WSFS 10-Q Quarterly Report Sept. 30, 2022

WSFS FINANCIAL CORP

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wsfs-20220930

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, 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: 61,586,798 shares as of October 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 Nine Months Ended September 30, 2022 and 2021	5
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021	6
	Consolidated Statements of Financial Condition as of September 30, 2022 and December 31, 2021	7
	Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months Ended September 30, 2022 and 2021	8
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021	10
	Notes to the Consolidated Financial Statements for the Three and Nine Months Ended September 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	75
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	76
Item 3.	Defaults upon Senior Securities	76
Item 4.	Mine Safety Disclosures	76
Item 5.	Other Information	76
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 September 30,				Nine Months Ended September 30,
(Dollars in thousands, except per share and share data)	2022		2021		2022		2021

Interest income:
Interest and fees on loans and leases	$	152,887	$	93,460	$	401,110	$	300,957
Interest on mortgage-backed securities	28,338		13,947		78,828		37,157
Interest and dividends on investment securities:
Taxable	703		702		2,107		2,105
Tax-exempt	1,278		651		2,535		2,080
Other interest income	3,359		691		6,142		1,335
	186,565		109,451		490,722		343,634
Interest expense:
Interest on deposits	6,643		3,550		13,537		11,824
Interest on Federal Home Loan Bank advances	42		—		42		5
Interest on senior and subordinated debt	2,061		1,089		5,939		5,408
Interest on federal funds purchased	28		—		28		—
Interest on trust preferred borrowings	951		316		2,146		957
Interest on other borrowings	9		5		26		15
	9,734		4,960		21,718		18,209
Net interest income	176,831		104,491		469,004		325,425
Provision for (recovery of) credit losses	7,454		( 21,310 )		34,693		( 109,033 )
Net interest income after provision for (recovery of) credit losses	169,377		125,801		434,311		434,458
Noninterest income:
Credit/debit card and ATM income	10,993		7,651		27,446		22,023
Investment management and fiduciary income	29,504		15,370		90,877		44,983
Deposit service charges	6,262		5,742		18,158		16,521
Mortgage banking activities, net	1,420		5,637		6,529		18,690
Loan and lease fee income	1,425		1,216		4,457		6,431
Securities gains, net	—		2		—		331
Unrealized (loss) gain on equity investments, net	—		( 120 )		5,988		5,141
Realized loss on sale of equity investments, net	—		( 706 )		—		( 706 )
Bank owned life insurance income	195		351		674		1,251
Other income	12,852		7,470		41,125		24,788
	62,651		42,613		195,254		139,453
Noninterest expense:
Salaries, benefits and other compensation	72,294		53,344		211,413		158,890
Occupancy expense	9,699		8,150		30,393		24,693
Equipment expense	9,913		6,807		30,674		21,536
Data processing and operations expenses	5,362		3,467		16,009		10,296
Professional fees	3,561		4,244		12,285		11,501
Marketing expense	2,082		1,480		4,985		3,758
Loss on debt extinguishment	—		—		—		1,087
FDIC expenses	1,540		1,061		4,399		3,186
Loan workout and other credit costs	1,001		196		1,103		764
Corporate development expense	1,248		2,049		41,679		6,687
Restructuring expense	1,344		—		22,792		( 409 )


Other operating expense	24,873		15,648		65,691		46,108
	132,917		96,446		441,423		288,097
Income before taxes	99,111		71,968		188,142		285,814
Income tax provision	25,767		17,516		49,929		70,610
Net income	$	73,344	$	54,452	$	138,213	$	215,204
Less: Net (loss) income attributable to noncontrolling interest	( 38 )		46		287		49
Net income attributable to WSFS	$	73,382	$	54,406	$	137,926	$	215,155
Earnings per share:
Basic	$	1.16	$	1.14	$	2.15	$	4.53
Diluted	$	1.16	$	1.14	$	2.15	$	4.51
Weighted average shares of common stock outstanding:
Basic	63,047,675		47,541,489		64,064,488		47,526,730
Diluted	63,227,983		47,670,645		64,282,992		47,676,515

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)	2022		2021		2022		2021
					(Unaudited)
Net income	$	73,344	$	54,452	$	138,213	$	215,204
Less: Net (loss) income attributable to noncontrolling interest	( 38 )		46		287		49
Net income attributable to WSFS	73,382		54,406		137,926		215,155
Other comprehensive (loss) income:
Net change in unrealized (losses) gains on investment securities available-for-sale
Net unrealized losses arising during the period, net of tax benefit of $ 63,954 , $ 8,094 , $ 178,061 and $ 22,457 , respectively	( 202,520 )		( 25,639 )		( 563,860 )		( 71,124 )

Less: reclassification adjustment for net gains on sales realized in net income, net of tax expense of $ — , $ 1 , $ — and $ 80 , respectively	—		( 2 )		—		( 252 )
	( 202,520 )		( 25,641 )		( 563,860 )		( 71,376 )
Net change in securities held-to-maturity
Net change in unrealized gain (loss) on available-for-sale securities reclassified to held-to-maturity, net of tax (benefit) expense of $( 1,884 ), $ 9 , $ 35,955 and $ 23 , respectively (1)	5,966		( 29 )		( 113,858 )		( 73 )
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 $ 10 , 7 , $ 27 and 20 , respectively	( 31 )		( 23 )		( 86 )		( 63 )


Net change in cash flow hedge

Amortization of unrealized gain on terminated cash flow hedges, net of tax benefit of $ 13 , $ 36 , $ 38 and $ 106 , respectively	( 41 )		( 113 )		( 120 )		( 336 )

Net change in equity method investments
Net change in other comprehensive income of equity method investments, net of tax expense of $ 8 , $ 26 , $ 67 and $ 112 , respectively	25		82		213		355
Total other comprehensive loss	( 196,601 )		( 25,724 )		( 677,711 )		( 71,493 )
Total comprehensive (loss) income	$	( 123,219 )	$	28,682	$	( 539,785 )	$	143,662

(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 for the nine months ended September 30, 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, 2022		December 31, 2021

Assets:
Cash and due from banks	$	443,104	$	1,046,992
Cash in non-owned ATMs	582,784		480,527
Interest-bearing deposits in other banks including collateral (restricted cash) of $ 5,310 at September 30, 2022 and $ 5,050 at December 31, 2021	5,503		5,420
Total cash, cash equivalents, and restricted cash	1,031,391		1,532,939
Investment securities, available-for-sale (amortized cost of $ 4,940,107 at September 30, 2022 and $ 5,249,882 at December 31, 2021	4,153,615		5,205,311
Investment securities, held-to-maturity, net of allowance for credit losses of $ 10 at September 30, 2022 and $ 4 at December 31, 2021 (fair value $ 1,041,163 at September 30, 2022 and $ 94,131 at December 31, 2021)	1,121,895		90,642
Other investments	25,122		10,518
Loans, held for sale at fair value	61,671		113,349
Loans and leases, net of allowance for credit losses of $ 146,195 at September 30, 2022 and $ 94,507 at December 31, 2021	11,559,195		7,791,482
Bank owned life insurance	101,061		33,099
Stock in Federal Home Loan Bank (FHLB) of Pittsburgh at cost	24,117		6,073
Other real estate owned	840		2,320
Accrued interest receivable	63,393		41,596
Premises and equipment	118,902		87,295
Goodwill	883,637		472,828
Intangible assets	132,776		74,403
Other assets	707,772		315,472
Total assets	$	19,985,387	$	15,777,327
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing	$	6,170,776	$	4,565,143
Interest-bearing	10,554,432		8,674,919






Total deposits	16,725,208		13,240,062


Trust preferred borrowings	90,393		67,011
Senior and subordinated debt	248,255		147,939
Other borrowed funds	35,719		24,527
Accrued interest payable	5,568		736
Other liabilities	779,413		360,036
Total liabilities	17,884,556		13,840,311
Stockholders’ Equity:
Common stock $ 0.01 par value, 90,000,000 shares authorized; issued 75,896,354 at September 30, 2022 and 57,695,676 at December 31, 2021	759		577
Capital in excess of par value	1,971,628		1,058,997
Accumulated other comprehensive loss	( 715,479 )		( 37,768 )
Retained earnings	1,336,039		1,224,614
Treasury stock at cost, 13,947,576 shares at September 30, 2022 and 10,086,936 shares at December 31, 2021	( 489,354 )		( 307,321 )
Total stockholders’ equity of WSFS	2,103,593		1,939,099
Noncontrolling interest	( 2,762 )		( 2,083 )
Total stockholders' equity	2,100,831		1,937,016
Total liabilities and stockholders' equity	$	19,985,387	$	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)


	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 )	$	1,937,016
Net income	—	—		—		—		137,926		—		137,926		287		138,213
Other comprehensive loss	—	—		—		( 677,711 )		—		—		( 677,711 )		—		( 677,711 )
Cash dividend, $ 0.41 per share	—	—		—		—		( 26,501 )		—		( 26,501 )		—		( 26,501 )
Contributions from noncontrolling shareholders	—	—		—		—		—		—		—		( 53 )		( 53 )
Issuance of common stock including proceeds from exercise of common stock options	83,830	1		2,518		—		—		—		2,519		—		2,519
Issuance of common stock in acquisition of BMT	18,116,848	181		907,835		—		—		—		908,016		—		908,016
Noncontrolling interest assumed in acquisition	—	—		—		—		—		—		—		( 913 )		( 913 )
Stock-based compensation expense	—	—		4,427		—		—		—		4,427		—		4,427
Repurchases of common stock (1)	—	—		( 2,149 )		—		—		( 182,033 )		( 184,182 )		—		( 184,182 )
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

	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 Income (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	—	—		—		—		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 (2)	—	—		—		—		—		( 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

(1) Repurchase of common stock includes 3,789,137 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors, and 104,965 shares withheld to cover tax liabilities.

(2) Repurchase of common stock includes 1,664,550 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors, and 4,872 shares withheld to cover tax liabilities.

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	Nine Months Ended September 30, 2021
(Dollars in thousands, except per share and share amounts)	Shares	Common Stock		Capital in Excess of Par Value		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock		Total Stockholders' Equity of WSFS		Non-controlling Interest		Total Stockholders' Equity
Balance, December 31, 2020	57,575,783	$	576	$	1,053,022	$	56,007	$	977,414	$	( 295,293 )	$	1,791,726	$	( 2,246 )	$	1,789,480
Net income	—	—		—		—		215,155		—		215,155		49		215,204
Other comprehensive loss	—	—		—		( 71,493 )		—		—		( 71,493 )		—		( 71,493 )
Cash dividend, $ 0.38 per share	—	—		—		—		( 18,058 )		—		( 18,058 )		—		( 18,058 )
Issuance of common stock including proceeds from exercise of common stock options	59,119	1		525		—		—		—		526		—		526

Stock-based compensation expense	—	—		4,250		—		—		—		4,250		—		4,250
Repurchases of common shares (1)	—	—		( 1,183 )		—		—		( 12,028 )		( 13,211 )		—		( 13,211 )
Balance, September 30, 2021	57,634,902	$	577	$	1,056,614	$	( 15,486 )	$	1,174,511	$	( 307,321 )	$	1,908,895	$	( 2,197 )	$	1,906,698

	Three Months Ended September 30, 2021
(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, June 30, 2021	57,622,151	$	577	$	1,054,276	$	10,238	$	1,126,284	$	( 307,321 )	$	1,884,054	$	( 2,243 )	$	1,881,811
Net income (loss)	—	—		—		—		54,406		—		54,406		46		54,452
Other comprehensive income	—	—		—		( 25,724 )		—		—		( 25,724 )		—		( 25,724 )
Cash dividend, $ 0.13 per share	—	—		—		—		( 6,179 )		—		( 6,179 )		—		( 6,179 )
Issuance of common stock including proceeds from exercise of common stock options	12,751	—		349		—		—		—		349		—		349

Stock-based compensation expense	—	—		1,989		—		—		—		1,989		—		1,989
Repurchases of common shares (1)	—	—		—		—		—		—		—		—		—
Balance, September 30, 2021	57,634,902	$	577	$	1,056,614	$	( 15,486 )	$	1,174,511	$	( 307,321 )	$	1,908,895	$	( 2,197 )	$	1,906,698

(1) Repurchase of common stock includes 267,309 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors and 18,348 shares withheld to cover tax liabilities.

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

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WSFS FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(Dollars in thousands)	2022		2021

Operating activities:
Net income	$	138,213	$	215,204
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for (recovery of) credit losses	34,693		( 109,033 )
Depreciation of premises and equipment, net	20,009		9,889
Accretion of fees and discounts, net	( 16,965 )		( 33,270 )
Amortization of intangible assets	14,505		7,949
Amortization of right-of-use lease assets	14,715		8,903
Decrease in operating lease liability	( 12,856 )		( 9,281 )
Income from mortgage banking activities, net	( 6,529 )		( 18,690 )
Gain on sale of securities, net	—		( 331 )
Loss on sale of other real estate owned and valuation adjustments, net	( 235 )		( 388 )
Stock-based compensation expense	4,427		4,250
Unrealized gain on equity investments, net	( 5,988 )		( 5,141 )
Realized loss on sale of equity investments, net	—		706

Deferred income tax (benefit) expense	( 6,439 )		35,492
(Increase) decrease in accrued interest receivable	( 11,096 )		4,935
Increase in other assets	( 39,991 )		( 24,809 )
Origination of loans held for sale	( 453,952 )		( 729,620 )
Proceeds from sales of loans held for sale	421,098		806,159
Increase in value of bank owned life insurance	( 437 )		( 1,737 )
Increase in capitalized interest, net	( 1,650 )		( 2,303 )
Increase in accrued interest payable	1,590		1,715
Increase in other liabilities	313,791		128,915

Net cash provided by operating activities	$	406,903	$	289,514
Investing activities:
Purchases of investment securities held to maturity	$	( 120,868 )	$	—
Repayments, maturities and calls of investment securities held-to-maturity	49,768		19,015
Sale of investment securities available-for-sale	—		14,046
Purchases of investment securities available-for-sale	( 1,218,022 )		( 2,341,784 )
Repayments, maturities and calls of investment securities available-for-sale	911,125		509,738
Net proceeds from sale of equity investments	—		4,899
Proceeds from bank-owned life insurance death benefit	1,437		—

Net decrease in loans	11,642		1,228,462
Net cash from business combinations	573,745		—
Purchase of loans held-for-investment	( 252,185 )		( 133,728 )
Purchases of stock of Federal Home Loan Bank of Pittsburgh	( 15,318 )		( 585 )
Redemptions of stock of Federal Home Loan Bank of Pittsburgh	6		267
Sales of other real estate owned	1,844		2,489
Investment in premises and equipment	( 7,665 )		( 4,722 )
Sales of premises and equipment	891		427
Net cash used in investing activities	$	( 63,600 )	$	( 701,476 )

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	Nine Months Ended September 30,
(Dollars in thousands)	2022		2021
Financing activities:
Net (decrease) increase in demand and saving deposits	$	( 466,105 )	$	1,213,808
Decrease in time deposits	( 132,825 )		( 123,431 )
Decrease in brokered deposits	( 37,704 )		( 178,897 )

Receipts from FHLB advances	458,100		—
Repayments of FHLB advances	( 458,100 )		( 6,623 )
Receipts from federal funds purchased	310,001		—
Repayments of federal funds purchased	( 310,001 )		—
Contribution from noncontrolling shareholders	( 53 )		—
Cash dividend	( 26,501 )		( 18,058 )
Issuance of common stock including proceeds from exercise of common stock options	2,519		526
Redemption of senior debt	—		( 100,000 )


Repurchases of common shares	( 184,182 )		( 13,211 )
Net cash (used in) provided by financing activities	$	( 844,851 )	$	774,114
(Decrease) increase in cash, cash equivalents, and restricted cash	( 501,548 )		362,152
Cash, cash equivalents, and restricted cash at beginning of period	1,532,939		1,654,735
Cash, cash equivalents, and restricted cash at end of period	$	1,031,391	$	2,016,887
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	16,886	$	16,493
Income taxes	26,237		29,064
Non-cash information:
Loans transferred to other real estate owned	$	502	$	1,844
Loans transferred to portfolio from held-for-sale at fair value	84,829		44,343

Securities transferred to held-to-maturity from available-for-sale at fair value	931,421		—
Held-to-maturity securities purchased, not settled	5,136		—
Fair value of assets acquired, net of cash received	4,713,544		—
Fair value of liabilities assumed	4,379,273		—

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

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WSFS FINANCIAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022

(UNAUDITED)

1. BASIS OF PRESENTATION

General

These unaudited Consolidated Financial Statements include the accounts of WSFS Financial Corporation (WSFS, and together with its subsidiaries, the Company), and its consolidated subsidiaries. WSFS’ primary subsidiary is Wilmington Savings Fund Society, FSB (WSFS Bank or the Bank). As of September 30, 2022, the other subsidiaries of WSFS include WSFS Wealth Management, LLC (Powdermill ® ), WSFS Capital Management, LLC (West Capital), Cypress Capital Management, LLC (Cypress), WSFS SPE Services, LLC, The Bryn Mawr Trust Company of Delaware (BMT-DE), and 601 Perkasie, LLC. The Company also has three unconsolidated subsidiaries: WSFS Capital Trust III, Royal Bancshares Capital Trust I, and Royal Bancshares Capital Trust II . WSFS Bank has two wholly owned subsidiaries: Beneficial Equipment Finance Corporation (BEFC) and 1832 Holdings, Inc. , and one majority-owned subsidiary, NewLane Finance Company (NewLane Finance ® ).

Additionally, WSFS and the Bank acquired certain subsidiaries in the merger of Bryn Mawr Bank Corporation (BMBC) with and into WSFS on January 1, 2022, and the merger of The Bryn Mawr Trust Company with and into the Bank (collectively, the BMBC Merger), pursuant to the agreement and plan of merger, by and between WSFS and BMBC, dated as of March 9, 2021 (the BMBC Merger Agreement) that are not named herein as they are not integral or significant to our business.

On April 1, 2022, WSFS completed the merger of Christiana Trust Company of Delaware ® and BMT-DE. The combined organization will retain and operate under The Bryn Mawr Trust Company of Delaware name. Additionally on April 1, 2022, Bryn Mawr Equipment Finance, Inc. merged with and into BEFC. On April 29, 2022, the portfolio of KCMI Capital, Inc. (KCMI), a specialized commercial lending unit acquired in the BMBC merger and not core to our overall lending strategy, was sold at par value for $ 55.5 million . Finally, on June 30, 2022, the business of BMT Insurance Advisors (BMTIA), was sold to Patriot Growth Services, LLC.

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.). The Company provides residential and commercial real estate, commercial and consumer lending services, as well as retail deposit and cash management services. The banking business is commercial lending funded primarily by customer-generated deposits. In addition, the Company offers a variety of wealth management and trust services to individuals, institutions and corporations. The Federal Deposit Insurance Corporation (FDIC) insures the customers’ deposits to their legal maximums. The Company serves its customers primarily from 119 offices located in Pennsylvania ( 61 ), Delaware ( 39 ) , New Jersey ( 17 ), Virginia ( 1 ) and Nevada ( 1 ), its ATM network, website at www.wsfsbank.com and mobile app. Information on the website is not incorporated by reference into this Quarterly Report on Form 10-Q.

Basis of Presentation

In preparing the unaudited Consolidated Financial Statements, 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 credit losses (including loans and leases held for investment, investment securities available-for-sale and held-to-maturity), fair values of assets acquired and liabilities assumed in acquisitions accounted for as business combinations using the acquisition method of accounting, lending-related commitments, goodwill, intangible assets, post-retirement benefit obligations, the fair value of financial instruments, and income taxes. Among other effects, changes to these estimates could result in future impairments of investment securities, goodwill and intangible assets, the establishment of additional allowance and lending-related commitment reserves, changes in the fair value of financial instruments, as well as increased post-retirement benefits and income tax expense.

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, 2022. These unaudited, interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Annual Report on Form 10-K for the year ended December 31, 2021 (the 2021 Annual Report on Form 10-K) that was filed with the SEC on March 1, 2022 and is available at www.sec.gov or on the website at www.wsfsbank.com . All significant intercompany accounts and transactions were eliminated in consolidation.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES:

The significant accounting policies used in preparation of the Consolidated Financial Statements are disclosed in the Company's 2021 Annual Report on Form 10-K. Those significant accounting policies remain unchanged at September 30, 2022.

RECENT ACCOUNTING PRONOUNCEMENTS

The following accounting pronouncement was adopted by the Company during the nine months ended September 30, 2022, but does not have a material impact on the unaudited Consolidated Financial Statements:

• ASU No. 2021-05, Leases (Topic 842), Lessors – Certain Leases with Variable Lease Payments

There were no other applicable material accounting pronouncements adopted by the Company since December 31, 2021.

Accounting guidance pending adoption at September 30, 2022

ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures: In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The guidance eliminates the accounting guidance for troubled debt restructurings (TDRs) by creditors (ASC 310-40) while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The guidance also requires that an entity disclose current-period write-offs by year of origination for financing receivables and net investments in leases within the scope of Topic 326. The guidance is effective for annual periods beginning after December 15, 2022. Early adoption is permitted. Adoption is required on a prospective basis, except for the transition method related to the recognition and measurement of TDRs where the entity as to apply on a modified-retrospective basis. The Company is currently evaluating the impact upon adoption and will apply the guidance after completion of its assessment.

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3. BUSINESS COMBINATIONS

Bryn Mawr Bank Corporation.

On January 1, 2022, WSFS closed its acquisition of BMBC and acquired 100 % of the outstanding common stock of BMBC. In accordance with the terms of the merger agreement, dated March 9, 2021, by and between WSFS and BMBC, each share of BMBC common stock was exchanged for 0.90 shares of WSFS common stock (with cash paid in lieu of fractional shares). The total value of consideration paid was $ 908.0 million based on 19,903,230 shares of BMBC common stock outstanding as of December 31, 2021, the vesting of 226,643 BMBC restricted stock awards, and the closing price per share of WSFS common stock of $ 50.12 on December 31, 2021. Results of the combined Company’s operations are included in the unaudited Consolidated Financial Statements since the date of the acquisition.

