WSFS Financial Corporation

11/06/2024 | Press release | Distributed by Public on 11/06/2024 13:26

Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)

wsfs-20240930
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, 2024
OR
☐ 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 x 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: 58,897,850 shares as of October 31, 2024.
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, 2024 and 2023
5
Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2024 and 2023
6
Consolidated Statements of Financial Condition as of September 30, 2024 and December 31, 2023
7
Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months Ended September 30, 2024 and 2023
8
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023
10
Notes to the Consolidated Financial Statements for the Three and Nine Months Ended September 30, 2024
12
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
53
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
68
Item 4.
Controls and Procedures
68
PART II. Other Information
Item 1.
Legal Proceedings
68
Item 1A.
Risk Factors
68
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
68
Item 3.
Defaults upon Senior Securities
68
Item 4.
Mine Safety Disclosures
68
Item 5.
Other Information
69
Item 6.
Exhibits
69
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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, and exhibits hereto, contains estimates, predictions, opinions, projections and other "forward-looking statements" as that phrase is defined in the Private Securities Litigation Reform Act of 1995. Such statements include, without limitation, references to the Company's predictions or expectations of future business or financial performance as well as its goals and objectives for future operations, financial and business trends, business prospects and management's outlook or expectations for earnings, revenues, expenses, capital levels, liquidity levels, asset quality or other future financial or business performance, strategies or expectations. The words "believe," "expect," "anticipate," "plan," "estimate," "target," "project" and similar expressions, among others, generally identify forward-looking statements. Such forward-looking statements are based on various assumptions (some of which may be beyond the Company's control) and are subject to risks and uncertainties (which change over time) and other factors which could cause actual results to differ materially from those currently anticipated. Such risks and uncertainties include, but are not limited to:
•difficult market conditions and unfavorable economic trends in the United States generally and in financial markets, particularly in the markets in which the Company operates and in which its loans are concentrated, including difficult and unfavorable conditions and trends related to housing markets, costs of living, unemployment levels, interest rates, supply chain issues, inflation, and economic growth;
•the impacts related to or resulting from bank failures and other economic and industry volatility, including potential increased regulatory requirements and costs and potential impacts to macroeconomic conditions;
•changes in market interest rates, which may increase funding costs and/or 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, which could impact market confidence in our operations;
•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;
•the credit risk associated with the substantial amount of commercial real estate, commercial and industrial, and construction and land development 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 success of the Company's growth plans;
•failure of the financial and/or operational controls of the Company's Cash Connect®and/or Wealth Management segments;
•negative perceptions or publicity with respect to the Company generally and, in particular, the Company's trust and wealth management business;
•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 remote working arrangements;
•the Company's ability to recruit and retain key Associates;
•the effects of weather, including climate change, and natural disasters such as floods, droughts, wind, tornadoes and hurricanes as well as effects from geopolitical instability, armed conflicts, public health crises and man-made disasters including terrorist attacks;
•the effects of regional or national civil unrest (including any resulting branch or ATM closures or damage);
•possible changes in the speed of loan prepayments by the Company's Customers and loan origination or sales volumes;
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•possible changes in market valuations and/or the speed of prepayments of mortgage-backed securities (MBS) due to changes in the interest rate environment and the related acceleration of premium amortization on prepayments in the event that prepayments accelerate;
•regulatory limits on the Company's ability to receive dividends from its subsidiaries and pay dividends to its stockholders;
•any reputation, credit, interest rate, market, operational, litigation, legal, liquidity, regulatory and compliance risk resulting from developments related to any of the risks discussed above;
•any compounding effects or unexpected interactions of the risks discussed above; and
•other risks and uncertainties, including those discussed herein under the heading "Risk Factors" and in other documents filed by the Company with the Securities and Exchange Commission (SEC) from time to time.
The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. The Company disclaims any duty to revise or update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company for any reason, except as specifically required by law.
As used in this Quarterly Report on Form 10-Q, the terms "WSFS", "the Company", "registrant", "we", "us", and "our" mean WSFS Financial Corporation and its subsidiaries, on a consolidated basis, unless the context indicates otherwise.
The following are registered trademarks of the Company: Bryn Mawr Trust®, Cash Connect®, NewLane Finance®, Powdermill®Financial Solutions, WSFS Institutional Services®, WSFS Mortgage®and WSFS Wealth®Investments. Any other trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.
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WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands, except per share and share data) 2024 2023 2024 2023
Interest income:
Interest and fees on loans and leases $ 235,977 $ 218,903 $ 691,495 $ 620,511
Interest on mortgage-backed securities 25,348 26,654 77,029 81,310
Interest and dividends on investment securities:
Taxable 699 699 2,098 2,103
Tax-exempt 1,485 1,481 4,453 4,496
Other interest income 9,875 3,402 25,168 10,871
273,384 251,139 800,243 719,291
Interest expense:
Interest on deposits 80,647 57,255 230,135 142,501
Interest on Federal Home Loan Bank advances 1,472 167 2,139 5,135
Interest on senior and subordinated debt 2,446 2,453 7,336 7,360
Interest on federal funds purchased 31 185 72 1,324
Interest on trust preferred borrowings 1,749 1,764 5,255 4,954
Interest on other borrowings 9,535 6,713 28,075 11,041
95,880 68,537 273,012 172,315
Net interest income 177,504 182,602 527,231 546,976
Provision for credit losses 18,422 18,414 53,374 63,255
Net interest income after provision for credit losses 159,082 164,188 473,857 483,721
Noninterest income:
Credit/debit card and ATM income 24,621 14,869 68,165 42,660
Investment management and fiduciary income 36,648 32,720 107,182 95,575
Deposit service charges 6,837 6,534 19,820 18,850
Mortgage banking activities, net 2,067 1,254 5,931 3,680
Loan and lease fee income 1,513 1,621 4,742 4,183
Unrealized loss on equity investments, net - (5) - (9)
Realized gain on sale of equity investments, net 56 - 2,186 -
Bank owned life insurance income 1,540 1,697 3,533 3,967
Other income 16,876 13,978 46,054 33,760
90,158 72,668 257,613 202,666
Noninterest expense:
Salaries, benefits and other compensation 86,124 74,453 245,179 219,669
Occupancy expense 9,595 9,529 28,461 30,069
Equipment expense 12,076 10,563 34,822 31,165
Data processing and operations expenses 4,985 4,867 13,452 14,362
Professional fees 3,819 4,612 13,081 15,169
Marketing expense 2,053 2,049 5,855 5,930
FDIC expenses 2,882 2,534 9,254 7,979
Loan workout and other credit costs 1,684 (189) 1,477 292
Corporate development expense 46 113 412 3,649
Restructuring expense - - - (787)
Other operating expense 40,459 31,158 116,570 86,490
163,723 139,689 468,563 413,987
Income before taxes 85,517 97,167 262,907 272,400
Income tax provision 21,108 22,904 63,567 66,880
Net income $ 64,409 $ 74,263 $ 199,340 $ 205,520
Less: Net (loss) income attributable to noncontrolling interest (26) 97 (129) 272
Net income attributable to WSFS $ 64,435 $ 74,166 $ 199,469 $ 205,248
Earnings per share:
Basic $ 1.09 $ 1.22 $ 3.34 $ 3.35
Diluted $ 1.08 $ 1.22 $ 3.33 $ 3.34
Weighted average shares of common stock outstanding:
Basic 59,185,848 60,941,922 59,788,212 61,264,862
