1,662
Loan workout and OREO expenses	1,145			681		1,253			1,107
Loan workout and other credit costs												Loan workout and other credit costs	4,587		1,419		5,040		1,690
Corporate development expense	13,946			457		40,573			457			Corporate development expense	2,801		13,946		4,142		40,573
Restructuring expense	1,881			—		6,243			—			Restructuring expense	—		1,881		—		6,243
Recovery of fraud loss	—			—		—			(1,665		)

Other operating expense	18,437			11,750		31,701			23,222			Other operating expense	14,231		18,163		34,382		31,264
	107,848			57,831		205,440			111,243				93,435		107,848		181,931		205,440
Income before taxes	46,060			35,647		65,250			83,766
Income tax provision	10,091			6,907		16,351			17,676
Net income	$	35,969		$	28,740	$	48,899		$	66,090
(Loss) income before taxes												(Loss) income before taxes	(10,058)		46,060		1,797		65,250
Income tax (benefit) provision												Income tax (benefit) provision	(2,247)		10,091		(959)		16,351
Net (loss) income												Net (loss) income	$	(7,811)	$	35,969	$	2,756	$	48,899
Less: Net loss attributable to noncontrolling interest	(231		)	—		(324		)	—			Less: Net loss attributable to noncontrolling interest	(700)		(231)		(1,060)		(324)
Net income attributable to WSFS	$	36,200		$	28,740	$	49,223		$	66,090
Earnings per share:
Net (loss) income attributable to WSFS												Net (loss) income attributable to WSFS	$	(7,111)	$	36,200	$	3,816	$	49,223
(Loss) earnings per share:												(Loss) earnings per share:
Basic	$	0.68		$	0.91	$	1.07		$	2.10		Basic	$	(0.14)	$	0.68	$	0.08	$	1.07
Diluted	$	0.68		$	0.89	$	1.06		$	2.05		Diluted	$	(0.14)	$	0.68	$	0.07	$	1.06
Weighted average shares of common stock outstanding:												Weighted average shares of common stock outstanding:
Basic												Basic	50,655,154		53,253,455		50,870,735		46,103,264
Diluted												Diluted	50,655,154		53,516,000		50,910,790		46,438,173

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

Table of Contents

WSFS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Three Months Ended June 30, Six Months Ended June 30,
2019 2018 2019 2018
(Dollars in thousands) (Unaudited) (Unaudited)
Net income $ 35,969
$ 28,740
$ 48,899
$ 66,090
Less: Net loss attributable to noncontrolling interest (231 ) —
(324 ) —
Net income attributable to WSFS 36,200
28,740
49,223
66,090
Other comprehensive income (loss):
Net change in unrealized gains (loss) on investment securities available for sale
Net unrealized gains (loss) arising during the period, net of tax (benefit) expense of $6,289 and ($1,398), $11,831, and ($5,112), respectively 19,591
(4,501 ) 36,856
(16,328 )
Less: reclassification adjustment for net gains on sales realized in net income, net of tax expense of $15, $0, $19 and $5, respectively
(48 ) —
(59 ) (16 )
19,543
(4,501 ) 36,797
(16,344 )
Net change in securities held to maturity
Amortization of unrealized gain on securities reclassified to held-to-maturity, net of tax expense of $27, $36, $56, and $73, respectively (84 ) (117 ) (177 ) (236 )
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 ($8), ($9), ($17) and $9, respectively (34 ) (30 ) (175 ) 29
Net change in cash flow hedge
Net unrealized gain (loss) arising during the period, net of tax expense (benefit) of $323, ($76), $525 and ($316) respectively 1,007
(245 ) 1,637
(1,010 )
Total other comprehensive income (loss) 20,432
(4,893 ) 38,082
(17,561 )
Total comprehensive income $ 56,632
$ 23,847
$ 87,305
$ 48,529


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
(Dollars in thousands)	(Unaudited)						(Unaudited)
Net (loss) income	$	(7,811)	$	35,969	$	2,756	$	48,899
Less: Net loss attributable to noncontrolling interest	(700)		(231)		(1,060)		(324)
Net (loss) income attributable to WSFS	(7,111)		36,200		3,816		49,223
Other comprehensive income:
Net change in unrealized gains on investment securities available-for-sale
Net unrealized gains arising during the period, net of tax expense of $1,169, $6,289, $15,707 and $11,831, respectively	3,703		19,591		49,739		36,856

Less: reclassification adjustment for net gains on sales realized in net income, net of tax expense of $458, $15, $624, and $19, respectively	(1,450)		(48)		(1,977)		(59)
	2,253		19,543		47,762		36,797
Net change in securities held-to-maturity
Amortization of unrealized gain on securities reclassified to held-to-maturity, net of tax expense of $18, $27, $38, and $56, respectively	(57)		(84)		(122)		(177)
Net change in unfunded pension liability
Change in unfunded pension liability related to unrealized gain (loss), prior service cost and transition obligation, net of tax benefit of $8, $8, $7, and $17, respectively	(26)		(34)		(22)		(175)
Pension settlement, net of tax expense of $67, $0, $67, and $0, respectively	212		—		212		—
	186		(34)		190		(175)
Net change in cash flow hedge
Net unrealized (loss) gain arising during the period, net of tax (benefit) expense of $(8), $323, $493, and $525, respectively	(25)		1,007		1,560		1,637
Amortization of unrealized gain on terminated cash flow hedges, net of tax benefit of $35, $0, $35, and $0, respectively	(111)		—		(111)		—
	(136)		1,007		1,449		1,637
Total other comprehensive income	2,246		20,432		49,279		38,082
Total comprehensive (loss) income	$	(4,865)	$	56,632	$	53,095	$	87,305

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

~~WSFS FINANCIAL CORPORATION~~

~~CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION~~

June 30, 2019 December 31, 2018
(Dollars in thousands, except per share and share data) (Unaudited)
Assets:
Cash and due from banks $ 183,632
$ 134,939
Cash in non-owned ATMs 338,006
484,648
Interest-bearing deposits in other banks including collateral of $0 at June 30, 2019 and $1,000 at December 31, 2018 187
1,170
Total cash and cash equivalents 521,825
620,757
Investment securities, available for sale (amortized cost of $1,767,602 at June 30, 2019 and $1,224,227 at December 31, 2018) 1,796,870
1,205,079
Investment securities, held to maturity, at cost (fair value $145,867 at June 30, 2019 and $149,431 at December 31, 2018) 143,317
149,950
Other investments 48,711
37,233
Loans, held for sale at fair value 51,721
25,318
Loans and leases, net of allowance of $45,364 at June 30, 2019 and $39,539 at December 31, 2018 8,567,709
4,863,919
Bank owned life insurance 30,118
6,687
Stock in Federal Home Loan Bank of Pittsburgh at cost 15,874
19,259
Other real estate owned 3,703
2,668
Accrued interest receivable 40,784
22,001
Premises and equipment 103,787
44,956
Goodwill 473,712
166,007
Intangible assets 101,984
20,016
Other assets 256,480
65,020
Total assets $ 12,156,595
$ 7,248,870
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing $ 2,205,992
$ 1,626,252
Interest-bearing 7,388,718
4,014,179
Total deposits 9,594,710
5,640,431
Federal funds purchased 115,000
157,975
Federal Home Loan Bank advances 115,675
328,465
Trust preferred borrowings 67,011
67,011
Senior debt 98,497
98,388
Other borrowed funds 18,948
47,949
Accrued interest payable 7,064
1,900
Other liabilities 303,302
85,831
Total liabilities 10,320,207
6,427,950
Stockholders’ Equity:
Common stock $0.01 par value, 90,000,000 shares authorized; issued 57,239,683 at June 30, 2019 and 56,926,978 at December 31, 2018 573
569
Capital in excess of par value 1,043,065
349,810
Accumulated other comprehensive income (loss) 22,688
(15,394 )
Retained earnings 830,397
791,031
Treasury stock at cost, 4,007,722 shares at June 30, 2019 and 25,552,887 shares at December 31, 2018 (60,112 ) (305,096 )
Total stockholders’ equity of WSFS 1,836,611
820,920
Noncontrolling interest (223 ) —
Total stockholders' equity 1,836,388
820,920
Total liabilities and stockholders' equity $ 12,156,595
$ 7,248,870

~~The accompanying notes are an integral part~~Table of ~~these unaudited Consolidated Financial Statements.~~Contents

WSFS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF ~~CHANGES IN STOCKHOLDERS' EQUITY~~FINANCIAL CONDITION

~~(Unaudited)~~


	June 30, 2020		December 31, 2019
(Dollars in thousands, except per share and share data)	(Unaudited)
Assets:
Cash and due from banks	$	583,221	$	164,021
Cash in non-owned ATMs	360,969		407,524
Interest-bearing deposits in other banks including collateral of $11,110 at June 30, 2020 and $0 December 31, 2019, respectively	11,577		207
Total cash and cash equivalents	955,767		571,752
Investment securities, available-for-sale (amortized cost of $2,097,114 at June 30, 2020 and $1,909,483 at December 31, 2019	2,195,389		1,944,914
Investment securities, held-to-maturity, net of allowance for credit losses of $8 at June 30, 2020 (fair value $132,198 at June 30, 2020 and $136,625 at December 31, 2019)	127,601		133,601
Other investments	10,211		70,046
Loans, held for sale at fair value	109,453		83,872
Loans and leases, net of allowance for credit losses of $232,192 at June 30, 2020 and $47,576 at December 31, 2019	9,120,288		8,424,464
Bank owned life insurance	30,391		30,294
Stock in Federal Home Loan Bank of Pittsburgh at cost	9,772		21,097
Other real estate owned	4,153		2,605
Accrued interest receivable	53,222		38,094
Premises and equipment	99,320		104,465
Goodwill	472,828		472,828
Intangible assets	89,687		95,917
Other assets	295,275		262,353
Total assets	$	13,573,357	$	12,256,302
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing	$	3,188,046	$	2,189,573
Interest-bearing	7,874,454		7,397,284






Total deposits	11,062,500		9,586,857
Federal funds purchased	—		195,000
Federal Home Loan Bank advances	106,395		112,675
Trust preferred borrowings	67,011		67,011
Senior debt	98,714		98,605
Other borrowed funds	23,673		15,997
Accrued interest payable	6,049		3,103
Other liabilities	387,221		327,563
Total liabilities	11,751,563		10,406,811
Stockholders’ Equity:
Common stock $0.01 par value, 90,000,000 shares authorized; issued 57,533,236 at June 30, 2020 and 57,435,658 at December 31, 2019	576		575
Capital in excess of par value	1,050,678		1,049,064
Accumulated other comprehensive income	72,780		23,501
Retained earnings	878,585		917,377
Treasury stock at cost, 6,873,120 shares at June 30, 2020 and 5,868,772 shares at December 31, 2019	(178,950)		(140,211)
Total stockholders’ equity of WSFS	1,823,669		1,850,306
Noncontrolling interest	(1,875)		(815)
Total stockholders' equity	1,821,794		1,849,491
Total liabilities and stockholders' equity	$	13,573,357	$	12,256,302

Six Months Ended June 30, 2019
(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, 2018 56,926,978
$ 569
$ 349,810
$ (15,394 ) $ 791,031
$ (305,096 ) $ 820,920
$ —
$ 820,920
Net income (loss) —
—
—
—
49,223
—
49,223
(324 ) 48,899
Other comprehensive income —
—
—
38,082
—
—
38,082
—
38,082
Cash dividend, $0.23 per share —
—
—
—
(9,857 ) —
(9,857 ) —
(9,857 )
Issuance of common stock including proceeds from exercise of common stock options 312,705
4
4,123
—
—
—
4,127
—
4,127
Re-issuance of treasury stock in connection with BNCL merger and related items —
—
687,897
—
—
262,071
949,968
101
950,069
Stock-based compensation expense —
—
1,235
—
—
—
1,235
—
1,235
Repurchases of common shares ⁽¹⁾
—
—
—
—
—
(17,087 ) (17,087 ) —
(17,087 )
Balance, June 30, 2019 57,239,683
$ 573
$ 1,043,065
$ 22,688
$ 830,397
$ (60,112 ) $ 1,836,611
$ (223 ) $ 1,836,388

Three Months Ended June 30, 2019
(Dollars in thousands, except per share and share amounts) Shares Common Stock Capital in Excess of Par Value Accumulated Other Comprehensive Income Retained Earnings Treasury Stock Total Stockholders' Equity of WSFS Non-controlling Interest Total Stockholders' Equity
Balance, March 31, 2019 56,941,493
$ 569
$ 1,038,494
$ 2,256
$ 800,511
$ (52,078 ) $ 1,789,752
$ (75 ) $ 1,789,677
Net income (loss) —
—
—
—
36,200
—
36,200
(231 ) 35,969
Other comprehensive income —
—
—
20,432
—
—
20,432
—
20,432
Cash dividend, $0.12 per share —
—
—
—
(6,406 ) —
(6,406 ) —
(6,406 )
Issuance of common stock including proceeds from exercise of common stock options 298,190
4
3,886
—
—
—
3,890
—
3,890
BNCL merger and related items —
—
—
—
92
—
92
83
175
Stock-based compensation expense —
—
685
—
—
—
685
—
685
Repurchases of common shares ⁽²⁾
—
—
—
—
—
(8,034 ) (8,034 ) —
(8,034 )
Balance, June 30, 2019 57,239,683
$ 573
$ 1,043,065
$ 22,688
$ 830,397
$ (60,112 ) $ 1,836,611
$ (223 ) $ 1,836,388


⁽¹⁾	Repurchase of common stock includes 271,340 shares repurchased in connection with the Company's share buyback program approved by the Board of Directors, and 132,993 shares repurchased to cover taxes due on the consideration transferred in the Beneficial acquisition related to the vesting of unrestricted Beneficial stock awards.


⁽²⁾	~~Repurchase of common stock includes 193,888 shares repurchased in connection with the Company's share buyback program approved by the Board of Directors.~~

Six Months Ended June 30, 2018
(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, 2017 56,279,527
$ 563
$ 336,271
$ (8,152 ) $ 669,557
$ (273,894 ) $ 724,345
$ —
$ 724,345
Net income —
—
—
—
66,090
—
66,090
—
66,090
Other comprehensive loss —
—
—
(17,581 ) —
—
(17,581 ) —
(17,581 )
Cash dividend, $0.20 per share —
—
—
—
(6,298 ) —
(6,298 ) —
(6,298 )
Reclassification due to the adoption of ASU No. 2016-01 —
—
—
20
(20 ) —
—
—
—
Issuance of common stock including proceeds from exercise of common stock options 405,857
3
7,059
—
—
—
7,062
—
7,062
Stock-based compensation expense —
—
1,420
—
—
—
1,420
—
1,420
Repurchases of common shares, 120,000 shares —
—
—
—
—
(6,061 ) (6,061 ) —
(6,061 )
Balance, June 30, 2018 56,685,384
$ 566
$ 344,750
$ (25,713 ) $ 729,329
$ (279,955 ) $ 768,977
$ —
$ 768,977

Three Months Ended June 30, 2018
(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, March 31, 2018 56,394,559
$ 564
$ 339,829
$ (20,820 ) $ 704,081
$ (277,375 ) $ 746,279
$ —
$ 746,279
Net income —
—
—
—
28,740
—
28,740
—
28,740
Other comprehensive loss —
—
—
(4,913 ) —
—
(4,913 ) —
(4,913 )
Cash dividend, $0.11 per share —
—
—
—
(3,472 ) —
(3,472 ) —
(3,472 )
Reclassification due to the adoption of ASU No. 2016-01 —
—
—
20
(20 ) —
—
—
—
Issuance of common stock including proceeds from exercise of common stock options 290,825
2
4,447
—
—
—
4,449
—
4,449
Stock-based compensation expense —
—
474
—
—
—
474
—
474
Repurchases of common shares, 50,000 shares —
—
—
—
—
(2,580 ) (2,580 ) —
(2,580 )
Balance, June 30, 2018 56,685,384
$ 566
$ 344,750
$ (25,713 ) $ 729,329
$ (279,955 ) $ 768,977
$ —
$ 768,977

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

Table of Contents

WSFS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)


	Six Months Ended June 30, 2020
(Dollars in thousands, except per share and share amounts)	Shares	Common Stock		Capital in Excess of Par Value		Accumulated Other Comprehensive Income		Retained Earnings		Treasury Stock		Total Stockholders' Equity of WSFS		Non-controlling Interest		Total Stockholders' Equity
Balance, December 31, 2019	57,435,658	$	575	$	1,049,064	$	23,501	$	917,377	$	(140,211)	$	1,850,306	$	(815)	$	1,849,491
Cumulative change in accounting principle (Note 2)	—	—		—		—		(30,368)		—		(30,368)		—		(30,368)
Balance, January 1, 2020 (as adjusted for change in accounting principle)	57,435,658	575		1,049,064		23,501		887,009		(140,211)		1,819,938		(815)		1,819,123
Net income (loss)	—	—		—		—		3,816		—		3,816		(1,060)		2,756
Other comprehensive income	—	—		—		49,279		—		—		49,279		—		49,279
Cash dividend, $0.24 per share	—	—		—		—		(12,240)		—		(12,240)		—		(12,240)
Issuance of common stock including proceeds from exercise of common stock options	97,578	1		990		—		—		—		991		—		991
Stock-based compensation expense	—	—		1,294		—		—		—		1,294		—		1,294
Repurchases of common shares ⁽¹⁾	—	—		(670)		—		—		(38,739)		(39,409)		—		(39,409)
Balance, June 30, 2020	57,533,236	$	576	$	1,050,678	$	72,780	$	878,585	$	(178,950)	$	1,823,669	$	(1,875)	$	1,821,794

	Three Months Ended June 30, 2020
(Dollars in thousands, except per share and share amounts)	Shares	Common Stock		Capital in Excess of Par Value		Accumulated Other Comprehensive Income		Retained Earnings		Treasury Stock		Total Stockholders' Equity of WSFS		Non-controlling Interest		Total Stockholders' Equity
Balance, March 31, 2020	57,506,298	$	576	$	1,050,658	$	70,534	$	891,776	$	(178,950)	$	1,834,594	$	(1,175)	$	1,833,419
Net income (loss)	—	—		—		—		(7,111)		—		(7,111)		(700)		(7,811)
Other comprehensive income	—	—		—		2,246		—		—		2,246		—		2,246
Cash dividend, $0.12 per share	—	—		—		—		(6,080)		—		(6,080)		—		(6,080)
Issuance of common stock including proceeds from exercise of common stock options	26,938	—		—		—		—		—		—		—		—
Stock-based compensation expense	—	—		690		—		—		—		690		—		690
Repurchases of common shares ⁽¹⁾	—	—		(670)		—		—		—		(670)		—		(670)
Balance, June 30, 2020	57,533,236	$	576	$	1,050,678	$	72,780	$	878,585	$	(178,950)	$	1,823,669	$	(1,875)	$	1,821,794

⁽¹⁾Repurchase of common stock includes 1,004,348 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors, and 22,531 shares withheld to cover tax liabilities.