BMBC was the holding company for The Bryn Mawr Trust Company (Bryn Mawr Bank), a Pennsylvania chartered bank and wholly-owned subsidiary. BMBC and Bryn Mawr Bank were headquartered in Bryn Mawr, Pennsylvania, a western suburb of Philadelphia, and served primarily the Greater Philadelphia region. BMBC and its direct and indirect subsidiaries was a locally managed, premier financial services company providing retail and commercial banking; trust administration and wealth management; and insurance and risk management solutions. Following the BMBC Merger, WSFS Bank is the oldest and largest, locally headquartered bank and trust company in the Greater Philadelphia and Delaware region with a full-service product suite and a balance sheet to compete with larger regional and national banks. The BMBC Merger also allows WSFS to accelerate our long-term strategic objectives, including scale to continue to invest in our delivery and talent transformations.

The acquisition of BMBC was accounted for as a business combination using the acquisition method of accounting and, accordingly, the assets acquired, liabilities assumed and consideration transferred were recorded at their estimated fair values as of the acquisition date. The excess of consideration transferred over the fair value of net assets acquired was recorded as goodwill, which is not amortizable nor deductible for tax purposes. The Company allocated goodwill to its WSFS Bank segment and Wealth Management segment.

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


(Dollars in thousands)
Consideration Transferred:	Fair Value
Common shares issued ( 18,116,848 )	$	908,016
Cash paid to BMBC stock and option holders	16
Value of consideration	908,032
Assets acquired:
Cash and due from banks	573,761
Investment securities	500,400
Loans and leases	3,456,748
Premises and equipment	44,842
Deferred income taxes	6,563
Bank owned life insurance	67,525
Intangible assets	73,065

Other assets	153,592
Total assets	4,876,496
Liabilities assumed:
Deposits	4,110,122
Other borrowings	145,512
Other liabilities	124,552
Noncontrolling interest	( 913 )
Total liabilities and noncontrolling interest	4,379,273
Net assets acquired:	497,223
Goodwill resulting from acquisition of BMBC	$	410,809

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The following table details the changes to goodwill recorded subsequent to acquisition:


(Dollars in thousands)	Fair Value
Goodwill resulting from the acquisition of BMBC reported as of March 31, 2022	$	414,337
Effects of adjustments to:




Deferred income taxes	1,870
Intangibles	1,500

Deposits	( 149 )
Other liabilities	1,352
Effect of sale of BMTIA business	( 8,101 )
Goodwill resulting from the acquisition of BMBC as of September 30, 2022	$	410,809

Adjustments to Goodwill were primarily related to the fair value of Wealth Management intangible assets, the subsequent sale of the BMTIA business, and the related deferred tax impacts.

While the valuation of acquired assets and liabilities is substantially completed, fair value estimates related to the assets and liabilities from BMBC are subject to adjustment for up to one year after the closing date of the acquisition as additional information becomes available. Valuations subject to adjustment include, but are not limited to, Wealth Management intangibles, loans, and deferred income taxes as management continues to review the estimated fair values and evaluate the assumed tax position. 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 remeasurement period, which ends one year from the closing date, or January 1, 2023.

The amount of goodwill recorded reflects the increased market share and related synergies that are expected to result from the acquisition, and represents the excess purchase price over the estimated fair value of the net assets acquired from BMBC.

The following is a description of the valuation methodologies used to estimate the fair values of major categories of assets acquired and liabilities assumed. 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 applying the appropriate market discount rates.

Cash and due from banks : The estimated fair values of cash and due from banks approximate their stated value.

Investment Securities : The acquired investment portfolio had a fair value of $ 500.4 million, primarily consisting of short-term U.S. Treasury bills that matured subsequent to closing on January 6, 2022. The estimated fair value approximated the stated value at maturity.

Loans and Leases : The Company recorded $ 3.5 billion of acquired loans, which were initially recorded at their fair values as of the acquisition date. Fair value for loans was based on a discounted cash flow methodology that considered credit loss and prepayment expectations, market interest rates and other market factors, such as liquidity, from the perspective of a market participant. Loan cash flows were generated on an individual loan basis. The probability of default, loss given default, exposure at default and prepayment assumptions are the key factors driving credit losses which are embedded into the estimated cash flows.

The table below presents information with respect to the fair value and unpaid principal balance of acquired loans and leases at the acquisition date.


	January 1, 2022
(Dollars in thousands)	Book Balance		Fair Value
Commercial and industrial	$	613,197	$	586,643
Owner-occupied commercial	513,267		503,182
Commercial mortgages	1,564,234		1,549,515
Construction	209,928		208,288
Commercial small business leases	125,770		119,119
Residential	310,092		315,454
Consumer	178,247		174,547
Total acquired loans and leases	$	3,514,735	$	3,456,748

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The table below presents the carrying amount of loans for which, at the date of acquisition, there was evidence of more than insignificant deterioration of credit quality since origination:


(Dollars in thousands)	January 1, 2022
Book balance of loans at acquisition	$	235,791
Allowance for credit losses at acquisition	( 26,103 )
Non-credit related discount	( 1,421 )
Total purchase credit deteriorated (PCD) loans acquired	$	208,267

The BMBC Merger resulted in the addition of $ 49.6 million in allowance for credit losses, including the $ 26.1 million identified in the table above for PCD loans, and $ 23.5 million for non-PCD loans recorded through the provision for credit losses at the date of acquisition.

Deferred Income Taxes : The Company recorded a deferred income tax asset (DTA) of $ 6.6 million related to tax attributes of BMBC along with the effects of fair value adjustments resulting from acquisition accounting for the combination. The DTA’s recorded were based on the expected federal and state tax benefits of when the acquired tax attributes and purchase accounting adjustments will reverse. In recording the DTA, consideration was given to potential limitations on the realizability of such acquired tax attributes. There was no material change to the valuation allowance as a result of the BMBC Merger.

Trust preferred borrowings and subordinated debt : The fair value of trust preferred borrowings and subordinated debt were determined by present valuing the expected cash flows using current market rates for similar instruments. A fair value discount of $ 2.5 million was recognized for the trust preferred borrowings and will be recognized as an increase to interest expense over the remaining life of the borrowings. A fair value premium of $ 0.7 million was recognized for the subordinated debt and will be recognized as a decrease to interest expense over the remaining life of the debt.

Intangible Assets : The Company recorded $ 10.9 million of core deposit intangible (CDI) which is being amortized over ten years using a straight-line amortization methodology. The fair value of the core deposit intangible was determined using the cost savings approach. The cost savings approach is defined as the difference between cost of funds on deposits and the cost of an equal amount of funds from an alternative source. The CDI fair value was determined by projecting net cash flow benefits, including assumptions related to customer attrition, discount rates, deposit interest rates, and alternative costs of funds.

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.

WSFS recorded $ 56.1 million of Wealth Management intangible assets that consisted of $ 53.0 million for customer relationships in our wealth management, trust and insurances lines of business, $ 2.9 million for the Bryn Mawr Trust tradename, and $ 0.2 million in non-compete agreements. Fair value for these Wealth Management intangible assets was based on a discounted cash flow methodology projecting net cash flow benefits, including assumptions related to customer attrition, discount rates, income projections and applicable growth rate assumptions.

Corporate development expenses and Restructuring expenses

For acquisitions, the Company develops comprehensive integration plans under which it has incurred direct costs, which are expensed as incurred. These direct costs include costs are primarily related to: (i) terminated contracts, (ii) consolidated facilities (including lease termination expenses), (iii) severance, (iv) marketing, and (v) professional and legal fees. Costs related to the acquisition and restructuring are included in the Corporate development expense and Restructuring expense line items, respectively, on the unaudited Consolidated Statements of Income.

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The following table details the costs identified and classified as corporate development and restructuring expenses, which are primarily related to the BMBC Merger:


	Three months ended September 30,		Nine months ended September 30,
(dollars in thousands)	2022		2022
Salaries, benefits and other compensation	$	112	$	12,370
Occupancy expense	( 2,211 )		9,149
Equipment expense	1,278		20,969
Professional fees	899		12,781
Data processing and operations expenses	1		100
Marketing expense	41		3,014

Other operating expense, net	2,472		6,088
Total corporate development and restructuring expenses	$	2,592	$	64,471

During the second quarter of 2021, WSFS announced a retail banking office optimization plan that included the planned consolidation of Bryn Mawr Trust and WSFS Bank banking offices. Most of the consolidations and rebranding of the banking offices were completed during the first quarter of 2022, which included the consolidation of 22 Bryn Mawr Trust and 12 WSFS Bank banking offices. Costs related to this plan are included in the Corporate development expense line item on the unaudited Consolidated Statements of Income. In addition, the Company had $ 7.5 million of premises and equipment as held-for-sale as of September 30, 2022, which is included in the Other assets line item on the unaudited Consolidated Statement of Financial Condition.

Pro Forma Income Statement (unaudited)

The following pro forma income statement for the three and nine months ended September 30, 2021 presents the pro forma results of operations of the combined institution (BMBC and the Corporation) as if the BMBC Merger occurred on January 1, 2021. The pro forma income statement adjustments are limited to the effects of fair value mark amortization and accretion and intangible asset amortization. No cost savings or additional merger expenses have been included in the pro forma results of operations.


	Three months ended September 30,		Nine months ended September 30,
(dollars in thousands, except share and per share data)	2021		2021
Net interest income	$	137,632	$	426,118
Provision for credit losses	( 1,410 )		( 120,906 )
Net interest income after provision for credit losses	139,042		547,024
Total noninterest income	65,200		202,847
Total noninterest expenses	134,514		398,107
Income before income taxes	69,728		351,764
Income tax provision	17,626		87,242
Net income	$	52,102	$	264,522
Per share data:
Weighted-average basic shares outstanding	65,443,945		65,430,218
Dilutive shares	282,516		297,071
Adjusted weighted-average diluted shares	65,726,461		65,272,289
Basic earnings per common share	$	0.80	$	4.04
Diluted earnings per common share	$	0.79	$	4.03

Due to the various conversions of BMBC systems since the date of acquisition, as well as other streamlining and continuing integration of BMBC's operating activities into those of the Company, reporting for revenue and net income of the former BMBC operations for the period subsequent to the acquisition is impracticable.

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4. NONINTEREST INCOME

Credit/debit card and ATM income

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2022		2021		2022		2021
Bailment fees	$	6,306	$	3,310	$	13,105	$	9,689
Interchange fees	3,870		3,537		11,859		10,077
Other card and ATM fees	817		804		2,482		2,257
Total credit/debit card and ATM income	$	10,993	$	7,651	$	27,446	$	22,023

Credit/debit card and ATM income is composed of bailment fees, interchange fees, and other card and ATM fees. Bailment fees are earned from bailment arrangements with customers. Bailment arrangements are legal relationships in which property is delivered to another party without a transfer of ownership. The party who transferred the property (the bailor) retains ownership interest of the property. In the event that the bailee files for bankruptcy protection, the property is not included in the bailee's assets. The bailee pays an agreed-upon fee for the use of the bailor's property in exchange for the bailor allowing use of the assets at the bailee's site. Bailment fees are earned from cash that is made available for customers' use at an offsite location, such as cash located in an ATM at a customer's place of business. These fees are typically indexed to a market interest rate. This revenue stream generates fee income through monthly billing for bailment services.

Credit/debit card and ATM income also includes interchange fees. Interchange fees are paid by a merchant's bank to a bank that issued a debit or credit card used in a transaction to compensate the issuing bank for the value and benefit the merchant receives from accepting electronic payments. These revenue streams generate fee income at the time a transaction occurs and are recorded as revenue at the time of the transaction.

Investment management and fiduciary income

The following table presents the components of investment management and fiduciary income:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2022		2021		2022		2021
Trust fees	$	19,170	$	10,626	$	58,658	$	31,198
Wealth management and advisory fees	10,334		4,744		32,219		13,785
Total investment management and fiduciary income	$	29,504	$	15,370	$	90,877	$	44,983

Investment management and fiduciary income is composed of trust fees and wealth management and advisory fees. Trust fees are based on revenue earned from custody, escrow, trustee and trustee related services on structured finance transactions; indenture trustee, administrative agent and collateral agent services to individuals, institutions and corporations; commercial domicile and independent director services; and investment and trustee services to families and individuals. Most fees are flat fees, except for a portion of personal and corporate trustee fees where the Company earns a percentage on the assets under management or assets held within a trust. This revenue stream primarily generates fee income through monthly, quarterly and annual billings for services provided.

Wealth management and advisory fees consists of fees from Bryn Mawr Trust (excluding The Bryn Mawr Trust Company of Delaware), Cypress, West Capital, Powdermill ® , and WSFS Wealth ® Investments. Wealth management and advisory fees are based on revenue earned from services including asset management, financial planning, family office, and brokerage. The fees are based on the market value of assets, are assessed as a flat fee, or are brokerage commissions. This revenue stream primarily generates fee income through monthly, quarterly and annual billings for the services.

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Deposit service charges

The following table presents the components of deposit service charges:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2022		2021		2022		2021
Service fees	$	3,933	$	3,629	$	11,789	$	10,604
Return and overdraft fees	2,164		1,850		5,835		4,932
Other deposit service fees	165		263		534		985
Total deposit service charges	$	6,262	$	5,742	$	18,158	$	16,521

Deposit service charges includes revenue earned from core deposit products, certificates of deposit, and brokered deposits. The Company generates fee revenues from deposit service charges primarily through service charges and overdraft fees. Service charges consist primarily of monthly account maintenance fees, 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 September 30,				Nine Months Ended September 30,
(Dollars in thousands)	2022		2021		2022		2021
Managed service fees	$	4,866	$	4,233	$	13,091	$	12,346
Currency preparation	1,104		1,045		2,904		3,153
ATM loss protection	681		639		1,963		1,889
Capital market revenue	793		—		5,738		—
Miscellaneous products and services (1)	5,408		1,553		17,429		7,400
Total other income	$	12,852	$	7,470	$	41,125	$	24,788

(1) Includes commissions income from BMTIA. The BMTIA business was sold during the second quarter.

Other income consists of managed service fees, which are primarily courier fees related to cash management, currency preparation, ATM loss protection, capital markets revenue, and other miscellaneous products and services offered by the Bank. These fees are primarily generated through monthly billings or at the time of the transaction. Through its subsidiary BMTIA, the Bank earned commissions from the sale of insurance policies, which are generally calculated as a percentage of the policy premium, and contingent income, which is calculated based on the volume and performance of the policies held by each carrier. Obligations for the sale of insurance policies are generally satisfied at the point in time which the policy is executed and are recognized at the point in time in which the amounts are known and collection is reasonably assured. Performance metrics for contingent income are generally satisfied over time, not exceeding one year, and are recognized at the point in time in which the amounts are known and collection is reasonably assured.

Arrangements with multiple performance obligations

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

Practical expedients and exemptions

The Company does not 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 the Company recognizes revenue at the amount to which it has the right to invoice for services performed.

See Note 16 for further information about the disaggregation of noninterest income by segment.

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5. EARNINGS PER SHARE

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars and shares in thousands, except per share data)	2022		2021		2022		2021
Numerator:
Net income attributable to WSFS	$	73,382	$	54,406	$	137,926	$	215,155
Denominator:
Weighted average basic shares	63,048		47,541		64,064		47,527
Dilutive potential common shares	180		130		219		150
Weighted average fully diluted shares	63,228		47,671		$	64,283	$	47,677
Earnings per share:
Basic	$	1.16	$	1.14	$	2.15	$	4.53
Diluted	$	1.16	$	1.14	$	2.15	$	4.51
Outstanding common stock equivalents having no dilutive effect	2		5		7		—

Basic earnings per share is calculated by dividing Net income attributable to WSFS by the weighted-average basic shares outstanding. Diluted earnings per share is calculated by dividing Net income attributable to WSFS by the weighted-average fully diluted shares outstanding, using the treasury stock method. Fully diluted shares include the adjustment for the dilutive effect of common stock awards, which include outstanding stock options and unvested restricted stock units under the 2013 Incentive Plan and the 2018 Incentive Plan.

6. INVESTMENTS

Debt Securities

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


	September 30, 2022
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Allowance for Credit Losses		Fair Value
Available-for-Sale Debt Securities
Collateralized mortgage obligation (CMO)	$	621,673	$	—	$	99,290	$	—	$	522,383
Fannie Mae (FNMA) mortgage-backed securities (MBS)	3,911,290		—		617,060		—		3,294,230
Freddie Mac (FHLMC) MBS	138,391		—		15,374		—		123,017
Ginnie Mae (GNMA) MBS	40,100		—		3,363		—		36,737
Government-sponsored enterprises (GSE) agency notes	228,653		—		51,405		—		177,248
	$	4,940,107	$	—	$	786,492	$	—	$	4,153,615
Held-to-Maturity Debt Securities (1)
FNMA MBS	$	919,383	$	—	$	69,694	$	—	$	849,689
State and political subdivisions	202,022		2		11,039		10		190,975
Foreign bonds	500		—		1		—		499
	$	1,121,905	$	2	$	80,734	$	10	$	1,041,163

(1) Held-to-maturity securities transferred from available-for-sale are included in held-to-maturity at fair value basis at the time of transfer. The amortized cost of transferred held-to-maturity securities included net unrealized losses of $ 149.6 million at September 30, 2022, which are offset in Accumulated other comprehensive (loss) 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.

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	December 31, 2021
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss		Allowance for Credit Losses		Fair Value
Available-for-Sale Debt Securities
CMO	$	586,830	$	3,569	$	14,633	$	—	$	575,766
FNMA MBS	4,275,307		24,170		53,793		—		4,245,684
FHLMC MBS	139,708		6,336		516		—		145,528
GNMA MBS	17,456		551		71		—		17,936
GSE agency notes	230,581		—		10,184		—		220,397
	$	5,249,882	$	34,626	$	79,197	$	—	$	5,205,311
Held-to-Maturity Debt Securities (1)
State and political subdivisions	$	90,146	$	3,489	$	—	$	4	$	93,631
Foreign bonds	500		—		—		—		500
	$	90,646	$	3,489	$	—	$	4	$	94,131

(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 transferred held-to-maturity securities included net unrealized gains of $ 0.2 million at December 31, 2021, 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.

The scheduled maturities of available-for-sale debt securities at September 30, 2022 and December 31, 2021 are presented in the table below:


	Available-for-Sale
	Amortized		Fair
(Dollars in thousands)	Cost		Value
September 30, 2022 (1)
Within one year	$	1,501	$	1,498
After one year but within five years	86,119		80,366
After five years but within ten years	457,657		390,595
After ten years	4,394,830		3,681,156
	$	4,940,107	$	4,153,615
December 31, 2021 (1)
Within one year	$	—	$	—
After one year but within five years	103,960		107,009
After five years but within ten years	204,186		204,289
After ten years	4,941,736		4,894,013
	$	5,249,882	$	5,205,311

(1) Actual maturities could differ from contractual maturities.

As of September 30, 2022, the Company’s available-for-sale investment securities consisted of 964 securities, 963 of which were in an unrealized loss position.

As of September 30, 2022, substantially all of the Corporation’s available-for-sale investment securities were mortgage-backed securities or collateral mortgage obligations which were issued or guaranteed by U.S. government-sponsored entities and agencies.

As of September 30, 2022 and December 31, 2021, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of shareholders’ equity.

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The scheduled maturities of held-to-maturity debt securities at September 30, 2022 and December 31, 2021 are presented in the table below:


	Held-to-Maturity
	Amortized		Fair
(Dollars in thousands)	Cost		Value
September 30, 2022 (1)
Within one year	$	732	$	729
After one year but within five years	7,393		7,233
After five years but within ten years	46,097		44,859
After ten years	1,067,683		988,342
	$	1,121,905	$	1,041,163
December 31, 2021 (1)
Within one year	$	232	$	234
After one year but within five years	2,675		2,736
After five years but within ten years	44,137		45,404
After ten years	43,602		45,757
	$	90,646	$	94,131

(1) Actual maturities could differ from contractual maturities.

MBS may have expected maturities that differ from their contractual maturities. These differences arise because issuers may have the right to call securities and borrowers may have the right to prepay obligations with or without prepayment penalty. The estimated weighted average duration of MBS was 6.0 years at September 30, 2022.

The held-to-maturity debt securities are not collateral-dependent securities as these are general obligation bonds issued by cities, states, counties, or other local and foreign governments.

During the second quarter of 2022, the Company transferred investment securities with a book value of $ 1.1 billion from available-for-sale to held-to-maturity to mitigate the impact of the rising interest rate environment to Accumulated other comprehensive (loss) income in the Company's Consolidated Statement of Changes in Stockholders' Equity. The transfer occurred at a fair value totaling $ 931.4 million. The amortized cost of transferred held-to-maturity securities included net unrealized losses of $ 157.6 million at June 30, 2022, which are offset in Accumulated other comprehensive (loss) income . No gains or losses on these securities were recognized at the time of transfer.

Investment securities with fair market values aggregating $ 2.9 billion and $ 2.2 billion were pledged as collateral for retail customer repurchase agreements, municipal deposits, and other obligations as of September 30, 2022 and December 31, 2021, respectively.

During the nine months ended September 30, 2022, the Company had no sales of debt securities categorized as available-for-sale. During the nine months ended September 30, 2021, the Company sold $ 14.0 million of debt securities categorized as available-for-sale resulting in $ 0.3 million of realized gains and no realized losses.

As of September 30, 2022 and December 31, 2021, the Company's debt securities portfolio had remaining unamortized premiums of $ 69.2 million and $ 69.4 million, respectively, and unaccreted discounts of $ 26.4 million and $ 12.7 million, respectively.

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For debt securities in an unrealized loss position, the table below shows the gross unrealized losses and fair value by investment category and length of time that individual debt securities were in a continuous unrealized loss position at September 30, 2022.