Diluted 59,393,651 61,039,317 59,956,324 61,367,802
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) 2024 2023 2024 2023
Net income $ 64,409 $ 74,263 $ 199,340 $ 205,520
Less: Net (loss) income attributable to noncontrolling interest (26) 97 (129) 272
Net income attributable to WSFS 64,435 74,166 199,469 205,248
Other comprehensive income (loss):
Net change in unrealized gains (losses) on investment securities available-for-sale
Net unrealized gains (losses) arising during the period, net of tax expense (benefit) of $40,491, $(40,270), $24,984, and $(36,278), respectively
128,223 (127,523) 79,116 (114,880)
Net change in securities held-to-maturity
Amortization of net unrealized losses on available-for-sale securities reclassified to held-to-maturity, net of tax benefit of $1,252, $1,379, $3,613, and $4,080, respectively
3,965 4,366 11,442 12,924
Net change in unfunded pension liability
Change in unfunded pension liability related to unrealized gain and prior service cost, net of tax expense of $17, $16, $72, and $44, respectively
(53) (51) (229) (140)
Net change in cash flow hedge
Net unrealized gain (loss) arising during the period, net of tax expense (benefit) of $3,386, $(508), $1,169, and $(869), respectively
10,722 (1,608) 3,702 (2,752)
Amortization of unrealized gain on terminated cash flow hedges, net of tax benefit of $-, $9, $-, and $34, respectively
- (28) - (107)
10,722 (1,636) 3,702 (2,859)
Net change in equity method investments
Net change in other comprehensive income of equity method investments, net of tax expense (benefit) of $1, $61, $(18), and $28, respectively
4 192 (57) 88
Total other comprehensive income (loss) 142,861 (124,652) 93,974 (104,867)
Total comprehensive income (loss) $ 207,296 $ (50,486) $ 293,443 $ 100,381
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, 2024 December 31, 2023
Assets:
Cash and due from banks $ 571,798 $ 629,310
Cash in non-owned ATMs 414,931 458,889
Interest-bearing deposits in other banks including collateral (restricted cash) of $3,730 at September 30, 2024 and $4,270 at December 31, 2023
4,189 4,701
Total cash, cash equivalents, and restricted cash 990,918 1,092,900
Investment securities, available-for-sale (amortized cost of $4,290,823 at September 30, 2024 and $4,504,342 at December 31, 2023)
3,737,119 3,846,537
Investment securities, held-to-maturity, net of allowance for credit losses of $7 at September 30, 2024 and $8 at December 31, 2023 (fair value $958,969 at September 30, 2024 and $985,931 at December 31, 2023)
1,026,305 1,058,557
Other investments 16,976 17,434
Loans, held for sale at fair value 42,121 29,268
Loans and leases, net of allowance for credit losses of $197,490 at September 30, 2024 and $186,126 at December 31, 2023
13,124,684 12,583,202
Bank owned life insurance 35,658 42,762
Stock in Federal Home Loan Bank (FHLB) of Pittsburgh at cost 17,497 15,398
Other real estate owned 1,301 1,569
Accrued interest receivable 87,360 85,979
Premises and equipment 104,401 104,484
Goodwill and intangible assets 992,163 1,004,560
Other assets 728,706 712,022
Total assets $ 20,905,209 $ 20,594,672
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 4,685,957 $ 4,917,297
Interest-bearing 11,741,074 11,556,789
Total deposits 16,427,031 16,474,086
FHLB advances 43,158 -
Trust preferred borrowings 90,785 90,638
Senior and subordinated debt 218,573 218,400
Other borrowed funds 722,645 586,038
Accrued interest payable 73,418 46,684
Other liabilities 662,584 709,011
Total liabilities 18,238,194 18,124,857
Stockholders' Equity:
Common stock $0.01 par value, 90,000,000 shares authorized; issued 76,246,771 at September 30, 2024 and 76,095,094 at December 31, 2023
762 761
Capital in excess of par value 1,994,072 1,984,746
Accumulated other comprehensive loss (500,017) (593,991)
Retained earnings 1,816,143 1,643,657
Treasury stock at cost, 17,213,764 shares at September 30, 2024 and 15,557,263 shares at December 31, 2023
(632,696) (557,537)
Total stockholders' equity of WSFS 2,678,264 2,477,636
Noncontrolling interest (11,249) (7,821)
Total stockholders' equity 2,667,015 2,469,815
Total liabilities and stockholders' equity $ 20,905,209 $ 20,594,672
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
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WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Three Months Ended September 30, 2024
(Dollars in thousands, except per share and share amounts) Shares Common Stock Capital in Excess of Par Value Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Total Stockholders' Equity of WSFS Non-controlling Interest Total Stockholders' Equity
Balance, June 30, 2024 76,208,354 $ 762 $ 1,989,289 $ (642,878) $ 1,760,598 $ (618,191) $ 2,489,580 $ (11,223) $ 2,478,357
Net income (loss) - - - - 64,435 - 64,435 (26) 64,409
Other comprehensive income - - - 142,861 - - 142,861 - 142,861
Cash dividend, $0.15 per share
- - - - (8,890) - (8,890) - (8,890)
Issuance of common stock including proceeds from exercise of common stock options (1)
38,417 - 1,436 - - - 1,436 - 1,436
Stock-based compensation expense - - 2,813 - - - 2,813 - 2,813
Repurchases of common shares (2)
- - 534 - - (14,505) (13,971) - (13,971)
Balance, September 30, 2024 76,246,771 $ 762 $ 1,994,072 $ (500,017) $ 1,816,143 $ (632,696) $ 2,678,264 $ (11,249) $ 2,667,015
Nine Months Ended September 30, 2024
(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, 2023 76,095,094 $ 761 $ 1,984,746 $ (593,991) $ 1,643,657 $ (557,537) $ 2,477,636 $ (7,821) $ 2,469,815
Net income (loss) - - - - 199,469 - 199,469 (129) 199,340
Other comprehensive income - - - 93,974 - - 93,974 - 93,974
Cash dividend, $0.45 per share
- - - - (26,983) - (26,983) - (26,983)
Distributions to noncontrolling shareholders - - - - - - - (3,299) (3,299)
Issuance of common stock including proceeds from exercise of common stock options (3)
151,677 1 336 - - - 337 - 337
Stock-based compensation expense - - 8,990 - - - 8,990 - 8,990
Repurchases of common stock (4)
- - - - - (75,159) (75,159) - (75,159)
Balance, September 30, 2024 76,246,771 $ 762 $ 1,994,072 $ (500,017) $ 1,816,143 $ (632,696) $ 2,678,264 $ (11,249) $ 2,667,015
(1)Issuance of common stock includes 1,610 shares withheld to cover tax liabilities.
(2)Repurchase of common stock includes 266,672 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors.
(3)Issuance of common stock includes 51,714 shares withheld to cover tax liabilities.
(4)Repurchase of common stock includes 1,656,501 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors.
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Three Months Ended September 30, 2023
(Dollars in thousands, except per share and share amounts) Shares Common Stock Capital in Excess of Par Value Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Total Stockholders' Equity of WSFS Non-controlling Interest Total Stockholders' Equity
Balance, June 30, 2023 76,021,963 $ 760 $ 1,977,945 $ (656,059) $ 1,523,849 $ (531,836) $ 2,314,659 $ (7,275) $ 2,307,384
Net income (loss) - - - - 74,166 - 74,166 97 74,263
Other comprehensive loss - - - (124,652) - - (124,652) - (124,652)
Cash dividend, $0.15 per share
- - - - (9,157) - (9,157) - (9,157)
Distributions to noncontrolling shareholders - - - - - - - (239) (239)
Issuance of common stock including proceeds from exercise of common stock options 21,939 1 2,057 - - - 2,058 - 2,058
Stock-based compensation expense - - 1,472 - - - 1,472 - 1,472
Repurchases of common shares (1)
- - - - - (15,751) (15,751) - (15,751)
Balance, September 30, 2023 76,043,902 $ 761 $ 1,981,474 $ (780,711) $ 1,588,858 $ (547,587) $ 2,242,795 $ (7,417) $ 2,235,378
Nine Months Ended September 30, 2023
(Dollars in thousands, except per share and share amounts) Shares Common Stock Capital in Excess of Par Value Accumulated Other Comprehensive Loss Retained Earnings Treasury Stock Total Stockholders' Equity of WSFS Non-controlling Interest Total Stockholders' Equity
Balance, December 31, 2022 75,921,997 $ 759 $ 1,974,210 $ (675,844) $ 1,411,243 $ (505,255) $ 2,205,113 $ (3,227) $ 2,201,886
Net income - - - - 205,248 - 205,248 272 205,520
Other comprehensive loss - - - (104,867) - - (104,867) - (104,867)
Cash dividend, $0.45 per share
- - - - (27,633) - (27,633) - (27,633)
Distributions to noncontrolling shareholders - - - - - - - (4,462) (4,462)
Issuance of common stock including proceeds from exercise of common stock options 121,905 2 2,418 - - - 2,420 - 2,420
Stock-based compensation expense - - 7,211 - - - 7,211 - 7,211
Repurchases of common stock (2)
- - (2,365) - - (42,332) (44,697) - (44,697)
Balance, September 30, 2023 76,043,902 $ 761 $ 1,981,474 $ (780,711) $ 1,588,858 $ (547,587) $ 2,242,795 $ (7,417) $ 2,235,378
(1)Repurchase of common stock includes 386,900 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors.
(2)Repurchase of common stock includes 1,006,178 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors, and 45,489 shares withheld to cover tax liabilities.