Table of Contents

Six Months Ended June 30,
2019 2018
(Dollars in thousands) (Unaudited)
Operating activities:
Net income $ 48,899
$ 66,090
Less: Net loss attributable to noncontrolling interest (324 ) —
Net income attributable to WSFS $ 49,223
$ 66,090
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 19,849
6,148
Depreciation of premises and equipment, net 7,203
4,189
Amortization of fees and discounts, net 24,079
7,914
Amortization of intangible assets 5,658
1,482
Amortization of right of use lease asset 12,982
—
Decrease in operating lease liability (4,405 ) —
Income from mortgage banking activities, net (4,938 ) (3,429 )
Gain on sale of securities, net (78 ) (21 )
Loss on sale of other real estate owned and valuation adjustments, net 63
70
Stock-based compensation expense 1,235
1,420
Unrealized gain on equity investments (4,831 ) (15,346 )
Deferred income tax expense 1,205
2,132
Increase in accrued interest receivable (1,284 ) (988 )
Decrease in other assets 23,060
1,827
Origination of loans held for sale (190,508 ) (178,182 )
Proceeds from sales of loans held for sale 154,508
177,997
Increase in accrued interest payable 5,164
3,094
Decrease in other liabilities (3,512 ) (13,526 )
(Increase) decrease in value of bank owned life insurance (632 ) 779
Increase in capitalized interest, net (1,808 ) (1,815 )
Net cash provided by operating activities $ 92,233
$ 59,835
Investing activities:
Repayments, maturities and calls of investment securities held to maturity 8,235
3,780
Sale of investment securities available for sale 602,432
7,012
Purchases of investment securities available for sale (619,652 ) (206,667 )
Repayments of investment securities available for sale 90,009
50,233
Proceeds from bank-owned life insurance surrender 59,711
96,429
Net increase in loans (20,646 ) (101,978 )
Net cash from business combinations 76,072
—
Purchases of stock of Federal Home Loan Bank of Pittsburgh (95,750 ) (92,211 )
Redemptions of stock of Federal Home Loan Bank of Pittsburgh 122,317
93,690
Sales of other real estate owned 1,610
1,121
Investment in premises and equipment (5,510 ) (3,792 )
Sales of premises and equipment 71
157
Net cash provided by (used in) investing activities $ 218,899
$ (152,226 )


	Six Months Ended June 30, 2019
(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, 2018	56,926,978	$	569	$	349,810	$	(15,394)	$	791,031	$	(305,096)	$	820,920	$	—	$	820,920
Net income (loss)	—	—		—		—		49,223		—		49,223		(324)		48,899
Other comprehensive income	—	—		—		38,082		—		—		38,082		—		38,082
Cash dividend, $0.23 per share	—	—		—		—		(9,857)		—		(9,857)		—		(9,857)
Issuance of common stock including proceeds from exercise of common stock options	312,705	4		4,123		—		—		—		4,127		—		4,127
Re-issuance of treasury stock in connection with the Beneficial merger and related items	—	—		687,897		—		—		262,071		949,968		101		950,069
Stock-based compensation expense	—	—		1,235		—		—		—		1,235		—		1,235
Repurchases of common shares ⁽¹⁾	—	—		—		—		—		(17,087)		(17,087)		—		(17,087)
Balance, June 30, 2019	57,239,683	$	573	$	1,043,065	$	22,688	$	830,397	$	(60,112)	$	1,836,611	$	(223)	$	1,836,388

	Three Months Ended June 30, 2019
(Dollars in thousands, except per share and share amounts)	Shares	Common Stock		Capital in Excess of Par Value		Accumulated Other Comprehensive Income		Retained Earnings		Treasury Stock		Total Stockholders' Equity of WSFS		Non-controlling Interest		Total Stockholders' Equity
Balance, March 31, 2019	56,941,493	$	569	$	1,038,494	$	2,256	$	800,511	$	(52,078)	$	1,789,752	$	(75)	$	1,789,677
Net income (loss)	—	—		—		—		36,200		—		36,200		(231)		35,969
Other comprehensive income	—	—		—		20,432		—		—		20,432		—		20,432
Cash dividend, $0.12 per share	—	—		—		—		(6,406)		—		(6,406)		—		(6,406)
Issuance of common stock including proceeds from exercise of common stock options	298,190	4		3,886		—		—		—		3,890		—		3,890
Beneficial merger and related items	—	—		—		—		92		—		92		83		175
Stock-based compensation expense	—	—		685		—		—		—		685		—		685
Repurchases of common shares ⁽²⁾	—	—		—		—		—		(8,034)		(8,034)		—		(8,034)
Balance, June 30, 2019	57,239,683	$	573	$	1,043,065	$	22,688	$	830,397	$	(60,112)	$	1,836,611	$	(223)	$	1,836,388

⁽¹⁾Repurchase of common stock includes 271,340 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors, and 132,993 shares repurchased to cover taxes due on the consideration transferred in the Beneficial acquisition related to the vesting of unrestricted Beneficial stock awards.

Six Months Ended June 30,
2019 2018
(Dollars in thousands) (Unaudited)
Financing activities:
Net decrease in demand and saving deposits $ (75,871 ) $ (45,121 )
Increase in time deposits 25,640
61,196
(Decrease) increase in brokered deposits (81,028 ) 98,890
Receipts from FHLB advances 23,341,156
68,146,387
Repayments of FHLB advances (23,553,946 ) (68,226,050 )
Receipts from federal funds purchased 15,056,950
13,923,750
Repayments of federal funds purchased (15,099,925 ) (13,881,750 )
Dividends paid (9,857 ) (6,298 )
Issuance of common stock and exercise of common stock options 4,127
7,062
Change in noncontrolling interest (223 ) —
Purchase of common stock (17,087 ) (6,061 )
Net cash (used in) provided by financing activities $ (410,064 ) $ 72,005
Decrease in cash and cash equivalents (98,932 ) (20,386 )
Cash and cash equivalents at beginning of period 620,757
723,866
Cash and cash equivalents at end of period $ 521,825
$ 703,480
Supplemental disclosure of cash flow information:
Cash paid during the period for:
     Interest $ 30,771
$ 17,967
     Income taxes 15,987
17,594
Non-cash information:
Loans transferred to other real estate owned 2,098
1,296
Loans transferred to portfolio from held-for-sale at fair value 14,846
1,766
Fair value of assets acquired, net of cash received 5,033,367
—
Fair value of liabilities assumed 5,109,931
—
Impact of ASC 842 Adoption:
     Right of use asset 121,288
—
     Lease liability (132,346 ) —
⁽²⁾Repurchase of common stock includes 193,888 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors.

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

Table of Contents

WSFS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Six Months Ended June 30,
	2020		2019
(Dollars in thousands)	(Unaudited)
Operating activities:
Net income	$	2,756	$	48,899
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	151,400		19,849
Depreciation of premises and equipment, net	7,933		7,203
(Accretion) amortization of fees and discounts, net	(27,442)		24,079
Amortization of intangible assets	5,528		5,658
Amortization of right of use lease asset	6,356		12,982
Decrease in operating lease liability	(7,008)		(4,405)
Income from mortgage banking activities, net	(11,965)		(4,938)
Gain on sale of securities, net	(2,601)		(78)
Loss on sale of other real estate owned and valuation adjustments, net	10		63
Stock-based compensation expense	1,294		1,235
Unrealized gain on equity investments, net	(657)		(4,831)
Realized gain on sale of equity investment	(22,052)		—

Deferred income tax (benefit) expense	(38,596)		1,205
Increase in accrued interest receivable	(15,128)		(1,284)
(Increase) decrease in other assets	(3,743)		23,060
Origination of loans held for sale	(404,036)		(190,508)
Proceeds from sales of loans held for sale	377,786		154,508
Increase in accrued interest payable	2,946		5,164
Increase (decrease) in other liabilities	59,651		(3,411)

Increase in value of bank owned life insurance	(97)		(632)
Increase in capitalized interest, net	(1,909)		(1,808)
Net cash provided by operating activities	$	80,426	$	92,010
Investing activities:

Repayments, maturities and calls of investment securities held-to-maturity	9,675		8,235
Sale of investment securities available-for-sale	109,605		602,432
Purchases of investment securities available-for-sale	(535,146)		(619,652)
Repayments of investment securities available-for-sale	232,426		90,009
Net proceeds from sale of Visa Class B shares	85,850		—
Proceeds from bank-owned life insurance surrender	—		59,711
Net (increase) decrease in loans	(839,620)		(20,646)
Net cash from business combinations	—		76,072
Purchases of stock of Federal Home Loan Bank of Pittsburgh	(145,399)		(95,750)
Redemptions of stock of Federal Home Loan Bank of Pittsburgh	156,724		122,317
Sales of other real estate owned	875		1,610
Investment in premises and equipment	(2,830)		(5,510)
Sales of premises and equipment	45		71
Net cash (used in) provided by investing activities	$	(927,795)	$	218,899

Table of Contents


	Six Months Ended June 30,
	2020		2019
(Dollars in thousands)	(Unaudited)
Financing activities:
Net increase (decrease) in demand and saving deposits	$	1,580,924	$	(75,871)
(Decrease) increase in time deposits	(128,170)		25,640
Increase (decrease) in brokered deposits	30,568		(81,028)

Receipts from FHLB advances	5,037,296		23,341,156
Repayments of FHLB advances	(5,043,576)		(23,553,946)
Receipts from federal funds purchased	8,025,475		15,056,950
Repayments of federal funds purchased	(8,220,475)		(15,099,925)

Dividends paid	(12,240)		(9,857)
Issuance of common stock and exercise of common stock options	991		4,127



Purchase of common stock	(39,409)		(17,087)
Net cash provided by (used in) financing activities	$	1,231,384	$	(409,841)
Increase (decrease) in cash and cash equivalents	384,015		(98,932)
Cash and cash equivalents at beginning of period	571,752		620,757
Cash and cash equivalents at end of period	$	955,767	$	521,825
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	26,886	$	30,771
Income taxes	3,610		15,987
Non-cash information:
Loans transferred to other real estate owned	2,503		2,098
Loans transferred to portfolio from held-for-sale at fair value	11,065		14,846
Fair value of assets acquired, net of cash received	—		5,033,367
Fair value of liabilities assumed	—		5,109,931
Impact of ASC 842 Adoption:
Right of use asset	—		121,288
Lease liability	—		(132,346)
Impact of ASC 326 Adoption (Note 2):
Allowance for credit losses on held-to-maturity debt securities	(8)		—
Allowance for credit losses on loans and leases	(35,855)		—
Deferred tax assets	8,461		—
Allowance for credit losses on unfunded lending commitments	(2,966)		—
Retained earnings	30,368		—

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

Table of Contents

WSFS FINANCIAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, ~~2019~~2020

(UNAUDITED)

1. BASIS OF PRESENTATION

General

~~Our~~These unaudited Consolidated Financial Statements include the accounts of WSFS Financial Corporation (the Company or WSFS), Wilmington Savings Fund Society, FSB (WSFS Bank or the Bank), WSFS Wealth Management, LLC (Powdermill), WSFS Capital Management, LLC (West Capital), Cypress Capital Management, LLC (Cypress) ~~and~~, Christiana Trust Company of Delaware (Christiana Trust DE)~~. We~~ and WSFS SPE Services, LLC. The Company also ~~have one~~has 1 unconsolidated subsidiary, WSFS Capital Trust III. WSFS Bank has ~~four~~3 wholly owned subsidiaries: Beneficial Equipment Finance Corporation (BEFC), WSFS Investment Group, Inc. (WSFS Wealth Investments), and 1832 Holdings, Inc., and ~~WSFS SPE Services, LLC, and one~~1 majority-owned subsidiary, NewLane Finance ~~Company.~~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 provide~~The Company provides residential and commercial real estate, commercial and consumer lending services, as well as retail deposit and cash management services. ~~Our~~The core banking business is commercial lending funded primarily by customer-generated deposits. In addition, ~~we offer~~the Company offers a variety of wealth management and trust services to personal and corporate customers. The Federal Deposit Insurance Corporation (FDIC) insures ~~our~~the customers’ deposits to their legal maximums. ~~We serve our~~The Company serves its customers primarily from ~~147~~115 offices located in Pennsylvania ~~(72)~~(54), Delaware ~~(49)~~(43), New Jersey ~~(24)~~(16), Virginia (1) and Nevada (1) ~~and through our~~, its ATM network, website at www.wsfsbank.com. and mobile app. Information on ~~our~~the website is not incorporated by reference into this Quarterly Report on Form 10-Q.

~~Our~~The Company's leasing business is conducted by NewLane Finance. NewLane Finance ~~Company (formerly Neumann Finance Company) and BEFC. Newlane Finance Company~~ originates small business leases and provides commercial financing ~~products and services~~ to businesses nationwide, targeting various equipment categories including technology, software, office, medical, veterinary and other areas. BEFC originates small business leases, primarily medical and veterinary equipment. During the second quarter of 2019, WSFS Bank announced its intention to combine the operations of NewLane Finance Company and BEFC later in 2019.

Basis of Presentation

In preparing the unaudited Consolidated Financial Statements, ~~we are~~the Company is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Amounts subject to significant estimates include the allowance for ~~loan~~credit losses (including loans and ~~lease losses~~leases held for investment, investment securities available-for-sale and ~~reserves for~~held-to-maturity), lending-related commitments, goodwill, intangible assets, post-retirement benefit obligations, the fair value of financial instruments, and income ~~taxes and other-than-temporary impairment (OTTI).~~taxes. Among other effects, changes to these estimates could result in future impairments of investment securities, goodwill and intangible assets, the establishment of ~~the~~additional allowance and lending-related ~~commitments~~commitment reserves as well as increased post-retirement benefits expense.

~~Our~~The Company's accounting and reporting policies conform to Generally Accepted Accounting Principles in the U.S. (GAAP), prevailing practices within the banking industry for interim financial information and Rule 10-01 of SEC Regulation S-X (Rule 10-01). Rule 10-01 does not require us to include all information and notes that would be required in audited financial statements. Certain prior period amounts have been reclassified to conform with current period presentation. Operating results for the periods presented are not necessarily indicative of the results that may be expected for any future quarters or for the year ending December 31, ~~2019.~~2020. These unaudited, interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in ~~our~~the Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 (the ~~2018~~2019 Annual Report on Form 10-K) that was filed with the SEC on ~~February 28, 2019~~March 2, 2020 and is available at www.sec.gov or on ~~our~~the website at ~~www.wsfsbank.com.~~www.wsfsbank.com. All significant intercompany accounts and transactions were eliminated in consolidation.

~~Business Combinations~~

On March 1, 2019, we acquired Beneficial Bancorp, Inc. (Beneficial), including its subsidiary Beneficial Bank, a community bank headquartered in Philadelphia, Pennsylvania, creating the largest, premier, locally-headquartered bank in the Greater Delaware Valley. Beneficial merged with and into WSFS, with WSFS continuing as the surviving corporation and simultaneously, Beneficial Bank merged with and into WSFS Bank, with WSFS Bank continuing as the surviving bank. This acquisition grew our market share, deepened our presence in the Philadelphia, southeastern Pennsylvania and New Jersey markets, and enhanced our customer base. The results of Beneficial's operations are included in our unaudited Consolidated Financial Statements since the date of the acquisition. See Note 3 for further information.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES:

~~Significant Accounting Policies:~~

The significant accounting policies used in preparation of ~~our~~the Consolidated Financial Statements are disclosed in ~~our 2018~~the Company's 2019 Annual Report on Form 10-K. Those significant accounting policies remain unchanged at June 30, ~~2019,~~2020, except as described below:

Loans

Loans 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.

Allowance for Credit Losses - Loans and Leases

~~We account for our leases~~The Company establishes its allowance in accordance with guidance provided in ASC ~~842~~326, Financial Instruments - ~~Leases~~Credit Losses. ~~Most~~The allowance for credit losses includes quantitative and qualitative factors that comprise management's current estimate of ~~our~~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 reasonable and supportable forecasts about future economic conditions, prepayment speeds, and qualitative adjustment factors.

The Company's portfolio segments, established based on similar risk characteristics and loss behaviors, are:

•Commercial and industrial, owner-occupied commercial, commercial mortgages, construction and commercial small business leases (collectively, commercial loans), and

•Residential, equity secured lines and loans, installment loans, unsecured lines of credit and education loans (collectively, retail loans).

Expected credit losses are recognized on the balance sheet by recording a right-of-use asset and lease liability for each lease. The right-of-use asset represents the right to use the asset under lease for the lease term, and the lease liability representsestimated over the contractual ~~obligation~~term, adjusted for expected prepayments and recoveries. The contractual term excludes any extensions, renewals and modifications unless the Company has reasonable expectations at the reporting date that it will result in a troubled debt restructuring (TDR) or they are not unconditionally cancellable. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to ~~make lease payments.~~be charged-off.

~~As a lessee, WSFS enters into operating leases~~The allowance includes two primary components: (i) an allowance established on loans which share similar risk characteristics collectively evaluated for ~~certain bank branches, office space,~~credit losses (collective basis) and ~~office equipment. The right-of-use assets~~(ii) an allowance established on loans which do not share similar risk characteristics with any loan segment and ~~lease liabilities~~ are ~~initially recognized~~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 retail loans, and each portfolio segment is further segmented by internally assessed risk ratings.

The Company uses a third-party economic forecast to adjust the ~~net present value~~calculated historical loss rates of the ~~remaining lease payments which include renewal options where management is reasonably certain they will be exercised.~~portfolio segments. The ~~net present value is determined using~~Company's economic forecast extends out 6 quarters (the forecast period) and reverts to 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. Lease expense for lease payments is recognizedhistorical loss rates on a straight-line basis over 4 quarters (the reversion period) as it believes this to be reasonable and supportable in the ~~lease term.~~current environment. The economic forecast and reversion periods will be evaluated periodically by the Company and updated as appropriate.

AsThe historical loss rates for commercial loans are estimated by determining the probability of default (PD) and expected loss given default (LGD). 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 retail loans is calculated based solely on average net loss rates over the same look-back period. The current look-back period is 38 quarters which ensures historical loss rates are adequately considering losses within a ~~lessor, WSFS provides direct financing~~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 TDRs, are not included in the collective basis evaluation. When it is probable the Company will not collect all principal and interest due according to ~~our customers through our equipment~~their contractual terms, which is assessed based on the credit characteristics of the loan and/or payment status, these loans are individually reviewed and ~~small-business leasing business. Direct financing leases~~measured for potential credit loss.

The amount of the potential credit loss is measured using one of 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.

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For collateral dependent loans, the expected credit losses at the individual asset level is 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, staff and portfolio concentrations,

•Risk rating accuracy, credit and 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), 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 in the model 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 loan reviews.

Accrued interest receivable on loans is excluded from the estimate of credit losses and is included in Accrued interest receivable on the Consolidated Statements of Financial Condition.

For additional detail regarding the allowance for credit losses and the provision for credit losses, see Note 7.

Past Due and Nonaccrual Loans

Past due loans are defined as loans contractually past due 30 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.

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, 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 atas 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).