	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	$	199,644	$	20,982	$	322,739	$	78,308	$	522,383	$	99,290
FNMA MBS	2,232,612		369,840		1,061,618		247,220		3,294,230		617,060
FHLMC MBS	101,605		12,968		8,036		2,406		109,641		15,374
GNMA MBS	34,985		2,936		1,751		427		36,736		3,363
GSE agency notes	—		—		177,248		51,405		177,248		51,405
	$	2,568,846	$	406,726	$	1,571,392	$	379,766	$	4,140,238	$	786,492

Held-to-maturity debt securities:
FNMA MBS	$	849,689	$	69,694	$	—	$	—	$	849,689	$	69,694
State and political subdivisions	183,181		11,039		—		—		183,181		11,039
Foreign bonds	500		1		—		—		500		1
	$	1,033,370	$	80,734	$	—	$	—	$	1,033,370	$	80,734


	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	$	411,347	$	12,730	$	35,638	$	1,903	$	446,985	$	14,633
FNMA MBS	3,018,606		41,021		356,665		12,772		3,375,271		53,793
FHLMC MBS	11,227		348		1,917		168		13,144		516
GNMA MBS	4,847		71		—		—		4,847		71
GSE agency notes	64,509		1,918		155,888		8,266		220,397		10,184
	$	3,510,536	$	56,088	$	550,108	$	23,109	$	4,060,644	$	79,197

At September 30, 2022, debt securities for which the amortized cost basis exceeded fair value totaled $ 5.2 billion. Total unrealized losses on these securities were $ 867.2 million at September 30, 2022. The Company does not have the intent to sell, nor is it more likely than not it will be required to sell these securities before it is able to recover the amortized cost basis. The unrealized losses are the result of changes in market interest rates subsequent to purchase, not credit loss, as these are highly rated agency securities with no expected credit loss, in the event of a default. As a result, there is no allowance for credit losses recorded for available-for-sale debt securities as of September 30, 2022.

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At September 30, 2022 and December 31, 2021, held-to-maturity debt securities had an amortized cost basis of $ 1.1 billion and $ 90.6 million, respectively. The held-to-maturity debt security portfolio primarily consists of mortgage-backed securities which were issued or guaranteed by U.S. government-sponsored entities and agencies and highly rated municipal bonds. The Company monitors credit quality of its debt securities through credit ratings. The following table summarizes the amortized cost of debt securities held-to-maturity as of September 30, 2022, aggregated by credit quality indicator:


(Dollars in thousands)	FNMA MBS		State and political subdivisions		Foreign bonds
A+ rated or higher	$	—	$	202,022	$	500
Not rated	919,383		—		—
Ending balance	$	919,383	$	202,022	$	500

The following table summarizes the amortized cost of debt securities held-to-maturity as of December 31, 2021, aggregated by credit quality indicator:


(Dollars in thousands)	State and political subdivisions		Foreign bonds
A+ rated or higher	$	90,146	$	500
Not rated	—		—
Ending balance	$	90,146	$	500

The Company reviewed its held-to-maturity debt securities by major security type for potential credit losses. There was no activity in the allowance for credit losses for FNMA MBS and foreign bond debt securities for the nine months ended September 30, 2022 and 2021. The following table presents the activity in the allowance for credit losses for state and political subdivisions debt securities for the three and nine months ended September 30, 2022 and 2021:


	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2022		2021		2022		2021
Allowance for credit losses:
Beginning balance	$	6	$	5	$	4	$	6

Provision for credit losses	4		( 1 )		6		( 2 )



Ending balance	$	10	$	4	$	10	$	4

Accrued interest receivable of $ 1.8 million and $ 0.9 million as of September 30, 2022 and December 31, 2021, respectively, for held-to-maturity debt securities were excluded from the evaluation of allowance for credit losses. There were no nonaccrual or past due held-to-maturity debt securities as of September 30, 2022 and December 31, 2021.

Equity Investments

The Company had equity investments with a fair value of $ 25.1 million and $ 10.5 million as of September 30, 2022 and December 31, 2021, respectively.

During the nine months ended September 30, 2022, total net gains on equity investments of $ 6.0 million were recorded, driven by an unrealized gain on the Company's investment in CRED.ai presented within Unrealized gain on equity investment, net in the Consolidated Statements of Income.

During the nine months ended September 30, 2021, total net gains on equity investments of $ 4.4 million were recorded from the sale of the Company's investment in Social Finance, Inc. (SoFi) in July 2021. This included a realized loss of $ 0.7 million which was recorded in Realized loss on equity investments, net in the Consolidated Statement of Income at the time of sale.

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7. LOANS AND LEASES

The following table shows the Company's loan and lease portfolio by category:



(Dollars in thousands)	September 30, 2022		December 31, 2021
Commercial and industrial (1)	$	2,634,786	$	1,918,043
Owner-occupied commercial	1,788,591		1,341,707
Commercial mortgages	3,280,379		1,881,510
Construction	1,028,203		687,213
Commercial small business leases	534,692		352,276
Residential (2)	761,611		546,667
Consumer (3)	1,677,128		1,158,573
	11,705,390		7,885,989
Less:

Allowance for credit losses	146,195		94,507
Net loans and leases	$	11,559,195	$	7,791,482

(1) Includes Paycheck Protection Program (PPP) loans of $ 4.2 million at September 30, 2022 and $ 31.5 million at December 31, 2021.

(2) Includes reverse mortgages at fair value of $ 3.0 million at September 30, 2022 and $ 3.9 million at December 31, 2021.

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

Accrued interest receivable on loans and leases was $ 49.8 million and $ 31.6 million at September 30, 2022 and December 31, 2021, respectively. Accrued interest receivable on loans and leases was excluded from the evaluation of allowance for credit losses.

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8. ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY INFORMATION

The following tables provide the activity of allowance for credit losses and loan balances for the three and nine months ended September 30, 2022 and 2021. The increase was primarily due to an initial ACL of $ 49.6 million recorded in connection with the BMBC Merger and loan growth during the quarter. The initial $ 49.6 million ACL recorded includes $ 23.5 million related to non-PCD loans, or the initial provision for credit loss recorded, and $ 26.1 million related to PCD loans, which does not have an initial income statement impact, but adjusts the amortized cost basis of the loans at acquisition (i.e., a balance sheet gross-up).


(Dollars in thousands)	Commercial and Industrial (1)		Owner-occupied Commercial		Commercial Mortgages		Construction		Residential (2)		Consumer (3)		Total
Three months ended September 30, 2022
Allowance for credit losses
Beginning balance	$	60,921	$	5,510	$	23,663	$	5,058	$	4,988	$	41,830	$	141,970

Charge-offs	( 5,120 )		—		( 544 )		—		—		( 1,834 )		( 7,498 )
Recoveries	3,194		4		101		653		207		114		4,273
Provision (credit)	889		489		( 1,686 )		788		( 377 )		7,347		7,450
Ending balance	$	59,884	$	6,003	$	21,534	$	6,499	$	4,818	$	47,457	$	146,195
Nine months ended September 30, 2022
Allowance for credit losses
Beginning balance	$	49,967	$	4,574	$	11,623	$	1,903	$	3,352	$	23,088	$	94,507
Initial allowance on acquired PCD loans	22,614		595		2,684		71		61		78		26,103
Charge-offs	( 11,308 )		( 179 )		( 581 )		—		( 186 )		( 4,062 )		( 16,316 )
Recoveries	4,667		271		223		653		737		663		7,214
(Credit) provision (4)	( 6,056 )		742		7,585		3,872		854		27,690		34,687
Ending balance	$	59,884	$	6,003	$	21,534	$	6,499	$	4,818	$	47,457	$	146,195
Period-end allowance allocated to:
Loans evaluated on an individual basis	$	5,348	$	—	$	—	$	—	$	—	$	—	$	5,348
Loans evaluated on a collective basis	54,536		6,003		21,534		6,499		4,818		47,457		140,847
Ending balance	$	59,884	$	6,003	$	21,534	$	6,499	$	4,818	$	47,457	$	146,195
Period-end loan balances:
Loans evaluated on an individual basis	$	21,565	$	1,713	$	9,483	$	5,360	$	6,451	$	1,884	$	46,456
Loans evaluated on a collective basis	3,147,913		1,786,878		3,270,896		1,022,843		752,142		1,675,244		11,655,916
Ending balance	$	3,169,478	$	1,788,591	$	3,280,379	$	1,028,203	$	758,593	$	1,677,128	$	11,702,372

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

(2) Period-end loan balance excludes reverse mortgages at fair value of $ 3.0 million.

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

(4) Includes $ 23.5 million initial provision for credit losses on non-PCD loans.

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(Dollars in thousands)	Commercial and Industrial (1)		Owner - occupied Commercial		Commercial Mortgages		Construction		Residential (2)		Consumer (3)		Total
Three months ended September 30, 2021
Allowance for credit losses
Beginning balance	$	87,203	$	6,181	$	16,099	$	3,512	$	3,293	$	16,130	$	132,418
Charge-offs	( 7,612 )		( 38 )		—		( 2,473 )		—		( 738 )		( 10,861 )
Recoveries	4,031		41		198		—		34		320		4,624
(Credit) provision	( 17,804 )		( 1,260 )		( 3,054 )		1,068		( 326 )		66		( 21,310 )
Ending balance	$	65,818	$	4,924	$	13,243	$	2,107	$	3,001	$	15,778	$	104,871
Nine months ended September 30, 2021
Allowance for loan losses
Beginning balance, prior to adoption of ASC 326	$	150,875	$	9,615	$	31,071	$	12,190	$	6,893	$	18,160	$	228,804
Charge-offs	( 19,176 )		( 83 )		—		( 2,473 )		—		( 1,683 )		( 23,415 )
Recoveries	6,550		146		242		—		629		948		8,515
(Credit) provision	( 72,431 )		( 4,754 )		( 18,070 )		( 7,610 )		( 4,521 )		( 1,647 )		( 109,033 )
Ending balance	$	65,818	$	4,924	$	13,243	$	2,107	$	3,001	$	15,778	$	104,871
Period-end allowance allocated to:
Loans evaluated on an individual basis	$	2,247	$	—	$	8	$	—	$	—	$	—	$	2,255
Loans evaluated on a collective basis	63,571		4,924		13,235		2,107		3,001		15,778		102,616
Ending balance	$	65,818	$	4,924	$	13,243	$	2,107	$	3,001	$	15,778	$	104,871
Period-end loan balances:
Loans evaluated on an individual basis	$	24,375	$	2,071	$	2,708	$	2,184	$	5,877	$	2,496	$	39,711
Loans evaluated on a collective basis	2,204,139		1,337,589		1,985,276		760,462		568,804		1,115,718		7,971,988
Ending balance	$	2,228,514	$	1,339,660	$	1,987,984	$	762,646	$	574,681	$	1,118,214	$	8,011,699

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

(2) Period-end loan balance excludes reverse mortgages at fair value of $ 7.5 million.

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

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The following tables show nonaccrual and past due loans presented at amortized cost at the date indicated:


	September 30, 2022
(Dollars in thousands)	30–89 Days Past Due and Still Accruing			Greater Than 90 Days Past Due and Still Accruing			Total Past Due And Still Accruing			Accruing Current Balances			Nonaccrual Loans (1)			Total Loans
Commercial and industrial (2)	$	6,641		$	8,351		$	14,992		$	3,149,649		$	4,837		$	3,169,478
Owner-occupied commercial	887			—			887			1,787,365			339			1,788,591
Commercial mortgages	6,927			—			6,927			3,268,392			5,060			3,280,379
Construction	—			2,000			2,000			1,021,045			5,158			1,028,203
Residential (3)	2,694			1,094			3,788			752,782			2,023			758,593
Consumer (4)	14,873			13,309			28,182			1,646,994			1,952			1,677,128
Total	$	32,022		$	24,754		$	56,776		$	11,626,227		$	19,369		$	11,702,372
% of Total Loans	0.27		%	0.21		%	0.49		%	99.34		%	0.17		%	100		%

(1) There was no allowance on nonaccrual loans as of September 30, 2022.

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

(3) Residential accruing current balances excludes reverse mortgages at fair value of $ 3.0 million.

(4) Includes $ 23.8 million of delinquent, but still accruing, U.S. government-guaranteed student loans that carry little risk of credit loss.


	December 31, 2021
(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)	$	5,007		$	547		$	5,554		$	2,256,554		$	8,211		$	2,270,319
Owner-occupied commercial	741			—			741			1,340,155			811			1,341,707
Commercial mortgages	3,525			810			4,335			1,875,105			2,070			1,881,510
Construction	7,933			—			7,933			679,268			12			687,213
Residential (3)	1,856			—			1,856			537,752			3,125			542,733
Consumer (4)	10,227			8,634			18,861			1,137,332			2,380			1,158,573
Total (4)	$	29,289		$	9,991		$	39,280		$	7,826,166		$	16,609		$	7,882,055
% of Total Loans	0.37		%	0.13		%	0.50		%	99.29		%	0.21		%	100		%

(1) Nonaccrual loans with an allowance totaled less than $ 0.1 million

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

(3) Residential accruing current balances excludes reverse mortgages, at fair value of $ 3.9 million.

(4) Includes $ 17.0 million of delinquent, but still accruing, U.S. government-guaranteed student loans that carry little risk of credit loss.

The following table presents the amortized cost basis of nonaccruing collateral-dependent loans by class at September 30, 2022 and December 31, 2021:


	September 30, 2022		December 31, 2021
(Dollars in thousands)	Property		Equipment and other		Property		Equipment and other
Commercial and industrial (1)	$	3,906	$	931	$	4,199	$	4,012
Owner-occupied commercial	339		—		811		—
Commercial mortgages	5,060		—		2,070		—
Construction	5,158		—		12		—
Residential (2)	2,023		—		3,125		—
Consumer (3)	1,952		—		2,380		—
Total	$	18,438	$	931	$	12,597	$	4,012

(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.

Interest income recognized on individually reviewed loans was $ 0.3 million and $ 0.6 million during the three and nine months ended September 30, 2022, respectively, and $ 0.2 million and $ 0.6 million during the three and nine months ended September 30, 2021, respectively.

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As of September 30, 2022, there were 37 residential loans and 12 commercial loans in the process of foreclosure. The total outstanding balance on these loans was $ 5.2 million and $ 3.3 million, respectively. As of December 31, 2021, there were 28 residential loans and 9 commercial loans in the process of foreclosure. The total outstanding balance on these loans was $ 2.5 million and $ 3.2 million, respectively. Loan workout and other real estate owned (OREO) (recoveries) expenses were less than $ 0.3 million and $ 0.5 million during the three and nine months ended September 30, 2022, respectively, and $ 0.6 million and $ 1.4 million during three and nine months ended September 30, 2021, respectively. Loan workout and OREO expenses are included in Loan workout and other credit costs on the Consolidated Statement of Income.

Credit Quality Indicators

Below is a description of each of 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.

• Special Mention. These borrowers have potential weaknesses that deserve management’s close attention. Borrowers in this category may be experiencing adverse operating trends, for example, declining revenues or margins, high leverage, tight liquidity, or increasing inventory without increasing sales. These adverse trends can have a potential negative effect on the borrower’s repayment capacity. These assets are not adversely classified and do not expose the Bank to significant risk that would warrant a more severe rating. Borrowers in this category may also be experiencing significant management problems, pending litigation, or other structural credit weaknesses.

• Substandard or Lower . These 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 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. Such impending events include: perfecting liens on additional collateral, obtaining collateral valuations, an acquisition or liquidation preceding, proposed merger, or refinancing plan.

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.

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The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for credit losses as of September 30, 2022.


	Term Loans Amortized Cost Basis by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
(Dollars in thousands)
Commercial and industrial (1) :
Risk Rating
Pass (2)	$	930,884	$	606,030	$	464,829	$	262,628	$	149,437	$	263,633	$	7,690	$	234,667	$	2,919,798
Special mention	24,704		36,492		8,117		10,012		6,415		445		—		11,649		97,834
Substandard or Lower	28,685		16,986		8,290		44,594		38,139		10,196		10		4,946		151,846
	$	984,273	$	659,508	$	481,236	$	317,234	$	193,991	$	274,274	$	7,700	$	251,262	$	3,169,478
Owner-occupied commercial:
Risk Rating
Pass	$	210,160	$	353,951	$	269,106	$	233,159	$	114,041	$	378,377	$	—	$	140,573	$	1,699,367
Special mention	537		—		—		—		—		2,803		—		3,427		6,767
Substandard or Lower	972		5,481		23,882		2,497		11,952		22,972		—		14,701		82,457
	$	211,669	$	359,432	$	292,988	$	235,656	$	125,993	$	404,152	$	—	$	158,701	$	1,788,591
Commercial mortgages:
Risk Rating
Pass	$	336,888	$	669,155	$	529,554	$	554,465	$	251,605	$	650,400	$	—	$	202,570	$	3,194,637
Special mention	1,456		77		6,077		6,201		—		32,197		—		3,706		49,714
Substandard or Lower	1,716		2,981		12,846		3,227		3,618		11,063		—		577		36,028
	$	340,060	$	672,213	$	548,477	$	563,893	$	255,223	$	693,660	$	—	$	206,853	$	3,280,379
Construction:
Risk Rating
Pass	$	345,581	$	324,841	$	167,194	$	13,731	$	26,587	$	3,915	$	—	$	129,465	$	1,011,314
Special mention	—		603		8,926		—		—		—		—		—		9,529
Substandard or Lower	2,000		4,402		—		190		—		—		—		768		7,360
	$	347,581	$	329,846	$	176,120	$	13,921	$	26,587	$	3,915	$	—	$	130,233	$	1,028,203
Residential (3) :
Risk Rating
Performing	$	43,179	$	116,041	$	61,107	$	36,561	$	45,222	$	450,032	$	—	$	—	$	752,142
Nonperforming (4)	—		565		503		1,000		124		4,259		—		—		6,451
	$	43,179	$	116,606	$	61,610	$	37,561	$	45,346	$	454,291	$	—	$	—	$	758,593
Consumer (5) :
Risk Rating
Performing	$	416,706	$	206,914	$	133,026	$	57,333	$	233,399	$	77,423	$	544,810	$	5,241	$	1,674,852
Nonperforming (6)	—		—		238		—		539		—		1,238		261		2,276
	$	416,706	$	206,914	$	133,264	$	57,333	$	233,938	$	77,423	$	546,048	$	5,502	$	1,677,128

(1) Includes commercial small business leases.

(2) Includes $ 4.2 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 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 accruing interest.

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The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for credit losses, as of December 31, 2021.


	Term Loans Amortized Cost Basis by Origination Year
	2021		2020		2019		2018		2017		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
(Dollars in thousands)
Commercial and industrial (1) :
Risk Rating
Pass (2)	$	556,896	$	420,698	$	329,354	$	273,345	$	139,800	$	148,809	$	5,551	$	176,006	$	2,050,459
Special mention	35,910		949		3,052		1,057		429		15,299		—		17,545		74,241
Substandard or Lower	12,533		14,408		53,655		29,046		19,114		6,921		29		9,913		145,619
	$	605,339	$	436,055	$	386,061	$	303,448	$	159,343	$	171,029	$	5,580	$	203,464	$	2,270,319
Owner-occupied commercial:
Risk Rating
Pass	$	305,156	$	189,128	$	172,503	$	67,526	$	136,697	$	262,629	$	—	$	128,188	$	1,261,827
Special mention	938		5,359		2,561		891		—		7,019		—		10,543		27,311
Substandard or Lower	3,192		13,736		4,138		9,418		5,580		11,039		—		5,466		52,569
	$	309,286	$	208,223	$	179,202	$	77,835	$	142,277	$	280,687	$	—	$	144,197	$	1,341,707
Commercial mortgages:
Risk Rating
Pass	$	416,149	$	280,889	$	217,311	$	134,477	$	229,863	$	368,527	$	—	$	187,396	$	1,834,612
Special mention	—		4,185		—		861		11,588		1,385		—		2,097		20,116
Substandard or Lower	2,438		1,624		3,789		2,114		2,254		14,085		—		478		26,782
	$	418,587	$	286,698	$	221,100	$	137,452	$	243,705	$	383,997	$	—	$	189,971	$	1,881,510
Construction:
Risk Rating
Pass	$	248,053	$	195,269	$	84,868	$	39,585	$	2,223	$	11,297	$	—	$	88,839	$	670,134

Substandard or Lower	12,922		—		2,422		—		90		—		—		1,645		17,079
	$	260,975	$	195,269	$	87,290	$	39,585	$	2,313	$	11,297	$	—	$	90,484	$	687,213
Residential (3) :
Risk Rating
Performing	$	59,977	$	28,426	$	12,526	$	32,871	$	44,969	$	358,964	$	—	$	—	$	537,733
Nonperforming (4)	—		112		1,044		—		63		3,781		—		—		5,000
	$	59,977	$	28,538	$	13,570	$	32,871	$	45,032	$	362,745	$	—	$	—	$	542,733
Consumer (5) :
Risk Rating
Performing	$	219,918	$	169,922	$	74,048	$	203,519	$	39,113	$	60,952	$	382,718	$	5,364	$	1,155,554
Nonperforming (6)	—		147		—		600		71		—		1,655		546		3,019
	$	219,918	$	170,069	$	74,048	$	204,119	$	39,184	$	60,952	$	384,373	$	5,910	$	1,158,573

(1) Includes commercial small business leases.

(2) Includes $ 31.5 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 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 accruing interest.

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Troubled Debt Restructurings (TDRs)

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



(Dollars in thousands)	September 30, 2022		December 31, 2021
Performing TDRs	$	17,108	$	14,204
Nonperforming TDRs	1,079		756
Total TDRs	$	18,187	$	14,960

Approximately $ 0.3 million and $ 0.2 million in related reserves have been established for these loans at September 30, 2022 and December 31, 2021, respectively.

The following tables present information regarding the types of loan modifications made for the three and nine months ended September 30, 2022 and 2021:


	Three months ended September 30, 2022					Nine months ended September 30, 2022
	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	—	—	—	2	2	1	—	—	2	3

Commercial mortgages	—	—	—	—	—	—	1	—	—	1
Construction	—	—	—	—	—	—	1	—	—	1
Residential	—	—	—	—	—	1	—	1	—	2
Consumer	50	8	4	2	64	51	32	7	3	93
Total	50	8	4	4	66	53	34	8	5	100


	Three months ended September 30, 2021					Nine months ended September 30, 2021
	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




Residential	—	—	—	—	—	—	—	2	—	2
Consumer	—	1	3	—	4	—	1	23	1	25
Total	—	1	3	—	4	—	1	25	1	27

(1) Other includes interest rate reduction, forbearance, and interest only payments.

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, which is typically six months , and repayment is reasonably assured. The following tables present loans modified as TDRs during the three and nine months ended September 30, 2022 and 2021.