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) 2024 2023
Operating activities:
Net income $ 199,340 $ 205,520
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 53,374 63,255
Depreciation of premises and equipment, net 10,678 13,552
Accretion of fees and discounts, net (17,825) (20,891)
Amortization of intangible assets 11,784 11,596
Amortization of right-of-use lease assets 7,713 11,559
Decrease in operating lease liability (8,115) (9,328)
Income from mortgage banking activities, net (5,931) (3,680)
Loss on sale of other real estate owned and valuation adjustments, net 296 195
Stock-based compensation expense 8,990 7,211
Unrealized loss on equity investments, net - 9
Realized gain on sale of equity investments, net (2,186) -
Deferred income tax benefit (1,989) (1,681)
Increase in accrued interest receivable (1,381) (7,461)
Increase in other assets (28,889) (42,228)
Origination of loans held for sale (281,945) (206,979)
Proceeds from sales of loans held for sale 229,224 144,990
Decrease in value of bank owned life insurance 376 511
Increase in capitalized interest, net (1,038) (1,702)
Increase in accrued interest payable 26,734 37,307
(Decrease) increase in other liabilities (38,351) 86,052
Net cash provided by operating activities $ 160,859 $ 287,807
Investing activities:
Repayments, maturities and calls of investment securities held-to-maturity 45,827 57,826
Purchases of investment securities available-for-sale (51,641) (21,080)
Repayments, maturities and calls of investment securities available-for-sale 262,808 269,156
Proceeds from bank-owned life insurance death benefit 112 -
Proceeds from bank-owned life insurance surrender 6,616 -
Net increase in loans (272,276) (486,508)
Net cash paid for business combinations - (3,000)
Purchase of loans held-for-investment (269,635) (238,047)
Purchases of stock of Federal Home Loan Bank of Pittsburgh (360,603) (119,479)
Redemptions of stock of Federal Home Loan Bank of Pittsburgh 358,504 131,396
Sales of other real estate owned 550 833
Investment in premises and equipment (10,595) (2,953)
Sales of premises and equipment - 3
Net cash used in investing activities $ (290,333) $ (411,853)
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Nine Months Ended September 30,
(Dollars in thousands) 2024 2023
Financing activities:
Net decrease in demand and saving deposits $ (352,369) $ (816,546)
Increase in time deposits 358,483 612,672
Decrease in brokered deposits (51,676) (33,486)
Receipts from FHLB advances 10,849,997 5,945,000
Repayments of FHLB advances (10,806,839) (6,295,000)
Receipts from federal funds purchased 380,001 6,033,000
Repayments of federal funds purchased (380,001) (6,008,000)
Receipts from Bank Term Funding Program 135,000 565,000
Distributions to noncontrolling shareholders (3,299) (4,462)
Cash dividend (26,983) (27,633)
Issuance of common stock including proceeds from exercise of common stock options 337 2,420
Redemption of senior and subordinated debt - (30,000)
Repurchases of common shares (75,159) (44,697)
Net cash (used in) provided by financing activities $ 27,492 $ (101,732)
Decrease in cash, cash equivalents, and restricted cash (101,982) (225,778)
Cash, cash equivalents, and restricted cash at beginning of period 1,092,900 837,258
Cash, cash equivalents, and restricted cash at end of period $ 990,918 $ 611,480
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 246,279 $ 135,008
Income taxes 56,638 72,789
Non-cash information:
Loans transferred to other real estate owned $ 282 $ 298
Loans transferred to portfolio from held-for-sale at fair value 43,499 68,022
Fair value of assets acquired, net of cash received - 7,993
Fair value of liabilities assumed - 4,993
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, 2024
(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, 2024, the other subsidiaries of WSFS include The Bryn Mawr Trust Company of Delaware (BMT-DE), Bryn Mawr Capital Management, LLC (BMCM), WSFS Wealth Management, LLC (Powdermill®), WSFS SPE Services, LLC, and 601 Perkasie, LLC. The Company also has three unconsolidated subsidiaries: WSFS Capital Trust III, Royal Bancshares Capital Trust I, and Royal Bancshares Capital Trust II. WSFS Bank has two wholly-owned subsidiaries: Beneficial Equipment Finance Corporation (BEFC) and 1832 Holdings, Inc., and one majority-owned subsidiary, NewLane Finance Company (NewLane Finance®).
Overview
Founded in 1832, the Bank is one of the ten oldest bank and trust companies continuously operating under the same name in the United States (U.S.). The Company provides residential and commercial mortgage, commercial and consumer lending services, as well as consumer deposit and treasury management services. The Company's core banking business is commercial lending funded primarily by customer-generated deposits. In addition, the Company offers a variety of wealth management and trust services to individuals, institutions and corporations. The Federal Deposit Insurance Corporation (FDIC) insures the Company's customers' deposits to their legal maximums. The Company serves its customers primarily from 114offices located in Pennsylvania (57), Delaware (39), New Jersey (14), Florida (2), Nevada (1) and Virginia (1), its ATM network, website at www.wsfsbank.comand mobile app. Information on the website is not incorporated by reference into this Quarterly Report on Form 10-Q.
The Company's leasing business is conducted by NewLane Finance®. NewLane Finance®originates small business leases and provides commercial financing to businesses nationwide, targeting various equipment categories including technology, software, office, medical, veterinary and other areas. In addition, NewLane Finance®offers captive insurance through its subsidiary, Prime Protect.
Basis of Presentation
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), loans held for sale, 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. 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, 2024. 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, 2023 (the 2023 Annual Report on Form 10-K) that was filed with the SEC on February 29, 2024 and is available at www.sec.govor 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 2023 Annual Report on Form 10-K. Those significant accounting policies remain unchanged at September 30, 2024.
RECENT ACCOUNTING PRONOUNCEMENTS
The following accounting pronouncements were adopted by the Company during the nine months ended September 30, 2024, but did not have a material impact on the unaudited Consolidated Financial Statements.
•ASU No. 2023-01, Leases (Topic 842) - Common Control Agreements
•ASU No. 2023-02, Investments - Equity Method and Joint Ventures (Topic 323) Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method
There were no other applicable material accounting pronouncements adopted by the Company since December 31, 2023.
Accounting Guidance Pending Adoption as of September 30, 2024
ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07): In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07 to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Adoption is required retrospectively for all prior periods presented in the financial statements. The Company is finalizing its assessment of this update and the impact on its disclosures. The Company will adopt this guidance beginning with its Annual Report on Form 10-K for the year ending December 31, 2024.
ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09): In December 2023, the FASB issued ASU 2023-09 to enhance the transparency and decision usefulness of income tax disclosures primarily related to the effective tax rate reconciliation and income taxes paid. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating this update to determine the impact on the Company's disclosures.
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3. NONINTEREST INCOME
Credit/debit card and ATM income
The following table presents the components of credit/debit card and ATM income:
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2024 2023 2024 2023
Bailment fees $ 19,616 $ 9,982 $ 53,399 $ 28,051
Interchange fees 4,046 3,885 11,770 11,764
Other card and ATM fees 959 1,002 2,996 2,845
Total credit/debit card and ATM income $ 24,621 $ 14,869 $ 68,165 $ 42,660
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) 2024 2023 2024 2023
Trust fees $ 25,295 $ 22,062 $ 73,299 $ 64,514
Wealth management and advisory fees 11,353 10,658 33,883 31,061
Total investment management and fiduciary income $ 36,648 $ 32,720 $ 107,182 $ 95,575
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 BMT-DE), BMCM, Powdermill®, and WSFS Wealth®Investments. Wealth management and advisory fees are based on revenue earned from services including asset management, financial planning, family office, and brokerage. The fees are based on the market value of assets, are assessed as a flat fee, or are brokerage commissions. This revenue stream primarily generates fee income through monthly, quarterly and annual billings for the services.
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Deposit service charges
The following table presents the components of deposit service charges:
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2024 2023 2024 2023
Service fees $ 4,649 $ 4,382 $ 13,533 $ 12,833
Return and overdraft fees 1,867 1,851 5,315 5,218
Other deposit service fees 321 301 972 799
Total deposit service charges $ 6,837 $ 6,534 $ 19,820 $ 18,850
Deposit service charges includes revenue earned from core deposit products, certificates of deposit, and brokered deposits. The Company generates fee revenues from deposit service charges primarily through service charges and overdraft fees. Service charges consist primarily of monthly account maintenance fees, treasury management fees, foreign ATM fees and other maintenance fees. All of these revenue streams generate fee income through service charges for monthly account maintenance and similar items, transfer fees, late fees, overlimit fees, and stop payment fees. Revenue is recorded at the time of the transaction.
