WSFS FINANCIAL CORP [WSFS] Filings

10-Q 1 wsfs-20230930.htm 10-Q wsfs-20230930

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 September 30, 2023


☐			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: 60,731,884 shares as of October 31, 2023.

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 Nine Months Ended September 30, 2023 and 2022	5
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2023 and 2022	6
	Consolidated Statements of Financial Condition as of September 30, 2023 and December 31, 2022	7
	Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months Ended September 30, 2023 and 2022	8
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	10
	Notes to the Consolidated Financial Statements for the Three and Nine Months Ended September 30, 2023	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	53
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	68
Item 4.	Controls and Procedures	68
PART II. Other Information
Item 1.	Legal Proceedings	69
Item 1A.	Risk Factors	69
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 3.	Defaults upon Senior Securities	69
Item 4.	Mine Safety Disclosures	69
Item 5.	Other Information	69
Item 6.	Exhibits	70

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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, costs of living, unemployment levels, interest rates, supply chain issues, inflation, and economic growth;

•the impacts related to or resulting from recent bank failures and other economic and industry volatility, including potential increased regulatory requirements and costs and potential impacts to macroeconomic conditions;

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

•the Company’s level of nonperforming assets and the costs associated with resolving problem loans including litigation and other costs 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 Secured Overnight Financing Rate (SOFR) as an alternative reference interest rate;

•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;

•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;

•negative perceptions or publicity with respect to the Company generally and, in particular, the Company’s trust and wealth management business;

•failure of the financial and/or operational controls of the Company’s Cash Connect® and/or Wealth Management divisions;

•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;

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

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

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

•possible changes in the speed of loan prepayments by the Company’s 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;

•any compounding effects or unexpected interaction 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, 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 September 30,				Nine Months Ended September 30,
(Dollars in thousands, except per share and share data)	2023		2022		2023		2022

Interest income:
Interest and fees on loans and leases	$	218,903	$	152,887	$	620,511	$	401,110
Interest on mortgage-backed securities	26,654		28,338		81,310		78,828
Interest and dividends on investment securities:
Taxable	699		703		2,103		2,107
Tax-exempt	1,481		1,278		4,496		2,535
Other interest income	3,402		3,359		10,871		6,142
	251,139		186,565		719,291		490,722
Interest expense:
Interest on deposits	57,255		6,643		142,501		13,537
Interest on Federal Home Loan Bank advances	167		42		5,135		42
Interest on senior and subordinated debt	2,453		2,061		7,360		5,939
Interest on federal funds purchased	185		28		1,324		28
Interest on trust preferred borrowings	1,764		951		4,954		2,146
Interest on other borrowings	6,713		9		11,041		26
	68,537		9,734		172,315		21,718
Net interest income	182,602		176,831		546,976		469,004
Provision for credit losses	18,414		7,454		63,255		34,693
Net interest income after provision for credit losses	164,188		169,377		483,721		434,311
Noninterest income:
Credit/debit card and ATM income	14,869		10,993		42,660		27,446
Investment management and fiduciary income	32,720		29,504		95,575		90,877
Deposit service charges	6,534		6,262		18,850		18,158
Mortgage banking activities, net	1,254		1,420		3,680		6,529
Loan and lease fee income	1,621		1,425		4,183		4,457

Unrealized (loss) gain on equity investments, net	(5)		—		(9)		5,988

Bank owned life insurance income	1,697		195		3,967		674
Other income	13,978		12,852		33,760		41,125
	72,668		62,651		202,666		195,254
Noninterest expense:
Salaries, benefits and other compensation	74,453		72,294		219,669		211,413
Occupancy expense	9,529		9,699		30,069		30,393
Equipment expense	10,563		9,913		31,165		30,674
Data processing and operations expenses	4,867		5,362		14,362		16,009
Professional fees	4,612		3,561		15,169		12,285
Marketing expense	2,049		2,082		5,930		4,985

FDIC expenses	2,534		1,540		7,979		4,399
Loan workout and other credit costs	(189)		1,001		292		1,103
Corporate development expense	113		1,248		3,649		41,679
Restructuring expense	—		1,344		(787)		22,792