	Three Months Ended September 30, 2022				Nine Months Ended September 30, 2022

(Dollars in thousands)	Pre Modification		Post Modification		Pre Modification		Post Modification
Commercial	$	157	$	157	$	185	$	185

Commercial mortgages	2,390		2,390		2,390		2,390
Construction	2,000		2,000		2,000		2,000
Residential	—		—		138		138
Consumer	948		948		1,409		1,409
Total (1)(2)	$	5,495	$	5,495	$	6,122	$	6,122

(1) During the three and nine months ended September 30, 2022, the TDRs set forth in the table above resulted in a less than $ 0.1 million increase and a $ 0.3 million increase in the allowance for credit losses, respectively, and no additional charge-offs in either period. During the three and nine months ended September 30, 2022, no TDRs defaulted that had received troubled debt modification during the past twelve months.

(2) The TDRs set forth in the table above did not occur as a result of the loan forbearance program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

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	Three Months Ended September 30, 2021				Nine Months Ended September 30, 2021

(Dollars in thousands)	Pre Modification		Post Modification		Pre Modification		Post Modification




Residential	$	—	$	—	$	147	$	147
Consumer	216		216		1,022		1,022
Total (1)(2)	$	216	$	216	$	1,169	$	1,169

(1) During the three and nine months ended September 30, 2021 the TDRs set forth in the table above resulted in a less than $ 0.1 million increase in the allowance for credit losses for both periods, and no additional charge-offs in either period. During the three and nine months ended September 30, 2021, no TDRs defaulted that had received troubled debt modification during the past twelve months.

(2) The TDRs set forth in the table above did not occur as a result of the loan forbearance program under the CARES Act.

9. LEASES

As a lessee, the Company enters into leases for its bank branches, corporate offices, and certain equipment. As a lessor, the Company primarily provides financing through its equipment leasing business.

Lessee

The Company's ongoing leases have remaining lease terms of less than one year to 39 years, which includes renewal options that are exercised at its discretion. The Company's lease terms to calculate the lease liability and right of use asset include options to extend the lease when it is reasonably certain that the Company will exercise the option. The lease liability and right-of-use asset is included in Other liabilities and Other assets , respectively, in the unaudited Consolidated Statement of Financial Condition. Leases with an initial term of 12 months or less are not recorded on the unaudited Consolidated Statement of Financial Condition. Lease expense is recognized on a straight-line basis over the lease term. Operating lease expense is included in Occupancy expense in the unaudited Consolidated Statement of Income. The Company accounts for lease components separately from nonlease components. The Company subleases certain real estate to third parties.

The components of operating lease cost were as follows:


	Three months ended				Nine months ended
(Dollars in thousands)	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Operating lease cost (1)	$	4,900	$	4,576	$	15,289	$	14,019
Sublease income	( 51 )		( 72 )		( 222 )		( 268 )
Net lease cost	$	4,849	$	4,504	$	15,067	$	13,751

(1) Includes variable lease cost and short-term lease cost.

Supplemental balance sheet information related to operating leases was as follows:


(Dollars in thousands)	September 30, 2022			December 31, 2021

Right-of-use assets	$	141,493		$	144,134



Lease liabilities	$	161,704		$	159,526


Lease term and discount rate

Weighted average remaining lease term (in years)	17.79			19.17

Weighted average discount rate	4.23		%	4.27		%

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Maturities of operating lease liabilities were as follows:


(Dollars in thousands)	September 30, 2022
Remaining in 2022	$	4,859
2023	19,691
2024	18,410
2025	18,461
2026	14,807
After 2026	169,201
Total lease payments	245,429
Less: Interest	( 83,725 )
Present value of lease liabilities	$	161,704

Supplemental cash flow information related to operating leases was as follows:


	Three months ended				Nine months ended
(Dollars in thousands)	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,196	$	4,451	$	15,911	$	13,525
Right of use assets obtained in exchange for new operating lease liabilities (non-cash)	—		—		13,707		—

In connection with the BMBC Merger, the Company initiated a branch optimization initiative for the combined locations of the legacy companies. During the nine months ended September 30, 2022, the Company recorded $ 4.3 million of accelerated right-of-use asset amortization expense due to asset impairment for the leased locations to be terminated.

As of September 30, 2022, the Corporation had not entered into any material leases that have not yet commenced.

Lessor Equipment Leasing

The Company provides equipment and small business lease financing through its leasing subsidiary, NewLane Finance ® . Interest income from direct financing leases where the Company is a lessor is recognized in Interest and fees on loans and leases on the Consolidated Statements of Income. The allowance for credit losses on finance leases is included in Provision for (recovery of) credit losses on the Consolidated Statements of Income.

The components of direct finance lease income are summarized in the table below:


	Three months ended				Nine months ended
(Dollars in thousands)	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Direct financing leases:
Interest income on lease receivable	$	10,822	$	5,879	$	30,885	$	15,604
Interest income on deferred fees and costs, net	( 925 )		( 633 )		( 2,422 )		( 1,389 )
Total direct financing lease net interest income	$	9,897	$	5,246	$	28,463	$	14,215

Equipment leasing receivables relate to direct financing leases. The composition of the net investment in direct financing leases was as follows:


(Dollars in thousands)	September 30, 2022		December 31, 2021
Lease receivables	$	610,962	$	399,688
Unearned income	( 87,618 )		( 55,066 )
Deferred fees and costs	11,348		7,654
Net investment in direct financing leases	$	534,692	$	352,276

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10. GOODWILL AND INTANGIBLE ASSETS

In accordance with ASC 805, Business Combinations (ASC 805) and ASC 350, Intangibles - Goodwill and Other (ASC 350), all assets acquired and liabilities assumed in purchase acquisitions, including goodwill, indefinite-lived intangibles and other intangibles are recorded at fair value as of acquisition date.

WSFS performs its annual goodwill impairment test on October 1 or more frequently if events and circumstances indicate that the fair value of a reporting unit is less than its carrying value. In between annual tests, management performs a qualitative review of goodwill quarterly as part of the Company's review of the overall business to ensure no events or circumstances have occurred that would impact its goodwill evaluation. During the nine months ended September 30, 2022, management determined based on its qualitative assessment that it is not more likely than not that the fair values of our reporting units are less than their carrying values. No goodwill impairment exists during the nine months ended September 30, 2022.

The following table shows the allocation of goodwill to the reportable operating segments for purposes of goodwill impairment testing:


(Dollars in thousands)	WSFS Bank		Cash Connect		Wealth Management		Consolidated Company
December 31, 2021	$	452,629	$	—	$	20,199	$	472,828
Goodwill from business combinations	297,646		—		116,691		414,337
Goodwill adjustments (1)	3,311		—		( 6,839 )		( 3,528 )
September 30, 2022	$	753,586	$	—	$	130,051	$	883,637

(1) Goodwill adjustments include the remeasurements as noted in Note 3 and Wealth Management includes the impact of the sale of the BMTIA business.

ASC 350 requires that an acquired intangible asset be separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the asset can be sold, transferred, licensed, rented or exchanged, regardless of the acquirer’s intent to do so. The following table summarizes the Company's intangible assets:


(Dollars in thousands)	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets		Amortization Period
September 30, 2022
Core deposits	$	104,751	$	( 37,863 )	$	66,888	10 years
Customer relationships	68,281		( 11,671 )		56,610		7 - 15 years
Non-compete agreements	200		( 150 )		50		1 year
Tradename	2,900		—		2,900		indefinite
Loan servicing rights (1)	10,992		( 4,664 )		6,328		10 - 25 years
Total intangible assets	$	187,124	$	( 54,348 )	$	132,776
December 31, 2021
Core deposits	$	93,811	$	( 30,103 )	$	63,708	10 years
Customer relationships	15,281		( 7,876 )		7,405		7 - 15 years

Loan servicing rights (2)	6,671		( 3,381 )		3,290		10 - 25 years
Total intangible assets	$	115,763	$	( 41,360 )	$	74,403

(1) Includes impairment losses of $ 0.1 million and $ 0.2 million for the three and nine months ended September 30, 2022, respectively.

(2) Includes reversal of impairment losses of $ 0.3 million for the year ended December 31, 2021

In connection with the BMBC Merger on January 1, 2022, the Company recorded $ 10.9 million of core deposit intangibles, $ 53.0 million of customer relationships, $ 2.9 million for the Bryn Mawr Trust tradename, $ 0.2 million in non-compete agreements, and $ 3.3 million of loan servicing rights. See Note 3 to the unaudited Consolidated Financial Statements for additional information on intangible assets recorded in connection with the BMBC Merger.

The Company recognized amortization expense on intangible assets of $ 3.9 million and $ 11.8 million for the three and nine months ended September 30, 2022, compared to $ 2.6 million and $ 7.9 million for the three and nine months ended September 30, 2021.

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The following table presents the estimated future amortization expense on definite life intangible assets:


(Dollars in thousands)	September 30, 2022
Remaining in 2022	$	4,224
2023	16,572
2024	16,317
2025	15,980
2026	15,314
Thereafter	61,469
Total	$	129,876

Servicing Assets

The Company records mortgage servicing rights on its mortgage loan servicing portfolio, which includes mortgages that it acquires or originates as well as mortgages that it services for others, and servicing rights on Small Business Administration (SBA) loans. Mortgage servicing rights and SBA loan servicing rights are included are in Intangible assets in the accompanying Consolidated Statements of Financial Condition. Mortgage loans which the Company services for others are not included in Loans and leases, net of allowance in the accompanying Consolidated Statements of Financial Condition. Servicing rights represent the present value of the future net servicing fees from servicing mortgage loans the Company acquires or originates, or that it services for others.

The value of the Company's mortgage servicing rights was $ 2.2 million and $ 0.5 million at September 30, 2022 and December 31, 2021, respectively, and the value of its SBA loan servicing rights was $ 4.1 million and $ 2.8 million at September 30, 2022 and December 31, 2021, respectively. In connection with the BMBC Merger, the Company acquired $ 2.0 million of mortgage servicing rights and $ 1.3 million of SBA loan servicing rights. Changes in the value of the Company's servicing rights resulted in impairment losses of $ 0.1 million and $ 0.2 million for the three and nine months ended September 30, 2022, respectively, and impairment losses of $ 0.1 million and less than $ 0.1 million for the three and nine months ended September 30, 2021, respectively. Revenues from originating, marketing and servicing mortgage loans as well as valuation adjustments related to capitalized mortgage servicing rights are included in Mortgage banking activities, net in the Consolidated Statements of Income and revenues from the Company's SBA loan servicing rights are included in Loan and lease fee income in the Consolidated Statements of Income.

Besides the impairment on loan servicing rights noted above, there was no impairment of other intangible assets as of September 30, 2022 or December 31, 2021. Changing economic conditions that may adversely affect the Company's performance and could result in impairment, which could adversely affect earnings in the future.

11. DEPOSITS

The following table shows deposits by category:


(Dollars in thousands)			September 30, 2022		December 31, 2021
Noninterest-bearing:
	Noninterest demand		$	6,170,776	$	4,565,143
		Total noninterest-bearing	$	6,170,776	$	4,565,143

Interest-bearing:
	Interest-bearing demand		$	3,461,763	$	2,793,279
	Savings		2,266,603		1,970,744
	Money market		3,739,751		2,906,260

	Customer time deposits		1,063,133		988,974
	Brokered deposits		23,182		15,662
		Total interest-bearing	10,554,432		8,674,919
		Total deposits	$	16,725,208	$	13,240,062

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12. BORROWED FUNDS

The following is a summary of borrowed funds by type as of September 30, 2022 and December 31, 2021:


(Dollars in thousands)	September 30, 2022		December 31, 2021


Trust preferred borrowings	$	90,393	$	67,011
Senior and subordinated debt	248,255		147,939
Other borrowed funds	35,719		24,527

Federal Funds Purchased and Securities Sold Under Agreements to Repurchase

The Company may utilize federal funds as a short-term funding source. The Company had no securities sold under agreements to repurchase at September 30, 2022 and December 31, 2021.

Federal Home Loan Bank Advances

The Company had no FHLB Advances at September 30, 2022 and December 31, 2021.

Pursuant to collateral agreements with the FHLB, advances are secured by qualifying loan collateral, qualifying fixed-income securities, FHLB stock and an interest-bearing demand deposit account with the FHLB. As a member of the FHLB, the Company is required to purchase and hold shares of capital stock in the FHLB and was in compliance with this requirement with a stock investment in FHLB of $ 24.1 million at September 30, 2022 and $ 6.1 million at December 31, 2021. This stock is carried on the accompanying Consolidated Statements of Financial Condition at cost, which approximates liquidation value.

The Company received dividends on its stock investment in FHLB of less than $ 0.1 million and $ 0.1 million for the three and nine months ended September 30, 2022, respectively, and less than $ 0.1 million for the three and nine months ended September 30, 2021.

Trust Preferred Borrowings

In 2005, the Company issued $ 67.0 million of aggregate principal amount of Pooled Floating Rate Securities at a variable interest rate of 177 basis points over the three-month LIBOR rate. These securities are currently callable and have a maturity date of June 1, 2035.

In connection with the BMBC Merger, WSFS acquired Royal Bancshares Capital Trust I (Trust I) and Royal Bancshares Capital Trust II (Trust II) (collectively, the Trusts), which were utilized for the sole purpose of issuing and selling capital securities representing preferred beneficial interests. Although WSFS owns an aggregate of $ 774.0 thousand of the common securities of Trust I and Trust II, the Trusts are not consolidated into the Corporation’s Consolidated Financial Statements as the Corporation is not deemed to be the primary beneficiary of these entities. Inclusive of the fair value marks, WSFS assumed junior subordinated debentures to the Trusts with a carrying value of $ 11.7 million each, totaling $ 23.4 million. The junior subordinated debentures incur interest at a coupon rate of 3.98 % as of September 30, 2022. The rate resets quarterly based on 3-month LIBOR plus 2.15 %.

Each of Trust I and Trust II issued an aggregate principal amount of $ 12.5 million of capital securities initially bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each Trust to an unaffiliated investment vehicle and an aggregate principal amount of $ 387.0 thousand of common securities bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each Trust to the Company. The Company has fully and unconditionally guaranteed all of the obligations of the Trusts, including any distributions and payments on liquidation or redemption of the capital securities.

The rights of holders of common securities of the Trusts are subordinate to the rights of the holders of capital securities only in the event of a default; otherwise, the common securities’ economic and voting rights are pari passu with the capital securities. The capital and common securities of the Trusts are subject to mandatory redemption upon the maturity or call of the junior subordinated debentures held by each. Unless earlier dissolved, the Trusts will dissolve on December 15, 2034. The junior subordinated debentures are the sole assets of Trusts, mature on December 15, 2034, and may be called at par by the Company any time. The Company records its investments in the Trusts’ common securities of $ 387.0 thousand each as investments in unconsolidated entities and records dividend income upon declaration by Trust I and Trust II.

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Senior and Subordinated Debt

On June 13, 2016, the Company issued $ 100.0 million of senior notes due 2026 (the 2026 Notes). The 2026 Notes had a fixed coupon rate of 4.50 % from issuance to but excluding June 15, 2021 and a variable coupon rate of three month LIBOR plus 3.30 % from June 15, 2021 until maturity. The 2026 Notes were redeemed on June 15, 2021 at 100 % of principal plus accrued and unpaid interest using cash on hand.

On December 3, 2020, the Company issued $ 150.0 million of senior notes due 2030 (the 2030 Notes). The 2030 Notes mature on December 15, 2030 and have a fixed coupon rate of 2.75 % from issuance until December 15, 2025 and a variable coupon rate equal to the three-month term SOFR, reset quarterly, plus 2.485 % from December 15, 2025 until maturity. The 2030 Notes may be redeemed beginning December 15, 2025 at 100 % of principal plus accrued and unpaid interest. The remaining net proceeds from the issuance of the 2030 Notes are being used for general corporate purposes, including, but not limited to, financing organic growth, acquisitions, repurchases of common stock, and redemption of outstanding indebtedness. The carrying value of the 2030 Notes, inclusive of deferred issuance costs, was $ 148.1 million as of September 30, 2022.

In connection with the BMBC Merger, the Company assumed $ 30.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2025 (the 2025 Notes) which were issued in a private placement to institutional accredited investors on August 6, 2015. The 2025 Notes mature on August 15, 2025, and currently bear interest at a variable rate that resets quarterly to a level equal to the then-current three-month LIBOR rate plus 2.150 % until August 15, 2025, or any early redemption date. The interest rate of the 2025 Notes was 5.443 % as of September 30, 2022. The carrying value of the 2025 Notes, inclusive of purchase accounting marks, was $ 30.0 million as of September 30, 2022.

In connection with the BMBC Merger, the Company assumed $ 70.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2027 (the 2027 Notes) which were issued by BMBC in an underwritten public offering on December 13, 2017. The 2027 Notes mature on December 15, 2027, and currently bear interest at an annual fixed rate of 4.25 % until and including December 14, 2022, and will thereafter bear interest at a variable rate that will reset quarterly to a level equal to the then-current three-month LIBOR rate plus 2.05 % until December 15, 2027, or any early redemption date. The carrying value of the 2027 Notes, inclusive of purchase accounting marks, was $ 70.1 million as of September 30, 2022.

Other Borrowed Funds

Included in other borrowed funds are collateralized borrowings of $ 35.7 million and $ 24.5 million at September 30, 2022 and December 31, 2021, respectively, consisting of outstanding retail repurchase agreements, contractual arrangements under which portions of certain securities are sold overnight to retail customers under agreements to repurchase. Such borrowings were collateralized by mortgage-backed securities.

Borrower in Custody

The Company had $ 217.0 million and $ 282.1 million of loans and securities pledged to the Federal Reserve of Philadelphia (FRB) at September 30, 2022 and December 31, 2021, respectively. The Company did no t borrow funds from the FRB during the three and nine months ended September 30, 2022 or 2021.

13. INCOME TAXES

There were no unrecognized tax benefits as of September 30, 2022. The Company records interest and penalties on potential income tax deficiencies as income tax expense. The Company's federal and state tax returns for the 2018 through 2021 tax years are subject to examination as of September 30, 2022. The Company does not expect to record or realize any material unrecognized tax benefits during 2022.

The amortization of the low-income housing credit investments has been reflected as income tax expense of $ 1.2 million and $ 0.9 million for the three months ended September 30, 2022 and 2021, respectively, and $ 3.6 million and $ 2.7 million of such amortization has been reflected as income tax expense for the nine months ended September 30, 2022 and 2021, respectively.

The amount of affordable housing tax credits, amortization, and tax benefits recorded as income tax expense for the nine months ended September 30, 2022 were $ 3.2 million, $ 3.6 million and $ 0.9 million, respectively. The carrying value of the investment in affordable housing credits is $ 52.0 million at September 30, 2022, compared to $ 39.6 million at December 31, 2021.

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14. FAIR VALUE DISCLOSURES OF FINANCIAL ASSETS AND LIABILITIES

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

ASC 820-10, Fair Value Measurement (ASC 820-10) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820-10 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:

• Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

• Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that are derived principally from or can be corroborated by observable market data by correlation or other means.

• Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

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The following tables present financial instruments carried at fair value as of September 30, 2022 and December 31, 2021 by level in the valuation hierarchy (as described above):


	September 30, 2022
(Dollars in thousands)	Quoted Prices in Active Markets for Identical Asset (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets measured at fair value on a recurring basis:
Available-for-sale securities:
CMO	$	—	$	522,383	$	—	$	522,383
FNMA MBS	—		3,294,230		—		3,294,230
FHLMC MBS	—		123,017		—		123,017
GNMA MBS	—		36,737		—		36,737
GSE agency notes	—		177,248		—		177,248

Other assets	—		163,144		85		163,229
Total assets measured at fair value on a recurring basis	$	—	$	4,316,759	$	85	$	4,316,844

Liabilities measured at fair value on a recurring basis:
Other liabilities	$	—	$	161,856	$	17,579	$	179,435

Assets measured at fair value on a nonrecurring basis:
Other investments	$	—	$	—	$	25,122	$	25,122
Other real estate owned	—		—		840		840
Loans held for sale	—		61,671		—		61,671

Total assets measured at fair value on a nonrecurring basis	$	—	$	61,671	$	25,962	$	87,633


	December 31, 2021
(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	$	—	$	575,766	$	—	$	575,766
FNMA MBS	—		4,245,684		—		4,245,684
FHLMC MBS	—		145,528		—		145,528
GNMA MBS	—		17,936		—		17,936
GSE agency notes	—		220,397		—		220,397

Other assets	—		5,153		—		5,153
Total assets measured at fair value on a recurring basis	$	—	$	5,210,464	$	—	$	5,210,464

Liabilities measured at fair value on a recurring basis:
Other liabilities	$	—	$	3,039	$	20,252	$	23,291

Assets measured at fair value on a nonrecurring basis
Other investments	$	—	$	—	$	10,518	$	10,518
Other real estate owned	—		—		2,320		2,320
Loans held for sale	—		113,349		—		113,349

Total assets measured at fair value on a nonrecurring basis	$	—	$	113,349	$	12,838	$	126,187

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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. 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 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

Securities classified as available-for-sale are reported at fair value using Level 2 inputs. The Company believes that this Level 2 designation is appropriate under ASC 820-10, as these securities are GSEs and GNMA securities with almost all fixed income securities, none are exchange traded, and all are priced by correlation to observed market data. For these securities 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 equity investments without readily determinable fair values and equity method investments, which are categorized as Level 3. The Company’s equity investments without readily determinable fair values are held at cost, and are adjusted for any observable transactions during the reporting period and its equity method investments are initially recorded at cost based on the Company’s percentage ownership in the investee, and are adjusted to reflect the recognition of the Company’s proportionate share of income or loss of the investee based on the investee’s earnings.

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 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 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.

Other assets

Other assets include the fair value of interest rate products, derivatives on the residential mortgage held for sale loan pipeline, and risk participation agreements. Valuation of interest rate products 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 . Valuation of risk participation agreements are obtained from an independent pricing service.

Other liabilities

Other liabilities include the fair value of interest rate products, derivatives on the residential mortgage held for sale loan pipeline, foreign exchange forward contracts, risk participation agreements, and derivative related to the sale of certain Visa Class B common shares. Valuation of interest rate products 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. Valuation of foreign exchange forward contracts and risk participation agreements are obtained from an independent pricing service. Valuation of the derivative related to the sale of certain Visa Class B common shares is based on: (i) the agreed upon graduated fee structure; (ii) the length of time until the resolution of the Visa covered litigation; and (iii) the estimated impact of dilution in the conversion ratio of Class B shares resulting from changes in the Visa covered litigation.