Other income
The following table presents the components of other income:
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2024 2023 2024 2023
Managed service fees $ 5,529 $ 5,301 $ 16,976 $ 15,316
Currency preparation 1,915 1,331 5,514 3,955
ATM loss protection 834 643 2,577 1,938
Capital markets revenue 3,371 3,581 9,750 8,170
Miscellaneous products and services 5,227 3,122 11,237 4,381
Total other income $ 16,876 $ 13,978 $ 46,054 $ 33,760
Other income consists of managed service fees, which are primarily courier fees related to treasury management and are partially offset in noninterest expense, currency preparation, ATM loss protection, capital markets revenue, and other miscellaneous products and services offered by the Bank. These fees are primarily generated through monthly billings or at the time of the transaction. Capital markets revenue consists of fees related to interest rate swaps, risk participation agreements, foreign exchange contracts, letters of credit, and trade finance products and services offered by the Bank.
Arrangements with multiple performance obligations
The Company's contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers.
Practical expedients and exemptions
The Company does not 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 14 for further information about the disaggregation of noninterest income by segment.
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4. 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) 2024 2023 2024 2023
Numerator:
Net income attributable to WSFS $ 64,435 $ 74,166 $ 199,469 $ 205,248
Denominator:
Weighted average basic shares 59,186 60,942 59,788 61,265
Dilutive potential common shares 208 97 168 103
Weighted average fully diluted shares 59,394 61,039 $ 59,956 $ 61,368
Earnings per share:
Basic $ 1.09 $ 1.22 $ 3.34 $ 3.35
Diluted $ 1.08 $ 1.22 $ 3.33 $ 3.34
Outstanding common stock equivalents having no dilutive effect - 18 2 18
Basic earnings per share is calculated by dividing Net income attributable to WSFSby the weighted-average basic shares outstanding. Diluted earnings per share is calculated by dividing Net income attributable to WSFSby 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 under the 2013 Incentive Plan and the 2018 Incentive Plan and unvested restricted stock units and performance stock units under the 2018 Incentive Plan.
5. INVESTMENT SECURITIES
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, 2024
(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) $ 537,666 $ 566 $ 82,749 $ - $ 455,483
Fannie Mae (FNMA) mortgage-backed securities (MBS) 3,362,926 793 423,832 - 2,939,887
Freddie Mac (FHLMC) MBS 120,570 - 8,763 - 111,807
Ginnie Mae (GNMA) MBS 46,150 41 2,368 - 43,823
Government-sponsored enterprises (GSE) agency notes 223,511 - 37,392 - 186,119
$ 4,290,823 $ 1,400 $ 555,104 $ - $ 3,737,119
Held-to-Maturity Debt Securities(1)
FNMA MBS $ 841,697 $ - $ 68,348 $ - $ 773,349
State and political subdivisions 184,615 1,795 783 7 185,620
$ 1,026,312 $ 1,795 $ 69,131 $ 7 $ 958,969
(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 $105.4 million at September 30, 2024, which are offset in Accumulated other comprehensive loss. At the time of transfer, there was no allowance for credit loss on the available-for-sale securities. Subsequent to transfer, the securities were evaluated for credit loss.
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December 31, 2023
(Dollars in thousands) Amortized Cost Gross
Unrealized
Gain 		Gross
Unrealized
Loss 		Allowance for Credit Losses Fair
Value
Available-for-Sale Debt Securities
CMO $ 560,952 $ - $ 96,333 $ - $ 464,619
FNMA MBS 3,544,762 162 502,574 - 3,042,350
FHLMC MBS 126,856 - 11,324 - 115,532
GNMA MBS 46,333 6 2,999 - 43,340
GSE agency notes 225,439 - 44,743 - 180,696
$ 4,504,342 $ 168 $ 657,973 $ - $ 3,846,537
Held-to-Maturity Debt Securities(1)
FNMA MBS $ 872,653 $ - $ 74,332 $ - $ 798,321
State and political subdivisions 185,912 2,665 959 8 187,610
$ 1,058,565 $ 2,665 $ 75,291 $ 8 $ 985,931
(1)Held-to-maturity securities transferred from available-for-sale are included in held-to-maturity at fair value at the time of transfer. The amortized cost of transferred held-to-maturity securities included net unrealized losses of $120.4 million at December 31, 2023, which are offset in Accumulated other comprehensive loss. At the time of transfer, there was no allowance for credit loss on the available-for-sale securities. Subsequent to transfer, the securities were evaluated for credit loss.
The scheduled maturities of available-for-sale debt securities at September 30, 2024 and December 31, 2023 are presented in the table below:
Available-for-Sale
Amortized Fair
(Dollars in thousands) Cost Value
September 30, 2024(1)
Within one year $ 16,929 $ 16,709
After one year but within five years 128,143 123,447
After five years but within ten years 503,009 438,564
After ten years 3,642,742 3,158,399
$ 4,290,823 $ 3,737,119
December 31, 2023(1)
Within one year $ - $ -
After one year but within five years 86,224 82,387
After five years but within ten years 569,956 485,593
After ten years 3,848,162 3,278,557
$ 4,504,342 $ 3,846,537
(1)Actual maturities could differ from contractual maturities.
As of September 30, 2024, the Company's available-for-sale investment securities consisted of 986 securities, 953 of which were in an unrealized loss position.
As of September 30, 2024, 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, 2024 and December 31, 2023, 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, 2024 and December 31, 2023 are presented in the table below:
Held-to-Maturity
Amortized Fair
(Dollars in thousands) Cost Value
September 30, 2024 (1)
Within one year $ - $ -
After one year but within five years 14,343 14,317
After five years but within ten years 53,396 53,382
After ten years 958,573 891,270
$ 1,026,312 $ 958,969
December 31, 2023(1)
Within one year $ - $ -
After one year but within five years 10,932 10,856
After five years but within ten years 46,489 46,246
After ten years 1,001,144 928,829
$ 1,058,565 $ 985,931
(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 5.7 years at September 30, 2024.
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.
Investment securities with fair market values aggregating $3.3 billion were pledged as collateral for investment sweep repurchase agreements, municipal deposits, and other obligations as of September 30, 2024 and December 31, 2023.
During the nine months ended September 30, 2024 and 2023, the Company had no sales of debt securities categorized as available-for-sale.
As of September 30, 2024 and December 31, 2023, the Company's debt securities portfolio had remaining unamortized premiums of $50.3 million and $56.9 million, respectively, and unaccreted discounts of $18.5 million and $20.9 million, respectively.
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, 2024.
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 $ - $ - $ 444,751 $ 82,749 $ 444,751 $ 82,749
FNMA MBS 3,126 7 2,889,219 423,825 2,892,345 423,832
FHLMC MBS - - 111,801 8,763 111,801 8,763
GNMA MBS 1,896 3 37,791 2,365 39,687 2,368
GSE agency notes - - 186,119 37,392 186,119 37,392
$ 5,022 $ 10 $ 3,669,681 $ 555,094 $ 3,674,703 $ 555,104
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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 December 31, 2023.
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 $ - $ - $ 464,619 $ 96,333 $ 464,619 $ 96,333
FNMA MBS 9,068 125 3,026,520 502,449 3,035,588 502,574
FHLMC MBS - - 115,525 11,324 115,525 11,324
GNMA MBS 10,543 217 31,681 2,782 42,224 2,999
GSE agency notes - - 180,696 44,743 180,696 44,743
$ 19,611 $ 342 $ 3,819,041 $ 657,631 $ 3,838,652 $ 657,973
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, 2024.
At September 30, 2024 and December 31, 2023, held-to-maturity debt securities had an amortized cost basis of $1.0 billion and $1.1 billion, 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 non-government and non-agency securities through credit ratings. The following table summarizes the amortized cost of debt securities held-to-maturity as of September 30, 2024, aggregated by credit quality indicator:
(Dollars in thousands) FNMA MBS State and political subdivisions
A+ rated or higher $ - $ 184,615
Not rated 841,697 -
Ending balance $ 841,697 $ 184,615
The following table summarizes the amortized cost of debt securities held-to-maturity as of December 31, 2023, aggregated by credit quality indicator:
(Dollars in thousands) FNMA MBS State and political subdivisions
A+ rated or higher $ - $ 185,912
Not rated 872,653 -
Ending balance $ 872,653 $ 185,912
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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 debt securities for the nine months ended September 30, 2024 and 2023. 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, 2024 and 2023:
Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2024 2023 2024 2023
Allowance for credit losses:
Beginning balance $ 7 $ 8 $ 8 $ 10
Release of credit losses - - (1) (2)
Ending balance $ 7 $ 8 $ 7 $ 8
Accrued interest receivable of $3.1 million and $3.7 million as of September 30, 2024 and December 31, 2023, 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, 2024 and December 31, 2023.
