WSFS FINANCIAL CORP [WSFS] Filings

10-Q 1 wsfs-20220630.htm 10-Q wsfs-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2022


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

For the transition period from to

Commission File Number 001-35638

WSFS FINANCIAL CORPORATION

(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 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

☐

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: 63,512,527 shares as of July 31, 2022.

WSFS FINANCIAL CORPORATION

FORM 10-Q

TABLE OF CONTENTS


	PART I. Financial Information	Page
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2022 and 2021	5
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2022 and 2021	6
	Consolidated Statements of Financial Condition as of June 30, 2022 and December 31, 2021	7
	Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months Ended June 30, 2022 and 2021	8
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021	10
	Notes to the Consolidated Financial Statements for the Three and Six Months Ended June 30, 2022	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	55
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	74
Item 4.	Controls and Procedures	75
PART II. Other Information
Item 1.	Legal Proceedings	75
Item 1A.	Risk Factors	75
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75
Item 3.	Defaults upon Senior Securities	75
Item 4.	Mine Safety Disclosures	75
Item 5.	Other Information	75
Item 6.	Exhibits	76

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, and exhibits 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:

•difficult market conditions and unfavorable economic trends in the United States generally and in financial markets, particularly in the markets in which the Company operates and in which its loans are concentrated, including difficult and unfavorable conditions and trends related to housing markets, unemployment levels, interest rates, supply chain issues, inflation, economic growth, and the novel coronavirus (COVID-19) pandemic, and related variant developments, vaccination efforts and emergency orders;

•possible additional loan losses and impairment of the collectability of loans;

•the Company’s level of nonperforming assets and the costs associated with resolving problem loans including litigation and other costs and complying with government-imposed foreclosure moratoriums;

•changes in market interest rates, which may increase funding costs and reduce earning asset yields and thus reduce margin;

•the impact of changes in interest rates and the credit quality and strength of underlying collateral and the effect of such changes on the market value of the Company’s investment securities portfolio;

•the credit risk associated with the substantial amount of commercial real estate, construction and land development and commercial and industrial loans in the Company's loan portfolio;

•the extensive federal and state regulation, supervision and examination governing almost every aspect of the Company’s operations and potential expenses associated with complying with such regulations;

•the Company’s ability to comply with applicable capital and liquidity requirements, including 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, and the uncertainty of the short- and long-term impacts of such changes;

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

•the discontinued publication of London Inter-Bank Offered Rate (LIBOR) and the transition to an alternative reference interest rate, such as the Secured Overnight Financing Rate (SOFR), including methodologies for calculating the rate that are different from the LIBOR methodology and changed language for existing and new floating or adjustable rate contracts;

•the success of the Company's growth plans, including its plans to grow the commercial small business leasing, residential, small business and Small Business Administration (SBA) portfolios and wealth management business following its recent acquisition of Bryn Mawr Bank Corporation (BMBC or Bryn Mawr Trust);

•the Company’s ability to successfully integrate and fully realize the cost savings and other benefits of its acquisitions, manage risks related to business disruption following those acquisitions, and post-acquisition Customer acceptance of the Company’s products and services and related Customer disintermediation, including its recent acquisition of BMBC (the BMBC Merger);

•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, particularly given widespread remote working arrangements;

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

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

•the effects of weather, including climate change, and natural disasters such as floods, droughts, wind, tornadoes and hurricanes as well as effects from geopolitical instability, armed conflicts, public health crises and man-made disasters including terrorist attacks;

•the effects of regional or national civil unrest (including any resulting branch or ATM closures or damage);

•additional credit, fraud and litigation risks associated with our PPP lending activities;

•possible changes in the speed of loan prepayments by the Company’s Customers and loan origination or sales volumes;

•possible changes in the speed of prepayments of mortgage-backed securities (MBS) due to changes in the interest rate environment and the related acceleration of premium amortization on prepayments in the event that prepayments accelerate;

•regulatory limits on the Company’s ability to receive dividends from its subsidiaries and pay dividends to its stockholders;

•any 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

•other risks and uncertainties, including those discussed herein under the heading “Risk Factors” and in other documents filed by the Company with the Securities and Exchange Commission (SEC) from time to time.

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.

The following are registered trademarks of the Company: Bryn Mawr Trust®, Cash Connect®, NewLane Finance®, Powdermill® Financial Solutions, West Capital Management®, WSFS Institutional Services®, WSFS Mortgage® and WSFS Wealth® Investments. Any other trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.