Other operating expense	31,158		24,873		86,490		65,691
	139,689		132,917		413,987		441,423
Income before taxes	97,167		99,111		272,400		188,142
Income tax provision	22,904		25,767		66,880		49,929
Net income	$	74,263	$	73,344	$	205,520	$	138,213
Less: Net income (loss) attributable to noncontrolling interest	97		(38)		272		287
Net income attributable to WSFS	$	74,166	$	73,382	$	205,248	$	137,926
Earnings per share:
Basic	$	1.22	$	1.16	$	3.35	$	2.15
Diluted	$	1.22	$	1.16	$	3.34	$	2.15
Weighted average shares of common stock outstanding:
Basic	60,941,922		63,047,675		61,264,862		64,064,488
Diluted	61,039,317		63,227,983		61,367,802		64,282,992

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 September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2023		2022		2023		2022

Net income	$	74,263	$	73,344	$	205,520	$	138,213
Less: Net income (loss) attributable to noncontrolling interest	97		(38)		272		287
Net income attributable to WSFS	74,166		73,382		205,248		137,926
Other comprehensive (loss) income:
Net change in unrealized losses on investment securities available-for-sale
Net unrealized losses arising during the period, net of tax benefit of $40,270, $63,954, $36,278, and $178,061, respectively	(127,523)		(202,520)		(114,880)		(563,860)



Net change in securities held-to-maturity
Net change unrealized gains (losses) on available-for-sale securities reclassified to held-to-maturity, net of tax (benefit) expense of $(1,379), $(1,884), $(4,080), and $35,955, respectively(1)	4,366		5,966		12,924		(113,858)
Net change in unfunded pension liability
Change in unfunded pension liability related to unrealized gain and prior service cost, net of tax expense of $16, $10, $44, and $27, respectively	(51)		(31)		(140)		(86)


Net change in cash flow hedge
Net unrealized loss arising during the period, net of tax benefit of $508, $—, $869, and $—, respectively	(1,608)		—		(2,752)		—
Amortization of unrealized gain on terminated cash flow hedges, net of tax expense of $9, $13, $34, and $38, respectively	(28)		(41)		(107)		(120)
	(1,636)		(41)		(2,859)		(120)
Net change in equity method investments
Net change in other comprehensive income of equity method investments, net of tax expense of $61, $8, $28, and $67, respectively	192		25		88		213
Total other comprehensive loss	(124,652)		(196,601)		(104,867)		(677,711)
Total comprehensive (loss) income	$	(50,486)	$	(123,219)	$	100,381	$	(539,785)

(1)Includes $119.8 million, net of tax benefit, of unrealized losses on transferred investment securities with a book value of $1.1 billion from available-for-sale to held-to-maturity that were transferred in June 2022.

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)	September 30, 2023		December 31, 2022

Assets:
Cash and due from banks	$	260,200	$	332,961
Cash in non-owned ATMs	345,754		499,017
Interest-bearing deposits in other banks including collateral (restricted cash) of $5,010 at September 30, 2023 and $4,650 at December 31, 2022	5,526		5,280
Total cash, cash equivalents, and restricted cash	611,480		837,258
Investment securities, available-for-sale (amortized cost of $4,584,190 at September 30, 2023 and $4,834,550 at December 31, 2022	3,691,541		4,093,060
Investment securities, held-to-maturity, net of allowance for credit losses of $8 at September 30, 2023 and $10 at December 31, 2022 (fair value $927,680 at September 30, 2023 and $1,040,104 at December 31, 2022)	1,068,871		1,111,619
Other investments	21,741		26,120
Loans, held for sale at fair value	36,658		42,985
Loans and leases, net of allowance for credit losses of $175,988 at September 30, 2023 and $151,861 at December 31, 2022	12,502,404		11,759,992
Bank owned life insurance	101,424		101,935
Stock in Federal Home Loan Bank (FHLB) of Pittsburgh at cost	12,199		24,116
Other real estate owned	298		833
Accrued interest receivable	81,909		74,448
Premises and equipment	105,001		115,603
Goodwill	885,898		883,637
Intangible assets	122,574		128,595
Other assets	798,994		714,554
Total assets	$	20,040,992	$	19,914,755
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing	$	4,913,517	$	5,739,647
Interest-bearing	11,072,852		10,463,922