Equity Investments
The Company had equity investments of $17.0 million and $17.4 million as of September 30, 2024 and December 31, 2023, respectively.
During the three and nine months ended September 30, 2024, the Company recognized realized gains of $0.1 million and $2.2 million, respectively, related to our equity investments.
During the three and nine months ended September 30, 2023, the Company recognized $0.7 million of net gains and $1.0 million of net losses, respectively, related to our equity method investments within Other incomeon the unaudited Consolidated Statements of Income.
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6. LOANS AND LEASES
The following table shows the Company's loan and lease portfolio by category:
(Dollars in thousands) September 30, 2024 December 31, 2023
Commercial and industrial $ 2,639,266 $ 2,540,070
Owner-occupied commercial 2,003,722 1,886,087
Commercial mortgages 4,149,049 3,801,180
Construction 805,857 1,035,530
Commercial small business leases 645,421 623,622
Residential(1)
940,780 870,705
Consumer(2)
2,138,079 2,012,134
13,322,174 12,769,328
Less:
Allowance for credit losses 197,490 186,126
Net loans and leases $ 13,124,684 $ 12,583,202
(1) Includes reverse mortgages at fair value of $3.2 million at September 30, 2024 and $2.8 million at December 31, 2023.
(2)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
Accrued interest receivable on loans and leases was $70.8 million and $69.8 million at September 30, 2024 and December 31, 2023, respectively. Accrued interest receivable on loans and leases was excluded from the evaluation of allowance for credit losses.
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7. 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, 2024 and 2023. For the three months ended September 30, 2024, the decrease was primarily due to runoff in our consumer loan portfolio from our partnership with Upstart. For the nine months ended September 30, 2024, the increase was primarily due to net loan growth, as well as increases in criticized loan levels in the commercial mortgages portfolio and specific reserves on certain commercial loans.
(Dollars in thousands)
Commercial and Industrial
Owner-occupied
Commercial 		Commercial
Mortgages 		Construction Commercial Small Business Leases
Residential(1)
Consumer(2)
Total
Three months ended September 30, 2024
Allowance for credit losses
Beginning balance $ 56,516 $ 9,668 $ 46,831 $ 9,198 $ 16,218 $ 5,057 $ 54,765 $ 198,253
Charge-offs (11,277) (177) (205) - (5,451) (8) (5,983) (23,101)
Recoveries 2,481 4 79 - 664 44 644 3,916
Provision (release) 9,075 292 2,284 (850) 3,943 370 3,308 18,422
Ending balance $ 56,795 $ 9,787 $ 48,989 $ 8,348 $ 15,374 $ 5,463 $ 52,734 $ 197,490
Nine months ended September 30, 2024
Allowance for credit losses
Beginning balance $ 49,394 $ 10,719 $ 36,055 $ 10,762 $ 15,170 $ 5,483 $ 58,543 $ 186,126
Charge-offs (13,659) (177) (5,137) - (15,191) (109) (18,259) (52,532)
Recoveries 5,983 209 183 - 2,086 176 1,884 10,521
Provision (release) 15,077 (964) 17,888 (2,414) 13,309 (87) 10,566 53,375
Ending balance $ 56,795 $ 9,787 $ 48,989 $ 8,348 $ 15,374 $ 5,463 $ 52,734 $ 197,490
Period-end allowance allocated to:
Loans evaluated on an individual basis $ 8,529 $ - $ - $ - $ - $ - $ - $ 8,529
Loans evaluated on a collective basis 48,266 9,787 48,989 8,348 15,374 5,463 52,734 188,961
Ending balance $ 56,795 $ 9,787 $ 48,989 $ 8,348 $ 15,374 $ 5,463 $ 52,734 $ 197,490
Period-end loan balances:
Loans evaluated on an individual basis
$ 64,972 $ 6,465 $ 7,449 $ 3,308 $ - $ 8,442 $ 2,981 $ 93,617
Loans evaluated on a collective basis 2,574,294 1,997,257 4,141,600 802,549 645,421 929,152 2,135,098 13,225,371
Ending balance
$ 2,639,266 $ 2,003,722 $ 4,149,049 $ 805,857 $ 645,421 $ 937,594 $ 2,138,079 $ 13,318,988
(1)Period-end loan balance excludes reverse mortgages at fair value of $3.2 million.
(2)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 Owner -
occupied
Commercial 		Commercial
Mortgages 		Construction Commercial Small Business Leases
Residential(1)
Consumer(2)
Total
Three months ended September 30, 2023
Allowance for credit losses
Beginning balance $ 52,400 $ 6,335 $ 31,937 $ 9,228 $ 10,383 $ 5,043 $ 56,543 $ 171,869
Charge-offs (7,153) - (300) - (3,522) - (5,872) (16,847)
Recoveries 1,640 14 1 1 484 55 357 2,552
Provision 4,791 1,501 1,549 2,088 2,647 253 5,585 18,414
Ending balance $ 51,678 $ 7,850 $ 33,187 $ 11,317 $ 9,992 $ 5,351 $ 56,613 $ 175,988
Nine months ended September 30, 2023
Allowance for loan losses
Beginning balance $ 49,526 $ 6,019 $ 21,473 $ 6,987 $ 9,868 $ 4,668 $ 53,320 $ 151,861
Charge-offs (20,169) (184) (300) - (10,327) (33) (15,374) (46,387)
Recoveries 4,155 50 4 532 1,399 211 906 7,257
Provision 18,166 1,965 12,010 3,798 9,052 505 17,761 63,257
Ending balance $ 51,678 $ 7,850 $ 33,187 $ 11,317 $ 9,992 $ 5,351 $ 56,613 $ 175,988
Period-end allowance allocated to:
Loans evaluated on an individual basis $ 1,054 $ 161 $ - $ 1,600 $ - $ - $ - $ 2,815
Loans evaluated on a collective basis 50,624 7,689 33,187 9,717 9,992 5,351 56,613 173,173
Ending balance $ 51,678 $ 7,850 $ 33,187 $ 11,317 $ 9,992 $ 5,351 $ 56,613 $ 175,988
Period-end loan balances:
Loans evaluated on an individual basis $ 26,355 $ 16,442 $ 7,918 $ 4,828 $ - $ 5,838 $ 1,798 $ 63,179
Loans evaluated on a collective basis 2,617,684 1,907,729 3,637,805 1,038,740 605,698 849,502 1,955,284 12,612,442
Ending balance
$ 2,644,039 $ 1,924,171 $ 3,645,723 $ 1,043,568 $ 605,698 $ 855,340 $ 1,957,082 $ 12,675,621
(1)Period-end loan balance excludes reverse mortgages at fair value of $2.8 million.
(2)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, 2024
(Dollars in thousands) 30-89 Days
Past Due and
Still
Accruing 		Greater
Than
90 Days
Past Due and
Still Accruing 		Total Past
Due
And Still
Accruing 		Accruing
Current
Balances 		Nonaccrual Loans With No Allowance Nonaccrual
Loans With An Allowance 		Total
Loans
Commercial and industrial
$ 2,175 $ 867 $ 3,042 $ 2,571,285 $ 41,095 $ 23,844 $ 2,639,266
Owner-occupied commercial 1,719 593 2,312 1,995,256 6,154 - 2,003,722
Commercial mortgages 7,879 21,835 29,714 4,111,886 7,449 - 4,149,049
Construction 22,979 - 22,979 779,570 3,308 - 805,857
Commercial small business leases 9,237 650 9,887 635,534 - - 645,421
Residential(1)
5,406 15 5,421 927,074 5,099 - 937,594
Consumer(2)
15,910 7,754 23,664 2,111,325 3,090 - 2,138,079
Total
$ 65,305 $ 31,714 $ 97,019 $ 13,131,930 $ 66,195 $ 23,844 $ 13,318,988
% of Total Loans 0.49 % 0.24 % 0.73 % 98.59 % 0.50 % 0.18 % 100 %
(1)Residential accruing current balances excludes reverse mortgages at fair value of $3.2 million.
(2)Includes $14.2 million of delinquent, but still accruing, U.S. government-guaranteed student loans that carry little risk of credit loss.