Unless loans are well-secured and collection is imminent, for loans greater than 90 days past due their respective reserves are generally charged off once the loss has been confirmed. Expected recoveries do not exceed the aggregate of ~~minimum lease payments~~amounts previously charged off and expected to be charged off.

A loan, for which the terms have been modified resulting in a concession to the borrower experiencing financial difficulty, is considered a TDR. Principal balances are generally not forgiven when a loan is modified as a TDR. Nonaccruing restructured loans remain in nonaccrual status until there has been a period of sustained repayment performance demonstrated, as noted above, and repayment is reasonably assured.

On March 27, 2020, the CARES Act was signed into law, which allows financial institutions to exclude eligible loan modifications from TDR reporting under its loan forbearance program. Eligible modifications must be related to the COVID-19 pandemic, executed on a loan that was not more than 30 days past due as of December 31, 2019 and executed between March 1, 2020 and the earlier of 60 days after the date of the termination of the national emergency or December 31, 2020. Management has elected to account and report eligible modifications under the provisions of the CARES Act.

For additional detail regarding past due and nonaccrual loans, see Note 7.

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Debt Securities

Investments in debt securities 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 ~~unamortized deferred lease origination fees~~tax, as a separate component of stockholders’ equity in accumulated other comprehensive income (loss). Realized gains and ~~costs~~losses on sales of investment and ~~unearned income. Interest~~mortgage-backed securities (MBS) are determined using the specific identification method. All sales are made without recourse.

Debt securities mostly include mortgage-backed securities (MBS), municipal bonds, and U.S. government and agency securities. 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 ~~direct financing leases is~~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 ~~term~~period to the earliest call date.

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.

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 management's discussion of the ~~lease. Origination fees~~allowance for credit loss 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: state and ~~costs~~political subdivisions, and foreign bonds. These securities are ~~deferred,~~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.

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 it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criteria 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 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.

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The Company performs this analysis on a quarterly basis to review the conditions and risks associated with the individual securities. Credit losses on an impaired security shall continue to be 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.

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 ~~net amount~~provision for credit losses for off-balance sheet exposure is ~~amortized to interest income over~~included in Loan workout and other credit costs on the ~~estimated life~~Consolidated Statements of Income.

For additional detail regarding the ~~lease.~~allowance for credit losses and the provision for credit losses, see Note 16.

RECENT ACCOUNTING PRONOUNCEMENTS

Accounting Guidance Adopted in ~~2019~~

~~ASU No. 2016-02,~~ ~~Leases (Topic 842):~~ ~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~. This ASU revises the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for substantially all leases. The new lease guidance also simplifies 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 comparative modified retrospective transition approach is required; however, in July 2018, the FASB issued ASU 2018-11, ~~Leases-Targeted Improvements~~, which provides an optional transition method whereby comparative periods presented in the financial statements in the period of adoption do not need to be restated under Topic 842. The Company adopted this guidance on January 1, 2019 using the transition option in ASU 2018-11 and the results of this adoption are recorded in the Consolidated Statements of Financial Condition. See Note 9 for additional disclosures resulting from our adoption of this standard.

~~ASU No. 2019-01,~~ ~~Leases (Topic 842)~~: ~~Codification Improvements:Subsequent to adopting ASU 2016-02, in March 2019, the FASB issued ASU No. 2019-01,~~ ~~Leases (Topic 842)~~: ~~Codification Improvements~~, which makes targeted changes to lessor accounting and clarifies interim transition disclosure requirements upon adopting Topic 842. The guidance is effective for annual periods beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this guidance on March 31, 2019. See Note 9 for additional disclosures resulting from our adoption of this standard.

~~ASU No. 2017-08,~~ ~~Premium Amortization on Purchased Callable Debt Securities:In March 2017, the FASB issued ASU No. 2017-08,~~ ~~Premium Amortization on Purchased Callable Debt Securities~~. The new guidance requires the amortization period for certain non-contingent callable debt securities held at a premium to end at the earliest call date 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 terms of the debt security. The guidance is effective in annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted. Use of the modified retrospective method, with a cumulative-effect adjustment to retained earnings is required. The Company adopted this standard on January 1, 2019, on a modified retrospective basis and the adoption did not have an effect on the Consolidated Financial Statements.

~~ASU No. 2017-12,~~ ~~Targeted Improvements to Accounting for Hedging Activities (Topic 815):In August 2017, the FASB issued ASU No. 2017-12,~~ ~~Targeted Improvements to Accounting for Hedging Activities (Topic 815)~~. The new guidance changes both the designation and measurement guidance for qualifying hedging relationships and simplifies the presentation of hedge results. Specifically, the guidance eliminates the requirement to separately measure and report hedge ineffectiveness and also aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. Further, the new guidance provides entities the ability to apply hedge accounting to additional hedging strategies as well as permits a one-time reclassification of eligible to be hedged instruments from held to maturity to available for sale upon adoption. The guidance is effective in annual and interim periods beginning after December 15, 2018. Early adoption is permitted. Adoption using the modified retrospective approach is required for hedging relationships that exist as of the date of adoption; presentation and disclosure requirements are applied prospectively. The Company adopted this standard on January 1, 2019 on a modified retrospective basis for existing hedging relationships and on a prospective basis for presentation and disclosure requirements. The adoption of this standard did not have an effect on the Consolidated Financial Statements. See Note 15 for additional disclosures resulting from our adoption of this standard.

~~ASU No. 2018-16~~ ~~Derivatives and Hedging - Inclusion of the Secured Overnight Financial Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (Topic 815):In October 2018, the FASB issued ASU No. 2018-16~~ ~~Derivatives and Hedging - Inclusion of the Secured Overnight Financial Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (Topic 815)~~. The new guidance applies to all entities that elect to apply hedge accounting to benchmark interest rate hedges under Topic 815. It permits the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes in addition to the existing applicable rates. The guidance is required to be adopted concurrently with ASU 2017-12, on a prospective basis for qualifying new or redesignated hedging relationships entered into on or after adoption. The Company adopted this standard on January 1, 2019 on a prospective basis and the adoption did not have an effect on the Consolidated Financial Statements.

~~Accounting Guidance Pending Adoption at June 30, 2019~~

2020

ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). ASU 2016-13 replaces the incurred loss impairment methodology ~~in current GAAP~~ with the current expected credit losses (CECL) methodology which requires management consideration and ~~requires consideration~~judgment of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. Purchased credit impaired loans will receive an allowance account at the acquisition date that represents a component 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 to the amount by which fair value is below amortized cost.

In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, ~~which clarifies~~clarifying that ~~receivables arising from~~ operating ~~leases~~lease receivables are not within the scope of Topic 326. In December 2018, federal regulators issued a final rule related to regulatory capital (and CECL (Regulatory Capital Rule: Implementation and Transition of the Current Expected Credit Losses Methodology for Allowances and Related Adjustments to the Regulatory Capital Rule and Conforming Amendments to Other ~~Regulations~~Regulations)~~) which is~~, intended to provide regulatory capital relief tofor entities transitioning to CECL. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, ~~which provides~~providing entities the option to irrevocably elect the fair value option on eligible financial instruments, ~~within~~which excluded held-to-maturity debt securities. In November 2019, the ~~scope~~FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, clarifying guidance on expected recoveries for purchased credit deteriorated financial assets, accrued interest receivable and collateral maintenance provisions and providing transition relief for troubled debt restructurings. In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments, clarifying the contractual term of ~~both ASC 326-20~~a net investment in a lease and ~~ASC 825-10 upon adoption~~the requirement to establish an allowance for credit loss when an entity regains control of ~~ASU 2016-13.~~sold financial assets.

~~This guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The~~While the CARES Act provided an option to defer implementation of the CECL methodology, the Company ~~does not plan to early adopt this guidance and will adopt~~adopted this guidance on January 1, 2020, using the modified retrospective approach for financial assets recorded at amortized cost with the exception of purchase credit deteriorated (PCD) assets, which were previously classified as purchase credit impaired (PCI) accounted for under ASC 310-30, adopted using the prospective approach. The cumulative effect of the adoption resulted in a $30.4 million decrease to the beginning balance of retained earnings as of January 1, 2020. ~~A cross-functional team from Finance, Credit,~~Results and ~~Information Technology is leading the implementation efforts~~disclosures for reporting periods beginning after January 1, 2020 are presented under ASC 326 while prior period amounts continue to ~~evaluate~~be reported in accordance with previously applicable GAAP. For further details on the impact of ~~this guidance on~~ the ~~Company’s~~adoption, accounting policies, elections, and practical expedients applied, see updated Significant Accounting Policies and CECL disclosures throughout the Notes to the Consolidated Financial ~~Statements, internal systems, accounting policies, processes~~Statements.

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The following table illustrates the impact of ASC 326 on loans, leases, purchased financial assets, debt securities, other assets and ~~related internal controls. We have completed~~unfunded lending commitments compared to the ~~implementation of our software solution and a third-party specialist has completed an independent model review of the solution. We continue~~incurred loss approach, as disclosed prior to ~~focus~~adoption on our evaluation of acceptable methodologies, accounting policies, and reporting requirements under the guidance as well as implementation and transition rules issued by regulators. As necessary, we will continue to consult with third-party experts and specialists to assist with our implementation efforts. Our implementation efforts to date suggest that adoption may materially increase the allowance for loan losses and decrease capital levels; however, the extent of these impacts will depend on the composition and asset quality of the portfolio, macroeconomic conditions, and significant estimates and judgments made by management at the time of adoption.January 1, 2020.


	January 1, 2020
	As reported under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption
(Dollars in thousands)
Assets:
Investment securities, held-to-maturity
State and political subdivisions	$	(8)	$	—	$	(8)

Allowance for credit losses on held-to-maturity debt securities	$	(8)	$	—	$	(8)
Loans and leases
Commercial and industrial⁽¹⁾	(42,596)		(22,849)		(19,747)
Owner-occupied commercial	(3,144)		(4,616)		1,472
Commercial mortgages	(9,114)		(7,452)		(1,662)
Construction	(4,572)		(3,891)		(681)
Residential	(8,903)		(1,381)		(7,522)
Consumer	(15,102)		(7,387)		(7,715)
Allowance for credit losses on loans and leases	$	(83,431)	$	(47,576)	$	(35,855)
Other assets
Deferred tax assets	18,452		9,991		8,461
Liabilities:
Other liabilities
Allowance for credit losses on unfunded lending commitments	(4,513)		(1,547)		(2,966)
Total ASC 326 impact to retained earnings					$	30,368

⁽¹⁾Includes commercial small business leases.

ASU No. 2018-13, Fair Value Measurement Disclosure Framework: In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement Disclosure Framework, which ~~amends~~amended ASC 820 - Fair Value Measurement. The new guidance modifies, adds and removes certain disclosures aimed to improve the overall usefulness of the disclosure requirements for fair value measurements. The guidance is effective in annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted. Adoption is required on either a prospective or retrospective basis, depending on the amendment. The Company ~~does not expect~~adopted this standard on January 1, 2020. See Note 13 for changes to financial statement disclosures resulting from the ~~application~~adoption of this ~~guidance to have a material impact on its Consolidated Financial Statements.~~standard.

ASU No. 2018-14, Compensation-Retirement Benefits - Defined Benefit Plans-General (Topic 715): In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits - Defined Benefit Plans-General (Topic 715) which applies to all employers that provide defined benefit pension or other postretirement benefit plans for their employees. The new guidance modifies, adds and removes certain disclosures aimed to improve the overall usefulness of the disclosure requirements to financial statement users. The guidance is effective for annual periods beginning after December 15, 2020. Early adoption is permitted. Use of the retrospective method is required. The Company ~~does not expect~~early adopted this standard on January 1, 2020. See Note 11 for changes to financial statement disclosures resulting from the ~~application~~adoption of this ~~guidance to have a material impact on its Consolidated Financial Statements.~~standard.

ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Topic 350): In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Topic 350). The new guidance ~~provides~~provided clarity on capitalizing and expensing implementation costs for cloud computing arrangements in a service contract. If an implementation cost is capitalized, the cost should be recognized over the noncancellable term and periodically assessed for impairment. The guidance is effective in annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted. Adoption ~~should~~can be applied retrospectively or prospectively to all implementation costs incurred after the date of adoption. ~~Our preliminary review of~~The Company adopted this ~~guidance~~standard on January 1, 2020, on a prospective basis with no impact to ~~date suggests that adoption may result in a material amount of implementation costs being deferred; however,~~ the ~~extent of the impact will depend on the cloud computing implementations occurring~~Consolidated Financial Statements at the time of adoption.

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ASU No. 2019-04, Codification Improvements to Topic 326, Financial ~~Instruments-Credit~~Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments: In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.The new guidance ~~amends~~amended ASU 2016-13 to address topics related to accrued interest receivables, recoveries, disclosures, and provides certain other clarifications. The new guidance also ~~amends~~amended ASU 2017-12 to provide clarification on certain hedge accounting topics and transition ~~requirements amended by ASU 2017-12.~~requirements. Lastly, the new guidance ~~amends~~amended ASU 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities, to add ~~clarification requiring remeasurement under ASC 820~~clarifying guidance when using the measurement alternative under ASC 820, among certain other clarifications. The guidance is effective for annual periods beginning after December 15, 2019. Early adoption is permitted. Adoption is required on a prospective, modified-retrospective or retrospective basis, depending on the amendment. The Company ~~will evaluate~~included the amendments related to ASU 2016-13 ~~in conjunction with our overall evaluation~~as part of ~~ASU 2016-13. For~~its CECL guidance implementation and adoption at January 1, 2020. The Company adopted other amendments within this guidance on January 1, 2020 with no impact to the Consolidated Financial Statements at the time of adoption.

Accounting Guidance Pending Adoption at June 30, 2020

ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes: In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The guidance adds new amendments to simplify income tax accounting and removes certain exceptions and modifies the accounting for certain income tax transactions. The guidance is effective for annual periods beginning after December 15, 2020. Early adoption is permitted. Adoption is required on a prospective, modified-retrospective or retrospective basis, depending on the amendment. The Company does not expect the application of this guidance to have a material impact on ~~its~~the Consolidated Financial Statements.

~~3. BUSINESS COMBINATIONS~~ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the Interactions between Topic 321, Topic 323, and Topic 815:

~~Beneficial Bancorp, Inc.~~

~~On March 1, 2019, we acquired Beneficial. Subject to~~In January 2020, the ~~terms~~FASB issued ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and ~~conditions of~~Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) –Clarifying the ~~merger agreement,~~Interactions between Topic 321, Topic 323, and Topic 815. The new guidance clarifies that observable transactions under the ~~Beneficial stockholders received 0.3013 shares of WSFS common stock and $2.93 in cash for each share of Beneficial common stock. Based on~~measurement alternative method (ASC 321) should be considered when applying or discontinuing the February 28, 2019 closing share price of $43.28, the value of the stock consideration was $950.0 million and cash consideration was $228.2 million, for total transaction value of $1.2 billion. Results of the combined entity’s operations are included in our Consolidated Financial Statements since the date of the acquisition.

Beneficial conducted its primary business operations through its wholly owned subsidiary, Beneficial Bank, which was merged into WSFS Bank. At closing, Beneficial had 74 branches and offices in southeastern Pennsylvania and southern New Jersey. WSFS acquired Beneficial to expand the scale and efficiency of its operations in the Philadelphia, southeastern Pennsylvania and New Jersey markets, and to create opportunities to generate additional revenue by providing its full suite of banking, mortgage banking, wealth management and insurance services to the legacy Beneficial markets.

~~The acquisition of Beneficial was accounted for as a business combination using the acquisition~~equity method of accounting (ASC 323). The guidance also clarifies that certain non-derivative forward contracts and ~~accordingly, the assets acquired, liabilities assumed and consideration transferred were recorded~~purchase call options to acquire securities, should be measured at ~~their estimated~~ fair ~~values as~~value before settlement or exercise. The guidance is effective for annual periods beginning after December 15, 2020. Early adoption is permitted. Use of the ~~acquisition date. The excess of consideration transferred over the fair value of net assets acquired was recorded as goodwill, which~~prospective method is ~~not amortizable nor deductible for tax purposes.~~required. The Company ~~allocated~~does not expect the ~~total balance~~application of ~~goodwill~~this guidance to ~~its WSFS Bank segment. While~~have a material impact on the valuation of acquired assets and liabilities is nearly completed, the values of certain assets and liabilities are preliminary in nature, and are subject to adjustment as additional information is obtained about the facts and circumstances that existed at the acquisition date. When the valuation is final, any changes to the preliminary valuation of acquired assets and liabilities could result in adjustments to identified intangibles and goodwill. The fair values of assets acquired and liabilities assumed is expected to be finalized during the measurement period, which ends one year from the closing date.

~~The following table summarizes the consideration transferred and the fair values of the identifiable assets acquired and liabilities assumed:~~

(Dollars in thousands) Fair Value
Consideration Transferred:
Common shares issued (21,816,355) $ 949,968
Cash paid to Beneficial stock and option holders 228,239
Value of consideration 1,178,207
Assets acquired:
Cash and due from banks 304,311
Investment securities 619,880
Loans and leases, net 3,711,246
Premises and equipment 69,873
Deferred income taxes 18,739
Bank owned life insurance 82,510
Core deposit intangible 85,053
Servicing rights intangible 2,466
Other assets 135,895
Total assets 5,029,973
Liabilities assumed:
Deposits 4,056,506
Other liabilities 102,965
Total liabilities 4,159,471
Net assets acquired: 870,502
Goodwill resulting from acquisition of Beneficial $ 307,705

~~The following table details the change to goodwill recorded subsequent to acquisition:~~

(Dollars in thousands) Fair Value
Goodwill resulting from the acquisition of Beneficial reported as of March 31, 2019 $ 309,486
Effects of adjustments to:
Cash and due from banks 246
Investment securities (3,177 )
Loans 911
Premises and equipment (741 )
Deferred income taxes 731
Other assets (420 )
Deposits 790
Other liabilities (121 )
Adjusted goodwill resulting from the acquisition of Beneficial as of June 30, 2019 $ 307,705

In many cases, the fair values of the assets acquired and liabilities assumed were determined by estimating the cash flows expected to result from those assets and liabilities and discounting them at appropriate market rates.

Acquired loans are initially recorded at their fair values as of the acquisition date. The fair value is based on a discounted cash flow methodology that uses assumptions as to credit risk, default rates, collateral values, and loss severity, along with estimated prepayment rates. Loans that have deteriorated in credit quality since their origination, and for which it is probable that all contractual cash flows will not be received, are accounted for in accordance with ASC 310-30, ~~Loans and Debt Securities Acquired with Deteriorated Credit Quality. For additional information regarding purchased impaired loans, see Note 7 to the unaudited~~ Consolidated Financial Statements.