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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, cash equivalents, and restricted cash

For cash and short-term investment securities, including due from banks, federal funds sold or purchased under agreements to resell and interest-bearing deposits with other banks, the carrying amount is a reasonable estimate of fair value.

Investment securities

Investment securities include debt securities classified as held-to-maturity or available-for-sale. Fair value is estimated using quoted prices for similar securities, which the Company obtains from a third party vendor. 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 the Company to validate the vendor’s methodology as described above in available-for-sale securities.

Other investments

Other investments includes equity investments without readily determinable fair values (see discussion in “Fair Value of Financial Assets and Liabilities” section above).

Loans held for sale

Loans held for sale are carried at their fair value (see discussion in “Fair Value of Financial Assets and Liabilities” section above).

Loans and leases

Loans and leases are segregated by portfolio segments with similar financial characteristics. The fair values of loans and leases, 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, 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.

Accrued interest receivable

The carrying amounts of interest receivable approximate fair value.

Other assets

Other assets include the fair value of interest rate products, derivatives on the residential mortgage held for sale loan pipeline, and risk participation agreements (see discussion in “Fair Value of Financial Assets and Liabilities” section above).

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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 the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.

Off-balance sheet instruments

The fair value of off-balance sheet instruments, including swap guarantees of $ 11.5 million at September 30, 2022 and $ 13.1 million at December 31, 2021, respectively, and standby letters of credit, approximates the recorded net deferred fee amounts. Because letters of credit are generally not assignable by either the Company or the borrower, they only have value to the Company and the borrower. In determining the fair value of the swap guarantees, the Company assesses the underlying credit risk exposure for each borrower in a paying position to the third-party financial institution.

Accrued interest payable

The carrying amounts of interest payable approximate fair value.

Other liabilities

Financial instruments 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 financial instruments classified as Level 3:

September 30, 2022

Financial Instrument

Fair Value

Valuation Technique(s)

Unobservable Input

Range
(Weighted Average)

Other investments

25,122

Observed market comparable transactions

Period of observed transactions

May 2022

Other real estate owned

840

Fair market value of collateral

Costs to sell

10.0 %

Other assets (Risk participation agreements purchased)

Credit Value Adjustment

CDS Spread and Loss Given Default (LGD)

CDS spread: 110 - 250 bps

LGD: 30 %

Other liabilities (Risk participation agreements sold)

Credit Value Adjustment

CDS Spread and Loss Given Default (LGD)

CDS spread: 1 - 250 bps

LGD: 30 %

Other liabilities (Financial derivative related to
sales of certain Visa Class B shares)

17,577

Discounted cash flow

Timing of Visa litigation resolution

1.00 - 6.00 years ( 3.75 years or 4Q 2025)

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The book value and estimated fair value of the Company's financial instruments are as follows:


		September 30, 2022				December 31, 2021
(Dollars in thousands)	Fair Value Measurement	Book Value		Fair Value		Book Value		Fair Value
Financial assets:
Cash, cash equivalents, and restricted cash	Level 1	$	1,031,391	$	1,031,391	$	1,532,939	$	1,532,939
Investment securities available-for-sale	Level 2	4,153,615		4,153,615		5,205,311		5,205,311
Investment securities held-to-maturity, net	Level 2	1,121,895		1,041,163		90,642		94,131
Other investments	Level 3	25,122		25,122		10,518		10,518
Loans, held for sale	Level 2	61,671		61,671		113,349		113,349
Loans and leases, net (1)	Level 3	11,559,195		11,471,216		7,791,482		7,723,867
Stock in FHLB of Pittsburgh	Level 2	24,117		24,117		6,073		6,073
Accrued interest receivable	Level 2	63,393		63,393		41,596		41,596
Other assets	Level 2	163,229		163,229		5,153		5,153
Financial liabilities:
Deposits	Level 2	16,725,208		16,677,292		13,240,062		13,236,816
Borrowed funds	Level 2	374,367		347,388		239,477		225,119
Standby letters of credit	Level 3	596		596		674		674
Accrued interest payable	Level 2	5,568		5,568		736		736
Other liabilities	Levels 2, 3	179,435		179,435		23,291		23,291

(1) Includes reverse mortgage loans.

At September 30, 2022 and December 31, 2021 the Company had no commitments to extend credit measured at fair value.

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15. DERIVATIVE FINANCIAL INSTRUMENTS

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both economic conditions and its business operations. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions. The Corporation does not use derivative financial instruments for trading purposes.

Fair Values of Derivative Instruments

The table below presents the fair value of derivative financial instruments as well as their location on the unaudited Consolidated Statements of Financial Condition as of September 30, 2022.


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



Derivatives not designated as hedging instruments:
Interest rate products		$	1,658,840	Other assets	$	161,476
Interest rate products		1,658,840		Other liabilities	( 161,476 )
Interest rate lock commitments with customers		52,653		Other assets	861
Interest rate lock commitments with customers		16,583		Other liabilities	( 307 )
Forward sale commitments		44,808		Other assets	767
Forward sale commitments		23,286		Other liabilities	( 72 )
FX forwards		849		Other assets	40
FX forwards		169		Other liabilities	( 1 )
Risk participation agreements sold		52,702		Other liabilities	( 2 )
Risk participation agreements purchased		75,344		Other assets	85
Financial derivatives related to sales of certain Visa Class B shares		113,177		Other liabilities	( 17,577 )
Total derivatives		$	3,697,251		$	( 16,206 )

The table below presents the fair value of derivative financial instruments as well as their location on the Consolidated Statements of Financial Condition as of December 31, 2021.


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



Derivatives not designated as hedging instruments:
Interest rate products		$	54,834	Other assets	$	2,625
Interest rate products		54,834		Other liabilities	( 2,847 )
Risk participation agreements		4,214		Other liabilities	( 3 )
Interest rate lock commitments with customers		102,264		Other assets	1,991
Interest rate lock commitments with customers		12,813		Other liabilities	( 73 )
Forward sale commitments		63,664		Other assets	537
Forward sale commitments		67,032		Other liabilities	( 116 )
Financial derivatives related to sales of certain Visa Class B shares		113,177		Other liabilities	( 20,252 )
Total derivatives		$	472,832		$	( 18,138 )

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Derivatives Designated as Hedging Instruments:

Cash Flow Hedges of Interest Rate Risk

In 2020, the Company terminated its three interest rate derivatives that were designated as cash flow hedges for a net gain of $ 1.3 million, recognized in accumulated other comprehensive income. The derivatives were used to hedge the variable cash flows associated with a variable rate loan pool. Hedge accounting was discontinued, and the net gain in accumulated comprehensive income is reclassified into earnings when the transaction affects earnings. As the underlying hedged transaction continues to be probable, the $ 1.3 million net gain will be recognized into earnings on a straight-line basis over each derivative's original contract term. During the three and nine months ended September 30, 2022, less than $ 0.1 million and $ 0.2 million was reclassified into interest income. During the next twelve months, the Company estimates that an additional $ 0.2 million will be reclassified as an increase to interest income.

Derivatives Not Designated as Hedging Instruments:

Swap Guarantees

The Company entered into agreements with five unrelated financial institutions whereby those financial institutions entered into interest rate derivative contracts (interest rate swap transactions) directly with customers referred to them by the Company. Under the terms of the agreements, those financial institutions have recourse to us for any exposure created under each swap transaction, only in the event that the customer defaults on the swap agreement and the agreement is in a paying position to the third-party financial institution. This is a customary arrangement that allows us to provide access to interest rate swap transactions for our customers without creating the swap ourselves. These swap guarantees are accounted for as credit derivatives.

At September 30, 2022 and December 31, 2021, there were 237 and 261 variable-rate to fixed-rate swap transactions between the third-party financial institutions and the Company's customers, respectively. The initial notional aggregate amount was approximately $ 1.0 billion and $ 1.1 billion at September 30, 2022 and December 31, 2021, respectively. At September 30, 2022, the swap transactions remaining maturities ranged from under 1 year to 13 years. At September 30, 2022, 5 of these customer swaps were in a paying position to third parties for $ 1.6 million, with our swap guarantees having a fair value of $ 11.5 million. At December 31, 2021, 193 of these customer swaps were in a paying position to third parties for $ 35.8 million, with the Company's swap guarantees having a fair value of $ 13.1 million. However, for both periods, none of the Company's customers were in default of the swap agreements.

Customer Derivatives – Interest Rate Swaps

The Company enters into interest rate swaps with commercial loan customers wishing to manage interest rate risk. The Company then enters into corresponding swap agreements with swap dealer counterparties to economically hedge the exposure arising from these contracts. The interest rate swaps with both the customers and third parties are not designated as hedges under ASC 815, Derivatives and Hedging (ASC 815) and are marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by ASC 820. As of September 30, 2022, there were no fair value adjustments related to credit quality.

Derivative Financial Instruments from Mortgage Banking Activities

Derivative financial instruments related to mortgage banking activities are recorded at fair value and are not designated as accounting hedges. This includes commitments to originate certain fixed-rate residential mortgage loans to customers, also referred to as interest rate lock commitments. The Company may also enter into forward sale commitments to sell loans to investors at a fixed price at a future date and trade asset-backed securities to mitigate interest rate risk.

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The table below presents the effect of the derivative financial instruments on the unaudited Consolidated Statements of Income for the three and nine months ended September 30, 2022 and September 30, 2021.








	Amount of (Loss) or Gain Recognized in Income				Amount of (Loss) or Gain Recognized in Income				Location of Gain or (Loss) Recognized in Income
(Dollars in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
Derivatives not designated as hedging instruments	2022		2021		2022		2021
Interest rate lock commitments with customers	$	( 1,032 )	$	( 814 )	$	( 1,856 )	$	( 4,901 )	Mortgage banking activities, net
Forward sale commitments	1,097		( 287 )		5,120		$	3,095	Mortgage banking activities, net
Total	$	65	$	( 1,101 )	$	3,264	$	( 1,806 )

Foreign Exchange Forward Contracts

The Company enters into foreign exchange forward contracts (FX forwards) with customers to exchange one currency for another on an agreed date in the future at an agreed exchange rate. The Corporation then enters into corresponding FX forwards with swap dealer counterparties to economically hedge its exposure on the exchange rate component of the customer agreements. The FX forwards with both the customers and third parties are not designated as hedges under ASC 815 and are marked to market through earnings. Exposure to gains and losses on these contracts increase or decrease over their respective lives as currency exchange and interest rates fluctuate. As the FX forwards are structured to offset each other, changes to the underlying term structure of currency exchange rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by ASC 820. As of September 30, 2022, there were no fair value adjustments related to credit quality.

Risk Participation Agreements

The Company may enter into a risk participation agreement (RPA) with another institution as a means to assume a portion of the credit risk associated with a loan structure which includes a derivative instrument, in exchange for fee income commensurate with the risk assumed. This type of derivative is referred to as an “RPA sold.” In addition, in an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the Corporation has provided a loan structured with a derivative, the Corporation may purchase an RPA from an institution participating in the facility in exchange for a fee commensurate with the risk shared. This type of derivative is referred to as an “RPA purchased.”

Credit-risk-related Contingent Features

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 has minimum collateral posting thresholds with certain of its derivative counterparties, and has posted collateral of $ 0.9 million in securities and $ 5.3 million in cash against its obligations under these agreements which meets or exceeds the minimum collateral posting requirements. If the Company had breached any of these provisions at September 30, 2022, it could have been required to settle its obligations under the agreements at the termination value.

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16. 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. 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 the Company's segments are those that apply to its preparation of the accompanying unaudited Consolidated Financial Statements. Based on these criteria, the Company has identified three 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 regulators, 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 in the WSFS Bank segment.

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. Bryn Mawr Trust ® is our predominant Wealth Management brand, providing advisory, investment management and trustee services to institutions, affluent and high-net-worth individuals. WSFS Wealth ® Investments provides financial advisory services along with annuities 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. WSFS Institutional Services ® provides trustee, agency, bankruptcy administration, custodial and commercial domicile services to institutional, corporate clients and special purpose vehicles. BMT-DE and Christiana Trust DE merged on April 1, 2022 under The Bryn Mawr Trust Company of Delaware name. BMT-DE provides personal trust and fiduciary services to families and individuals across the U.S. and internationally. 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 Private Banking serves high-net-worth clients by delivering credit and deposit products and partnering with other Wealth Management businesses to provide comprehensive solutions to clients. BMTIA was a full-service insurance agency, through which the Bank offered insurance and related products and services to its customer base. This included casualty, property and allied insurance lines, as well as life insurance, annuities, medical insurance and accident and health insurance for groups and individuals. The BMTIA business was sold to Patriot Growth Insurance Services, LLC in June 2022.

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The following tables show segment results for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30, 2022								Three Months Ended September 30, 2021
(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	$	183,107	$	—	$	3,458	$	186,565	$	107,226	$	—	$	2,225	$	109,451
Noninterest income	17,585		15,416		29,650		62,651		15,896		11,201		15,516		42,613
Total external customer revenues	200,692		15,416		33,108		249,216		123,122		11,201		17,741		152,064
Inter-segment revenues:
Interest income	4,570		416		13,658		18,644		893		236		3,033		4,162
Noninterest income	6,906		431		222		7,559		4,044		322		184		4,550
Total inter-segment revenues	11,476		847		13,880		26,203		4,937		558		3,217		8,712
Total revenue	212,168		16,263		46,988		275,419		128,059		11,759		20,958		160,776
External customer expenses:
Interest expense	8,923		—		811		9,734		4,808		—		152		4,960
Noninterest expenses	104,817		9,646		18,454		132,917		80,398		7,531		8,517		96,446
Provision for (recovery of) credit losses	7,463		—		( 9 )		7,454		( 19,949 )		—		( 1,361 )		( 21,310 )
Total external customer expenses	121,203		9,646		19,256		150,105		65,257		7,531		7,308		80,096
Inter-segment expenses:
Interest expense	14,074		3,414		1,156		18,644		3,269		245		648		4,162
Noninterest expenses	653		1,185		5,721		7,559		506		1,162		2,882		4,550
Total inter-segment expenses	14,727		4,599		6,877		26,203		3,775		1,407		3,530		8,712
Total expenses	135,930		14,245		26,133		176,308		69,032		8,938		10,838		88,808
Income before taxes	$	76,238	$	2,018	$	20,855	$	99,111	$	59,027	$	2,821	$	10,120	$	71,968
Income tax provision							25,767								17,516
Consolidated net income							73,344								54,452
Net (loss) income attributable to noncontrolling interest							( 38 )								46
Net income attributable to WSFS							$	73,382							$	54,406
Supplemental Information
Capital expenditures for the period ended	$	3,213	$	16	$	—	$	3,229	$	1,717	$	—	$	—	$	1,717

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	Nine Months Ended September 30, 2022								Nine Months Ended September 30, 2021
(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	$	481,683	$	—	$	9,039	$	490,722	$	337,082	$	—	$	6,552	$	343,634
Noninterest income	63,833		37,500		93,921		195,254		61,526		32,116		45,811		139,453
Total external customer revenues	545,516		37,500		102,960		685,976		398,608		32,116		52,363		483,087
Inter-segment revenues:
Interest income	7,720		1,148		27,865		36,733		2,579		833		8,759		12,171
Noninterest income	20,103		1,220		569		21,892		11,529		924		1,100		13,553
Total inter-segment revenues	27,823		2,368		28,434		58,625		14,108		1,757		9,859		25,724
Total revenue	573,339		39,868		131,394		744,601		412,716		33,873		62,222		508,811
External customer expenses:
Interest expense	20,475		—		1,243		21,718		17,695		—		514		18,209
Noninterest expenses	361,949		25,383		54,091		441,423		241,422		22,117		24,558		288,097
Provision for (recovery of) credit losses	34,647		—		46		34,693		( 105,927 )		—		( 3,106 )		( 109,033 )
Total external customer expenses	417,071		25,383		55,380		497,834		153,190		22,117		21,966		197,273
Inter-segment expenses:
Interest expense	29,013		4,896		2,824		36,733		9,592		632		1,947		12,171
Noninterest expenses	1,789		3,436		16,667		21,892		2,024		3,353		8,176		13,553
Total inter-segment expenses	30,802		8,332		19,491		58,625		11,616		3,985		10,123		25,724
Total expenses	447,873		33,715		74,871		556,459		164,806		26,102		32,089		222,997
Income before taxes	$	125,466	$	6,153	$	56,523	$	188,142	$	247,910	$	7,771	$	30,133	$	285,814
Income tax provision							49,929								70,610
Consolidated net income							138,213								215,204
Net income attributable to noncontrolling interest							287								49
Net income attributable to WSFS							$	137,926							$	215,155
Supplemental Information
Capital expenditures for the period ended	$	7,649	$	16	$	—	$	7,665	$	4,722	$	—	$	—	$	4,722

The following table shows significant components of segment net assets as of September 30, 2022 and December 31, 2021:


	September 30, 2022								December 31, 2021
(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	$	436,447	$	559,371	$	35,573	$	1,031,391	$	1,039,046	$	477,806	$	16,087	$	1,532,939
Goodwill	753,586		—		130,051		883,637		452,629		—		20,199		472,828
Other segment assets	17,718,878		6,603		344,878		18,070,359		13,481,370		6,785		283,405		13,771,560
Total segment assets	$	18,908,911	$	565,974	$	510,502	$	19,985,387	$	14,973,045	$	484,591	$	319,691	$	15,777,327

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17. COMMITMENTS AND CONTINGENCIES

Secondary Market Loan Sales

The Company typically sells newly originated residential mortgage loans in the secondary market to mortgage loan aggregators and on a more limited basis, to GSEs such as FHLMC, FNMA, and the FHLB. Loans held for sale are reflected on the unaudited Consolidated Statements of Financial Condition at fair value with changes in the value reflected in the unaudited Consolidated Statements of Income. Gains and losses are recognized at the time of sale. The Company periodically retains the servicing rights on residential mortgage loans sold which results in monthly service fee income. The mortgage servicing rights are included in Intangible assets in the unaudited Consolidated Statements of Financial Condition. Otherwise, the Company sells loans with servicing released on a nonrecourse basis. Rate-locked loan commitments that the Company intends to sell in the secondary market are accounted for as derivatives under ASC 815.

The Company does not sell loans with recourse, except for standard loan sale contract provisions covering violations of representations and warranties and, under certain circumstances, early payment default by the borrower. These are customary repurchase provisions in the secondary market for residential mortgage loan sales. These provisions may include either an indemnification from loss or the repurchase of the loans. Repurchases and losses have been rare and no provision is made for losses at the time of sale. There were two repurchases for $ 0.8 million during the nine months ended September 30, 2022 and no repurchases during the same period in 2021.

Unfunded Lending Commitments

At September 30, 2022 and December 31, 2021, the allowance for credit losses of unfunded lending commitments was $ 12.2 million and $ 7.4 million, respectively. A provision expense of $ 0.7 million and $ 0.6 million was recognized during the three and nine months ended September 30, 2022, respectively, compared to a provision release of $ 0.4 million and $ 0.5 million during the three and nine months ended September 30, 2021, respectively.

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18. CHANGE IN ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

Accumulated other comprehensive income includes unrealized gains and losses on available-for-sale investments, unrealized gains and losses on cash flow hedges, as well as unrecognized prior service costs, transition costs, and actuarial gains and losses on defined benefit pension plans. Changes to accumulated other comprehensive (loss) income are presented, net of tax, as a component of stockholders’ equity. Amounts that are reclassified out of accumulated other comprehensive (loss) income are recorded on the unaudited Consolidated Statement of Income either as a gain or loss. Changes to accumulated other comprehensive (loss) income by component are shown, net of taxes, in the following tables for the period indicated:


(Dollars in thousands)	Net change in investment securities available-for-sale		Net change in investment securities held-to-maturity		Net change in defined benefit plan		Net change in fair value of derivatives used for cash flow hedges (1)		Net change in equity method investments		Total
Balance, June 30, 2022	$	( 395,213 )	$	( 119,649 )	$	( 4,746 )	$	189	$	541	$	( 518,878 )
Other comprehensive (loss) income	( 202,520 )		( 1 )		( 4 )		—		25		( 202,500 )

Less: Amounts reclassified from accumulated other comprehensive (loss) income	—		5,967		( 27 )		( 41 )		—		5,899
Net current-period other comprehensive (loss) income	( 202,520 )		5,966		( 31 )		( 41 )		25		( 196,601 )
Balance, September 30, 2022	$	( 597,733 )	$	( 113,683 )	$	( 4,777 )	$	148	$	566	$	( 715,479 )

Balance, June 30, 2021	$	14,147	$	232	$	( 4,828 )	$	423	$	264	$	10,238
Other comprehensive income (loss)	( 25,639 )		( 1 )		( 8 )		—		82		( 25,566 )
Less: Amounts reclassified from accumulated other comprehensive income (loss)	( 2 )		( 28 )		( 15 )		( 113 )		—		( 158 )
Net current-period other comprehensive income (loss)	( 25,641 )		( 29 )		( 23 )		( 113 )		82		( 25,724 )
Balance, September 30, 2021	$	( 11,494 )	$	203	$	( 4,851 )	$	310	$	346	$	( 15,486 )
(1) Cash flow hedges were terminated as of April 1, 2020


(Dollars in thousands)	Net change in investment securities available-for-sale		Net change in investment securities held-to-maturity		Net change in defined benefit plan		Net change in fair value of derivatives used for cash flow hedges (1)		Net change in equity method investments		Total
Balance, December 31, 2021	$	( 33,873 )	$	175	$	( 4,691 )	$	268	$	353	$	( 37,768 )
Other comprehensive (loss) income (2)	( 563,860 )		( 119,769 )		( 4 )		—		213		( 683,420 )

Less: Amounts reclassified from accumulated other comprehensive (loss) income	—		5,911		( 82 )		( 120 )		—		5,709
Net current-period other comprehensive (loss) income	( 563,860 )		( 113,858 )		( 86 )		( 120 )		213		( 677,711 )
Balance, September 30, 2022	$	( 597,733 )	$	( 113,683 )	$	( 4,777 )	$	148	$	566	$	( 715,479 )

Balance, December 31, 2020	$	59,882	$	276	$	( 4,788 )	$	646	$	( 9 )	$	56,007
Other comprehensive income (loss)	( 71,124 )		1		( 17 )		—		355		( 70,785 )
Less: Amounts reclassified from accumulated other comprehensive (loss) income	( 252 )		( 74 )		( 46 )		( 336 )		—		( 708 )
Net current-period other comprehensive (loss) income	( 71,376 )		( 73 )		( 63 )		( 336 )		355		( 71,493 )
Balance, September 30, 2021	$	( 11,494 )	$	203	$	( 4,851 )	$	310	$	346	$	( 15,486 )
(1) Cash flow hedges were terminated as of April 1, 2020
(2) Includes $ 119.8 million, net of tax, of unrealized losses on transferred investment securities from available-for-sale to held-to-maturity.