December 31, 2023
(Dollars in thousands) 30-89 Days
Past Due and
Still
Accruing 		Greater
Than
90 Days
Past Due and
Still Accruing 		Total Past
Due
And Still
Accruing 		Accruing
Current
Balances
Nonaccrual Loans With No Allowance(1)
Nonaccrual
Loans With An Allowance 		Total
Loans
Commercial and industrial $ 1,630 $ 293 $ 1,923 $ 2,518,934 $ 13,645 $ 5,568 $ 2,540,070
Owner-occupied commercial 1,786 487 2,273 1,878,952 4,862 - 1,886,087
Commercial mortgages 1,190 - 1,190 3,777,698 22,292 - 3,801,180
Construction - - - 1,022,913 12,617 - 1,035,530
Commercial small business leases 6,697 772 7,469 616,153 - - 623,622
Residential(2)
9,261 - 9,261 856,055 2,579 - 867,895
Consumer(3)
15,249 10,032 25,281 1,984,407 2,446 - 2,012,134
Total
$ 35,813 $ 11,584 $ 47,397 $ 12,655,112 $ 58,441 $ 5,568 $ 12,766,518
% of Total Loans 0.28 % 0.09 % 0.37 % 99.13 % 0.46 % 0.04 % 100 %
(1)Excludes nonaccruing loans held-for-sale.
(2)Residential accruing current balances excludes reverse mortgages, at fair value of $2.8 million.
(3)Includes $14.5 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, 2024 and December 31, 2023:
September 30, 2024 December 31, 2023
(Dollars in thousands) Property
Equipment and other
Property
Equipment and other
Commercial and industrial(1)
$ 42,532 $ 22,407 $ 17,230 $ 1,983
Owner-occupied commercial 6,154 - 4,862 -
Commercial mortgages 7,449 - 22,292 -
Construction 3,308 - 12,617 -
Residential(2)
5,099 - 2,579 -
Consumer(3)
3,090 - 2,446 -
Total $ 67,632 $ 22,407 $ 62,026 $ 1,983
(1)Excludes nonaccruing loans held-for-sale in 2023.
(2)Excludes reverse mortgages at fair value.
(3)Includes home equity lines of credit.
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As of September 30, 2024, there were 36 residential loans and 19 commercial loans in the process of foreclosure. The total outstanding balance on these loans was $6.0 million and $8.9 million, respectively. As of December 31, 2023, there were 31 residential loans and 9 commercial loans in the process of foreclosure. The total outstanding balance on these loans was $3.2 million and $1.1 million, respectively. Loan workout and other real estate owned (OREO) expenses (recoveries) were $0.8 million and $0.7 million during the three and nine months ended September 30, 2024, respectively, and $(0.3) million and less than $0.1 million during three and nine months ended September 30, 2023, respectively. Loan workout and OREO expenses are included in Loan workout and other credit costson the unaudited Consolidated Statements 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, 2024.
Term Loans Amortized Cost Basis by Origination Year(1)
(Dollars in thousands) 2024 2023 2022 2021 2020 Prior Revolving loans amortized cost basis Revolving loans converted to term Total
Commercial and industrial:
Risk Rating
Pass $ 472,797 $ 662,751 $ 383,695 $ 135,462 $ 162,191 $ 298,797 $ 9,775 $ 242,784 $ 2,368,252
Special mention 17,659 3,913 4,979 2,744 2,670 1,195 - 15,899 49,059
Substandard or Lower 71,171 41,898 29,621 5,987 4,896 38,620 70 29,692 221,955
$ 561,627 $ 708,562 $ 418,295 $ 144,193 $ 169,757 $ 338,612 $ 9,845 $ 288,375 $ 2,639,266
Current-period gross writeoffs $ - $ 1,081 $ 3,782 $ 585 $ 275 $ 7,936 $ - $ - $ 13,659
Owner-occupied commercial:
Risk Rating
Pass $ 222,614 $ 313,975 $ 211,697 $ 230,312 $ 171,898 $ 430,446 $ - $ 252,832 $ 1,833,774
Special mention 10,530 1,948 20,157 1,300 25,677 5,324 - 2,310 67,246
Substandard or Lower - 5,183 23,193 10,720 5,319 46,546 - 11,741 102,702
$ 233,144 $ 321,106 $ 255,047 $ 242,332 $ 202,894 $ 482,316 $ - $ 266,883 $ 2,003,722
Current-period gross writeoffs $ - $ 114 $ - $ - $ - $ 63 $ - $ - $ 177
Commercial mortgages:
Risk Rating
Pass $ 448,085 $ 747,896 $ 524,510 $ 437,941 $ 407,068 $ 917,704 $ - $ 465,513 $ 3,948,717
Special mention 3,946 18,781 16,100 5,743 2,655 2,309 - 36,825 86,359
Substandard or Lower 32,205 28,132 930 130 25,105 26,739 - 732 113,973
$ 484,236 $ 794,809 $ 541,540 $ 443,814 $ 434,828 $ 946,752 $ - $ 503,070 $ 4,149,049
Current-period gross writeoffs $ - $ 62 $ - $ - $ 97 $ 4,978 $ - $ - $ 5,137
Construction:
Risk Rating
Pass $ 247,244 $ 289,273 $ 173,141 $ 7,798 $ 88 $ 2,241 $ - $ 29,014 $ 748,799
Special mention 2,200 - 3,400 - - - - - 5,600
Substandard or Lower 1,743 24,809 20,779 3,439 - 142 - 546 51,458
$ 251,187 $ 314,082 $ 197,320 $ 11,237 $ 88 $ 2,383 $ - $ 29,560 $ 805,857
Current-period gross writeoffs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Commercial small business leases:
Risk Rating
Performing $ 193,681 $ 207,734 $ 138,351 $ 67,168 $ 20,199 $ 18,288 $ - $ - $ 645,421
Nonperforming - - - - - - - - -
$ 193,681 $ 207,734 $ 138,351 $ 67,168 $ 20,199 $ 18,288 $ - $ - $ 645,421
Current-period gross writeoffs $ 409 $ 3,903 $ 6,391 $ 2,965 $ 1,069 $ 454 $ - $ - $ 15,191
Residential(2):
Risk Rating
Performing $ 124,092 $ 181,135 $ 63,356 $ 93,860 $ 51,527 $ 415,006 $ - $ - $ 928,976
Nonperforming - 121 362 3,473 857 3,805 - - 8,618
$ 124,092 $ 181,256 $ 63,718 $ 97,333 $ 52,384 $ 418,811 $ - $ - $ 937,594
Current-period gross writeoffs $ - $ - $ - $ - $ - $ 109 $ - $ - $ 109
Consumer(3):
Risk Rating
Performing $ 247,462 $ 377,635 $ 475,078 $ 125,151 $ 89,903 $ 273,693 $ 540,062 $ 6,114 $ 2,135,098
Nonperforming - 249 96 267 196 27 1,843 303 2,981
$ 247,462 $ 377,884 $ 475,174 $ 125,418 $ 90,099 $ 273,720 $ 541,905 $ 6,417 $ 2,138,079
Current-period gross writeoffs $ 891 $ 2,575 $ 11,318 $ 2,241 $ 785 $ 449 $ - $ - $ 18,259
(1)Origination date represents the most recent underwriting of the loan which includes new relationships, renewals and extensions.
(2)Excludes reverse mortgages at fair value.
(3)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
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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, 2023.