The Company acquired Beneficial’s investment portfolio with a fair value of $619.9 million, of which $578.8 million of investment securities were sold subsequent to closing. The proceeds received for the investments sold approximated their fair values asASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the ~~acquisition date. The fair value~~Effects of Reference Rate Reform on Financial Reporting: In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the ~~retained investment portfolio was determined by taking into account market prices obtained from independent valuation source(s). See Note 14~~Effects of Reference Rate Reform on Financial Reporting. The amendments provide optional guidance to entities for ~~additional information.~~

~~The Company recorded~~ a ~~deferred income tax asset (DTA)~~limited period of ~~$18.7 million related~~time to ~~tax attributes of Beneficial along with~~ease the transition in accounting for and recognizing the effects of reference rate reform on financial reporting. Under the guidance, modifications of contracts due to reference rate reform will not require contract remeasurement or reassessment of a previous accounting determination. For hedge accounting, modification of critical terms of the hedge due to changes in reference rate reform will not affect hedge accounting or dedesignate the hedging relationship. The guidance also provides specific expedients for fair value ~~adjustments resulting from acquisition accounting for~~hedges, cash flow hedges, and excluded components. Further, the ~~combination.~~guidance provides a one-time election to sell or transfer held to maturity debt securities that are affected by the reference rate change. The guidance is effective upon issuance through December 31, 2022. The Company will apply the guidance to any contracts modifications made due to reference rate reform.

~~WSFS recorded $85.1 million~~

Table of core deposit intangibles which are being amortized over ten years using a straight-line amortization methodology. The fair value of core deposit intangibles was determined based on modeling assumptions that take into consideration customer attrition, deposit interest rates, and alternative costs of funds.Contents

Certificates of deposit accounts were valued by segregating the portfolio into pools based on remaining maturity and comparing the contractual cost of the portfolio to an identical portfolio bearing current market rates. The valuation adjustment will be accreted or amortized to interest expense over the remaining maturities of the respective pools.

Direct costs related to the acquisition were expensed as incurred. As a result of the merger, the Company developed a comprehensive integration plan under which we have begun to incur costs, including costs to terminate contracts, consolidate facilities and relocate Associates. Costs related to the acquisition and restructuring are presented in the “Corporate Development” and “Restructuring” expense line items, respectively, on the Consolidated Statements of Income.

During the fourth quarter of 2018, WSFS announced a retail banking office optimization plan that includes the consolidation of fourteen Beneficial and eleven WSFS Bank banking offices, which we expect to begin during the third quarter of 2019. Additionally, during the second quarter, WSFS completed the sale of five Beneficial retail banking offices in New Jersey to the Bank of Princeton, a New Jersey-based financial institution, at a deposit premium of 7.37%.

4.3. NONINTEREST INCOME

Credit/debit card and ATM income

The following table presents the components of credit/debit card and ATM income:

Three Months Ended June 30, Six Months Ended June 30,
(Dollars in thousands) 2019 2018 2019 2018
Bailment fees $ 6,908
$ 6,588
$ 13,807
$ 12,681
Interchange fees 6,452
3,847
10,839
7,307
Other card and ATM fees 317
274
546
526
Total credit/debit card and ATM income $ 13,677
$ 10,709
$ 25,192
$ 20,514


	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2020		2019		2020		2019
Bailment fees	$	3,080	$	6,908	$	8,161	$	13,807
Interchange fees	5,631		6,452		11,247		10,839
Other card and ATM fees	595		317		1,257		546
Total credit/debit card and ATM income	$	9,306	$	13,677	$	20,665	$	25,192

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 ~~our~~ 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:

Three Months Ended June 30, Six Months Ended June 30,
(Dollars in thousands) 2019 2018 2019 2018
Trust fees $ 6,685
$ 6,118
$ 13,250
$ 11,366
Wealth management and advisory fees 3,697
4,126
7,279
8,067
Total investment management and fiduciary income $ 10,382
$ 10,244
$ 20,529
$ 19,433


	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2020		2019		2020		2019
Trust fees	$	7,308	$	6,685	$	14,262	$	13,250
Wealth management and advisory fees	3,621		3,697		7,629		7,279
Total investment management and fiduciary income	$	10,929	$	10,382	$	21,891	$	20,529

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 and trustee services on structured finance transactions; indenture trustee, administrative agent and collateral agent services to institutions and corporations; commercial domicile and independent director services; and investment and trustee services to families and individuals across the U.S. Most fees are flat fees, except for a portion of personal and corporate trustee fees where ~~we earn~~the Company earns a percentage on the assets under management. 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 ~~Cypress,~~ West Capital, Cypress, Powdermill and WSFS Wealth ~~Client Management, WSFS Wealth Investments and WSFS Institutional Services.~~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 quarterly and annual billing for the services.

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Deposit service charges

The following table presents the components of deposit service charges:

Three Months Ended June 30, Six Months Ended June 30,
(Dollars in thousands) 2019 2018 2019 2018
Service fees $ 3,179
$ 2,634
$ 5,895
$ 5,214
Return and overdraft fees 2,696
1,893
4,544
3,777
Other deposit service fees 228
137
410
303
Total deposit service charges $ 6,103
$ 4,664
$ 10,849
$ 9,294


	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2020		2019		2020		2019
Service fees	$	2,919	$	3,179	$	6,130	$	5,895
Return and overdraft fees	1,134		2,696		3,466		4,544
Other deposit service fees	122		228		226		410
Total deposit service charges	$	4,175	$	6,103	$	9,822	$	10,849

Deposit service charges includes revenue earned from ~~our~~ core deposit products, certificates of deposit, and brokered deposits. ~~We generate~~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, cash 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:

Three Months Ended June 30, Six Months Ended June 30,
(Dollars in thousands) 2019 2018 2019 2018
Managed service fees $ 3,624
$ 3,105
$ 6,566
$ 5,931
Currency preparation 851
818
1,590
1,543
ATM insurance 652
605
1,280
1,195
Miscellaneous products and services 2,607
2,583
6,005
4,350
Total other income $ 7,734
$ 7,111
$ 15,441
$ 13,019


	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2020		2019		2020		2019
Managed service fees	$	3,724	$	3,624	$	7,755	$	6,566
Currency preparation	919		851		1,759		1,590
ATM loss protection	571		652		1,218		1,280
Miscellaneous products and services	766		2,607		2,201		6,005
Total other income	$	5,980	$	7,734	$	12,933	$	15,441

Other income consists of managed service fees, which are primarily courier fees related to cash management, currency preparation, ATM ~~insurance~~loss protection 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. ~~For~~Miscellaneous products and services include gains from the sale of SBA loans, which were higher during the three and six months ended June 30, 2019, ~~"Miscellaneous products~~ and ~~services" included income related to~~ a non-recurring transfer of client accounts to a departing Wealth investment ~~adviser,~~advisor in accordance with the buy-out provisions of the ~~adviser's contract.~~advisor's contract, which occurred during the six months ended June 30, 2019.

Arrangements with multiple performance obligations

~~Our~~The Company's contracts with customers may include multiple performance obligations. For such arrangements, ~~we allocate~~the Company allocates revenue to each performance obligation based on its relative standalone selling price. WeThe Company generally ~~determine~~determines standalone selling prices based on the prices charged to customers.

Practical expedients and exemptions

~~We do~~The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which ~~we recognize~~the Company recognizes revenue at the amount to which ~~we have~~it has the right to invoice for services performed.

See Note 1615 for further information about the disaggregation of noninterest income by segment.

5.Table of Contents

4. (LOSS) EARNINGS PER SHARE

The following table shows the computation of basic and diluted earnings per share:


	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars and shares in thousands, except per share data)	2020		2019		2020		2019
Numerator:
Net (loss) income attributable to WSFS	$	(7,111)	$	36,200	$	3,816	$	49,223
Denominator:
Weighted average basic shares	50,655		53,253		50,871		46,103
Dilutive potential common shares⁽¹⁾	—		263		40		335
Weighted average fully diluted shares	$	50,655	$	53,516	$	50,911	$	46,438
(Loss) earnings per share:
Basic	$	(0.14)	$	0.68	$	0.08	$	1.07
Diluted	$	(0.14)	$	0.68	$	0.07	$	1.06
Outstanding common stock equivalents having no dilutive effect	48		1		15		1

Three Months Ended June 30, Six Months Ended June 30,
(Dollars and shares in thousands, except per share data) 2019 2018 2019 2018
Numerator:
Net income attributable to WSFS $ 36,200
$ 28,740
$ 49,223
$ 66,090
Denominator:
Weighted average basic shares 53,253
31,567
46,103
31,497
Dilutive potential common shares 263
697
335
729
Weighted average fully diluted shares $ 53,516
$ 32,264
$ 46,438
$ 32,226
Earnings per share:
Basic $ 0.68
$ 0.91
$ 1.07
$ 2.10
Diluted $ 0.68
$ 0.89
$ 1.06
$ 2.05
Outstanding common stock equivalents having no dilutive effect 1
11
1
23

⁽¹⁾For the three months ended June 30, 2020, the effect of 14 thousand dilutive potential common shares were excluded from the computation of diluted net loss per common share, as these shares would have been antidilutive due to the net loss reported in this period.

~~6. INVESTMENT SECURITIES~~5. INVESTMENTS

Debt Securities

The following tables detail the amortized cost, allowance for credit losses and the estimated fair value of ~~our~~the Company's investments in available-for-sale and held-to-maturity debt ~~securities as well as our equity investments. None~~securities. NaN of ~~our~~the Company's investments in debt securities are classified as trading.


	June 30, 2020
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Allowance for Credit Losses		Fair Value
Available-for-Sale Debt Securities
CMO	$	343,725	$	12,185	$	89	$	—	$	355,821
FNMA MBS	1,326,940		67,158		63		—		1,394,035
FHLMC MBS	280,752		16,795		—		—		297,547
GNMA MBS	29,567		1,257		—		—		30,824
GSE	116,130		1,071		39		—		117,162
	$	2,097,114	$	98,466	$	191	$	—	$	2,195,389
Held-to-Maturity Debt Securities⁽¹⁾
State and political subdivisions	$	127,108	$	4,597	$	—	$	8	$	131,697
Foreign bonds	501		—		—		—		501
	$	127,609	$	4,597	$	—	$	8	$	132,198

⁽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 gains of $0.5 million at June 30, 2020, related to securities transferred, which are offset in Accumulated other comprehensive income. 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. See Note 2 for updated Significant Accounting Policies on held-to-maturity debt securities.

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June 30, 2019
(Dollars in thousands) Amortized Cost
Gross
Unrealized
Gain

Gross
Unrealized
Loss

Fair
Value
Available-for-Sale Debt Securities
CMO $ 367,289
$ 5,455
$ 509
$ 372,235
FNMA MBS 1,034,233
19,091
929
1,052,395
FHLMC MBS 330,609
6,219
245
336,583
GNMA MBS 35,471
378
192
35,657
$ 1,767,602
$ 31,143
$ 1,875
$ 1,796,870
Held-to-Maturity Debt Securities⁽¹⁾

State and political subdivisions $ 141,315
$ 2,552
$ 6
$ 143,861
Foreign bonds $ 2,002
$ 4
$ —
$ 2,006
$ 143,317
$ 2,556
$ 6
$ 145,867

Equity Investments⁽²⁾

Visa Class B shares $ 15,716
$ 24,221
$ —
$ 39,937
Other equity investments 8,149
625
—
8,774
$ 23,865
$ 24,846
$ —
$ 48,711


⁽¹⁾	Held-to–maturity securities transferred from available-for-sale are included in held-to-maturity at fair value at the time of transfer. The amortized cost of held-to-maturity securities included net unrealized gains of $0.8 million at June 30, 2019, related to securities transferred, which are offset in Accumulated other comprehensive income, net of tax.


⁽²⁾	~~Equity investments are included in~~ ~~Other investments~~ ~~in the unaudited Consolidated Statements of Financial Condition.~~


	December 31, 2019
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
Available-for-Sale Debt Securities
CMO	$	336,194	$	4,578	$	542	$	340,230
FNMA MBS	1,219,522		25,717		2,786		1,242,453
FHLMC MBS	320,896		8,641		591		328,946
GNMA MBS	32,871		477		63		33,285
	$	1,909,483	$	39,413	$	3,982	$	1,944,914
Held-to-Maturity Debt Securities⁽¹⁾
State and political subdivisions	$	131,600	$	3,023	$	—	$	134,623
Foreign bonds	2,001		1		—		2,002
	$	133,601	$	3,024	$	—	$	136,625

December 31, 2018
(Dollars in thousands) Amortized Cost Gross
Unrealized
Gain Gross
Unrealized
Loss Fair
Value
Available-for-Sale Debt Securities
CMO $ 376,867
$ 1,721
$ 6,838
$ 371,750
FNMA MBS 655,485
1,526
12,938
644,073
FHLMC MBS 155,758
558
2,394
153,922
GNMA MBS 36,117
97
880
35,334
$ 1,224,227
$ 3,902
$ 23,050
$ 1,205,079
Held-to-Maturity Debt Securities⁽¹⁾

State and political subdivisions $ 149,950
$ 275
$ 794
$ 149,431

Equity Investments⁽²⁾

Visa Class B shares $ 13,918
$ 20,015
$ —
$ 33,933
Other equity investments 3,300
—
—
3,300
$ 17,218
$ 20,015
$ —
$ 37,233


⁽¹⁾⁽¹⁾Held-to–maturity securities transferred from available-for-sale are included in held-to-maturity at fair value at the time of transfer. The amortized cost of held-to-maturity securities included net unrealized gains of $0.6 million at December 31, 2019, related to securities transferred, which are offset in Accumulated other comprehensive income.	Held-to–maturity securities transferred from available-for-sale are included in held-to-maturity at fair value at the time of transfer. The amortized cost of held-to-maturity securities included net unrealized gains of $1.0 million at December 31, 2018, related to securities transferred, which are offset in Accumulated other comprehensive loss, net of tax.


⁽²⁾	~~Equity investments are included in~~ ~~Other investments~~ ~~in the unaudited Consolidated Statements of Financial Condition.~~

The scheduled maturities of ~~our~~ available-for-sale debt securities at June 30, ~~2019~~2020 and December 31, ~~2018~~2019 are presented in the table below:


	Available-for-Sale
	Amortized		Fair
(Dollars in thousands)	Cost		Value
June 30, 2020⁽¹⁾
Within one year	$	—	$	—
After one year but within five years	33,142		34,759
After five years but within ten years	217,301		229,175
After ten years	1,846,671		1,931,455
	$	2,097,114	$	2,195,389
December 31, 2019⁽¹⁾
Within one year	$	—	$	—
After one year but within five years	22,136		22,207
After five years but within ten years	194,197		194,376
After ten years	1,693,150		1,728,331
	$	1,909,483	$	1,944,914

⁽¹⁾Actual maturities could differ from contractual maturities.

Available for Sale
Amortized Fair
(Dollars in thousands) Cost Value
June 30, 2019⁽¹⁾

Within one year $ —
$ —
After one year but within five years 19,457
19,519
After five years but within ten years 155,351
156,432
After ten years 1,592,794
1,620,919
$ 1,767,602
$ 1,796,870
December 31, 2018⁽¹⁾

Within one year $ —
$ —
After one year but within five years 19,714
19,423
After five years but within ten years 170,118
163,731
After ten years 1,034,395
1,021,925
$ 1,224,227
$ 1,205,079


⁽¹⁾ Table of Contents	~~Actual maturities could differ from contractual maturities.~~

The scheduled maturities of ~~our~~ held-to-maturity debt securities at June 30, ~~2019~~2020 and December 31, ~~2018~~2019 are presented in the table below:


	Held-to-Maturity
	Amortized		Fair
(Dollars in thousands)	Cost		Value
June 30, 2020 ⁽¹⁾
Within one year	$	1,130	$	1,131
After one year but within five years	5,197		5,286
After five years but within ten years	31,881		33,015
After ten years	89,401		92,766
	$	127,609	$	132,198
December 31, 2019⁽¹⁾
Within one year	$	2,649	$	2,653
After one year but within five years	4,239		4,270
After five years but within ten years	35,288		35,967
After ten years	91,425		93,735
	$	133,601	$	136,625

Held to Maturity
Amortized Fair
(Dollars in thousands) Cost Value
June 30, 2019 ⁽¹⁾

Within one year $ 2,626
$ 2,630
After one year but within five years 7,423
7,458
After five years but within ten years 30,228
30,703
After ten years 103,040
105,076
$ 143,317
$ 145,867
December 31, 2018⁽¹⁾

Within one year $ 1,018
$ 1,016
After one year but within five years 6,703
6,701
After five years but within ten years 29,613
29,547
After ten years 112,616
112,167
$ 149,950
$ 149,431

⁽¹⁾
Actual maturities could differ from contractual maturities.

Table of net deferred loan costs 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. Loans greater than 90 days past due and still accruing 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 are in the process of collection.Contents

The following ~~tables show our~~table shows nonaccrual and past due loans presented at amortized cost at the ~~dates indicated:~~date indicated under the CECL model:


	June 30, 2020
(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⁾	$	7,577		$	1,080		$	8,657		$	3,142,796		$	15,381		$	3,166,834
Owner-occupied commercial	5,198			197			5,395			1,327,646			4,212			1,337,253
Commercial mortgages	7,895			996			8,891			2,155,508			1,148			2,165,547
Construction	—			—			—			638,504			—			638,504
Residential⁽³⁾	1,504			175			1,679			890,063			3,118			894,860
Consumer⁽⁴⁾	5,473			6,153			11,626			1,119,429			2,316			1,133,371
Total	$	27,647		$	8,601		$	36,248		$	9,273,946		$	26,175		$	9,336,369
% of Total Loans	0.30		%	0.09		%	0.39		%	99.33		%	0.28		%	100		%

June 30, 2019
(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 and industrial⁽¹⁾
$ 3,894
$ 682
$ —
$ 4,576
$ 2,309,943
$ 4,964
$ 21,041
$ 2,340,524
Owner-occupied commercial 4,105
398
1,165
5,668
1,262,522
3,951
8,753
1,280,894
Commercial mortgages 4,499
201
—
4,700
2,225,436
13,609
2,302
2,246,047
Construction 249
—
—
249
540,901
546
—
541,696
Residential⁽²⁾
6,022
6
115
6,143
1,047,891
7,863
3,887
1,065,784
Consumer⁽³⁾
6,693
3,811
14,387
24,891
1,097,190
2,999
1,653
1,126,733
Total⁽⁴⁾
$ 25,462
$ 5,098
$ 15,667
$ 46,227
$ 8,483,883
$ 33,932
$ 37,636
$ 8,601,678
% of Total Loans 0.30 % 0.06 % 0.18 % 0.54 % 98.63 % 0.39 % 0.44 % 100 %

⁽¹⁾Nonaccrual loans with an allowance totaled $16 thousand.