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The unaudited Consolidated Statements of Income were impacted by components of other comprehensive income as shown in the tables below:


	Three Months Ended September 30,				Affected line item in unaudited Consolidated Statements of Income
(Dollars in thousands)	2022		2021
Securities available for sale:
Realized gains on securities transactions	$	—	$	( 2 )	Securities gains, net
Income taxes	—		—		Income tax provision
Net of tax	—		( 2 )
Net unrealized holding losses (gains) on securities transferred between available-for-sale and held-to-maturity:
Amortization of net unrealized losses (gains) to income during the period	7,851		( 37 )		Net interest income
Income taxes	( 1,884 )		9		Income tax provision
Net of tax	5,967		( 28 )
Amortization of defined benefit pension plan-related items:
Prior service credits	( 19 )		( 22 )

Actuarial (gains) losses	( 17 )		2
Total before tax	( 36 )		( 20 )		Salaries, benefits and other compensation
Income taxes	9		5		Income tax provision
Net of tax	( 27 )		( 15 )




Net unrealized gains on terminated cash flow hedges:
Amortization of net unrealized gains to income during the period	( 54 )		( 149 )		Interest and fees on loans and leases
Income taxes	13		36		Income tax provision
Net of tax	( 41 )		( 113 )
Total reclassifications	$	5,899	$	( 158 )

	Nine Months Ended September 30,				Affected line item in unaudited Consolidated Statements of Operations
	2022		2021
Securities available-for-sale:
Realized gains on securities transactions	$	—	$	( 331 )	Securities gains, net
Income taxes	—		79		Income tax provision
Net of tax	—		( 252 )
Net unrealized holding losses (gains) on securities transferred between available-for-sale and held-to-maturity:
Amortization of net unrealized losses (gains) to income during the period	7,777		( 97 )		Net interest income
Income taxes	( 1,866 )		23		Income tax provision
Net of tax	5,911		( 74 )
Amortization of defined benefit pension plan-related items:
Prior service credits	( 57 )		( 66 )

Actuarial losses (gains)	( 51 )		5
Total before tax	( 108 )		( 61 )		Salaries, benefits and other compensation
Income taxes	26		15		Income tax provision
Net of tax	( 82 )		( 46 )




Net unrealized gains on terminated cash flow hedges:
Amortization of net unrealized gains to income during the period	( 158 )		( 442 )		Interest and fees on loans and leases
Income taxes	38		106		Income tax provision
Net of tax	( 120 )		( 336 )
Total reclassifications	$	5,709	$	( 708 )

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19. LEGAL AND OTHER PROCEEDINGS

In accordance with the current accounting standards for loss contingencies, the Company establishes reserves for litigation-related matters that arise in the ordinary course of its business activities when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss can be reasonably estimated. Litigation claims and proceedings of all types are subject to many uncertain factors that generally cannot be predicted with assurance. In addition, the Company's defense of litigation claims may result in legal fees, which it expenses as incurred.

There were no material changes or additions to other significant pending legal or other proceedings involving the Company other than those arising out of routine operations.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

WSFS Financial Corporation (WSFS, and together with its subsidiaries, the Company) is a savings and loan holding company headquartered in Wilmington, Delaware. Substantially all of our assets are held by our subsidiary, Wilmington Savings Fund Society, FSB (WSFS Bank or the Bank), one of the ten oldest bank and trust companies in the United States (U.S.) continuously operating under the same name. With $20.0 billion in assets and $61.4 billion in assets under management (AUM) and assets under administration (AUA) at September 30, 2022, WSFS Bank is the oldest and largest locally-managed bank and trust company headquartered in the Greater Philadelphia and Delaware region. As a federal savings bank that was formerly chartered as a state mutual savings bank, WSFS Bank enjoys a broader scope of permissible activities than most other financial institutions. A fixture in the community, we have been in operation for more than 190 years. In addition to our focus on stellar customer experience, we have continued to fuel growth and remain a leader in our community. We are a relationship-focused, locally-managed, community banking institution. Our mission is simple: “We Stand for Service.” Our strategy of “Engaged Associates, living our culture, enriching the communities we serve” focuses on exceeding customer expectations, delivering stellar experiences and building customer advocacy through highly-trained, relationship-oriented, friendly, knowledgeable and empowered Associates.

As of September 30, 2022, we had seven consolidated subsidiaries: WSFS Bank, WSFS Wealth Management, LLC (Powdermill ® ), WSFS Capital Management, LLC (West Capital), Cypress Capital Management, LLC (Cypress), WSFS SPE Services, LLC, The Bryn Mawr Trust Company of Delaware (BMT-DE), and 601 Perkasie, LLC. The Company also has three unconsolidated subsidiaries: WSFS Capital Trust III, Royal Bancshares Capital Trust I, and Royal Bancshares Capital Trust II . WSFS Bank has two wholly owned subsidiaries: Beneficial Equipment Finance Corporation (BEFC) and 1832 Holdings, Inc., and one majority-owned subsidiary, NewLane Finance Company (NewLane Finance ® ).

On January 1, 2022, WSFS and the Bank acquired certain subsidiaries in the merger of Bryn Mawr Bank Corporation (BMBC) with and into WSFS, and the merger of The Bryn Mawr Trust Company with and into the Bank (collectively, the BMBC Merger), pursuant to the agreement and plan of merger, by and between WSFS and BMBC, dated as of March 9, 2021 (the BMBC Merger Agreement) that are not named herein as they are not integral or significant to our business.

On April 1, 2022, WSFS completed the merger of Christiana Trust Company of Delaware ® and BMT-DE. The combined organization will retain and operate under The Bryn Mawr Trust Company of Delaware name. Additionally on April 1, 2022, Bryn Mawr Equipment Finance, Inc. merged with and into BEFC. On April 29, 2022, the portfolio of KCMI Capital, Inc. (KCMI), a specialized commercial lending unit acquired in the BMBC merger and not core to our overall lending strategy, was sold at par value for $55.5 million. Finally, on June 30, 2022, the business of BMT Insurance Advisors (BMTIA), was sold to Patriot Growth Services, LLC.

Our banking business had a total loan and lease portfolio of $11.7 billion as of September 30, 2022, which was funded primarily through commercial relationships and retail and customer generated deposits. We have built a $9.3 billion commercial loan and lease portfolio by recruiting seasoned commercial lenders in our markets, offering the high level of service and flexibility typically associated with a community bank and through acquisitions. We also offer a broad variety of consumer loan products and retail securities brokerage through our retail branches, in addition to mortgage and title services through our branches and WSFS Mortgage ® , our mortgage banking company specializing in a variety of residential mortgage and refinancing solutions. Our leasing business, conducted by NewLane Finance ® , originates small business leases and provides commercial financing to businesses nationwide, targeting various equipment categories including technology, software, office, medical, veterinary and other areas. In addition, NewLane Finance ® offers captive insurance through its subsidiary, Prime Protect.

Our Cash Connect ® business is a premier provider of ATM vault cash, smart safe (safes that automatically accept, validate, record and hold cash in a secure environment) and other cash logistics services through strategic partnerships with several of the largest networks, manufacturers and service providers in the ATM industry. Cash Connect ® services non-bank and WSFS-branded ATMs and retail safes nationwide, and manages approximately $1.7 billion in total cash and services approximately 27,000 non-bank ATMs and 7,300 smart safes nationwide. Cash Connect ® provides related services such as online reporting and ATM cash management, predictive cash ordering and reconcilement services, armored carrier management, loss protection, ATM processing equipment sales and deposit safe cash logistics. Cash Connect ® also supports over 600 branded ATMs for WSFS Bank Customers, which is one of the largest branded ATM networks in our market.

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Our Wealth Management business 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. Combined, these businesses had $61.4 billion of AUM and AUA at September 30, 2022. Bryn Mawr Trust ® is our predominant Wealth Management brand, providing advisory, investment management and trustee services to institutions, affluent and high-net-worth individuals. WSFS Wealth ® Investments provides financial advisory services along with annuities 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. WSFS Institutional Services ® provides trustee, agency, bankruptcy administration, custodial and commercial domicile services to institutional, corporate clients and special purpose vehicles. BMT-DE 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 Private Banking serves high-net-worth clients by delivering credit and deposit products and partnering with other Wealth Management businesses to provide comprehensive solutions to clients. As of September 30, 2022, we service our customers primarily from 119 offices located in Pennsylvania (61), Delaware (39), New Jersey, (17), Virginia (1) and Nevada (1), our ATM network, our website at www.wsfsbank.com and our mobile app.

Highlights and Other Notables Items for Three and Nine Months Ended September 30, 2022

• Three Months Ended September 30, 2022

◦ WSFS repurchased 1,664,550 shares of common stock under the Company's share repurchase program at an average price of $48.66 per share, for an aggregate purchase price of $81.0 million.

◦ The Board of Directors approved a $0.15 per share quarterly dividend.

◦ The allowance for credit losses (ACL) on loans and leases increased $4.2 million, due to loan growth and the impact from the economic forecast, partially offset by upgrades to criticized and classified loans.

◦ Valuation adjustment of $1.8 million related to our derivative liability established from the sale of 360,000 Visa Class B shares in 2Q 2020.

◦ Net corporate development and restructuring expenses of $2.6 million primarily related to the BMBC Merger.

• Nine Months Ended September 30, 2022

◦ We successfully closed the BMBC Merger on January 1, 2022. The total value of consideration paid of $908.0 million and $497.2 million in net assets acquired resulted in $410.8 million of goodwill recognized, as adjusted.

◦ The BMBC Merger initially added $3.5 billion of net loans and leases, $4.1 billion of deposits, and $23.6 billion of AUM and AUA.

◦ We recorded $41.7 million of corporate development expenses and $22.8 million of restructuring expenses during the nine months ended September 30, 2022, primarily related to the BMBC Merger.

◦ During the nine months ended September 30, 2022, the ACL increased $51.7 million, primarily due to an initial ACL of $49.6 million recorded in connection with the BMBC Merger. The initial $49.6 million ACL recorded includes $23.5 million related to non-purchase credit deteriorated (PCD) loans, or the initial provision for credit loss recorded, and $26.1 million related to PCD loans, which did not have an initial income statement impact, but adjusted the amortized cost basis of the loans at acquisition (i.e., a balance sheet gross-up).

◦ $1.1 billion of available-for-sale ("AFS") mortgage-backed securities ("MBS"), or 19% of the AFS portfolio, were designated as held-to-maturity ("HTM") to limit the capital impact from the rising interest rate environment.

◦ KCMI loan portfolio was sold at par value for $55.5 million.

◦ The business of BMTIA was sold to Patriot Growth Insurance Services, LLC.

◦ During the nine months ended September 30, 2022, WSFS repurchased 3,789,137 shares of common stock under the Company's share repurchase program at an average price of $46.68 per share, for an aggregate purchase price of $176.9 million.

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FINANCIAL CONDITION

Total assets increased $4.2 billion to $20.0 billion at September 30, 2022 compared to December 31, 2021. This increase is primarily comprised of the following:

• Net loans and leases, excluding loans held for sale, increased $3.8 billion primarily driven by the $3.5 billion of loans and leases acquired in the BMBC Merger partially offset by the initial $49.6 million ACL recorded in connection with the BMBC Merger .

• Goodwill and intangible assets increased $410.8 million and $58.4 million, respectively, primarily due to the BMBC Merger. See Notes 3 and 10 to the unaudited Consolidated Financial Statements for additional information.

• Other assets increased $392.3 million primarily due to a $214.0 million increase on our tax asset related to unrealized losses on AFS securities and $153.6 million of BMT acquired assets.

• Total cash and cash equivalents decreased $501.5 million, primarily due to decreased deposits and increased lending activity, offset by $573.8 million acquired in the BMBC Merger.

• Loans held for sale decreased $51.7 million during the nine months ended September 30, 2022 driven by a combination of lower origination volume and higher loans sales in our mortgage banking business during the nine months ended September 30, 2022.

• Total investment securities decreased $20.4 million:

◦ Investment securities, held-to-maturity increased $1.0 billion primarily due to the designation of $1.1 billion (book value) of AFS MBS to HTM to limit the capital impact from the rising interest rate environment.

◦ Investment securities, available-for-sale decreased $1.1 billion during the nine months ended September 30, 2022, primarily due to the designation of AFS MBS to HTM as mentioned above, repayments of $911.1 million and decreased market values on available-for-sale securities of $741.9 million. These decreases were partially offset by $1.2 billion in purchases and $500.4 million acquired in the BMBC merger.

Total liabilities increased $4.0 billion to $17.9 billion at September 30, 2022 compared to December 31, 2021. This increase is primarily comprised of the following:

• Total deposits increased $3.5 billion, primarily driven by $4.1 billion of deposits assumed in the BMBC Merger, partially offset by declines due to a reduction in customer balances spread across most business lines.

• Other liabilities increased $419.4 million primarily due to a net increase of $323.4 million in collateral held on derivatives and derivative liabilities driven by rising interest rates and $124.6 million of BMT acquired liabilities, partially offset by $34.5 million lower accrued expenses reflecting the timing of settlement for debt security trades.

• Senior and subordinated debt increased $100.3 million due to the addition of subordinated notes assumed in the BMBC Merger.

For further information, see "Notes to the Consolidated Financial Statements (Unaudited)."

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Loans and Leases

The following table shows the remaining contractual maturity and rate sensitivity of the loan portfolio by loan category as of September 30, 2022. Loans may be pre-paid, so the actual maturity may differ from the contractual maturity. Prepayments tend to be highly dependent upon the interest rate environment. Loans having no stated maturity or repayment schedule are reported in the "Less than One Year" category.


(Dollars in thousands)	Less than One Year		One to Five Years		Five to Fifteen Years		Over Fifteen Years		Total
Commercial and industrial (1)
Interest rate:
Fixed	$	15,475	$	495,658	$	197,630	$	43,797	$	752,560
Adjustable	184,329		1,167,164		467,945		62,788		1,882,226
Total	$	199,804	$	1,662,822	$	665,575	$	106,585	$	2,634,786
Owner-occupied commercial
Interest rate:
Fixed	$	25,640	$	389,029	$	421,245	$	181,722	$	1,017,636
Adjustable	30,759		254,097		421,692		64,407		770,955
Total	$	56,399	$	643,126	$	842,937	$	246,129	$	1,788,591
Commercial mortgages
Interest rate:
Fixed	$	64,581	$	802,113	$	423,043	$	161,740	$	1,451,477
Adjustable	61,080		651,929		1,032,873		83,020		1,828,902
Total	$	125,661	$	1,454,042	$	1,455,916	$	244,760	$	3,280,379
Construction
Interest rate:
Fixed	$	1,155	$	34,486	$	38,734	$	6,216	$	80,591
Adjustable	177,825		530,558		232,429		6,800		947,612
Total	$	178,980	$	565,044	$	271,163	$	13,016	$	1,028,203
Commercial small business leases
Interest rate:
Fixed	$	5,205	$	469,546	$	59,941	$	—	$	534,692
Adjustable	—		—		—		—		—
Total	$	5,205	$	469,546	$	59,941	$	—	$	534,692
Residential (2)
Interest rate:
Fixed	$	7,582	$	25,044	$	117,753	$	471,941	$	622,320
Adjustable (3)	—		427		27,236		108,610		136,273
Total	$	7,582	$	25,471	$	144,989	$	580,551	$	758,593
Consumer
Interest rate:
Fixed	$	247	$	350,159	$	387,132	$	379,972	$	1,117,510
Adjustable	4,282		74,580		30,370		450,386		559,618
Total	$	4,529	$	424,739	$	417,502	$	830,358	$	1,677,128
Total loans and leases	$	578,160	$	5,244,790	$	3,858,023	$	2,021,399	$	11,702,372

(1) Includes $ 4.2 million of PPP loans.

(2) Excludes reverse mortgages at fair value of $ 3.0 million.

(3) Includes hybrid adjustable-rate mortgages.

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Deposits

The following table shows the maturities of certificates of deposit of $250,000 or more as of September 30, 2022:


(Dollars in thousands)
Maturity Period	September 30, 2022
Less than 3 months	$	60,704
Over 3 months to 6 months	17,287
Over 6 months to 12 months	48,388
Over 12 months	41,338
Total	$	167,717

The estimated amount of total uninsured deposits as of September 30, 2022 was $10.3 billion as compared to $7.5 billion at December 31, 2021.

LIQUIDITY AND CAPITAL RESOURCES

Capital Resources

Stockholders’ equity of WSFS increased $164.5 million between December 31, 2021 and September 30, 2022. This increase was primarily due to $908.0 million of WSFS common shares issued in connection with the BMBC Merger and $137.9 million of earnings, offset by a decrease of $677.7 million in accumulated other comprehensive income from market value decreases on investment securities resulting from the current rising interest rate environment, $176.9 million from the repurchase of shares of common stock under our stock repurchase plan, and the payment of dividends on our common stock of $26.5 million.

During the third quarter of 2022, our Board of Directors approved a quarterly cash dividend of $0.15 per share of common stock. This dividend will be paid on November 18, 2022 to stockholders of record as of November 4, 2022.

Book value per share of common stock was $33.96 at September 30, 2022, a decrease of $6.77 from $40.73 at December 31, 2021. Tangible book value per share of common stock (a non-GAAP financial measure) was $17.55 at September 30, 2022, a decrease of $11.69 from $29.24 at December 31, 2021. These decreases are primarily due to increases in our outstanding shares, goodwill, and intangible assets as a result of the BMBC Merger. We believe tangible book value per common share helps management and investors better understand and assess changes from period to period in stockholders’ equity exclusive of changes in intangible assets. This non-GAAP measure should be considered in addition to results prepared in accordance with Generally Accepted Accounting Principles in the U.S. (GAAP), and is not a substitute for, or superior to, GAAP results. For a reconciliation of tangible book value per common share to book value per share in accordance with GAAP, see "Reconciliation of Non-GAAP Measure to GAAP Measure."

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The table below compares the Bank's and the Company’s consolidated capital position to the minimum regulatory requirements as of September 30, 2022:


	Consolidated Capital				Minimum For Capital Adequacy Purposes				To be Well-Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Percent		Amount		Percent		Amount		Percent
Total Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB	$	2,064,364	13.34	%	$	1,238,255	8.00	%	$	1,547,819	10.00	%
WSFS Financial Corporation	2,163,310		13.94		1,241,408		8.00		1,551,760		10.00
Tier 1 Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB	1,915,598		12.38		928,691		6.00		1,238,255		8.00
WSFS Financial Corporation	1,844,792		11.89		931,056		6.00		1,241,408		8.00
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB	1,915,598		12.38		696,518		4.50		1,006,082		6.50
WSFS Financial Corporation	1,844,792		11.89		698,292		4.50		1,008,644		6.50
Tier 1 Leverage Capital
Wilmington Savings Fund Society, FSB	1,915,598		9.76		784,766		4.00		980,957		5.00
WSFS Financial Corporation	1,844,792		9.39		785,658		4.00		982,073		5.00

Under the prompt corrective action regime, regulators have established five capital tiers: well-capitalized, adequately-capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized. A depository institution’s capital tier depends on its capital levels in relation to various relevant capital measures, which include leverage and risk-based capital measures and certain other factors. Depository institutions that are not classified as well-capitalized are subject to various restrictions, which may include restrictions on capital distributions, payment of management fees, acceptance of brokered deposits and other operating activities.

Regulatory capital requirements for the Bank and the Company include a minimum common equity Tier 1 capital ratio of 4.50% of risk-weighted assets, a Tier 1 capital ratio of 6.00% of risk-weighted assets, a minimum Total capital ratio of 8.00% of risk-weighted assets and a minimum Tier 1 leverage capital ratio of 4.00% of average assets. In order to avoid limits on capital distributions and discretionary bonus payments, the Bank and the Company must maintain a capital conservation buffer of 2.5% of common equity Tier 1 capital over each of the risk-based capital requirements. As of September 30, 2022, the Bank and the Company were in compliance with the regulatory capital requirements and met or exceeded the amounts required to be considered “well-capitalized” as defined in the regulations.

Not included in the Bank’s capital, WSFS separately held $239.4 million in cash to support share repurchases, potential dividends, acquisitions, strategic growth plans and other general corporate purposes.

As part of our adoption of the Current Expected Credit Losses (CECL) methodology in 2020, we elected to phase in the day-one adverse effects on regulatory capital that may result from the adoption of CECL over a three-year period, as permitted under a final rule of the federal banking agencies.

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Liquidity

We manage our liquidity and funding needs through our Treasury function and our Asset/Liability Committee. We have a policy that separately addresses liquidity, and management monitors our adherence to policy limits. Also, liquidity risk management is a primary area of examination by the banking regulators.

Funding sources to support growth and meet our liquidity needs include cash from operations, retail deposit programs, loan repayments, FHLB borrowings, repurchase agreements, access to the Federal Reserve Discount Window, and access to the brokered deposit market as well as other wholesale funding avenues. In addition, we have a large portfolio of high-quality, liquid investments, primarily short-duration mortgage-backed securities, that provide a near-continuous source of cash flow to meet current cash needs, or can be sold to meet larger discrete needs for cash. We believe these sources are sufficient to meet our funding needs as well as maintain required and prudent levels of liquidity over the next twelve months and beyond.

As of September 30, 2022, the Corporation has $1.0 billion in cash, cash equivalents, and restricted cash. Additionally, the maximum borrowing capacity with the FHLB was $4.9 billion with an unused borrowing availability of $4.9 billion. Borrowing availability at the Federal Reserve Discount Window was $213.3 million, and borrowing availability through the overnight fed funds lines totaled $1.3 billion.