Term Loans Amortized Cost Basis by Origination Year(1)
(Dollars in thousands) 2023 2022 2021 2020 2019
Prior
Revolving loans amortized cost basis Revolving loans converted to term Total
Commercial and industrial:
Risk Rating
Pass $ 716,848 $ 490,934 $ 180,343 $ 211,151 $ 90,522 $ 383,609 $ 8,785 $ 237,786 $ 2,319,978
Special mention 7,209 11,860 2,804 463 735 743 - 1,649 25,463
Substandard or Lower 72,993 54,024 5,951 10,224 22,046 17,906 - 11,485 194,629
$ 797,050 $ 556,818 $ 189,098 $ 221,838 $ 113,303 $ 402,258 $ 8,785 $ 250,920 $ 2,540,070
Current-period gross writeoffs $ - $ 568 $ 5,214 $ 1,747 $ 7,567 $ 11,557 $ - $ - $ 26,653
Owner-occupied commercial:
Risk Rating
Pass $ 346,908 $ 264,895 $ 251,262 $ 212,365 $ 194,153 $ 313,801 $ - $ 178,150 $ 1,761,534
Special mention 2,885 3,115 5,419 1,105 11,002 5,559 - 1,393 30,478
Substandard or Lower 996 18,865 11,109 6,787 8,019 35,330 - 12,969 94,075
$ 350,789 $ 286,875 $ 267,790 $ 220,257 $ 213,174 $ 354,690 $ - $ 192,512 $ 1,886,087
Current-period gross writeoffs $ - $ - $ - $ - $ 184 $ - $ - $ - $ 184
Commercial mortgages:
Risk Rating
Pass $ 847,137 $ 464,895 $ 526,280 $ 465,354 $ 486,855 $ 619,448 $ - $ 290,083 $ 3,700,052
Special mention 20,632 - 67 1,837 10,666 - - - 33,202
Substandard or Lower 9,862 1,153 1,047 13,837 14,352 12,212 - 15,463 67,926
$ 877,631 $ 466,048 $ 527,394 $ 481,028 $ 511,873 $ 631,660 $ - $ 305,546 $ 3,801,180
Current-period gross writeoffs $ - $ 83 $ - $ 217 $ - $ - $ - $ - $ 300
Construction:
Risk Rating
Pass $ 429,055 $ 319,958 $ 111,333 $ 3,030 $ 388 $ 7,016 $ - $ 87,741 $ 958,521
Special mention 28,718 19,769 8,227 - - - - - 56,714
Substandard or Lower 5,698 - 3,308 8,598 2,134 - - 557 20,295
$ 463,471 $ 339,727 $ 122,868 $ 11,628 $ 2,522 $ 7,016 $ - $ 88,298 $ 1,035,530
Current-period gross writeoffs $ - $ - $ 794 $ - $ - $ - $ - $ - $ 794
Commercial small business leases:
Risk Rating
Performing $ 260,348 $ 191,746 $ 103,428 $ 40,697 $ 15,411 $ 11,992 $ - $ - $ 623,622
Nonperforming - - - - - - - - -
$ 260,348 $ 191,746 $ 103,428 $ 40,697 $ 15,411 $ 11,992 $ - $ - $ 623,622
Current-period gross writeoffs $ 1,528 $ 7,250 $ 4,447 $ 1,454 $ 735 $ 227 $ - $ - $ 15,641
Residential(2):
Risk Rating
Performing $ 188,644 $ 67,358 $ 102,982 $ 57,273 $ 33,499 $ 412,099 $ - $ - $ 861,855
Nonperforming - 170 713 486 1,251 3,420 - - 6,040
$ 188,644 $ 67,528 $ 103,695 $ 57,759 $ 34,750 $ 415,519 $ - $ - $ 867,895
Current-period gross writeoffs $ 33 $ - $ - $ - $ - $ 8 $ - $ - $ 41
Consumer(3):
Risk Rating
Performing $ 391,580 $ 568,919 $ 153,930 $ 104,248 $ 44,996 $ 245,849 $ 494,663 $ 5,662 $ 2,009,847
Nonperforming - - 135 352 176 30 1,362 232 2,287
$ 391,580 $ 568,919 $ 154,065 $ 104,600 $ 45,172 $ 245,879 $ 496,025 $ 5,894 $ 2,012,134
Current-period gross writeoffs $ 1,790 $ 15,227 $ 4,411 $ 313 $ 198 $ 455 $ - $ - $ 22,394
(1)Origination date represents the most recent underwriting of the loan which includes new relationships, renewals and extensions.
(2)Excludes reverse mortgages at fair value.
(3)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
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Troubled Loans
The Company offers loan modifications to commercial and consumer borrowers that may result in a payment delay, interest rate reduction, term extension, principal forgiveness, or combination thereof. Loan modifications are offered on a case-by-case basis and are generally term extension, payment delay, and interest rate reduction modification types. Forbearance (due to hardship) programs result in modification types including payment delay and/or term extension. In addition, certain reorganization bankruptcy judgments may result in interest rate reduction, term extension, or principal forgiveness modification types.
The following tables show the period-end amortized cost basis of troubled loans modified during the three and nine months ended September 30, 2024 and 2023, disaggregated by portfolio segment and type of modification granted:
Three Months Ended September 30, 2024
(Dollars in thousands) Term Extension Interest Rate Reduction More-Than-Insignificant Payment Delay Combination- Term Extension and Payment Delay Combination- Term Extension and Interest Rate Reduction Total % of Total Loan Category
Commercial and industrial $ 7,021 $ - $ 15,157 $ - $ 28 $ 22,206 0.84 %
Commercial mortgages 14,557 - - - - 14,557 0.35 %
Construction 18,120 - - - - 18,120 2.25 %
Residential - 121 25 - - 146 0.02 %
Consumer(1)
307 - 879 1,234 - 2,420 0.11 %
Total $ 40,005 $ 121 $ 16,061 $ 1,234 $ 28 $ 57,449 0.43 %
Nine Months Ended September 30, 2024
(Dollars in thousands) Term Extension Interest Rate Reduction More-Than-Insignificant Payment Delay Combination- Term Extension and Payment Delay Combination- Term Extension and Interest Rate Reduction Total % of Total Loan Category
Commercial and industrial $ 66,728 $ - $ 16,028 $ 755 $ 28 $ 83,539 3.17 %
Commercial mortgages 14,557 - - - - 14,557 0.35 %
Construction 21,294 - - - - 21,294 2.64 %
Residential - 121 25 - - 146 0.02 %
Consumer(1)
717 - 1,897 3,406 - 6,020 0.28 %
Total $ 103,296 $ 121 $ 17,950 $ 4,161 $ 28 $ 125,556 0.94 %
(1)Includes home equity lines of credit, installment loans and unsecured lines of credit.
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Three months ended September 30, 2023
(Dollars in thousands) Term Extension More-Than-Insignificant Payment Delay Combination- Term Extension and Payment Delay Combination- Term Extension and Interest Rate Reduction Combination - Payment Delay and Interest Rate Reduction Total % of Total Loan Category
Commercial and industrial $ 23,972 $ 1,193 $ - $ 31 $ - $ 25,196 0.95 %
Owner-occupied commercial 67 - - - - 67 - %
Construction 9,194 - - - - 9,194 0.88 %
Residential 563 50 - - - 613 0.07 %
Consumer(1)
392 1,687 3,291 - 300 5,670 0.29 %
Total $ 34,188 $ 2,930 $ 3,291 $ 31 $ 300 $ 40,740 0.32 %
Nine Months Ended September 30, 2023
(Dollars in thousands) Term Extension More-Than-Insignificant Payment Delay Combination- Term Extension and Payment Delay Combination- Term Extension and Interest Rate Reduction Combination - Payment Delay and Interest Rate Reduction Total % of Total Loan Category
Commercial and industrial $ 36,683 $ 1,193 $ 10,163 $ 31 $ - $ 48,070 1.48 %
Owner-occupied commercial - - 1,062 209 - 1,271 0.07 %
Commercial mortgages 9,427 - - - - 9,427 0.26 %
Construction 9,194 - - - - 9,194 0.88 %
Residential 563 50 - - - 613 0.07 %
Consumer(1)
1,102 2,704 5,154 157 494 9,611 0.49 %
Total $ 56,969 $ 3,947 $ 16,379 $ 397 $ 494 $ 78,186 0.62 %
(1)Includes home equity lines of credit, installment loans and unsecured lines of credit.
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The following table describes the financial effect of the modifications made to troubled loans during the three and nine months ended September 30, 2024 and 2023:
Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024
Term Extension(1)
Interest Rate Reduction(2)
More-Than-Insignificant Payment Delay(3)
Term Extension(1)
Interest Rate Reduction(2)
More-Than-Insignificant Payment Delay(3)
Commercial and industrial 0.31 6.11% 0.11% 0.90 6.11% 0.13%
Commercial mortgages 0.45 - - 0.45 - -
Construction 0.17 - - 0.37 - -
Residential - 4.25 - - 4.25 -
Consumer 0.49 - 0.02 0.48 - 0.04
Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023
Term Extension(1)
Interest Rate Reduction(2)
More-Than-Insignificant Payment Delay(3)
Term Extension(1)
Interest Rate Reduction(2)
More-Than-Insignificant Payment Delay(3)
Commercial and industrial 1.80 4.00% 0.09% 1.55 4.00% 0.09%
Owner-occupied commercial 0.92 - - 1.27 2.58 0.01
Commercial mortgages - - - 1.33 - -
Construction 0.27 - - 0.27 - -
Residential 20.18 - - 20.18 - -
Consumer 0.39 4.00 0.04 3.07 3.27 0.07
(1)Represents the weighted-average increase in the life of modified loans measured in years, which reduces monthly payment amounts for borrowers.
(2)Represents the weighted-average decrease in the contractual interest rate on the modified loans.
(3)Represents the percentage of loans deferred over the total loan portfolio excluding reverse mortgages at fair value.
As of September 30, 2024 and December 31, 2023, the Company had commitments to extend credit of $26.0 million and $18.4 million, respectively, to borrowers experiencing financial difficulty whose terms had been modified.
Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.
The following tables show the amortized cost of loans that received a modification that had a payment default during the three and nine months ended September 30, 2024 and 2023 and were modified in the 12 months before default to borrowers experiencing financial difficulty.