⁽²⁾Includes commercial small business leases and PPP loans. ⁽³⁾⁽¹⁾	~~Includes commercial small business leases.~~


⁽²⁾	Residential accruing current balances excludes reverse mortgages at ~~fair value of $15.9 million.~~


⁽³⁾	~~Includes $22.3 million of delinquent, but still accruing, U.S. government-guaranteed student loans that carry little risk of credit loss.~~


⁽⁴⁾	~~The balances above include a total of $3.7 billion acquired non-impaired loans.~~

December 31, 2018
(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 and industrial $ 3,653
$ 993
$ 71
$ 4,717
$ 1,452,185
$ 1,531
$ 14,056
$ 1,472,489
Owner-occupied commercial 733
865
—
1,598
1,049,722
4,248
4,406
1,059,974
Commercial mortgages 1,388
908
—
2,296
1,148,988
7,504
3,951
1,162,739
Construction 157
—
—
157
312,879
749
2,781
316,566
Residential⁽¹⁾
1,970
345
660
2,975
194,960
761
2,854
201,550
Consumer 525
971
104
1,600
677,182
151
2,006
680,939
Total⁽²⁾
$ 8,426
$ 4,082
$ 835
$ 13,343
$ 4,835,916
$ 14,944
$ 30,054
$ 4,894,257
% of Total Loans 0.17 % 0.08 % 0.02 % 0.27 % 98.81 % 0.31 % 0.61 % 100 %


⁽¹⁾	~~Residential accruing current balances excludes reverse mortgages, at fair value of $16.5 million.~~


⁽²⁾	~~The balances above include a total of $430.0 million acquired non-impaired loans.~~

~~Impaired Loans~~

Loans for which it is probable we 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, are measured for impairment in accordance with the provisions of SAB 102 and ASC 310. The amount of impairment is required to be measured using one of three methods: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the fair value of ~~collateral, if the loan is collateral dependent or (3) the loan’s observable market price. If the measure~~$16.1 million.

⁽⁴⁾Includes $10.5 million of ~~the impaired loan is less than the recorded investment in the loan, a related allowance is allocated for the impairment.~~delinquent, but still accruing, U.S. government-guaranteed student loans that carry little risk of credit loss.

The following ~~tables provide~~table shows nonaccrual and past due loans presented at unpaid principal balance at the date indicated under the incurred loss model:


	December 31, 2019
(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			Acquired Impaired Loans			Nonaccrual Loans			Total Loans
Commercial and industrial⁽¹⁾	$	6,289		$	2,038		$	8,327		$	2,214,506		$	1,564		$	11,031		$	2,235,428
Owner-occupied commercial	1,498			831			2,329			1,283,320			6,757			4,060			1,296,466
Commercial mortgages	4,999			99			5,098			2,207,582			8,670			1,626			2,222,976
Construction	—			—			—			580,591			491			—			581,082
Residential⁽²⁾	6,733			437			7,170			980,893			7,326			4,490			999,879
Consumer⁽³⁾	13,164			12,745			25,909			1,098,980			2,127			1,715			1,128,731
Total⁽³⁾	$	32,683		$	16,150		$	48,833		$	8,365,872		$	26,935		$	22,922		$	8,464,562
% of Total Loans	0.39		%	0.19		%	0.58		%	98.83		%	0.32		%	0.27		%	100		%

⁽¹⁾Includes commercial small business leases.

⁽²⁾Residential accruing current balances excludes reverse mortgages, at fair value of $16.6 million.

⁽³⁾Includes $22.3 million of delinquent, but still accruing, U.S. government-guaranteed student loans that carry little risk of credit loss.

⁽⁴⁾Balances in the table above include a total of $3.2 billion acquired non-impaired loans.

The following table presents the amortized cost basis of nonaccruing collateral-dependent loans by class at June 30, 2020 under the CECL model:


	June 30, 2020
(Dollars in thousands)	Property		Equipment and other
Commercial and industrial⁽¹⁾	$	11,008	$	4,373
Owner-occupied commercial	4,212		—
Commercial mortgages	1,148		—
Construction	—		—
Residential⁽²⁾	3,118		—
Consumer⁽³⁾	2,316		—
Total	$	21,802	$	4,373

⁽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.

Table of Contents

The following table provides an analysis of ~~our~~the Company's impaired loans at December 31, 2019 under the incurred loss model:


	December 31, 2019
(Dollars in thousands)	Ending Loan Balances		Loans with No Related Reserve⁽¹⁾		Loans with Related Reserve⁽²⁾		Related Reserve		Contractual Principal Balances⁽²⁾		Average Loan Balances
Commercial and industrial	$	11,900	$	9,979	$	1,921	$	1,185	$	14,653	$	17,033
Owner-occupied commercial	5,596		3,919		1,677		233		6,083		7,869
Commercial mortgages	4,888		1,753		3,135		65		5,215		4,607
Construction	435		—		435		24		488		1,686
Residential	14,119		8,858		5,261		557		16,721		12,031
Consumer	7,584		5,876		1,708		178		8,444		7,729
Total	$	44,522	$	30,385	$	14,137	$	2,242	$	51,604	$	50,955

⁽¹⁾Reflects loan balances at or written down to their remaining book balance.

⁽²⁾The above includes acquired impaired loans totaling $7.9 million in the ending loan balance and $9.0 million in the contractual principal balance.

Interest income of $0.2 million and $0.4 million was recognized on individually reviewed loans during the three and six months ended June 30, ~~2019 and December 31, 2018:~~

June 30, 2019
(Dollars in thousands)
Ending
Loan
Balances

Loans with
No Related
Reserve⁽¹⁾

Loans with
Related
Reserve⁽²⁾
Related Reserve
Contractual
Principal Balances⁽²⁾
Average Loan Balances
Commercial and industrial $ 21,173
$ 8,227
$ 12,946
$ 4,324
$ 25,425
$ 18,055
Owner-occupied commercial 10,134
8,753
1,381
79
10,430
6,522
Commercial mortgages 3,755
2,431
1,324
48
8,047
6,300
Construction 546
—
546
8
638
3,285
Residential 11,610
7,733
3,877
530
13,722
11,602
Consumer 7,414
6,009
1,405
185
8,161
7,932
Total $ 54,632
$ 33,153
$ 21,479
$ 5,174
$ 66,423
$ 53,696


⁽¹⁾	~~Reflects loan balances at or written down to their remaining book balance.~~


⁽²⁾	~~The above includes acquired impaired loans totaling $3.5 million in the ending loan balance and $3.8 million in the contractual principal balance.~~

December 31, 2018
(Dollars in thousands)
Ending
Loan
Balances

Loans with
No Related
Reserve⁽¹⁾

Loans with
Related
Reserve⁽²⁾

Related
Reserve

Contractual
Principal
Balances⁽²⁾

Average
Loan
Balances
Commercial and industrial $ 14,841
$ 8,625
$ 6,216
$ 878
$ 22,365
$ 18,484
Owner-occupied commercial 6,065
4,406
1,659
92
6,337
5,378
Commercial mortgages 5,679
4,083
1,596
79
15,372
7,438
Construction 3,530
—
3,530
458
5,082
5,091
Residential 11,321
6,442
4,879
581
13,771
12,589
Consumer 7,916
6,899
1,017
170
8,573
7,956
Total $ 49,352
$ 30,455
$ 18,897
$ 2,258
$ 71,500
$ 56,936


⁽¹⁾	~~Reflects loan balances at or written down to their remaining book balance.~~


⁽²⁾	~~The above includes acquired impaired loans totaling $4.3 million in the ending loan balance and $4.8 million in the contractual principal balance.~~

2020. Interest income of $0.4 million and $0.6 million was recognized on impaired loans during the three and six months ended June 30, ~~2019, respectively. Interest income of $0.4 million and $0.7 million was recognized on impaired loans during the three and six months ended June 30, 2018, respectively.~~2019.

As of June 30, ~~2019,~~2020, there were 1925 residential loans and 1420 commercial loans in the process of foreclosure. The total outstanding balance on these loans was $2.0 million and ~~$5.2~~$6.2 million, respectively. As of December 31, ~~2018,~~2019, there were 2633 residential loans and 1129 commercial loans in the process of foreclosure. The total outstanding balance on ~~the~~these loans was ~~$1.9~~$3.2 million and ~~$5.3~~$9.5 million, respectively.

~~Reserves on Acquired Nonimpaired Loans~~

~~In accordance with ASC 310, loans acquired by~~ Loan workout and OREO expenses were $1.1 million and $1.8 million during the ~~Bank through its mergers with First National Bank of Wyoming, Alliance Bancorp, Inc. (Alliance), Penn Liberty Bank (Penn Liberty)~~three and ~~Beneficial~~six months ended June 30, 2020, respectively, and $1.1 million and $1.3 million during three and six months ended June 30, 2019, respectively. Loan workout and OREO expenses are ~~reflected~~included in Loan workout and other credit costs on the ~~balance sheet at their fair values on the date~~Consolidated Statement of ~~acquisition as opposed to their contractual values. Therefore, on the date~~Income.

Table of acquisition establishing an allowance for acquired loans is prohibited. After the acquisition date, the Bank performs a separate allowance analysis on a quarterly basis to determine if an allowance for loan loss is necessary. Should the credit risk calculated exceed the purchased loan portfolio’s remaining credit mark, additional reserves will be added to the Bank’s allowance. When a purchased loan becomes impaired after its acquisition, it is evaluated as part of the Bank’s reserve analysis and a specific reserve is established to be included in the Bank’s allowance.Contents

Credit Quality Indicators

Below is a description of each of ~~our~~the 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. •~~. These borrowers currently show no indication of deterioration or potential problems and their loans are considered fully collectible.~~

•

Special Mention. 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. 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. In addition, some borrowers in this category could 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~~. 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.

•

~~Doubtful. Borrowers have well-defined weaknesses inherent in the Substandard category with~~ the added characteristic that the possibility of loss is extremely high. Current circumstances in the credit relationship make collection or liquidation in full highly questionable. ~~A doubtful asset has some pending event that may strengthen the asset that defers the loss classification.~~ Such impending events include: perfecting liens on additional collateral, obtaining collateral valuations, an acquisition or liquidation preceding, proposed merger, or refinancing plan.


•	~~Loss~~. Loans are uncollectible or of such negligible value that continuance as a bankable asset is not supportable. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical to defer writing off this asset even though partial recovery may be recognized sometime in the future.

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.

Table of Contents

The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the ~~Allowance~~allowance for ~~Loan Loss.~~credit losses, as of June 30, 2020 under the CECL model.


	Term Loans Amortized Cost Basis by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
(Dollars in thousands)
Commercial and industrial⁽¹⁾:
Risk Rating
Pass⁽²⁾	$	1,249,900	$	568,960	$	310,071	$	207,981	$	135,074	$	176,408	$	6,368	$	137,064	$	2,791,826
Special mention	1,106		24,940		17,372		7,703		4,699		31,935		—		16,089		103,844
Substandard or Lower	58,854		68,996		58,303		44,712		9,854		24,370		31		6,044		271,164
	$	1,309,860	$	662,896	$	385,746	$	260,396	$	149,627	$	232,713	$	6,399	$	159,197	$	3,166,834
Owner-occupied commercial:
Risk Rating
Pass	$	95,721	$	262,486	$	112,582	$	166,073	$	144,973	$	340,010	$	—	$	149,516	$	1,271,361
Special mention	—		311		—		11,585		—		1,266		—		1,848		15,010
Substandard or Lower	1,818		9,282		7,188		8,952		9,209		9,645		—		4,788		50,882
	$	97,539	$	272,079	$	119,770	$	186,610	$	154,182	$	350,921	$	—	$	156,152	$	1,337,253
Commercial mortgages:
Risk Rating
Pass	$	163,925	$	335,085	$	291,054	$	316,021	$	317,738	$	530,844	$	—	$	127,835	$	2,082,502
Special mention	20,041		6,276		—		15,857		1,901		4,570		—		1,870		50,515
Substandard or Lower	140		1,306		1,394		4,157		2,650		20,604		—		2,279		32,530
	$	184,106	$	342,667	$	292,448	$	336,035	$	322,289	$	556,018	$	—	$	131,984	$	2,165,547
Construction:
Risk Rating
Pass	$	90,202	$	204,676	$	220,350	$	38,300	$	6,156	$	4,201	$	—	$	55,891	$	619,776
Special mention	—		8,137		—		—		—		—		—		—		8,137
Substandard or Lower	—		8,775		—		—		—		88		—		1,728		10,591
	$	90,202	$	221,588	$	220,350	$	38,300	$	6,156	$	4,289	$	—	$	57,619	$	638,504
Residential⁽³⁾:
Risk Rating
Performing	$	12,967	$	35,388	$	92,212	$	112,961	$	173,609	$	462,272	$	—	$	—	$	889,409
Nonperforming⁽⁴⁾	—		—		—		—		92		5,359		—		—		5,451
	$	12,967	$	35,388	$	92,212	$	112,961	$	173,701	$	467,631	$	—	$	—	$	894,860
Consumer⁽⁵⁾:
Risk Rating
Performing	$	85,834	$	165,512	$	287,173	$	80,871	$	57,913	$	70,555	$	375,483	$	7,392	$	1,130,733
Nonperforming⁽⁶⁾	—		—		651		219		—		—		1,378		390		2,638
	$	85,834	$	165,512	$	287,824	$	81,090	$	57,913	$	70,555	$	376,861	$	7,782	$	1,133,371

⁽¹⁾Includes commercial small business leases.

⁽²⁾Includes $945.1 million of PPP loans.

⁽³⁾Excludes reverse mortgages at fair value.

⁽⁴⁾Includes troubled debt restructured mortgages performing in accordance with the loans' modified terms and are accruing interest.

⁽⁵⁾Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.

⁽⁶⁾Includes troubled debt restructured home equity installment loans performing in accordance with the loans' modified terms and are accruing interest.

Table of Contents

The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for loan and lease loss, as of December 31, 2019 under the incurred loss model.

Commercial Credit Exposure

June 30, 2019

Commercial and Industrial⁽¹⁾

Owner-occupied
Commercial

Commercial
Mortgages
Construction
Total
Commercial⁽²⁾
(Dollars in thousands) Amount %
Risk Rating:
Special mention $ 4,000
$ 10,817
$ 7,352
$ —
$ 22,169

Substandard:
Accrual 51,980
18,969
10,910
497
82,356

Nonaccrual 16,717
8,753
2,302
—
27,772

Doubtful 4,324
—
—
—
4,324

Total Special Mention and Substandard 77,021
38,539
20,564
497
136,621
2 %
Acquired impaired 4,964
3,951
13,609
546
23,070
— %
Pass 2,258,539
1,238,404
2,211,874
540,653
6,249,470
98 %
Total $ 2,340,524
$ 1,280,894
$ 2,246,047
$ 541,696
$ 6,409,161
100 %


⁽¹⁾	~~Includes commercial small business leases.~~


⁽²⁾	~~Table includes $2.5 billion of acquired non-impaired loans as of June 30, 2019.~~


	December 31, 2019
	Commercial and Industrial⁽¹⁾		Owner-occupied Commercial		Commercial Mortgages		Construction		Total Commercial⁽²⁾
(Dollars in thousands)									Amount		%
Risk Rating:
Special mention	$	12,287	$	—	$	40,478	$	—	$	52,765
Substandard:
Accrual	78,809		32,679		23,017		—		134,505
Nonaccrual	9,852		4,037		1,626		—		15,515
Doubtful	1,179		23		—		—		1,202
Total Special Mention and Substandard	102,127		36,739		65,121		—		203,987		3	%
Acquired impaired	1,564		6,757		8,670		491		17,482		—	%
Pass	2,131,737		1,252,970		2,149,185		580,591		6,114,483		97	%
Total	$	2,235,428	$	1,296,466	$	2,222,976	$	581,082	$	6,335,952	100	%

⁽¹⁾Includes commercial small business leases.

December 31, 2018

Commercial
and Industrial

Owner-occupied
Commercial

Commercial
Mortgages
Construction
Total
Commercial⁽¹⁾
(Dollars in thousands) Amount %
Risk Rating:
Special mention $ 8,710
$ 21,230
$ —
$ —
$ 29,940

Substandard:

Accrual 37,424
21,081
9,767
168
68,440

Nonaccrual 13,180
4,406
3,951
2,337
23,874

Doubtful 876
—
—
444
1,320

Total Special Mention and Substandard 60,190
46,717
13,718
2,949
123,574
3 %
Acquired impaired 1,531
4,248
7,504
749
14,032
— %
Pass 1,410,768
1,009,009
1,141,517
312,868
3,874,162
97 %
Total $ 1,472,489
$ 1,059,974
$ 1,162,739
$ 316,566
$ 4,011,768
100 %
⁽²⁾Includes $2.2 billion of acquired non-impaired loans as of December 31, 2019.


⁽¹⁾	~~Table includes $350.5 million of acquired non-impaired loans as of December 31, 2018.~~

~~Residential and Consumer~~Retail Credit Exposure


	Residential⁽²⁾		Consumer		Total Retail⁽³⁾
	December 31, 2019		December 31, 2019		December 31, 2019
(Dollars in thousands)							Amount		Percent
Nonperforming⁽¹⁾	$	12,858	$	7,374	$	20,232	1	%
Acquired impaired loans	7,326		2,127		9,453		—	%
Performing	979,695		1,119,230		2,098,925		99	%
Total	$	999,879	$	1,128,731	$	2,128,610	100	%

⁽¹⁾Includes $14.0 million as of December 31, 2019 of troubled debt restructured mortgages and home equity installment loans that are performing in accordance with the loans’ modified terms and are accruing interest.

⁽²⁾Residential performing loans excludes $16.6 million of reverse mortgages at fair value as of December 31, 2019.

⁽³⁾Total includes $1.1 billion in acquired non-impaired loans as of December 31, 2019.

Table of Contents

Residential⁽²⁾
Consumer
Total Residential and Consumer⁽³⁾
June 30, December 31, June 30, December 31, June 30, 2019 December 31, 2018
(Dollars in thousands) 2019 2018 2019 2018 Amount Percent Amount Percent
Nonperforming⁽¹⁾
$ 12,106
$ 11,017
$ 7,378
$ 7,883
$ 19,484
1 % $ 18,900
2 %
Acquired impaired loans 7,863
761
2,999
151
10,862
— % 912
— %
Performing 1,045,815
189,772
1,116,356
672,905
2,162,171
99 % 862,677
98 %
Total $ 1,065,784
$ 201,550
$ 1,126,733
$ 680,939
$ 2,192,517
100 % $ 882,489
100 %


⁽¹⁾	Includes $13.9 million as of June 30, 2019 and $14.0 million as of December 31, 2018 of troubled debt restructured mortgages and home equity installment loans that are performing in accordance with the loans’ modified terms and are accruing interest.


⁽²⁾	~~Residential performing loans excludes $15.9 million and $16.5 million of reverse mortgages at fair value as of June 30, 2019 and December 31, 2018, respectively.~~


⁽³⁾	~~Total includes $1.2 billion and $79.5 million in acquired non-impaired loans as of June 30, 2019 and December 31, 2018, respectively.~~

Troubled Debt Restructurings (TDRs)

~~TDRs are recorded in accordance with ASC 310-40,~~ ~~Troubled Debt Restructuring by Creditors~~.