Total deposits	15,986,369		16,203,569
Federal funds purchased	25,000		—
FHLB advances	—		350,000
Trust preferred borrowings	90,589		90,442
Senior and subordinated debt	218,342		248,169
Other borrowed funds	583,902		38,283
Accrued interest payable	42,481		5,174
Other liabilities	858,931		777,232
Total liabilities	17,805,614		17,712,869
Stockholders’ Equity:
Common stock $0.01 par value, 90,000,000 shares authorized; issued 76,043,902 at September 30, 2023 and 75,921,997 at December 31, 2022	761		759
Capital in excess of par value	1,981,474		1,974,210
Accumulated other comprehensive loss	(780,711)		(675,844)
Retained earnings	1,588,858		1,411,243
Treasury stock at cost, 15,316,263 shares at September 30, 2023 and 14,310,085 shares at December 31, 2022	(547,587)		(505,255)
Total stockholders’ equity of WSFS	2,242,795		2,205,113
Noncontrolling interest	(7,417)		(3,227)
Total stockholders' equity	2,235,378		2,201,886
Total liabilities and stockholders' equity	$	20,040,992	$	19,914,755

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)


	Three Months Ended September 30, 2023
(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, June 30, 2023	76,021,963	$	760	$	1,977,945	$	(656,059)	$	1,523,849	$	(531,836)	$	2,314,659	$	(7,275)	$	2,307,384
Net income	—	—		—		—		74,166		—		74,166		97		74,263
Other comprehensive loss	—	—		—		(124,652)		—		—		(124,652)		—		(124,652)
Cash dividend, $0.15 per share	—	—		—		—		(9,157)		—		(9,157)		—		(9,157)
Distributions to noncontrolling shareholders	—	—		—		—		—		—		—		(239)		(239)
Issuance of common stock including proceeds from exercise of common stock options	21,939	1		2,057		—		—		—		2,058		—		2,058


Stock-based compensation expense	—	—		1,472		—		—		—		1,472		—		1,472
Repurchases of common shares (1)	—	—		—		—		—		(15,751)		(15,751)		—		(15,751)
Balance, September 30, 2023	76,043,902	$	761	$	1,981,474	$	(780,711)	$	1,588,858	$	(547,587)	$	2,242,795	$	(7,417)	$	2,235,378

	Nine Months Ended September 30, 2023
(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, 2022	75,921,997	$	759	$	1,974,210	$	(675,844)	$	1,411,243	$	(505,255)	$	2,205,113	$	(3,227)	$	2,201,886
Net income	—	—		—		—		205,248		—		205,248		272		205,520
Other comprehensive loss	—	—		—		(104,867)		—		—		(104,867)		—		(104,867)
Cash dividend, $0.45 per share	—	—		—		—		(27,633)		—		(27,633)		—		(27,633)
Distributions to noncontrolling shareholders	—	—		—		—		—		—		—		(4,462)		(4,462)
Issuance of common stock including proceeds from exercise of common stock options	121,905	2		2,418		—		—		—		2,420		—		2,420


Stock-based compensation expense	—	—		7,211		—		—		—		7,211		—		7,211
Repurchases of common stock (2)	—	—		(2,365)		—		—		(42,332)		(44,697)		—		(44,697)
Balance, September 30, 2023	76,043,902	$	761	$	1,981,474	$	(780,711)	$	1,588,858	$	(547,587)	$	2,242,795	$	(7,417)	$	2,235,378

(1)Repurchase of common stock includes 386,900 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors.

(2)Repurchase of common stock includes 1,006,178 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors, and 45,489 shares withheld to cover tax liabilities.

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	Three Months Ended September 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, June 30, 2022	75,870,300	$	759	$	1,968,175	$	(518,878)	$	1,272,192	$	(406,888)	$	2,315,360	$	(2,484)	$	2,312,876
Net income (loss)	—	—		—		—		73,382		—		73,382		(38)		73,344
Other comprehensive loss	—	—		—		(196,601)		—		—		(196,601)		—		(196,601)
Cash dividend, $0.15 per share	—	—		—		—		(9,535)		—		(9,535)		—		(9,535)
Contributions from noncontrolling shareholders	—	—		—		—		—		—		—		(240)		(240)
Issuance of common stock including proceeds from exercise of common stock options	26,054	—		2,087		—		—		—		2,087		—		2,087


Stock-based compensation expense	—	—		1,366		—		—		—		1,366		—		1,366
Repurchases of common shares (1)	—	—		—		—		—		(82,466)		(82,466)		—		(82,466)
Balance, September 30, 2022	75,896,354	$	759	$	1,971,628	$	(715,479)	$	1,336,039	$	(489,354)	$	2,103,593	$	(2,762)	$	2,100,831

	Nine Months Ended September 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

WSFS FINANCIAL CORP [WSFS] Filings
10-Q	[2023-11-03]
10-Q	[2023-08-03]
10-Q	[2023-05-05]
10-K	[2023-02-28]
10-Q	[2022-11-04]
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]
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