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WSFS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands, except per share and share data)	2022		2021		2022		2021

Interest income:
Interest and fees on loans and leases	$	129,342	$	98,645	$	248,223	$	207,497
Interest on mortgage-backed securities	27,377		12,506		50,490		23,210
Interest and dividends on investment securities:
Taxable	702		702		1,404		1,403
Tax-exempt	638		681		1,257		1,429
Other interest income	1,961		368		2,783		644
	160,020		112,902		304,157		234,183
Interest expense:
Interest on deposits	3,766		3,778		6,894		8,274
Interest on Federal Home Loan Bank advances	—		—		—		5
Interest on senior and subordinated debt	1,949		2,053		3,878		4,319

Interest on trust preferred borrowings	682		317		1,195		641
Interest on other borrowings	8		5		17		10
	6,405		6,153		11,984		13,249
Net interest income	153,615		106,749		292,173		220,934
Provision for (recovery of) credit losses	8,268		(67,563)		27,239		(87,723)
Net interest income after provision for (recovery of) credit losses	145,347		174,312		264,934		308,657
Noninterest income:
Credit/debit card and ATM income	8,772		7,567		16,453		14,372
Investment management and fiduciary income	31,192		15,360		61,373		29,613
Deposit service charges	6,071		5,319		11,896		10,779
Mortgage banking activities, net	2,211		4,453		5,109		13,053
Loan and lease fee income	1,698		1,730		3,032		5,215
Securities gains, net	—		—		—		329
Unrealized gain on equity investments, net	5,991		5,261		5,988		5,261

Bank owned life insurance income	374		695		479		900
Other income	15,720		8,633		28,273		17,318
	72,029		49,018		132,603		96,840
Noninterest expense:
Salaries, benefits and other compensation	68,189		52,408		139,119		105,546
Occupancy expense	9,902		8,083		20,694		16,543
Equipment expense	10,388		7,338		20,761		14,729
Data processing and operations expenses	5,288		3,444		10,647		6,829
Professional fees	5,273		3,401		8,724		7,257
Marketing expense	1,637		1,286		2,903		2,278
Loss on debt extinguishment	—		1,087		—		1,087
FDIC expenses	1,468		1,056		2,859		2,125
Loan workout and other credit costs	(226)		(552)		102		568
Corporate development expense	6,393		2,543		40,431		4,638
Restructuring expense	3,934		(144)		21,448		(409)


Other operating expense	21,803		16,082		40,818		30,460
	134,049		96,032		308,506		191,651
Income before taxes	83,327		127,298		89,031		213,846
Income tax provision	22,425		31,687		24,162		53,094
Net income	$	60,902	$	95,611	$	64,869	$	160,752
Less: Net income (loss) attributable to noncontrolling interest	162		(56)		325		3
Net income attributable to WSFS	$	60,740	$	95,667	$	64,544	$	160,749
Earnings per share:
Basic	$	0.95	$	2.01	$	1.00	$	3.38
Diluted	$	0.94	$	2.01	$	1.00	$	3.37
Weighted average shares of common stock outstanding:
Basic	64,224,018		47,529,143		64,581,321		47,519,229
Diluted	64,283,288		47,691,709		64,696,053		47,675,223

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

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WSFS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2022		2021		2022		2021
					(Unaudited)
Net income	$	60,902	$	95,611	$	64,869	$	160,752
Less: Net income (loss) attributable to noncontrolling interest	162		(56)		325		3
Net income attributable to WSFS	60,740		95,667		64,544		160,749
Other comprehensive (loss) income:
Net change in unrealized (losses) gains on investment securities available-for-sale
Net unrealized (losses) gains arising during the period, net of tax (benefit) of $(26,975), $7,615, $(114,107), and $(14,361), respectively	(85,422)		24,104		(361,340)		(45,485)

Less: reclassification adjustment for net gains on sales realized in net income, net of tax expense of $—, $—, $— and $79, respectively	—		—		—		(250)
	(85,422)		24,104		(361,340)		(45,735)
Net change in securities held-to-maturity
Net change in unrealized loss on available-for-sale securities reclassified to held-to-maturity, net of tax benefit of $37,830, $9 , $37,839 and $14, respectively(1)	(119,796)		(28)		(119,824)		(44)
Net change in unfunded pension liability
Change in unfunded pension liability related to unrealized loss, prior service cost and transition obligation, net of tax benefit of $(9), (8), $(17) and (13), respectively	(28)		(24)		(55)		(40)


Net change in cash flow hedge
Net unrealized gain arising during the period, net of tax expense of $—, $— , $— and $— respectively	—		—		1		—
Amortization of unrealized gain on terminated cash flow hedges, net of tax benefit of $(13), $(35) , $(25) and $(70), respectively	(40)		(112)		(80)		(223)
	(40)		(112)		(79)		(223)
Net change in equity method investments
Net change in other comprehensive income of equity method investments, net of tax expense of $59,$— , $59 and $86, respectively	188		—		188		273
Total other comprehensive (loss) income	(205,098)		23,940		(481,110)		(45,769)
Total comprehensive (loss) income	$	(144,358)	$	119,607	$	(416,566)	$	114,980

(1)Includes $119.8 million, net of tax benefit, of unrealized losses on transferred investment securities with a book value of $1.1 billion from available-for-sale to held-to-maturity.