The following table presents the balance of TDRs as of the indicated dates:



(Dollars in thousands)	June 30, 2020		December 31, 2019
Performing TDRs	$	14,550	$	14,281
Nonperforming TDRs	4,284		5,896
Total TDRs	$	18,834	$	20,177

(Dollars in thousands) June 30, 2019 December 31, 2018
Performing TDRs $ 14,203
$ 14,953
Nonperforming TDRs 6,966
10,211
Total TDRs $ 21,169
$ 25,164

Approximately $0.8 million and ~~$1.2~~$0.6 million in related reserves have been established for these loans at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

The following ~~table presents~~tables present information regarding the types of loan modifications made for the three and six months ended June 30, ~~2019~~2020 and ~~2018:~~2019:

Three months ended June 30, 2019 Six months ended June 30, 2019
Contractual payment reduction and term extension Maturity Date Extension Discharged in bankruptcy
Other⁽¹⁾
Total Contractual payment reduction and term extension Maturity Date Extension Discharged in bankruptcy
Other⁽¹⁾
Total
Commercial and Industrial —
1
—
2
3
—
1
—
2
3
Owner-occupied commercial —
—
—
2
2
—
—
—
2
2
Commercial Mortgages —
—
—
1
1
1
—
—
1
2
Construction —
—
—
—
—
—
—
—
—
—
Residential 3
—
—
—
3
4
—
1
—
5
Consumer 3
1
—
—
4
6
1
1
—
8
Total 6
2
—
5
13
11
2
2
5
20


												Three months ended June 30, 2020									Six months ended June 30, 2020
	Three months ended June 30, 2018					Six months ended June 30, 2018						Contractual payment reduction and term extension	Maturity Date Extension	Discharged in bankruptcy	Other⁽¹⁾	Total	Contractual payment reduction and term extension	Maturity Date Extension	Discharged in bankruptcy	Other⁽¹⁾	Total
	Contractual payment reduction and term extension	Maturity Date Extension	Discharged in bankruptcy	Other⁽¹⁾	Total	Contractual payment reduction and term extension	Maturity Date Extension	Discharged in bankruptcy	Other(1)	Total
Commercial and Industrial	3	—	—	—	3	3	—	—	—	3
Commercial and industrial											Commercial and industrial	—	—	—	—	—	1	—	—	—	1
Owner-occupied commercial	—	—	—	—	—	—	—	—	—	—	Owner-occupied commercial	2	—	—	—	2	3	—	—	—	3
Commercial Mortgages	1	—	—	—	1	1	1	—	—	2
Commercial mortgages											Commercial mortgages	—	—	—	—	—	—	1	—	—	1
Construction	—	—	—	—	—	—	1	—	—	1	Construction	—	—	—	—	—	—	—	—	—	—
Residential	4	—	—	—	4	4	—	—	—	4	Residential	—	—	3	1	4	—	—	4	2	6
Consumer	6	—	3	—	9	7	1	3	2	13	Consumer	—	—	4	1	5	—	—	7	3	10
Total	14	—	3	—	17	15	3	3	2	23	Total	2	—	7	2	11	4	1	11	5	21

Table of Contents

~~There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the six months ended June 30, 2019.~~

Fair value is based on quoted market prices, where available. If such quoted market prices are not available, fair value is based on 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. ~~Our~~The 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 our~~the 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

~~As of June 30, 2019, securities~~Securities classified as available-for-sale are reported at fair value using Level 2 inputs. ~~Included in the Level 2 total are $1.8 billion in Federal Agency MBS. We believe~~The Company believes that this Level 2 designation is appropriate ~~for these securities~~ under ASC 820-10 ~~because,~~ as, these securities are federal agency MBS with almost all fixed income securities, none are exchange traded, and all are priced by correlation to observed market data. For these securities ~~we obtain~~the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors.

Other investments

Other investments includes ~~our~~equity investments ~~in equity securities~~ without readily determinable fair ~~values. These investments include, among others, our Visa Class B shares~~values and ~~our investments in Spring EQ and SoFi, all of which~~ are categorized as Level 3. Our Visa Class B ownership includes shares acquired at no cost from our prior participation in Visa’s network while Visa operated as a cooperative as well as shares subsequently acquired through private transactions and auctions.

~~Our~~The Company's equity investments without readily determinable fair values are held at cost, and are adjusted for any observable transactions during the reporting period. As a result of our adoption of ASU 2016-01 and observable market transactions, we recorded unrealized gains on our investments in Visa Class B shares and Spring EQ of $4.8 million during the six months ended June 30, 2019 as compared to $15.3 million during the six months ended June 30, 2018.

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 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 ~~our~~other 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 on estimates using Level 2 inputs. These inputs are based on pricing information obtained from wholesale mortgage banks and brokers and applied to loans with similar interest rates and maturities.

~~Impaired loans~~

~~We evaluate and value impaired loans at the time the loan is identified as impaired, and the fair values~~

Table of such loans are estimated using Level 3 inputs in the fair value hierarchy. Each loan’s collateral has a unique appraisal and management’s discount of the value is based on the factors unique to each impaired loan. The significant unobservable input in determining the fair value is management’s subjective discount on appraisals of the collateral securing the loan, which typically ranges from 10% - 20%. Collateral may consist of real estate and/or business assets including equipment, inventory and/or accounts receivable and the value of these 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.Contents

The gross amount of impaired loans, which are measured for impairment by either calculating the expected future cash flows discounted at the loan’s effective interest rate or determining the fair value of the collateral for collateral dependent loans was $54.6 million and $49.4 million at June 30, 2019 and December 31, 2018, respectively. The valuation allowance on impaired loans was $5.2 million as of June 30, 2019 and $2.3 million as of December 31, 2018.

FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

Fair value is estimated using quoted prices for similar securities, which ~~we obtain~~the Company obtains from a third party vendor. ~~We utilize~~The 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 as described above in available-for-sale securities.

Other investments

Other investments includes ~~our~~equity investments ~~in equity securities with and~~ 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 in “Fair Value of Financial Assets and Liabilities” section above).

Loans

Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by ~~type: commercial, commercial small business leases, commercial mortgages, owner-occupied commercial, construction, residential mortgages and consumer.~~portfolio segments (see Note 2). For loans that reprice frequently, the book value approximates fair value. The fair values of other types of loans, with the exception of reverse 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 used if appraisals are not available. This technique does 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.

Other assets

Other assets ~~includes, among other things, investments~~include the fair value of interest rate swaps and derivatives on the residential mortgage held for sale loan pipeline. Valuation of interest rate swaps is obtained from an independent pricing service and also from the derivative counterparty. Valuation of the derivative related to the residential mortgage held for sale loan pipeline is based on valuation of the loans held for sale portfolio as described above in ~~subsidiaries, prepaid expenses, interest and fee income receivable, derivative financial instruments and deferred tax assets (see discussion in “Fair Value~~Loans held for sale.

Table of ~~Financial Assets and Liabilities” section above).~~Contents

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.

Other ~~Liabilities~~liabilities

Other liabilities ~~includes, among others, cash flow derivatives~~include the fair value of interest rate swaps, risk participation agreements and derivatives on the residential mortgage held for sale loan pipeline. Valuation of ~~our cash flow derivatives~~interest rate swaps and risk participation agreements is obtained from an independent pricing service and also from the derivative counterparty. Valuation of the derivative related to the residential mortgage held for sale loan pipeline is based on valuation of the loans held for sale portfolio as described above in Loans held for sale.

Off-balance sheet instruments

The fair value of off-balance sheet instruments, including ~~commitments to extend credit and~~ standby letters of credit, approximates the recorded net deferred fee amounts, which are not significant. 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.

Assets measured at fair value using significant unobservable inputs (Level 3)

The following table provides a description of the valuation technique and significant unobservable inputs for the Company's assets classified as Level 3 and measured at fair value on a nonrecurring basis:

June 30, 2020

Financial Instrument

Fair Value

Valuation Technique(s)

Unobservable Input

Range (Weighted Average)

Other investments

10,211

Observed market comparable transactions

Period of observed transactions

May 2020

Other real estate owned

4,153

Fair market value of collateral

Costs to sell

5.0% - 12.0% (10.0%)

Other liabilities

25,205

Discounted cash flow

Timing of the resolution of the Visa litigation

3 - 8 years (5.75 years or 4Q 2025)

Table of Contents

The book value and estimated fair value of ~~our~~ financial instruments are as follows:


		June 30, 2020						December 31, 2019
(Dollars in thousands)	Fair Value Measurement	Book Value		Fair Value		Book Value		Fair Value
Financial assets:
Cash and cash equivalents	Level 1	$	955,767	$	955,767	$	571,752	$	571,752
Investment securities available-for-sale	Level 2	2,195,389		2,195,389		1,944,914		1,944,914
Investment securities held-to-maturity, net	Level 2	127,601		132,198		133,601		136,625
Other investments	Level 3	10,211		10,211		70,046		70,046
Loans, held for sale	Level 2	109,453		109,453		83,872		83,872
Loans, net⁽¹⁾	Level 3	9,120,288		9,386,635		8,424,464		8,580,015

Stock in FHLB of Pittsburgh	Level 2	9,772		9,772		21,097		21,097
Accrued interest receivable	Level 2	53,222		53,222		38,094		38,094
Other assets	Level 2	15,243		15,243		4,884		4,884
Financial liabilities:
Deposits	Level 2	11,062,500		11,052,211		9,586,857		9,575,394
Borrowed funds	Level 2	295,793		313,839		489,288		489,561
Standby letters of credit	Level 3	416		416		623		623
Accrued interest payable	Level 2	6,049		6,049		3,103		3,103
Other liabilities	Levels 2, 3	34,222		34,222		3,918		3,918

June 30, 2019 December 31, 2018
(Dollars in thousands)
Fair Value
Measurement
Book Value Fair Value Book Value Fair Value
Financial assets:
Cash and cash equivalents Level 1 $ 521,825
$ 521,825
$ 620,757
$ 620,757
Investment securities available for sale See previous table 1,796,870
1,796,870
1,205,079
1,205,079
Investment securities held to maturity Level 2 143,317
145,867
149,950
149,431
Other investments Level 3 48,711
48,711
37,233
37,233
Loans, held for sale Level 2 51,721
51,721
25,318
25,318
Loans, net⁽¹⁾⁽²⁾
Level 3 8,518,251
8,739,014
4,816,825
4,772,377
Impaired loans, net Level 3 49,458
49,458
47,094
47,094
Stock in FHLB of Pittsburgh Level 2 15,874
15,874
19,259
19,259
Accrued interest receivable Level 2 40,784
40,784
22,001
22,001
Other assets Level 2 4,995
4,995
2,098
2,098
Financial liabilities:
Deposits Level 2 9,594,710
9,680,779
5,640,431
5,597,227
Borrowed funds Level 2 415,131
415,155
699,788
694,526
Standby letters of credit Level 3 407
407
495
495
Accrued interest payable Level 2 7,064
7,064
1,900
1,900
Other liabilities Level 2 4,562
4,579
3,493
3,493

⁽¹⁾ ~~Excludes impaired loans, net.~~

⁽²⁾ Includes reverse mortgage loans.

At June 30, ~~2019~~2020 and December 31, ~~2018 we~~2019 the Company had no0 commitments to extend credit measured at fair value.

~~15.~~Table of Contents

14. DERIVATIVE FINANCIAL INSTRUMENTS

Risk Management Objective of Using Derivatives

~~We are~~The Company is exposed to certain risks arising from both economic conditions and ~~our~~its business operations. WeThe Company principally ~~manage our~~manages its exposures to a wide variety of business and operational risks through management of ~~our~~its core business activities. ~~We manage~~The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of ~~our~~its assets and liabilities. ~~We manage~~The Company manages a matched book with respect to ~~our~~its derivative instruments in order to minimize ~~our~~its net risk exposure resulting from such transactions.

Fair Values of Derivative Instruments

The table below presents the fair value of ~~our~~ derivative financial instruments as well as their location on the unaudited Consolidated Statements of Financial Condition as of June 30, ~~2019.~~2020.


	Fair Values of Derivative Instruments
(Dollars in thousands)		Notional		Balance Sheet Location	Derivatives (Fair Value)



Derivatives not designated as hedging instruments:
Interest rate products		$	65,626	Other assets	$	6,579
Interest rate products		65,626		Other liabilities	(7,404)
Risk participation agreements		4,449		Other liabilities	(14)
Interest rate lock commitments with customers		287,204		Other assets	8,218
Interest rate lock commitments with customers		20,260		Other liabilities	(132)
Forward sale commitments		44,840		Other assets	446
Forward sale commitments		232,570		Other liabilities	(1,467)
Financial derivatives related to sales of certain Visa Class B shares		113,177		Other liabilities	(25,205)
Total derivatives		$	833,752		$	(18,979)

Fair Values of Derivative Instruments
(Dollars in thousands) Count Notional Balance Sheet Location
Derivatives
(Fair Value)
Derivatives designated as hedging instruments:
Interest rate products 3 $ 75,000
Other Liabilities $ (1,075 )
Total $ 75,000
$ (1,075 )
Derivatives not designated as hedging instruments:
Interest rate products $ 80,996
Other Assets $ 3,043
Interest rate products 80,996
Other Liabilities (3,247 )
Risk participation agreements 5,455
Other Liabilities (7 )
Interest rate lock commitments with customers
108,345
Other Assets 1,727
Interest rate lock commitments with customers
5,693
Other Liabilities (13 )
Forward sale commitments
47,607
Other Assets 225
Forward sale commitments
65,116
Other Liabilities (220 )
Total
$ 394,208
$ 1,508
Total derivatives
$ 469,208
$ 433

The table below presents the fair value of ~~our~~ derivative financial instruments as well as their location on the Consolidated Statements of Financial Condition as of December 31, ~~2018.~~2019.


	Fair Values of Derivative Instruments
(Dollars in thousands)		Count	Notional		Balance Sheet Location	Derivatives (Fair Value)
Derivatives designated as hedging instruments:
Interest rate products		3	$	75,000	Other liabilities	$	(759)
Total			$	75,000		$	(759)
Derivatives not designated as hedging instruments:
Interest rate products			$	71,804	Other assets	$	2,520
Interest rate products			71,804		Other liabilities	(2,688)
Risk participation agreements			4,524		Other liabilities	(4)
Interest rate lock commitments with customers			99,057		Other assets	1,768
Interest rate lock commitments with customers			28,505		Other liabilities	(191)
Forward sale commitments			61,301		Other assets	596
Forward sale commitments			90,177		Other liabilities	(276)
Total			$	427,172		$	1,725
Total derivatives			$	502,172		$	966

Fair Values of Derivative Instruments
(Dollars in thousands) Count Notional Balance Sheet Location
Derivatives
(Fair Value)
Derivatives designated as hedging instruments:
Interest rate products 3 $ 75,000
Other Liabilities $ (3,308 )
Total $ 75,000
$ (3,308 )
Derivatives not designated as hedging instruments:
Interest rate lock commitments with customers
$ 40,795
Other Assets $ 686
Interest rate lock commitments with customers
6,530
Other Liabilities (24 )
Forward sale commitments
19,732
Other Assets 143
Forward sale commitments
25,876
Other Liabilities (161 )
Total
$ 92,933
$ 644
Total derivatives
$ 167,933
$ (2,664 )

Table of Contents

Cash Flow Hedges of Interest Rate Risk

~~Our~~The Company's objectives in using interest rate derivatives are to add stability to interest income and to manage ~~our~~its exposure to interest rate movements. To accomplish this objective, wethe Company primarily ~~use~~uses interest rate swaps as part of ~~our~~its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of fixed amounts from a counterparty in exchange for usthe Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount.

Changes to the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecast transaction affects earnings. During the six months ended June 30, ~~2019,~~2020, such derivatives were used to hedge the variable cash flows associated with a variable rate loan pool.

~~Amounts reported~~The Company has agreements with certain derivative counterparties that contain a provision under which, if it defaults on any of its 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.

In April 2020, the Company terminated its three interest rate derivatives that were designated as cash flow hedges for a net gain of $1.3 million. At this point, hedge accounting was discontinued, and the net gain was recognized in accumulated other comprehensive income (loss) ~~related~~. Once a cash flow hedge is discontinued, the net gain or loss that remains in accumulated comprehensive income (loss) is reclassified into earnings when the transaction affects earnings. As the underlying hedged transaction continues to ~~derivatives are reclassified to interest income as interest payments are received~~be probable, the $1.3 million net gain will be recognized into earnings on ~~our variable-rate pooled loans.~~a straight-line basis over each derivative's original contract term. During the next twelve months, ~~we estimate~~the Company estimates that $0.6 million will be reclassified as an increase to interest income. During the three and six months ended June 30, ~~2019, $0.7~~2020, $0.1 million was reclassified into interest ~~income.~~income for both periods.

We are hedging our exposure to the variability in future cash flows for forecasted transactions over a maximum period of one month (excluding forecasted transactions related to the payment of variable interest on existing financial instruments).

~~As of June 30, 2019, we had three outstanding interest rate derivatives with an aggregate notional amount of $75 million that were designated as cash flow hedges of interest rate risk.~~

~~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 three and six months ended June 30, ~~2019~~2020 and June 30, ~~2018.~~2019.


	Amount of (Loss) or Gain Recognized in OCI on Derivative (Effective Portion)						Amount of (Loss) or Gain Recognized in OCI on Derivative (Effective Portion)			Location of (Loss) or Gain Reclassified from Accumulated OCI into Income (Effective Portion)
(Dollars in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
Derivatives in Cash Flow Hedging Relationships	2020		2019		2020		2019
Interest Rate Products	$	(25)	$	1,007	$	1,560	$	1,637	Interest income
Total	$	(25)	$	1,007	$	1,560	$	1,637

	Amount of Gain or (Loss) Recognized in Income						Amount of Gain or (Loss) Recognized in Income			Location of Gain or (Loss) Recognized in Income
(Dollars in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
Derivatives Not Designated as a Hedging Instrument	2020		2019		2020		2019
Interest Rate Lock Commitments	$	3,178	$	542	$	6,227	$	1,174	Mortgage banking activities, net
Forward Sale Commitments	(2,439)		(487)		(6,484)		$	(721)	Mortgage banking activities, net
Total	$	739	$	55	$	(257)	$	453

Amount of (Loss) or Gain Recognized in OCI on Derivative (Effective Portion) Amount of (Loss) or Gain Recognized in OCI on Derivative (Effective Portion) Location of (Loss) or Gain Reclassified from Accumulated OCI into Income (Effective Portion)
(Dollars in thousands) Three Months Ended June 30, Six Months Ended June 30,
Derivatives in Cash Flow Hedging Relationships 2019 2018 2019 2018
Interest Rate Products $ (1,007 ) $ (246 ) $ (1,637 ) $ (1,010 ) Interest income
Total $ (1,007 ) $ (246 ) $ (1,637 ) $ (1,010 )

Amount of Gain or (Loss) Recognized in Income Amount of Gain or (Loss) Recognized in Income Location of Gain or (Loss) Recognized in Income
(Dollars in thousands) Three Months Ended June 30, Six Months Ended June 30,
Derivatives Not Designated as a Hedging Instrument 2019 2018 2019 2018
Interest Rate Lock Commitments $ 542
$ 96
$ 1,174
$ (296 ) Mortgage banking activities, net
Forward Sale Commitments (487 ) $ 60
(721 ) $ (332 ) Mortgage banking activities, net
Total $ 55
$ 156
$ 453
$ (628 )

~~Credit risk-related Contingent Features~~

~~We have agreements with certain derivative counterparties that contain a provision where if we default on any of our indebtedness, including default where repayment of the indebtedness~~The Company has ~~not been accelerated by the lender, then we could also be declared in default on our derivative obligations.~~

We also have agreements with certain derivative counterparties that contain a provision where if we fail to maintain our status as a well-capitalized or adequately capitalized institution, then the counterparty could terminate the derivative positions and we would be required to settle our obligations under the agreements.