Our primary cash contractual obligations relate to operating leases, long-term debt, credit obligations, and data processing. At September 30, 2022, we had $245.4 million in total contractual payments for ongoing leases that have remaining lease terms of less than one year to 39 years, which includes renewal options that are exercised at our discretion. For additional information on our operating leases see Note 9 to the unaudited Consolidated Financial Statements. At September 30, 2022, we had no FHLB advances, and obligations for principal payments on long-term debt included $67.0 million for our trust preferred borrowings, due June 1, 2035, and $150.0 million for our senior debt, due December 15, 2030. In connection with the BMBC Merger, we assumed debt in the form of $30.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2025 and $70.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2027. We also acquired Royal Bancshares Capital Trust I (Trust I) and Royal Bancshares Capital Trust II (Trust II) (collectively, the Trusts), which were utilized for the sole purpose of issuing and selling capital securities representing preferred beneficial interests. Although WSFS owns an aggregate of $774.0 thousand of the common securities of Trust I and Trust II, the Trusts are not consolidated into the Company’s Consolidated Financial Statements. Inclusive of the fair value marks, WSFS assumed junior subordinated debentures owed to the Trusts with a carrying value of $11.7 million each, totaling $23.4 million. The Company records its investments in the Trusts’ common securities of $387.0 thousand each as investments in unconsolidated entities and records dividend income upon declaration by Trust I and Trust II. The Company has fully and unconditionally guaranteed all of the obligations of the Trusts, including any distributions and payments on liquidation or redemption of the capital securities.

We are also contractually obligated to make interest payments on our long-term debt through their respective maturities. For additional information regarding long-term debt, see Note 12 to the unaudited Consolidated Financial Statements. At September 30, 2022, the Company had total commitments to extend credit of $3.6 billion, which are generally one year commitments.

In 2022, we plan to invest approximately $13.0 million in our Delivery Transformation initiative to increase adoption and usage of digital channels aligned with our strategy. Our organization is committed to product and service innovation as a means to drive growth and to stay ahead of changing customer demands and emerging competition. We are focused on developing and maintaining a strong “culture of innovation” that solicits, captures, prioritizes and executes innovation initiatives, including feedback from our customers, as well as leveraging technology from product creation to process improvement.

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NONPERFORMING ASSETS

Nonperforming assets include nonaccruing loans, OREO and restructured loans. Nonaccruing loans are those on which we no longer accrue interest. Loans are placed on nonaccrual status immediately if, in the opinion of management, collection is doubtful, or when principal or interest is past due 90 days or more and the value of the collateral is insufficient to cover principal and interest. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed and charged against interest income. In addition, the amortization of net deferred loan fees is suspended when a loan is placed on nonaccrual status. Subsequent cash receipts are applied either to the outstanding principal balance or recorded as interest income, depending on management’s assessment of the ultimate collectability of principal and interest. Past due loans are defined as loans contractually past due 90 days or more as to principal or interest payments but which remain in accrual status because they are considered well secured and in the process of collection.

The following table shows our nonperforming assets and past due loans at the dates indicated:


(Dollars in thousands)	September 30, 2022			December 31, 2021
Nonaccruing loans:
Commercial and industrial	$	4,837		$	8,211
Owner-occupied commercial	339			811
Commercial mortgages	5,060			2,070
Construction	5,158			12
Residential	2,023			3,125
Consumer	1,952			2,380
Total nonaccruing loans	19,369			16,609
Other real estate owned	840			2,320
Restructured loans (1)(6)	17,108			14,204
Total nonperforming assets	$	37,317		$	33,133
Past due loans:
Commercial	$	10,351		$	1,357
Residential	1,094			—
Consumer (2)	13,309			8,634
Total past due loans	$	24,754		$	9,991
Ratio of allowance for credit losses to total loans and leases (3)	1.14		%	1.19		%

Ratio of nonaccruing loans to total gross loans and leases (4)	0.17			0.21
Ratio of nonperforming assets to total assets	0.19			0.21
Ratio of allowance for credit losses to nonaccruing loans	755			569
Ratio of allowance for credit losses to total nonperforming assets (5)	392			285

(1) Accruing loans only, which includes acquired nonimpaired loans. Nonaccruing Troubled Debt Restructurings (TDRs) are included in their respective categories of nonaccruing loans.

(2) Includes U.S. government guaranteed student loans with little risk of credit loss.

(3) Represents amortized cost basis for loans, leases and held-to-maturity securities.

(4) Total loans exclude loans held for sale and reverse mortgages.

(5) Excludes acquired impaired loans.

(6) Balance excludes COVID-19 modifications.

Nonperforming assets increased $4.2 million between December 31, 2021 and September 30, 2022. This increase was primarily due to the transfer in of one commercial relationship totaling $5.5 million and one CRE relationship totaling $2.6 million during the period. These inflows were partially offset by a partial charge-off on the CRE relationship of $0.5 million, several smaller payoffs and the continued collection of principal payments on the majority of these loans. The ratio of nonperforming assets to total assets decreased from 0.21% at December 31, 2021 to 0.19% at September 30, 2022.

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The following table summarizes the changes in nonperforming assets during the periods indicated:


	Nine Months Ended September 30,
(Dollars in thousands)	2022		2021
Beginning balance	$	33,133	$	60,508
Additions	24,513		42,159
Collections	(15,909)		(29,669)
Transfers to accrual	(922)		(494)
Charge-offs	(3,498)		(20,674)
Ending balance	$	37,317	$	51,830

The timely identification of problem loans is a key element in our strategy to manage our loan portfolio. Problem loans are all criticized, classified and nonperforming loans and other real estate owned. Timely identification enables us to take appropriate action and accordingly, minimize losses. An asset review system established to monitor the asset quality of our loans and investments in real estate portfolios facilitates the identification of problem assets. In general, this system uses guidelines established by federal regulation.

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INTEREST RATE SENSITIVITY

Our primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on net interest income and capital, while maximizing the yield/cost spread on our asset/liability structure. Interest rates are partly a function of decisions by the Federal Open Market Committee (FOMC) on the target range for the federal funds rate, and these decisions are sometimes difficult to anticipate. In response to the economic and financial effects of COVID-19, the FOMC reduced interest rates through 2020 and 2021 and instituted quantitative easing measures as well as domestic and global capital market support programs. The FOMC raised the federal funds target rate six times in 2022 for a total of 375 basis points, and has suggested it may continue raising interest rates further in 2022. In order to manage the risks associated with changes or possible changes in interest rates, we rely primarily on our asset/liability structure.

Our primary tool for achieving our asset/liability management strategies is to match maturities or repricing periods of interest rate-sensitive assets and liabilities to promote a favorable interest rate spread and mitigate exposure to fluctuations in interest rates. We regularly review our interest rate sensitivity and adjust the sensitivity within acceptable tolerance ranges. At September 30, 2022, interest-earning assets exceeded interest-bearing liabilities that mature or reprice within one year (interest-sensitive gap) by $1.8 billion. Our interest-sensitive assets as a percentage of interest-sensitive liabilities within the one-year window was 125.53% at September 30, 2022 compared with 120.40% at December 31, 2021. Likewise, the one-year interest-sensitive gap as a percentage of total assets was 8.82% at September 30, 2022 compared with 7.28% at December 31, 2021.

The repricing and maturities of our interest-rate sensitive assets and interest-rate sensitive liabilities at September 30, 2022 are shown in the following table:


(Dollars in thousands)	Less than One Year			One to Five Years		Five to Fifteen Years		Over Fifteen Years		Total
Interest-rate sensitive assets:
Loans:
Commercial loans and leases (2)	$	4,377,434		$	1,383,350	$	309,062	$	9,782	$	6,079,628
Commercial mortgage loans (2)	2,289,686			812,905		186,985		4,379		3,293,955
Residential (1)(2)	161,847			280,689		264,627		81,090		788,253
Consumer (2)	902,140			552,287		184,645		3,846		1,642,918
Loans held for sale (2)	63,564			1,671		2,274		1,500		69,009
Investment securities, available-for-sale	760,150			2,058,029		2,132,124		194,734		5,145,037
Investment securities, held-to-maturity	91,667			333,596		528,240		168,402		1,121,905
Other interest-earning assets	24,117			—		—		—		24,117
Total interest-rate sensitive assets:	$	8,670,605		$	5,422,527	$	3,607,957	$	463,733	$	18,164,822
Interest-rate sensitive liabilities:
Interest-bearing deposits:
Interest-bearing demand	$	1,730,882		$	—	$	—	$	—	$	1,730,882
Savings	1,270,812			—		—		—		1,270,812
Money market	2,911,497			—		—		—		2,911,497
Customer time deposits	747,654			311,708		2,029		—		1,061,391

Trust preferred borrowings	90,393			—		—		—		90,393
Senior and subordinated debt	100,143			148,112		—		—		248,255
Other borrowed funds	55,893			—		—		—		55,893
Total interest-rate sensitive liabilities:	$	6,907,274		$	459,820	$	2,029	$	—	$	7,369,123

Excess of interest-rate sensitive assets over interest-rate liabilities (interest-rate sensitive gap)	$	1,763,331		$	4,962,707	$	3,605,928	$	463,733	$	10,795,699
One-year interest-rate sensitive assets/interest-rate sensitive liabilities	125.53		%
One-year interest-rate sensitive gap as a percent of total assets	8.82		%

(1) Includes reverse mortgage loans

(2) Loan balances exclude nonaccruing loans, deferred fees and costs

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Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from interest rate risk inherent in our lending, investing, and funding activities. To that end, we actively monitor and manage our interest rate risk exposure. One measure evaluates the impact of an immediate change in interest rates in 100 basis point increments on the economic value of equity ratio. The economic value of the equity ratio is defined as the economic value of the estimated cash flows from assets and liabilities as a percentage of economic value of cash flows from total assets.

The following table shows the estimated impact of immediate changes in interest rates on our net interest margin and economic value of equity ratio at the specified levels at September 30, 2022 and December 31, 2021:


	September 30, 2022		December 31, 2021
% Change in Interest Rate (Basis Points)	% Change in Net Interest Margin (1)	Economic Value of Equity (2)	% Change in Net Interest Margin (1)	Economic Value of Equity (2)
+300	20.4%	29.53%	25.1%	24.27%
+200	13.5%	28.36%	16.6%	23.07%
+100	6.8%	27.08%	8.2%	21.76%
+50	3.4%	25.60%	4.1%	20.33%
+25	1.7%	25.38%	2.0%	20.05%
—	—%	25.14%	—%	19.73%
-25	(1.8)%	24.88%	(1.4)%	19.28%
-50	(3.7)%	24.57%	(2.2)%	18.72%
-100	(7.7)%	23.85%	(3.8)%	17.36%
' -200 (3)	(15.9)%	22.08%	NMF	NMF
' -300 (4)	NMF	NMF	NMF	NMF

(1) The percentage difference between net interest margin in a stable interest rate environment and net interest margin as projected under the various rate change environments.

(2) The economic value of equity ratio in a stable interest rate environment and the economic value of equity ratio as projected under the various rate change environments.

(3) At December 31, 2021 , s ensitivity indicated by a decrease of 200 basis points is not deemed meaningful (NMF) given the low absolute level of interest rates in the period.

(4) Sensitivity indicated by a decrease of 300 basis points is not deemed meaningful (NMF) given the low absolute level of interest rates in the periods presented.

We also engage in other business activities that are sensitive to changes in interest rates. For example, mortgage banking revenues and expenses can fluctuate with changing interest rates. These fluctuations are difficult to model and estimate.

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RESULTS OF OPERATIONS

Three months ended September 30, 2022: Net income for the three months ended September 30, 2022 was $73.4 million, compared to $54.4 million for the three months ended September 30, 2021.

• Net interest income increased $72.3 million during the three months ended September 30, 2022 compared to the three months ended September 30, 2021, primarily due to an increase from the balance sheet size and mix from the BMBC Merger and the rising interest rate environment, offset by lower purchase accounting accretion and the impact of PPP loans. See “Net Interest Income” for further information.

• Our provision for credit losses for the three months ended September 30, 2022 increased $28.8 million compared to the three months ended September 30, 2021, primarily due to the release of ACL reserves that occurred in 2021 as a result of positive economic forecasts following the impact of the COVID-19 pandemic. See “Allowance for Credit Losses” for further information.

• Noninterest income for the three months ended September 30, 2022 increased $20.0 million compared to the three months ended September 30, 2021, due to increased Wealth Management revenue that is primarily attributable to the BMBC Merger, higher other banking fees, Cash Connect ® , and capital markets income, partially offset by a decline in our mortgage banking business. See “Noninterest Income” for further information.

• Noninterest expense increased $36.5 million during the three months ended September 30, 2022 compared to the three months ended September 30, 2021, primarily due to higher costs after the BMBC Merger. These increases include salaries and benefits and variable operating costs. See “Noninterest Expense” for further information.

• Income tax provision for the three months ended September 30, 2022 increased $8.3 million compared to the three months ended September 30, 2021, primarily due to the $27.1 million increase in pre-tax income.

Nine months ended September 30, 2022: Net income for the nine months ended September 30, 2022 was $137.9 million, compared to $215.2 million for the nine months ended September 30, 2021.

• Net interest income increased $143.6 million during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily due to the reasons described above. See “Net Interest Income” for further information.

• Our provision for credit losses for the nine months ended September 30, 2022 increased $143.7 million compared to the nine months ended September 30, 2021, due to the reasons described above and the initial provision for credit losses of $23.5 million recorded in connection with the BMBC Merger. See “Allowance for Credit Losses” for further information.

• Noninterest income for the nine months ended September 30, 2022 increased $55.8 million compared to the nine months ended September 30, 2021, primarily due to the reasons described above. See “Noninterest Income” for further information.

• Noninterest expense increased $153.3 million during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, due to the reasons described above, including increases in net corporate development and restructuring costs, salaries and benefits, and variable operating costs. See “Noninterest Expense” for further information.

• Income tax provision for the nine months ended September 30, 2022 decreased $20.7 million compared to the nine months ended September 30, 2021, primarily due to the $97.7 million decrease in pre-tax income.

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Net Interest Income

The following tables provide information concerning the balances, yields and rates on interest-earning assets and interest-bearing liabilities during the periods indicated:


	Three months ended September 30,
	2022						2021
(Dollars in thousands)	Average Balance		Interest		Yield/ Rate (1)		Average Balance		Interest		Yield/ Rate (1)
Assets:
Interest-earning assets:
Loans: (2)
Commercial loans and leases	$	4,895,972	$	67,060	5.45	%	$	3,623,187	$	43,335	4.75	%
Commercial real estate loans	4,262,599		53,096		4.94		2,788,963		28,454		4.05
Residential loans	769,151		8,379		4.36		601,998		9,245		6.14
Consumer loans	1,594,673		23,384		5.82		1,109,188		11,639		4.16
Loans held for sale	66,103		968		5.81		90,635		787		3.44
Total loans and leases	11,588,498		152,887		5.24		8,213,971		93,460		4.52
Mortgage-backed securities (3)	5,243,169		28,338		2.16		3,397,297		13,947		1.64
Investment securities (3)	361,113		1,981		2.57		319,226		1,353		1.89
Other interest-earning assets	460,124		3,359		2.90		1,697,840		691		0.16
Total interest-earning assets	$	17,652,904	$	186,565	4.21	%	$	13,628,334	$	109,451	3.19	%
Allowance for credit losses	(143,943)						(125,830)
Cash and due from banks	242,734						145,547
Cash in non-owned ATMs	603,780						481,755
Bank-owned life insurance	100,863						33,349
Other noninterest-earning assets	1,779,411						974,417
Total assets	$	20,235,749					$	15,137,572
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand	$	3,370,158	$	2,179	0.26	%	$	2,698,391	$	573	0.08	%
Savings	2,287,227		185		0.03		1,931,433		139		0.03
Money market	3,833,113		2,907		0.30		2,761,222		780		0.11
Customer time deposits	1,083,290		1,230		0.45		1,045,746		1,646		0.62
Total interest-bearing customer deposits	10,573,788		6,501		0.24		8,436,792		3,138		0.15
Brokered deposits	24,184		142		2.33		58,645		412		2.79
Total interest-bearing deposits	10,597,972		6,643		0.25		8,495,437		3,550		0.17
Federal Home Loan Bank advances	4,979		42		3.35		—		—		—
Trust preferred borrowings	90,361		951		4.18		67,011		316		1.87
Senior and subordinated debt	248,332		2,061		3.32		147,730		1,089		2.95
Other borrowed funds (4)	39,745		37		0.37		23,324		5		0.09
Total interest-bearing liabilities	$	10,981,389	$	9,734	0.35	%	$	8,733,502	$	4,960	0.23	%
Noninterest-bearing demand deposits	6,319,755						4,177,984
Other noninterest-bearing liabilities	589,817						320,421
Stockholders’ equity	2,347,178						1,907,868
Noncontrolling interest	(2,390)						(2,203)
Total liabilities and stockholders’ equity	$	20,235,749					$	15,137,572
Excess of interest-earning assets over interest-bearing liabilities	$	6,671,515					$	4,894,832
Net interest income			$	176,831					$	104,491
Interest rate spread					3.86	%					2.96	%
Net interest margin					3.99	%					3.05	%

(1) Weighted average yields for tax-exempt securities and loans have been computed on a tax-equivalent basis.

(2) Average balances are net of unearned income and include nonperforming loans.

(3) Includes securities available-for-sale at fair value.

(4) Includes federal funds purchased.

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	Nine months ended September 30,
	2022						2021
(Dollars in thousands)	Average Balance		Interest		Yield/ Rate (1)		Average Balance		Interest		Yield/ Rate (1)
Assets:
Interest-earning assets:
Loans: (2)
Commercial loans and leases	$	4,860,079	$	176,476	4.87	%	$	3,885,392	$	141,994	4.89	%
Commercial real estate loans	4,263,906		137,183		4.30		2,794,540		85,922		4.11
Residential loans	799,980		26,810		4.47		660,858		33,380		6.73
Consumer loans	1,472,878		57,900		5.26		1,130,554		36,425		4.31
Loans held for sale	69,068		2,741		5.31		127,535		3,236		3.39
Total loans and leases	11,465,911		401,110		4.68		8,598,879		300,957		4.68
Mortgage-backed securities (3)	5,253,248		78,828		2.00		2,964,437		37,157		1.67
Investment securities	325,960		4,642		2.21		324,620		4,185		1.95
Other interest-earning assets	1,124,922		6,142		0.73		1,407,422		1,335		0.13
Total interest-earning assets	$	18,170,041	$	490,722	3.62	%	$	13,295,358	$	343,634	3.46	%
Allowance for credit losses	(138,532)						(181,947)
Cash and due from banks	240,421						145,571
Cash in non-owned ATMs	560,202						448,244
Bank-owned life insurance	100,659						32,615
Other noninterest-earning assets	1,728,847						990,187
Total assets	$	20,661,638					$	14,730,028
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand	$	3,384,443	$	3,701	0.15	%	$	2,610,795	$	1,722	0.09	%
Savings	2,276,861		506		0.03		1,895,221		438		0.03
Money market	3,969,219		5,063		0.17		2,733,068		2,435		0.12
Customer time deposits	1,132,489		3,826		0.45		1,080,149		5,865		0.73
Total interest-bearing customer deposits	10,763,012		13,096		0.16		8,319,233		10,460		0.17
Brokered deposits	40,866		441		1.44		86,050		1,364		2.12
Total interest-bearing deposits	10,803,878		13,537		0.17		8,405,283		11,824		0.19
Federal Home Loan Bank advances	1,678		42		3.35		243		5		2.63
Trust preferred borrowings	90,313		2,146		3.18		67,011		957		1.91
Senior debt	248,448		5,939		3.19		207,186		5,408		3.48
Other borrowed funds (4)	36,401		54		0.20		21,561		15		0.09
Total interest-bearing liabilities	$	11,180,718	$	21,718	0.26	%	$	8,701,284	$	18,209	0.28	%
Noninterest-bearing demand deposits	6,466,720						3,879,948
Other noninterest-bearing liabilities	526,945						324,011
Stockholders’ equity	2,489,860						1,827,007
Noncontrolling interest	(2,605)						(2,222)
Total liabilities and stockholders’ equity	$	20,661,638					$	14,730,028
Excess of interest-earning assets over interest-bearing liabilities	$	6,989,323					$	4,594,074
Net interest and dividend income			$	469,004					$	325,425
Interest rate spread					3.36	%					3.18	%
Net interest margin					3.46	%					3.28	%

(1) Weighted average yields for tax-exempt securities and loans have been computed on a tax-equivalent basis.

(2) Average balances are net of unearned income and include nonperforming loans.

(3) Includes securities available-for-sale at fair value.

(4) Includes federal funds purchased.

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Three months ended September 30, 2022: During the three months ended September 30, 2022, net interest income increased $72.3 million from the three months ended September 30, 2021 primarily due to a $74.6 million increase from the balance sheet size and mix from the BMBC Merger and the rising interest rate environment, offset by $2.6 million from the impact of PPP loans and a $2.2 million decrease in purchase accounting accretion. Net interest margin was 3.99% for the third quarter of 2022, a 94 basis point increase compared to 3.05% for the third quarter of 2021 due to a favorable increase of 70 basis points from rising interest rate environment and 38 basis points from the balance sheet size and mix, offset by reductions of 9 basis points from lower purchase accounting accretion and 5 basis points from PPP loans.

Nine months ended September 30, 2022: During the nine months ended September 30, 2022, net interest income increased $143.6 million from the nine months ended September 30, 2021. This increase included $174.0 million from balance sheet size and mix from the BMBC Merger and the rising interest rate environment, partially offset by $17.7 million of PPP income recognized during the nine months ended September 30, 2021 and a $12.7 million decrease in purchase accounting accretion. Net interest margin was 3.46% for the nine months ended September 30, 2022, an 18 basis point increase compared to 3.28% for the nine months ended September 30, 2021 reflecting a 42 basis point increase due to balance sheet size and mix and the rising interest rate environment, partially offset by a 16 basis points decrease from lower purchase accounting accretion and 8 basis points from PPP loans.

The following table provides certain information regarding changes in net interest income attributable to changes in the volumes of interest-earning assets and interest-bearing liabilities and changes in the rates for the periods indicated. For each category of interest-earning assets and interest-bearing liabilities, information is provided on the changes that are attributable to: (i) changes in volume (change in volume multiplied by prior year rate); (ii) changes in rates (change in rate multiplied by prior year volume on each category); and (iii) net change (the sum of the change in volume and the change in rate). Changes due to the combination of rate and volume changes (changes in volume multiplied by changes in rate) are allocated proportionately between changes in rate and changes in volume.