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

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WSFS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)


(Dollars in thousands, except per share and share data)	June 30, 2022		December 31, 2021

Assets:
Cash and due from banks	$	1,036,554	$	1,046,992
Cash in non-owned ATMs	633,710		480,527
Interest-bearing deposits in other banks including collateral (restricted cash) of $6,030 at June 30, 2022 and $5,050 at December 31, 2021	6,345		5,420
Total cash, cash equivalents, and restricted cash	1,676,609		1,532,939
Investment securities, available-for-sale (amortized cost of $5,016,103 at June 30, 2022 and $5,249,882 at December 31, 2021	4,496,087		5,205,311
Investment securities, held-to-maturity, net of allowance for credit losses of $6 at June 30, 2022 and $4 at December 31, 2021 (fair value $1,063,352 at June 30, 2022 and $94,131 at December 31, 2021)	1,064,182		90,642
Other investments	21,064		10,518
Loans, held for sale at fair value	60,775		113,349
Loans and leases, net of allowance for credit losses of $141,970 at June 30, 2022 and $94,507 at December 31, 2021	11,340,711		7,791,482
Bank owned life insurance	100,515		33,099
Stock in Federal Home Loan Bank (FHLB) of Pittsburgh at cost	10,118		6,073
Other real estate owned	358		2,320
Accrued interest receivable	55,718		41,596
Premises and equipment	120,606		87,295
Goodwill	883,116		472,828
Intangible assets	136,741		74,403
Other assets	583,616		315,472
Total assets	$	20,550,216	$	15,777,327
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing	$	6,551,542	$	4,565,143
Interest-bearing	10,718,065		8,674,919






Total deposits	17,269,607		13,240,062


Trust preferred borrowings	90,344		67,011
Senior and subordinated debt	248,372		147,939
Other borrowed funds	31,067		24,527
Accrued interest payable	3,091		736
Other liabilities	594,859		360,036
Total liabilities	18,237,340		13,840,311
Stockholders’ Equity:
Common stock $0.01 par value, 90,000,000 shares authorized; issued 75,870,300 at June 30, 2022 and 57,695,676 at December 31, 2021	759		577
Capital in excess of par value	1,968,175		1,058,997
Accumulated other comprehensive loss	(518,878)		(37,768)
Retained earnings	1,272,192		1,224,614
Treasury stock at cost, 12,283,026 shares at June 30, 2022 and 10,086,936 shares at December 31, 2021	(406,888)		(307,321)
Total stockholders’ equity of WSFS	2,315,360		1,939,099
Noncontrolling interest	(2,484)		(2,083)
Total stockholders' equity	2,312,876		1,937,016
Total liabilities and stockholders' equity	$	20,550,216	$	15,777,327

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

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WSFS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)


	Six Months Ended June 30, 2022
(Dollars in thousands, except per share and share amounts)	Shares	Common Stock		Capital in Excess of Par Value		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total Stockholders' Equity of WSFS		Non-controlling Interest		Total Stockholders' Equity
Balance, December 31, 2021	57,695,676	$	577	$	1,058,997	$	(37,768)	$	1,224,614	$	(307,321)	$	1,939,099	$	(2,083)	$	1,937,016
Net income	—	—		—		—		64,544		—		64,544		325		64,869
Other comprehensive loss	—	—		—		(481,110)		—		—		(481,110)		—		(481,110)
Cash dividend, $0.26 per share	—	—		—		—		(16,966)		—		(16,966)		—		(16,966)
Contributions from noncontrolling shareholders	—	—		—		—		—		—		—		187		187
Issuance of common stock including proceeds from exercise of common stock options	57,776	1		431		—		—

WSFS FINANCIAL CORP [WSFS] Filings
10-Q	[2022-08-04]
10-Q	[2022-05-10]
10-K	[2022-03-01]
10-Q	[2021-11-05]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-03-01]
10-Q	[2020-11-04]
10-Q	[2020-08-07]
10-Q	[2020-05-08]
10-K	[2020-03-02]
10-Q	[2019-11-08]
10-Q	[2019-08-07]
10-Q	[2019-05-10]
10-K	[2019-02-28]
10-Q	[2018-11-08]
10-Q	[2018-08-08]
10-Q	[2018-05-10]
10-K	[2018-03-01]
10-Q	[2017-11-08]
10-Q	[2017-08-08]
10-Q	[2017-05-09]
10-K	[2017-03-01]
10-Q	[2016-11-09]
10-Q	[2016-08-09]
10-Q	[2016-05-06]
10-K	[2016-02-29]
10-Q	[2015-11-06]
10-Q	[2015-08-07]
10-Q	[2015-05-11]
10-K	[2015-03-16]
10-Q	[2014-11-10]
10-Q	[2014-08-11]
10-Q	[2014-05-12]
10-K	[2014-03-17]
10-Q	[2013-11-12]
10-Q	[2013-08-09]
10-Q	[2013-05-10]
10-K	[2013-03-18]
10-Q	[2012-11-09]
10-Q	[2012-08-09]
10-Q	[2012-05-10]
10-K	[2012-03-15]