As of June 30, 2019, the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $1.2 million. We have minimum collateral posting thresholds with certain of ~~our~~its derivative counterparties, and ~~have~~has posted collateral of ~~$6.6~~$9.0 million against ~~our~~its obligations under these agreements. If wethe Company had breached any of these provisions at June 30, ~~2019, we~~2020, it could have been required to settle ~~our~~its obligations under the agreements at the termination value.

~~16.~~Table of Contents

15. SEGMENT INFORMATION

As defined in ASC 280, Segment Reporting (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~~The Company evaluates performance based on pretax net income relative to resources used, and allocate resources based on these results. The accounting policies applicable to ~~our~~the Company's segments are those that apply to ~~our~~its preparation of the accompanying unaudited Consolidated Financial Statements. Based on these criteria, ~~we have~~the Company has identified ~~three~~3 segments: WSFS Bank, Cash Connect^®, and Wealth Management.

The WSFS Bank segment provides financial products to commercial and retail customers. Retail and Commercial Banking, Commercial Real Estate Lending and other banking business units are operating departments of WSFS Bank. These departments share the same regulator, the same market, many of the same customers and provide similar products and services through the general infrastructure of the Bank. Accordingly, these departments are not considered discrete segments and are appropriately aggregated ~~within~~in the WSFS Bank segment in accordance with ASC 280.

~~Our~~The Company's Cash Connect^® segment provides ATM vault cash, smart safe and other cash logistics services 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 retail 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^®.

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 through multiple integrated businesses. WSFS Wealth Investments provides financial advisory services along with insurance and brokerage products. Cypress, a registered investment adviser, is a fee-only wealth management firm managing a “balanced” investment style portfolio focused on preservation of capital and generating current income. West Capital, a registered investment adviser, is a fee-only wealth management firm operating under a multi-family office philosophy to provide customized solutions to institutions and high-net-worth individuals. The institutional trust division of WSFS, ~~(doing business as~~ WSFS Institutional ~~Services)~~Services, provides trustee, agency, bankruptcy administration, custodial and commercial domicile services to institutional and corporate clients. ~~The personal trust division~~Christiana Trust DE, a subsidiary of WSFS, ~~(doing business as Christiana Trust)~~ provides personal trust and fiduciary services to families and individuals across the U.S. Powdermill is a multi-family office specializing in providing independent solutions to high-net-worth individuals, families and corporate executives through a coordinated, centralized approach. WSFS Wealth Client Management serves high-net-worth clients by delivering credit and deposit products and partnering with other Wealth Management units to provide comprehensive solutions to clients.

Table of Contents

The following tables show segment results for the three and six months ended June 30, ~~2019~~2020 and ~~2018:~~2019:


	Three Months Ended June 30, 2020														Three Months Ended June 30, 2019
(Dollars in thousands)	WSFS Bank		Cash Connect^®		Wealth Management		Total		WSFS Bank		Cash Connect^®		Wealth Management		Total
Statements of Income
External customer revenues:
Interest income	$	123,710	$	—	$	2,173	$	125,883	$	140,231	$	—	$	2,672	$	142,903
Noninterest income	44,304		9,008		11,063		64,375		18,870		13,355		10,646		42,871
Total external customer revenues	168,014		9,008		13,236		190,258		159,101		13,355		13,318		185,774
Inter-segment revenues:
Interest income	937		237		2,442		3,616		3,345		—		4,052		7,397
Noninterest income	3,542		188		347		4,077		2,156		192		211		2,559
Total inter-segment revenues	4,479		425		2,789		7,693		5,501		192		4,263		9,956
Total revenue	172,493		9,433		16,025		197,951		164,602		13,547		17,581		195,730
External customer expenses:
Interest expense	11,659		—		468		12,127		18,282		—		1,389		19,671
Noninterest expenses	79,789		6,413		7,233		93,435		91,415		8,893		7,540		107,848
Provision for credit losses	93,819		—		935		94,754		12,239		—		(44)		12,195
Total external customer expenses	185,267		6,413		8,636		200,316		121,936		8,893		8,885		139,714
Inter-segment expenses:
Interest expense	2,679		131		806		3,616		4,052		2,203		1,142		7,397
Noninterest expenses	535		899		2,643		4,077		403		698		1,458		2,559
Total inter-segment expenses	3,214		1,030		3,449		7,693		4,455		2,901		2,600		9,956
Total expenses	188,481		7,443		12,085		208,009		126,391		11,794		11,485		149,670
(Loss) income before taxes	$	(15,988)	$	1,990	$	3,940	$	(10,058)	$	38,211	$	1,753	$	6,096	$	46,060
Income tax (benefit) provision							(2,247)								10,091
Consolidated net (loss) income							(7,811)								35,969
Net loss attributable to noncontrolling interest							(700)								(231)
Net (loss) income attributable to WSFS							(7,111)								36,200

Table of Contents

Three Months Ended June 30, 2019 Three Months Ended June 30, 2018
(Dollars in thousands) WSFS Bank
Cash
Connect^®

Wealth
Management
Total WSFS Bank
Cash
Connect^®
Wealth
Management Total
Statements of Income
External customer revenues:
Interest income $ 140,231
$ —
$ 2,672
$ 142,903
$ 69,599
$ —
$ 2,552
$ 72,151
Noninterest income 18,870
13,355
10,646
42,871
12,045
12,328
10,614
34,987
Total external customer revenues 159,101
13,355
13,318
185,774
81,644
12,328
13,166
107,138
Inter-segment revenues:
Interest income 3,345
—
4,052
7,397
3,565
—
2,670
6,235
Noninterest income 2,156
192
211
2,559
2,219
200
37
2,456
Total inter-segment revenues 5,501
192
4,263
9,956
5,784
200
2,707
8,691
Total revenue 164,602
13,547
17,581
195,730
87,428
12,528
15,873
115,829
External customer expenses:
Interest expense 18,282
—
1,389
19,671
10,599
—
563
11,162
Noninterest expenses 91,415
8,893
7,540
107,848
42,505
7,905
7,421
57,831
Provision for loan losses 12,239
—
(44 ) 12,195
2,284
—
214
2,498
Total external customer expenses 121,936
8,893
8,885
139,714
55,388
7,905
8,198
71,491
Inter-segment expenses:
Interest expense 4,052
2,203
1,142
7,397
2,670
2,516
1,049
6,235
Noninterest expenses 403
698
1,458
2,559
237
637
1,582
2,456
Total inter-segment expenses 4,455
2,901
2,600
9,956
2,907
3,153
2,631
8,691
Total expenses 126,391
11,794
11,485
149,670
58,295
11,058
10,829
80,182
Income before taxes $ 38,211
$ 1,753
$ 6,096
$ 46,060
$ 29,133
$ 1,470
$ 5,044
$ 35,647
Income tax provision 10,091
6,907
Consolidated net income 35,969
28,740
Net loss attributable to noncontrolling interest (231 ) —
Net income attributable to WSFS 36,200
28,740


	Six Months Ended June 30, 2020														Six Months Ended June 30, 2019
(Dollars in thousands)	WSFS Bank		Cash Connect^®		Wealth Management		Total		WSFS Bank		Cash Connect^®		Wealth Management		Total
Statements of Income
External customer revenues:
Interest income	$	255,019	$	—	$	4,719	$	259,738	$	237,177	$	—	$	5,303	$	242,480
Noninterest income	62,376		20,687		22,159		105,222		36,134		25,757		22,102		83,993
Total external customer revenues	317,395		20,687		26,878		364,960		273,311		25,757		27,405		326,473
Inter-segment revenues:
Interest income	2,880		237		5,291		8,408		7,137		—		8,057		15,194
Noninterest income	6,449		417		520		7,386		4,039		369		397		4,805
Total inter-segment revenues	9,329		654		5,811		15,794		11,176		369		8,454		19,999
Total revenue	326,724		21,341		32,689		380,754		284,487		26,126		35,859		346,472
External customer expenses:
Interest expense	28,406		—		1,426		29,832		33,418		—		2,516		35,934
Noninterest expenses	152,874		14,636		14,421		181,931		173,992		16,923		14,525		205,440
Provision for credit losses	148,853		—		2,547		151,400		19,525		—		324		19,849
Total external customer expenses	330,133		14,636		18,394		363,163		226,935		16,923		17,365		261,223
Inter-segment expenses:
Interest expense	5,528		1,085		1,795		8,408		8,057		4,761		2,376		15,194
Noninterest expenses	937		1,640		4,809		7,386		766		1,243		2,796		4,805
Total inter-segment expenses	6,465		2,725		6,604		15,794		8,823		6,004		5,172		19,999
Total expenses	336,598		17,361		24,998		378,957		235,758		22,927		22,537		281,222
(Loss) income before taxes	$	(9,874)	$	3,980	$	7,691	$	1,797	$	48,729	$	3,199	$	13,322	$	65,250
Income (benefit) tax provision							(959)								16,351
Consolidated net income							2,756								48,899
Net loss attributable to noncontrolling interest							(1,060)								(324)
Net income attributable to WSFS							3,816								49,223

Six Months Ended June 30, 2019 Six Months Ended June 30, 2018
(Dollars in thousands) WSFS Bank
Cash
Connect^®

Wealth
Management
Total WSFS Bank
Cash
Connect^®
Wealth
Management Total
Statements of Income
External customer revenues:
Interest income $ 237,177
$ —
$ 5,303
$ 242,480
$ 134,889
$ —
$ 4,875
$ 139,764
Noninterest income 36,134
25,757
22,102
83,993
38,651
23,681
20,122
82,454
Total external customer revenues 273,311
25,757
27,405
326,473
173,540
23,681
24,997
222,218
Inter-segment revenues: —

Interest income 7,137
—
8,057
15,194
6,533
—
5,033
11,566
Noninterest income 4,039
369
397
4,805
4,327
381
71
4,779
Total inter-segment revenues 11,176
369
8,454
19,999
10,860
381
5,104
16,345
Total revenue 284,487
26,126
35,859
346,472
184,400
24,062
30,101
238,563
External customer expenses: —

Interest expense 33,418
—
2,516
35,934
20,102
—
959
21,061
Noninterest expenses 173,992
16,923
14,525
205,440
81,940
15,224
14,079
111,243
Provision for loan losses 19,525
—
324
19,849
5,945
—
203
6,148
Total external customer expenses 226,935
16,923
17,365
261,223
107,987
15,224
15,241
138,452
Inter-segment expenses: —

Interest expense 8,057
4,761
2,376
15,194
5,033
4,575
1,958
11,566
Noninterest expenses 766
1,243
2,796
4,805
452
1,309
3,018
4,779
Total inter-segment expenses 8,823
6,004
5,172
19,999
5,485
5,884
4,976
16,345
Total expenses 235,758
22,927
22,537
281,222
113,472
21,108
20,217
154,797
Income before taxes $ 48,729
$ 3,199
$ 13,322
$ 65,250
$ 70,928
$ 2,954
$ 9,884
$ 83,766
Income tax provision 16,351
17,676
Consolidated net income 48,899
66,090
Net loss attributable to noncontrolling interest (324 ) —
Net income attributable to WSFS 49,223
66,090

The following table shows significant components of segment net assets as of June 30, ~~2019~~2020 and December 31, ~~2018:~~2019:


	June 30, 2020														December 31, 2019
(Dollars in thousands)	WSFS Bank		Cash Connect^®		Wealth Management		Total		WSFS Bank		Cash Connect^®		Wealth Management		Total
Statements of Financial Condition
Cash and cash equivalents	$	591,518	$	356,785	$	7,464	$	955,767	$	202,792	$	357,494	$	11,466	$	571,752
Goodwill	452,629		—		20,199		472,828		452,629		—		20,199		472,828
Other segment assets	11,914,250		5,171		225,341		12,144,762		10,982,681		6,555		222,486		11,211,722
Total segment assets	$	12,958,397	$	361,956	$	253,004	$	13,573,357	$	11,638,102	$	364,049	$	254,151	$	12,256,302
Capital expenditures for the period ended	$	2,437	$	256	$	137	$	2,830	$	11,806	$	2,120	$	272	$	14,198

June 30, 2019 December 31, 2018
(Dollars in thousands) WSFS Bank
Cash
Connect^®
Wealth
Management Total WSFS Bank
Cash
Connect^®

Wealth
Management
Total
Statements of Financial Condition
Cash and cash equivalents $ 167,173
$ 345,971
$ 8,681
$ 521,825
$ 115,147
$ 491,863
$ 13,747
$ 620,757
Goodwill 453,513
—
20,199
473,712
145,808
—
20,199
166,007
Other segment assets 10,938,718
6,875
215,465
11,161,058
6,225,820
7,743
228,543
6,462,106
Total segment assets $ 11,559,404
$ 352,846
$ 244,345
$ 12,156,595
$ 6,486,775
$ 499,606
$ 262,489
$ 7,248,870
Capital expenditures $ 5,240
$ 71
$ 130
$ 5,441
$ 4,779
$ 375
$ 344
$ 5,498



(Dollars in thousands)	March 1, 2019
Contractual required principal and interest at acquisition	$	53,647
Contractual cash flows not expected to be collected (nonaccretable difference)	20,118
Expected cash flows at acquisition	33,529
Interest component of expected cash flows (accretable yield)	3,068
Fair value of acquired loans accounted for under ASC 310-30	30,461



	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2019			2018			2019			2018
Balance at beginning of period	$	4,955		$	2,440		$	2,463		$	3,035
Addition from Beneficial	—			—			3,068			—
Accretion	(662		)	(501		)	(1,074		)	(918		)
Reclassification from nonaccretable difference	207			1,076			207			1,078
Additions/adjustments	(445		)	(90		)	(609		)	(270		)
Balance at end of period	$	4,055		$	2,925		$	4,055		$	2,925


(Dollars in thousands)	Commercial and Industrial⁽¹⁾		Owner-occupied Commercial		Commercial Mortgages		Construction		Residential⁽²⁾		Consumer⁽³⁾		Total
Three months ended June 30, 2020
Allowance for credit losses
Beginning balance	$	65,771	$	9,541	$	26,600	$	5,198	$	11,593	$	20,370	$	139,073

Charge-offs	(2,072)		(53)		—		—		(32)		(667)		(2,824)
Recoveries	968		—		3		—		24		194		1,189
Provision (credit)	79,558		(532)		11,794		4,928		(2,414)		1,420		94,754
Ending balance	$	144,225	$	8,956	$	38,397	$	10,126	$	9,171	$	21,317	$	232,192
Six months ended June 30, 2020
Allowance for credit losses
Beginning balance, prior to adoption of ASC 326	$	22,849	$	4,616	$	7,452	$	3,891	$	1,381	$	7,387	$	47,576
Impact of adopting ASC 326⁽⁴⁾	19,747		(1,472)		1,662		681		7,522		7,715		35,855
Charge-offs	(5,136)		(336)		(51)		—		(175)		(1,581)		(7,279)
Recoveries	3,815		125		32		5		115		548		4,640
Provision (credit)	102,950		6,023		29,302		5,549		328		7,248		151,400
Ending balance	$	144,225	$	8,956	$	38,397	$	10,126	$	9,171	$	21,317	$	232,192
Period-end allowance allocated to:
Loans evaluated on an individual basis	$	18	$	—	$	—	$	—	$	—	$	—	$	18
Loans evaluated on a collective basis	144,207		8,956		38,397		10,126		9,171		21,317		232,174

Ending balance	$	144,225	$	8,956	$	38,397	$	10,126	$	9,171	$	21,317	$	232,192
Period-end loan balances:
Loans evaluated on an individual basis	$	15,634	$	5,425	$	4,470	$	88	$	5,452	$	2,464	$	33,533
Loans evaluated on a collective basis	3,151,200		1,331,828		2,161,077		638,416		889,408		1,130,907		9,302,836


Ending balance	$	3,166,834	$	1,337,253	$	2,165,547	$	638,504	$	894,860	$	1,133,371	$	9,336,369



(Dollars in thousands)	Commercial and Industrial⁽¹⁾			Owner-occupied Commercial			Commercial Mortgages			Construction			Residential⁽²⁾			Consumer			Total
Three months ended June 30, 2019
Allowance for loan losses
Beginning balance	$	21,016		$	4,949		$	6,679		$	4,044		$	1,401		$	8,232		$	46,321
Charge-offs	(13,002		)	(8		)	(153		)	(42		)	(163		)	(960		)	(14,328		)
Recoveries	203			78			398			1			(2		)	498			1,176
Provision (credit)	13,568			(526		)	(474		)	(1,013		)	24			72			11,651
Provision (credit) for acquired loans	219			(13		)	94			(6		)	98			152			544
Ending balance	$	22,004		$	4,480		$	6,544		$	2,984		$	1,358		$	7,994		$	45,364
Six months ended June 30, 2019
Allowance for loan losses
Beginning balance	$	14,211		$	5,057		$	6,806		$	3,712		$	1,428		$	8,325		$	39,539
Charge-offs	(13,744		)	(8		)	(155		)	(42		)	(285		)	(1,644		)	(15,878		)
Recoveries	561			81			427			2			(16		)	799			1,854
Provision (credit)	20,691			(637		)	(630		)	(682		)	75			329			19,146
Provision (credit) for acquired loans	285			(13		)	96			(6		)	156			185			703
Ending balance	$	22,004		$	4,480		$	6,544		$	2,984		$	1,358		$	7,994		$	45,364
Period-end allowance allocated to:
Loans individually evaluated for impairment	$	4,324		$	—		$	—		$	—		$	488		$	183		$	4,995
Loans collectively evaluated for impairment	17,679			4,401			6,496			2,976			828			7,810			40,190
Acquired loans evaluated for impairment	1			79			48			8			42			1			179
Ending balance	$	22,004		$	4,480		$	6,544		$	2,984		$	1,358		$	7,994		$	45,364
Period-end loan balances:
Loans individually evaluated for impairment⁽³⁾	$	21,171		$	8,753		$	2,431		$	—		$	11,398		$	7,383		$	51,136
Loans collectively evaluated for impairment	1,575,810			1,168,864			765,268			324,307			134,235			848,396			4,816,880
Acquired nonimpaired loans	738,579			99,326			1,464,739			216,843			912,288			267,955			3,699,730
Acquired impaired loans	4,964			3,951			13,609			546			7,863			2,999			33,932
Ending balance⁽⁴⁾	$	2,340,524		$	1,280,894		$	2,246,047		$	541,696		$	1,065,784		$	1,126,733		$	8,601,678