Nine Months Ended September 30,	2022 vs. 2021
(Dollars in thousands)	Volume		Yield/Rate		Net
Interest Income:
Loans:
Commercial loans and leases (1)	$	35,458	$	(976)	$	34,482
Commercial mortgage loans	47,118		4,143		51,261
Residential	8,978		(15,548)		(6,570)
Consumer	12,428		9,047		21,475
Loans held for sale	(2,412)		1,917		(495)
Mortgage-backed securities	33,179		8,492		41,671
Investment securities (2)	14		443		457
Other interest-earning assets	(503)		5,310		4,807
Favorable (unfavorable)	134,260		12,828		147,088
Interest expense:
Deposits:
Interest-bearing demand	609		1,370		1,979
Money market	1,367		1,261		2,628
Savings	68		—		68
Customer time deposits	450		(2,489)		(2,039)
Brokered certificates of deposits	(573)		(350)		(923)
FHLB advances	36		2		38
Trust preferred borrowings	408		781		1,189
Senior and subordinated debt	1,222		(691)		531
Other borrowed funds	14		25		39
Unfavorable (favorable)	3,601		(91)		3,510
Net change, as reported	$	130,659	$	12,919	$	143,578

(1) Includes a tax-equivalent income adjustment related to commercial loans.

(2) Includes a tax-equivalent income adjustment related to municipal bonds.

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Allowance for Credit Losses

We maintain the allowance for credit losses at an appropriate level based on our assessment of estimable and expected losses in the loan portfolio. Our allowance for credit losses is based on our historical loss experience that includes the inherent risk of our loans and various other factors including but not limited to, collateral values, trends in asset quality, level of delinquent loans and concentrations. Further, regional and national economic forecasts are considered in our expected credit losses. Our evaluation is based on a review of the portfolio and requires significant, complex and difficult judgments.

During the three months ended September 30, 2022, we recorded a provision for credit losses of $7.5 million, a net change of $28.8 million, as compared with the recovery of credit losses of $21.3 million for the three months ended September 30, 2021. The increase is primarily due to the release of ACL reserves in 2021 from positive economic forecasts following the impact of the COVID-19 pandemic.

During the nine months ended September 30, 2022, we recorded a provision for credit losses of $34.7 million, a net change of $143.7 million, as compared with the recovery of credit losses of $109.0 million for the nine months ended September 30, 2021. The increase was primarily due to the reasons described above and the initial provision for credit losses of $23.5 million recorded in connection with the BMBC Merger.

The allowance for credit losses increased to $146.2 million at September 30, 2022 from $94.5 million at December 31, 2021. The increase was primarily due to an initial ACL of $49.6 million recorded in connection with the BMBC Merger. The initial $49.6 million ACL recorded includes $23.5 million related to non-PCD loans, or the initial provision for credit loss recorded, and $26.1 million related to PCD loans, which does not have an initial income statement impact, but adjusts the amortized cost basis of the loans at acquisition (i.e., a balance sheet gross-up). The ratio of allowance for credit losses to total loans and leases was 1.14% at September 30, 2022 and 1.19% at December 31, 2021.

The following tables detail the allocation of the ACL and show our net charge-offs (recoveries) by portfolio category:


(Dollars in thousands)	Commercial and Industrial (1)			Owner- occupied Commercial			Commercial Mortgages			Construction			Residential (2)			Consumer (3)			Total
As of September 30, 2022
Allowance for credit losses	$	59,884		$	6,003		$	21,534		$	6,499		$	4,818		$	47,457		$	146,195
% of ACL to total ACL	41		%	5		%	15		%	4		%	3		%	32		%	100		%
Loan portfolio balance	$	3,169,478		$	1,788,591		$	3,280,379		$	1,028,203		$	758,593		$	1,677,128		$	11,702,372
% to total loans and leases	27		%	15		%	28		%	9		%	7		%	14		%	100		%
Three months ended September 30, 2022
Charge-offs	$	5,120		$	—		$	544		$	—		$	—		$	1,834		$	7,498
Recoveries	3,194			4			101			653			207			114			4,273
Net charge-offs (recoveries)	$	1,926		$	(4)		$	443		$	(653)		$	(207)		$	1,720		$	3,225
Average loan balance	$	3,098,451		$	1,797,521		$	3,294,284		$	968,315		$	766,320		$	1,594,674		$	11,519,565
Ratio of net charge-offs (recoveries) to average gross loans	0.25		%	NMF			0.05		%	(0.27)		%	(0.11)		%	0.43		%	0.11		%
Nine months ended September 30, 2022
Charge-offs	$	11,308		$	179		$	581		$	—		$	186		$	4,062		$	16,316
Recoveries	4,667			271			223			653			737			663			7,214
Net charge-offs (recoveries)	$	6,641		$	(92)		$	358		$	(653)		$	(551)		$	3,399		$	9,102
Average loan balance	$	3,017,771		$	1,842,307		$	3,332,108		$	931,799		$	796,323		$	1,472,879		$	11,393,186
Ratio	0.29		%	(0.01)		%	0.01		%	(0.09)		%	(0.09)		%	0.31		%	0.11		%

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

(2) Excludes reverse mortgages.

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

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(Dollars in thousands)	Commercial and Industrial (1)			Owner- occupied Commercial			Commercial Mortgages			Construction			Residential (2)			Consumer (3)			Total
As of December 31, 2021
Allowance for credit losses	$	49,967		$	4,574		$	11,623		$	1,903		$	3,352		$	23,088		$	94,507
% of ACL to total ACL	53		%	5		%	12		%	2		%	4		%	24		%	100		%
Loan portfolio balance	$	2,270,319		$	1,341,707		$	1,881,510		$	687,213		$	542,733		$	1,158,573		$	7,882,055
% to total loans and leases	28		%	17		%	24		%	9		%	7		%	15		%	100		%
Year ended December 31, 2021
Charge-offs	$	23,592		$	83		$	73		$	2,473		$	—		$	2,094		$	28,315
Recoveries	8,756			160			269			—			789			1,131			11,105
Net charge-offs (recoveries)	$	14,836		$	(77)		$	(196)		$	2,473		$	(789)		$	963		$	17,210
Average loan balance	$	2,463,933		$	1,337,883		$	1,994,995		$	775,246		$	628,411		$	1,134,569		$	8,335,037
Ratio of net charge-offs (recoveries) to average gross loans	0.60		%	(0.01)		%	(0.01)		%	0.32		%	(0.13)		%	0.08		%	0.21		%

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

(2) Excludes reverse mortgages.

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

See Note 8 to the unaudited Consolidated Financial Statements and Nonperforming Assets above for further information.

Noninterest Income

Three months ended September 30, 2022: During the three months ended September 30, 2022, noninterest income was $62.7 million, an increase of $20.0 million from $42.6 million during the three months ended September 30, 2021. The increase was driven by a $14.2 million increase in Wealth Management revenue, of which $12.3 million was attributable to the combination with Bryn Mawr Trust. In addition, year-over-year increase included $6.5 million of other banking fees, including fees associated with our consumer lending partnerships, gain on sale of SBA loans and traditional bank service fees, $4.2 million in Cash Connect ® , and $0.8 million in capital markets income. Partially offsetting the increase was a $4.2 million decline in mortgage banking fees primarily resulting from the decline in refinancing originations compared to the historically higher levels in 3Q 2021.

Nine months ended September 30, 2022: During the nine months ended September 30, 2022, noninterest income was $195.3 million, an increase of $55.8 million from $139.5 million during the nine months ended September 30, 2021. This increase reflects a $48.3 million increase in Wealth Management revenue, of which $42.1 million was attributable to the combination with Bryn Mawr Trust, $12.1 million in other banking fees as described above, $5.8 million in capital markets income, and $5.4 million from Cash Connect ® , partially offset by a $12.2 million decrease in mortgage banking activities as described above.

For further information, see Note 4 to the unaudited Consolidated Financial Statements.

Noninterest Expense

Three months ended September 30, 2022 : During the three month ended September 30, 2022, noninterest expense was $132.9 million, an increase of $36.5 million from $96.4 million for the three months ended September 30, 2021. The increase was primarily due to higher costs after the BMBC Merger. These higher costs included $19.0 million in salaries and benefits and $8.7 million of higher variable operating costs, including $2.1 million from Cash Connect ® .

Nine months ended September 30, 2022: During the nine months ended September 30, 2022, noninterest expense was $441.4 million, an increase of $153.3 million from $288.1 million for the nine months ended September 30, 2021. The increase is due to the same reasons described above, which included net corporate development and restructuring costs of $58.2 million, salaries and benefits of $52.5 million, and higher variable operating costs of $27.7 million.

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Income Taxes

We and our subsidiaries file a consolidated federal income tax return and separate state income tax returns. Income taxes are accounted for in accordance with ASC 740, Income Taxes , which requires the recording of deferred income taxes for tax consequences of temporary differences. We recorded income tax expense of $25.8 million and $49.9 million during the three and nine months ended September 30, 2022 compared to income tax expense of $17.5 million and $70.6 million for the same period in 2021.

Our effective tax rate was 26.0% and 26.5% for the three and nine months ended September 30, 2022 compared to 24.3% and 24.7% for the same period in 2021. The effective tax rate for both the three and nine months ended September 30, 2022 increased primarily due to higher state tax expense resulting from the acquisition of BMT. In addition, we recognized $0.4 million of tax expense related to nondeductible acquisition costs during the nine months ended September 30, 2022 combined with $1.9 million of tax expense related to nondeductible costs incurred from the sale of the BMTIA business during 2022.

The effective tax rate reflects the recognition of certain tax benefits in the financial statements including those benefits from tax-exempt interest income, federal low-income housing tax credits, research and development tax credits and excess tax benefits from recognized stock compensation. These tax benefits are offset by the tax effect of stock-based compensation expense related to incentive stock options, nondeductible acquisition costs and a provision for state income tax expense. We frequently analyze our projections of taxable income and make adjustments to our provision for income taxes accordingly.

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RECONCILIATION OF NON-GAAP MEASURE TO GAAP MEASURE

The following table provides a reconciliation of tangible book value per share of common stock to book value per share of common stock, the most directly comparable GAAP financial measure. We believe this measure helps management and investors better understand and assess changes from period to period in stockholders’ equity exclusive of changes in intangible assets. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, and is not a substitute for, or superior to, GAAP results.


(Dollars and share amounts in thousands, except per share amounts)	September 30, 2022		December 31, 2021
Stockholders’ equity of WSFS	$	2,103,593	$	1,939,099
Less: Goodwill and other intangible assets	1,016,413		547,231
Tangible common equity (numerator)	$	1,087,180	$	1,391,868
Shares of common stock outstanding (denominator)	61,949		47,609
Book value per share of common stock	$	33.96	$	40.73
Goodwill and other intangible assets	16.41		11.49
Tangible book value per share of common stock	$	17.55	$	29.24

CRITICAL ACCOUNTING ESTIMATES

The preparation of the unaudited Consolidated Financial Statements in accordance with U.S. GAAP requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenue and expenses. We regularly evaluate these estimates and assumptions including those related to the allowance for credit losses, business combinations, deferred taxes, fair value measurements and goodwill and other intangible assets. We base our estimates on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances. These form the basis for making judgments on the carrying value of certain assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Although our current estimates contemplate current economic conditions and how we expect them to change in the future, for the remainder of 2022, it is possible that actual conditions may be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Actual results may differ from these estimates under different assumptions or conditions. The following critical accounting policy involves more significant judgments and estimates. We have reviewed this critical accounting policy and estimates with the Audit Committee.

Allowance for Credit Losses

We maintain an allowance for credit losses (ACL) which represents our best estimate of expected losses in our financial assets, which include loans, leases and held-to-maturity debt securities. We establish our allowance in accordance with guidance provided in ASC 326, Financial Instruments – Credit Losses. The ACL includes two primary components: (i) an allowance established on financial assets which share similar risk characteristics collectively evaluated for credit losses (collective basis), and (ii) an allowance established on financial assets which do not share similar risk characteristics with any loan segment and is individually evaluated for credit losses (individual basis). We consider the determination of the allowance for credit losses to be critical because it requires significant judgment reflecting our best estimate of expected credit losses based on our historical loss experience, current conditions and economic forecasts. Our evaluation is based upon a continuous review of our financial assets, with consideration given to evaluations resulting from examinations performed by regulatory authorities. The allowance for credit losses increased to $146.2 million at September 30, 2022 from $94.5 million at December 31, 2021. The increase was primarily due to an initial ACL of $49.6 million recorded in connection with the BMBC Merger. See Note 8 to the unaudited Consolidated Financial Statements for further discussion of the ACL.

The calculation of expected credit losses is determined using a single scenario third-party economic forecast to adjust the calculated historical loss rates of the portfolio segments to incorporate the effects of current and future economic conditions. The determination of the appropriate level of the ACL inherently involves a high degree of subjectivity and requires us to make significant estimates, including modeling methodology, historical loss experience, relevant available information from internal and external sources relating to qualitative adjustment factors, prepayment speeds and reasonable and supportable forecasts about future economic conditions. The Company's economic forecast considers the general health of the economy, the interest rate environment, real estate pricing and market risk.

The ACL may increase or decrease due to changes in economic conditions affecting borrowers and macroeconomic variables that our financial assets are more susceptible to, including unforeseen events such as natural disasters and pandemics, new information regarding existing financial assets, identification of additional problems assets, the fair value of underlying collateral, and other factors. These changes, both within and outside the Company’s control, may frequently update and have a material impact to our financial results.

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Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses on our financial assets, and therefore the appropriateness of the ACL, could change significantly. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall ACL because a wide variety of factors and inputs are considered in these estimates and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across the Company’s portfolio mix and segmentation. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. As of September 30, 2022, the Company believes that its ACL was adequate.

Business Combinations

We account for business combinations under ASC 805, Business Combinations using the acquisition method of accounting and record the identifiable assets acquired, liabilities assumed, consideration paid, and any non-controlling interests of the acquired business at fair value at the acquisition date. The excess of consideration paid over the fair value of the net assets acquired is recorded as goodwill. The fair values are preliminary estimates subject to adjustments during the measurement period, which does not exceed one year after acquisition. The application of business combination principles, including the determination of the fair value of net assets acquired, requires the use of significant estimates and assumptions under ASC 820, Fair Value Measurement. See Note 3 to the unaudited Consolidated Financial Statements.

Determining estimated fair value requires a significant amount of judgment and estimates. If our assumptions change or errors are determined in its calculations, the fair value could materially change resulting in a change in our goodwill or identifiable net assets acquired, including identified intangible assets. As of September 30, 2022, the Company believes that the fair value of the assets acquired, liabilities assumed, consideration paid, and any non-controlling interests of the acquired business at fair value at the acquisition date was appropriately determined in accordance with GAAP.

RECENT REGULATORY DEVELOPMENTS

Recent regulatory developments at September 30, 2022 did not significantly change from our recent regulatory developments at December 31, 2021, which are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021, except as noted below.

FDIC Deposit Insurance Assessment Rates

On October 18, 2022 the FDIC adopted a final rule to increase initial base deposit insurance assessment rates for insured depository institutions by 2 basis points, beginning with the first quarterly assessment period of 2023. The increased assessment rate schedules would remain in effect unless and until the reserve ratio of the Deposit Insurance Fund meets or exceeds 2 percent. As a result of the new rule, the FDIC insurance costs of insured depository institutions, including WSFS Bank, would generally increase.

Community Reinvestment Act

On May 5, 2022 the federal banking agencies issued a proposed rule that would substantially revise how they evaluate an insured depository institution’s record of satisfying the credit needs of its entire communities, including low- and moderate-income individuals and neighborhoods, under the Community Reinvestment Act (CRA). If the proposed rule is finalized as proposed, it may become more challenging and/or costly for WSFS Bank to achieve an “Outstanding” or “Satisfactory” CRA rating, which could negatively impact our ability to obtain regulatory approval for an acquisition or branch expansion.

Transition from London Inter-Bank Offered Rate (LIBOR)

In 2014, a committee of private-market derivative participants and their regulators, the Alternative Reference Rate Committee (ARRC), was convened by the Federal Reserve to identify an alternative reference interest rate to replace LIBOR. In June 2017, the ARRC announced the Secured Overnight Funding Rate (SOFR), a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, as its preferred alternative to LIBOR. The United Kingdom Financial Conduct Authority (FCA), ceased publishing most LIBOR settings as of January 1, 2022, however, the FCA will continue to publish five U.S. LIBOR settings through mid-2023. The Federal Reserve has continued to encourage banks to transition away from LIBOR as soon as practicable and the federal banking agencies have encouraged banking organizations to cease entering into new contracts that use U.S. LIBOR as a reference rate by no later than December 31, 2021, and to ensure existing contracts have robust fallback language that includes a clearly defined alternative reference rate. The Federal Reserve Bank of New York has published SOFR rates on a daily basis since April 2018 and has published SOFR "term rates" daily since early 2020. The ARRC and other institutions continue to take steps to advance SOFR as an alternative benchmark. In July 2020, the federal banking agencies issued guidance for banking organizations on managing the transition to an alternative reference rate; for the agencies, however, SOFR is not the exclusive alternative.

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The International Swaps and Derivatives Association, which develops standardized language for the derivatives contracts that we enter into, has developed language that took effect in January 2021 replacing LIBOR with alternative risk-free benchmark rates, including SOFR for derivative contracts denominated in U.S. dollars. In 2021 the ARRC announced the SOFR program, which created a phased transition for switching derivative trading conventions from USD LIBOR to SOFR for multiple financial instruments during the second half of 2021. The program was intended to migrate the market from LIBOR and create liquidity in SOFR.

Given LIBOR’s extensive use across financial markets, the transition away from LIBOR presents various risks and challenges to financial markets and institutions, including to the Company. The Company’s commercial and consumer businesses issue, trade, and hold various products that are indexed to LIBOR. As of September 30, 2022, the Company had approximately $2.9 billion of loans and $2.1 billion of derivatives that are utilized for customer guarantees, indexed to LIBOR, that mature after planned cessation in June of 2023. In addition, the Company had approximately $193.0 million of debt securities outstanding that are indexed to LIBOR (either currently or in the future) as of September 30, 2022. The Company had one investment security totaling $0.5 million, and no repurchase and resale agreements or FHLB advances indexed to LIBOR as of September 30, 2022.

Due to the uncertainty surrounding the future of LIBOR, it is expected that the transition will span several reporting periods through June 2023. A cross-functional team from Finance, Lending, Risk and IT is leading our efforts to monitor this activity and evaluate the related risks and potential process changes arising from the transition from LIBOR. An internal risk assessment was completed and the cross-functional team is working towards the migration of our existing contracts and system implementation. Our variable or floating rate instruments currently use LIBOR and give us discretion to determine a replacement benchmark rate if LIBOR becomes unavailable. In the first quarter of 2022, the Bank began utilizing Term SOFR as a replacement to LIBOR. Term SOFR was identified as the primary successor for 1 month and 3 month LIBOR due to operational similarities and ease of conversion. We are still considering the appropriate transition for our legacy contracts; however, we have begun to shift new products primarily to Term SOFR and are actively migrating the existing LIBOR indexed loan portfolio away from the LIBOR index.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information required by this Item is incorporated herein by reference to the information provided in Part I Item 2 (Interest Rate Sensitivity) of this Quarterly Report on Form 10-Q.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. Based on their evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934), our principal executive officer and principal financial officer have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q such disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b) Changes in internal control over financial reporting. There was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting during the three months ended September 30, 2022.

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

The information required by this Item is incorporated herein by reference to the information provided in Note 19 – Legal and Other Proceedings to the unaudited Consolidated Financial Statements.

Item 1A. Risk Factors

There have not been any material changes to the risk factors previously disclosed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, previously filed with the Securities and Exchange Commission.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the first quarter of 2020, the Board of Directors of the Company approved a share repurchase program authorizing the repurchase of 7,594,977 shares of common stock, or 15% of its outstanding shares as of March 31, 2020. During the second quarter of 2022, the Board of Directors of the Company approved an additional share repurchase authorization under the program of 6,358,727 shares of common stock, or 10% of its outstanding shares as of June 30, 2022. Under the program, repurchases may be made from time to time in the open market or through negotiated transactions, subject to market conditions and other factors, and in accordance with applicable securities laws. The program is consistent with our intent to return a minimum of 35% of annual net income to stockholders through dividends and share repurchases while maintaining capital ratios in excess of “well-capitalized” regulatory benchmarks.

The following table represents information with respect to repurchases of common stock made by the Company during the three months ended September 30, 2022.



Month	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2022 - July 30, 2022	84,900	$	40.81	84,900	8,530,401
August 1, 2022 - August 31, 2022	749,465	49.72		749,465	7,780,936
September 1, 2022 - September 30, 2022	830,185	48.51		830,185	6,950,751
Total	1,664,550	$	48.66	1,664,550

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit Number						Description of Document

31.1						Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32						Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS						XBRL Instance Document *
101.SCH						XBRL Schema Document *
101.CAL						XBRL Calculation Linkbase Document *
101.LAB						XBRL Labels Linkbase Document *
101.PRE						XBRL Presentation Linkbase Document *
101.DEF						XBRL Definition Linkbase Document *
104						The cover page of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, filed with the SEC on November 4, 2022, is formatted in Inline XBRL.

* Submitted as Exhibits 101 to this Quarterly Report on Form 10-Q are documents formatted in XBRL (Extensible Business Reporting Language). Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						WSFS FINANCIAL CORPORATION

Date: November 4, 2022						/s/ Rodger Levenson
						Rodger Levenson
						Chairman, President and Chief Executive Officer
						(Principal Executive Officer)

Date: November 4, 2022						/s/ Dominic C. Canuso
						Dominic C. Canuso
						Executive Vice President and
						Chief Financial Officer
						(Principal Financial and Accounting Officer)

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Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II. Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

Exhibits

31.1 Certification of CEO pursuant to Section302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of CFO pursuant to Section302 of the Sarbanes-Oxley Act of 2002 32 Certification pursuant to 18 U.S.C. Section1350, as adopted pursuant to Section906 of the Sarbanes-Oxley Act of2002

WSFS 10-Q Quarter ended Sept. 30, 2022

Exhibits