(Dollars in thousands)	Commercial and Industrial⁽¹⁾		Owner - occupied Commercial		Commercial Mortgages		Construction		Residential⁽²⁾		Consumer		Total
Three months ended June 30, 2019
Allowance for loan and lease losses
Beginning balance	$	21,016	$	4,949	$	6,679	$	4,044	$	1,401	$	8,232	$	46,321
Charge-offs	(13,002)		(8)		(153)		(42)		(163)		(960)		(14,328)
Recoveries	203		78		398		1		(2)		498		1,176
Provision (credit)	13,568		(526)		(474)		(1,013)		24		72		11,651
Provision (credit) for acquired loans	219		(13)		94		(6)		98		152		544
Ending balance	$	22,004	$	4,480	$	6,544	$	2,984	$	1,358	$	7,994	$	45,364
Six months ended June 30, 2019
Allowance for loan losses
Beginning balance	$	14,211	$	5,057	$	6,806	$	3,712	$	1,428	$	8,325	$	39,539
Charge-offs	(13,744)		(8)		(155)		(42)		(285)		(1,644)		(15,878)
Recoveries	561		81		427		2		(16)		799		1,854
Provision (credit)	20,691		(637)		(630)		(682)		75		329		19,146
Provision (credit) for acquired loans	285		(13)		96		(6)		156		185		703
Ending balance	$	22,004	$	4,480	$	6,544	$	2,984	$	1,358	$	7,994	$	45,364
Period-end allowance allocated to:
Individually evaluated for impairment	$	4,324	$	—	$	—	$	—	$	488	$	183	$	4,995
Collectively evaluated for impairment	17,679		4,401		6,496		2,976		828		7,810		40,190
Acquired loans individually evaluated for impairment	1		79		48		8		42		1		179
Ending balance	$	22,004	$	4,480	$	6,544	$	2,984	$	1,358	$	7,994	$	45,364
Period-end loan balances:
Individually evaluated for impairment⁽²⁾	$	21,171	$	8,753	$	2,431	$	—	$	11,398	$	7,383	$	51,136
Collectively evaluated for impairment	1,575,810		1,168,864		765,268		324,307		134,235		848,396		4,816,880
Acquired nonimpaired loans	738,579		99,326		1,464,739		216,843		912,288		267,955		3,699,730
Acquired impaired loans	4,964		3,951		13,609		546		7,863		2,999		33,932
Ending balance⁽³⁾	$	2,340,524	$	1,280,894	$	2,246,047	$	541,696	$	1,065,784	$	1,126,733	$	8,601,678



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	June 30, 2019			December 31, 2018
(Dollars in thousands, except per share and share data)	(Unaudited)
Assets:
Cash and due from banks	$	183,632		$	134,939
Cash in non-owned ATMs	338,006			484,648
Interest-bearing deposits in other banks including collateral of $0 at June 30, 2019 and $1,000 at December 31, 2018	187			1,170
Total cash and cash equivalents	521,825			620,757
Investment securities, available for sale (amortized cost of $1,767,602 at June 30, 2019 and $1,224,227 at December 31, 2018)	1,796,870			1,205,079
Investment securities, held to maturity, at cost (fair value $145,867 at June 30, 2019 and $149,431 at December 31, 2018)	143,317			149,950
Other investments	48,711			37,233
Loans, held for sale at fair value	51,721			25,318
Loans and leases, net of allowance of $45,364 at June 30, 2019 and $39,539 at December 31, 2018	8,567,709			4,863,919
Bank owned life insurance	30,118			6,687
Stock in Federal Home Loan Bank of Pittsburgh at cost	15,874			19,259
Other real estate owned	3,703			2,668
Accrued interest receivable	40,784			22,001
Premises and equipment	103,787			44,956
Goodwill	473,712			166,007
Intangible assets	101,984			20,016
Other assets	256,480			65,020
Total assets	$	12,156,595		$	7,248,870
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing	$	2,205,992		$	1,626,252
Interest-bearing	7,388,718			4,014,179
Total deposits	9,594,710			5,640,431
Federal funds purchased	115,000			157,975
Federal Home Loan Bank advances	115,675			328,465
Trust preferred borrowings	67,011			67,011
Senior debt	98,497			98,388
Other borrowed funds	18,948			47,949
Accrued interest payable	7,064			1,900
Other liabilities	303,302			85,831
Total liabilities	10,320,207			6,427,950
Stockholders’ Equity:
Common stock $0.01 par value, 90,000,000 shares authorized; issued 57,239,683 at June 30, 2019 and 56,926,978 at December 31, 2018	573			569
Capital in excess of par value	1,043,065			349,810
Accumulated other comprehensive income (loss)	22,688			(15,394		)
Retained earnings	830,397			791,031
Treasury stock at cost, 4,007,722 shares at June 30, 2019 and 25,552,887 shares at December 31, 2018	(60,112		)	(305,096		)
Total stockholders’ equity of WSFS	1,836,611			820,920
Noncontrolling interest	(223		)	—
Total stockholders' equity	1,836,388			820,920
Total liabilities and stockholders' equity	$	12,156,595		$	7,248,870



(Dollars in thousands)	Fair Value
Consideration Transferred:
Common shares issued (21,816,355)	$	949,968
Cash paid to Beneficial stock and option holders	228,239
Value of consideration	1,178,207
Assets acquired:
Cash and due from banks	304,311
Investment securities	619,880
Loans and leases, net	3,711,246
Premises and equipment	69,873
Deferred income taxes	18,739
Bank owned life insurance	82,510
Core deposit intangible	85,053
Servicing rights intangible	2,466
Other assets	135,895
Total assets	5,029,973
Liabilities assumed:
Deposits	4,056,506
Other liabilities	102,965
Total liabilities	4,159,471
Net assets acquired:	870,502
Goodwill resulting from acquisition of Beneficial	$	307,705



(Dollars in thousands)	Fair Value
Goodwill resulting from the acquisition of Beneficial reported as of March 31, 2019	$	309,486
Effects of adjustments to:
Cash and due from banks	246
Investment securities	(3,177		)
Loans	911
Premises and equipment	(741		)
Deferred income taxes	731
Other assets	(420		)
Deposits	790
Other liabilities	(121		)
Adjusted goodwill resulting from the acquisition of Beneficial as of June 30, 2019	$	307,705



	Available for Sale
	Amortized		Fair
(Dollars in thousands)	Cost		Value
June 30, 2019⁽¹⁾
Within one year	$	—	$	—
After one year but within five years	19,457		19,519
After five years but within ten years	155,351		156,432
After ten years	1,592,794		1,620,919
	$	1,767,602	$	1,796,870
December 31, 2018⁽¹⁾
Within one year	$	—	$	—
After one year but within five years	19,714		19,423
After five years but within ten years	170,118		163,731
After ten years	1,034,395		1,021,925
	$	1,224,227	$	1,205,079



	Held to Maturity
	Amortized		Fair
(Dollars in thousands)	Cost		Value
June 30, 2019 ⁽¹⁾
Within one year	$	2,626	$	2,630
After one year but within five years	7,423		7,458
After five years but within ten years	30,228		30,703
After ten years	103,040		105,076
	$	143,317	$	145,867
December 31, 2018⁽¹⁾
Within one year	$	1,018	$	1,016
After one year but within five years	6,703		6,701
After five years but within ten years	29,613		29,547
After ten years	112,616		112,167
	$	149,950	$	149,431


	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	$	40,948	$	89	$	—	$	—	$	40,948	$	89
FNMA MBS	45,453		60		4,403		3		49,856		63


GSE	18,351		39		—		—		18,351		39
Total	$	104,752	$	188	$	4,403	$	3	$	109,155	$	191


⁽²⁾	~~Period-end loan balance excludes reverse mortgages at fair value of $15.9 million.~~


⁽³⁾	The difference between this amount and nonaccruing loans represents accruing troubled debt restructured loans of $14.2 million for the period ending June 30, 2019. Accruing troubled debt restructured loans are considered impaired loans.


⁽⁴⁾	~~Ending loan balances do not include net deferred fees.~~



	June 30, 2019
(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 and industrial⁽¹⁾	$	3,894		$	682		$	—		$	4,576		$	2,309,943		$	4,964		$	21,041		$	2,340,524
Owner-occupied commercial	4,105			398			1,165			5,668			1,262,522			3,951			8,753			1,280,894
Commercial mortgages	4,499			201			—			4,700			2,225,436			13,609			2,302			2,246,047
Construction	249			—			—			249			540,901			546			—			541,696
Residential⁽²⁾	6,022			6			115			6,143			1,047,891			7,863			3,887			1,065,784
Consumer⁽³⁾	6,693			3,811			14,387			24,891			1,097,190			2,999			1,653			1,126,733
Total⁽⁴⁾	$	25,462		$	5,098		$	15,667		$	46,227		$	8,483,883		$	33,932		$	37,636		$	8,601,678
% of Total Loans	0.30		%	0.06		%	0.18		%	0.54		%	98.63		%	0.39		%	0.44		%	100		%



	December 31, 2018
	Commercial and Industrial		Owner-occupied Commercial		Commercial Mortgages		Construction		Total Commercial⁽¹⁾
(Dollars in thousands)									Amount		%
Risk Rating:
Special mention	$	8,710	$	21,230	$	—	$	—	$	29,940
Substandard:
Accrual	37,424		21,081		9,767		168		68,440
Nonaccrual	13,180		4,406		3,951		2,337		23,874
Doubtful	876		—		—		444		1,320
Total Special Mention and Substandard	60,190		46,717		13,718		2,949		123,574		3	%
Acquired impaired	1,531		4,248		7,504		749		14,032		—	%
Pass	1,410,768		1,009,009		1,141,517		312,868		3,874,162		97	%
Total	$	1,472,489	$	1,059,974	$	1,162,739	$	316,566	$	4,011,768	100	%



	Residential⁽²⁾				Consumer				Total Residential and Consumer⁽³⁾
	June 30,		December 31,		June 30,		December 31,		June 30, 2019				December 31, 2018
(Dollars in thousands)	2019		2018		2019		2018		Amount		Percent		Amount		Percent
Nonperforming⁽¹⁾	$	12,106	$	11,017	$	7,378	$	7,883	$	19,484	1	%	$	18,900	2	%
Acquired impaired loans	7,863		761		2,999		151		10,862		—	%	912		—	%
Performing	1,045,815		189,772		1,116,356		672,905		2,162,171		99	%	862,677		98	%
Total	$	1,065,784	$	201,550	$	1,126,733	$	680,939	$	2,192,517	100	%	$	882,489	100	%


	Three months ended						Six months ended
(Dollars in thousands)	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Operating lease cost ^{(1) (2)}	$	4,950	$	11,024	$	9,500	$	16,748
Sublease income	(93)		(175)		(186)		(276)
Net lease cost	$	4,857	$	10,849	$	9,314	$	16,472


⁽¹⁾ ⁽²⁾Includes $5.9 million and $8.0 million for the three and six months ended June 30, 2019, respectively, in Corporate development expense in the unaudited Consolidated Statement of Income.	~~Includes variable lease cost and short-term lease cost.~~


⁽²⁾	~~Includes accelerated expense due to the previously announced retail branch optimization plan.~~



(Dollars in thousands)	June 30, 2019
Assets
Operating right of use assets	$	172,458
Total assets	$	172,458

Liabilities
Operating lease liabilities	$	186,186
Total liabilities	$	186,186

Lease term and discount rate
	June 30, 2019
Weighted average remaining lease term (in years)
Operating leases	19.79
Weighted average discount rate
Operating leases	4.27		%


(Dollars in thousands)	June 30, 2020
Remaining in 2020	$	8,724
2021	17,182
2022	17,146
2023	17,263
2024	16,095
After 2024	195,550
Total lease payments	271,960
Less: Interest	(100,348)
Present value of lease liabilities	$	171,612



(Dollars in thousands)	June 30, 2019
Lease receivables	$	176,497
Unearned income	(20,321		)
Deferred fees and costs	562
Net investment in direct financing leases	$	156,738



(Dollars in thousands)	Direct financing leases
2019	$	31,405
2020	54,378
2021	41,351
2022	27,301
2023	16,245
After 2023	5,817
Total lease payments	$	176,497



(Dollars in thousands)	WSFS Bank			Cash Connect		Wealth Management		Consolidated Company
December 31, 2018	$	145,808		$	—	$	20,199	$	166,007
Goodwill from business combinations	309,486			—		—		309,486
Remeasurement adjustments	(1,781		)	—		—		(1,781		)
June 30, 2019	$	453,513		$	—	$	20,199	$	473,712


(Dollars in thousands)	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets		Amortization Period
June 30, 2020
Core deposits	$	95,711	$	(18,033)	$	77,678	10 years
Customer relationships	17,561		(8,216)		9,345		7-15 years
Non-compete agreements	221		(168)		53		5 years
Loan servicing rights⁽¹⁾	4,605		(1,994)		2,611		10-25 years
Total intangible assets	$	118,098	$	(28,411)	$	89,687
December 31, 2019
Core deposits	$	95,711	$	(13,326)	$	82,385	10 years
Customer relationships	17,561		(7,416)		10,145		7-15 years
Non-compete agreements	221		(146)		75		5 years
Loan servicing rights⁽²⁾	4,880		(1,568)		3,312		10-25 years
Total intangible assets	$	118,373	$	(22,456)	$	95,917


⁽¹⁾	The favorable lease asset was fully amortized and written off during the six months ended June 30, 2019 as a result of our adoption of ASU 2016-02 on January 1, 2019. See Note 2 for further information.



(Dollars in thousands)	Amortization of Intangibles
Remaining in 2019	$	5,644
2020	11,105
2021	10,780
2022	10,717
2023	10,689
Thereafter	53,049
Total	$	101,984


	June 30, 2020
(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	$	—	$	355,821	$	—	$	355,821
FNMA MBS	—		1,394,035		—		1,394,035
FHLMC MBS	—		297,547		—		297,547
GNMA MBS	—		30,824		—		30,824
GSE	—		117,162		—		117,162

Other assets	—		15,243		—		15,243
Total assets measured at fair value on a recurring basis	$	—	$	2,210,632	$	—	$	2,210,632

Liabilities measured at fair value on a recurring basis:
Other liabilities	$	—	$	9,017	$	25,205	$	34,222

Assets measured at fair value on a nonrecurring basis:
Other investments	$	—	$	—	$	10,211	$	10,211
Other real estate owned	—		—		4,153		4,153
Loans held for sale	—		109,453		—		109,453

Total assets measured at fair value on a nonrecurring basis	$	—	$	109,453	$	14,364	$	123,817


(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		Total
Balance, March 31, 2020	$	72,436	$	403	$	(3,313)	$	1,008	$	70,534
Other comprehensive income (loss) before reclassifications	3,703		—		7		(25)		3,685
Less: Amounts reclassified from accumulated other comprehensive income (loss)	(1,450)		(57)		179		(111)		(1,439)
Net current-period other comprehensive income (loss)	2,253		(57)		186		(136)		2,246
Balance, June 30, 2020	$	74,689	$	346	$	(3,127)	$	872	$	72,780

Balance, March 31, 2019	$	2,701	$	686	$	693	$	(1,824)	$	2,256
Other comprehensive income before reclassifications	19,591		—		10		1,007		20,608
Less: Amounts reclassified from accumulated other comprehensive income	(48)		(84)		(44)		—		(176)
Net current-period other comprehensive income (loss)	19,543		(84)		(34)		1,007		20,432
Balance, June 30, 2019	$	22,244	$	602	$	659	$	(817)	$	22,688


(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		Total
Balance, December 31, 2019	$	26,927	$	468	$	(3,317)	$	(577)	$	23,501
Other comprehensive income before reclassifications	49,739		—		43		1,560		51,342
Less: Amounts reclassified from accumulated other comprehensive income	(1,977)		(122)		147		(111)		(2,063)
Net current-period other comprehensive income (loss)	47,762		(122)		190		1,449		49,279
Balance, June 30, 2020	$	74,689	$	346	$	(3,127)	$	872	$	72,780

Balance, December 31, 2018	$	(14,553)	$	779	$	834	$	(2,454)	$	(15,394)
Other comprehensive income (loss) before reclassifications	36,856		(2)		(89)		1,637		38,402
Less: Amounts reclassified from accumulated other comprehensive income (loss)	(59)		(175)		(86)		—		(320)
Net current-period other comprehensive income (loss)	36,797		(177)		(175)		1,637		38,082
Balance, June 30, 2019	$	22,244	$	602	$	659	$	(817)	$	22,688


	Three Months Ended June 30,					Affected line item in unaudited Consolidated Statements of Income
(Dollars in thousands)	2020		2019
Securities available for sale:
Realized gains on securities transactions	$	(1,908)	$	(63)	Securities gains, net
Income taxes	458		15		Income tax provision
Net of tax	$	(1,450)	$	(48)
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	$	(75)	$	(111)	Interest and dividends on investment securities
Income taxes	18		27		Income tax provision
Net of tax	$	(57)	$	(84)
Amortization of defined benefit pension plan-related items:
Prior service credits	$	(19)	$	(19)

Actuarial gains	(24)		(16)
Total before tax	$	(43)	$	(35)	Salaries, benefits and other compensation
Income taxes	10		(9)		Income tax provision
Net of tax	$	(33)	$	(44)
Defined benefit pension plan settlement:
Realized losses on plan settlement	$	279	$	—	Other operating expense
Income taxes	(67)		—		Income tax provision
Net of tax	$	212	$	—
Net unrealized gains on terminated cash flow hedges:
Amortization of net unrealized gains to income during the period	$	(146)	$	—	Interest and fees on loans and leases
Income taxes	35		—		Income tax provision
Net of tax	$	(111)	$	—
Total reclassifications	$	(1,439)	$	(176)


⁽¹⁾ Table of Contents	Prior service costs balance for the six months ended June 30, 2018 includes a tax true-up adjustment of $0.1 million from March 31, 2018. Note that the tax true-up was made to the deferred tax asset with an offset to AOCI and does not affect the actual net periodic benefit costs of the pension plan.



	Consolidated Capital				For Capital Adequacy Purposes				To be Well-Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Percent		Amount		Percent		Amount		Percent
Total Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB	$	1,311,045	12.93	%	$	811,192	8.00	%	$	1,013,990	10.00	%
WSFS Financial Corporation	1,375,538		13.55	%	811,905		8.00	%	1,014,881		10.00	%
Tier 1 Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB	1,264,110		12.47	%	608,394		6.00	%	811,192		8.00	%
WSFS Financial Corporation	1,328,603		13.09	%	608,929		6.00	%	811,905		8.00	%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB	1,264,110		12.47	%	456,295		4.50	%	659,093		6.50	%
WSFS Financial Corporation	1,263,603		12.45	%	456,697		4.50	%	659,673		6.50	%
Tier 1 Leverage Capital
Wilmington Savings Fund Society, FSB	1,264,110		10.95	%	461,793		4.00	%	577,241		5.00	%
WSFS Financial Corporation	1,328,603		11.49	%	462,668		4.00	%	578,335		5.00	%