Three Months Ended September 30, 2024
Term Extension Interest Rate Reduction More-Than-Insignificant Payment Delay Total
Commercial and industrial $ 19,176 $ - $ 14,997 $ 34,173
Residential - 121 - 121
Consumer - - 96 96
Total $ 19,176 $ 121 $ 15,093 $ 34,390
Nine Months Ended September 30, 2024
Term Extension Interest Rate Reduction More-Than-Insignificant Payment Delay Total
Commercial and industrial $ 34,341 $ - $ 14,997 $ 49,338
Residential - 121 - 121
Consumer - - 96 96
Total $ 34,341 $ 121 $ 15,093 $ 49,555
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Three Months Ended September 30, 2023
Term Extension More-Than-Insignificant Payment Delay Combination Term Extension & Payment Delay Total
Commercial and industrial $ 707 $ - $ 10,163 $ 10,870
Owner-occupied commercial - - 1,062 1,062
Consumer $ - $ 101 $ - $ 101
Total $ 707 $ 101 $ - $ 12,033
Nine Months Ended September 30, 2023
Term Extension More-Than-Insignificant Payment Delay Combination Term Extension & Payment Delay Total
Commercial and industrial $ 707 $ - $ 10,163 $ 10,870
Owner-occupied commercial - - 1,062 1,062
Consumer - 101 - 101
Total $ 707 $ 101 $ 11,225 $ 12,033
The Company closely monitors the performance of troubled loans to understand the effectiveness of its modification efforts. The following tables show the performance of loans that have been modified in the last 12 months as of September 30, 2024 and 2023:
September 30, 2024
(Dollars in thousands) 30-89 Days Past Due and Still Accruing 90+ Days Past Due and Still Accruing Accruing Current Balances Nonaccrual Loans Total
Commercial and industrial $ - $ - $ 63,410 $ 44,121 $ 107,531
Commercial mortgages - - 30,001 - 30,001
Construction - - 21,294 - 21,294
Residential - - - 309 309
Consumer(1)
908 382 6,147 182 7,619
Total $ 908 $ 382 $ 120,852 $ 44,612 $ 166,754
(1)Includes home equity lines of credit, installment loans and unsecured lines of credit.
September 30, 2023
30-89 Days Past Due and Still Accruing 90+ Days Past Due and Still Accruing Accruing Current Balances Nonaccrual Loans Total
Commercial and industrial $ 428 $ - $ 36,299 $ 11,343 $ 48,070
Owner-occupied commercial - - - 1,271 1,271
Commercial mortgages - - 9,427 - 9,427
Construction 8,285 - 909 - 9,194
Residential - - 613 - 613
Consumer(1)
727 207 8,277 400 9,611
Total $ 9,440 $ 207 $ 55,525 $ 13,014 $ 78,186
(1)Includes home equity lines of credit, installment loans and unsecured lines of credit.
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8. 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 oneyear to 21 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 liabilitiesand Other assets, respectively, in the unaudited Consolidated Statements of Financial Condition. Leases with an initial term of 12 months or less are not recorded on the unaudited Consolidated Statements of Financial Condition. Lease expense is recognized on a straight-line basis over the lease term. Operating lease expense is included in Occupancy expensein the unaudited Consolidated Statements 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, 2024 September 30, 2023 September 30, 2024 September 30, 2023
Operating lease cost (1)
$ 4,308 $ 3,077 $ 12,732 $ 12,593
Sublease income (30) (37) (90) (118)
Net lease cost $ 4,278 $ 3,040 $ 12,642 $ 12,475
(1)Includes variable lease cost and short-term lease cost.
Supplemental information related to operating leases was as follows:
(Dollars in thousands) September 30, 2024 December 31, 2023
Right-of-use assets $ 134,342 $ 130,601
Lease liabilities $ 157,309 $ 151,596
Lease term and discount rate
Weighted average remaining lease term (in years) 12.73 13.01
Weighted average discount rate 5.26 % 5.20 %
Maturities of operating lease liabilities were as follows:
(Dollars in thousands) September 30, 2024
Remaining in 2024 $ 4,721
2025 18,730
2026 17,985
2027 16,584
2028 16,601
After 2028 145,256
Total lease payments 219,877
Less: Interest (62,568)
Present value of lease liabilities $ 157,309
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Supplemental cash flow information related to operating leases was as follows:
Three months ended Nine months ended
(Dollars in thousands) September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 4,999 $ 4,041 $ 14,482 $ 14,235
As of September 30, 2024, 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 leaseson the unaudited Consolidated Statements of Income. The allowance for credit losses on finance leases is included in Provision for credit losseson the unaudited 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, 2024 September 30, 2023 September 30, 2024 September 30, 2023
Direct financing leases:
Interest income on lease receivable $ 16,051 $ 13,682 $ 46,665 $ 39,200
Interest income on deferred fees and costs, net (2,034) (1,643) (5,715) (4,479)
Total direct financing lease net interest income $ 14,017 $ 12,039 $ 40,950 $ 34,721
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, 2024 December 31, 2023
Lease receivables $ 747,886 $ 721,338
Unearned income (122,591) (114,341)
Deferred fees and costs 20,126 16,625
Net investment in direct financing leases $ 645,421 $ 623,622
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9. 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, 2024, management determined based on its qualitative assessment that the fair values of our reporting units exceeded their carrying values, and no goodwill impairment existed during the nine months ended September 30, 2024.
The following table shows the allocation of goodwill to the reportable operating segments for purposes of goodwill impairment testing:
(Dollars in thousands) WSFS
Bank 		Wealth
Management 		Consolidated
Company
December 31, 2023 $ 753,586 $ 132,312 $ 885,898
Goodwill adjustments - - -
September 30, 2024 $ 753,586 $ 132,312 $ 885,898
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, 2024
Core deposits $ 104,751 $ (58,463) $ 46,288 10 years
Customer relationships 73,880 (22,229) 51,651
7-15 years
Loan servicing rights(1)
13,200 (7,774) 5,426
10-25 years
Tradename 2,900 - 2,900 indefinite
Total intangible assets $ 194,731 $ (88,466) $ 106,265
December 31, 2023
Core deposits $ 104,751 $ (50,754) $ 53,997 10 years
Customer relationships 73,880 (18,153) 55,727
7-15 years
Loan servicing rights(2)
12,613 (6,575) 6,038
10-25 years
Tradename 2,900 - 2,900 indefinite
Total intangible assets $ 194,144 $ (75,482) $ 118,662
(1)Includes impairment losses of less than $0.1 million and $0.2 million for the three and nine months endedSeptember 30, 2024, respectively.
(2)Includes impairment losses of less than $0.1 million for the year ended December 31, 2023.
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, 2024, respectively, compared to $3.9 million and $11.6 million for the three and nine months ended September 30, 2023, respectively.
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The following table presents the estimated future amortization expense on definite life intangible assets:
(Dollars in thousands) September 30, 2024
Remaining in 2024 $ 4,207
2025 16,640
2026 15,923
2027 15,444
2028 14,609
Thereafter 36,542
Total $ 103,365
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 in Goodwill and intangible assetsin the accompanying unaudited 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 unaudited 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 $1.5 million and $1.7 million at September 30, 2024 and December 31, 2023, respectively, and the value of its SBA loan servicing rights was $3.9 million and $4.3 million at September 30, 2024 and December 31, 2023, respectively. Changes in the value of the Company's servicing rights resulted in impairment losses of less than $0.1 million and $0.2 million for the three and nine months ended September 30, 2024, respectively, and a reversal of impairment losses of $0.2 million and less than $0.1 million for the three and nine months ended September 30, 2023, 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, netin the unaudited Consolidated Statements of Income and revenues from the Company's SBA loan servicing rights are included in Loan and lease fee incomein the unaudited 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, 2024 or December 31, 2023. Changing economic conditions that may adversely affect the Company's performance and could result in impairment, which could adversely affect earnings in the future.
10. DEPOSITS
The following table shows deposits by category:
(Dollars in thousands) September 30, 2024 December 31, 2023
Noninterest-bearing:
Noninterest demand $ 4,685,957 $ 4,917,297
Total noninterest-bearing $ 4,685,957 $ 4,917,297
Interest-bearing:
Interest-bearing demand $ 2,931,448 $ 2,935,530
Savings 1,488,373 1,610,143
Money market 5,178,388 5,175,123
Customer time deposits 2,142,865 1,784,317
Brokered deposits - 51,676
Total interest-bearing 11,741,074 11,556,789
Total deposits $ 16,427,031 $ 16,474,086
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11. INCOME TAXES
There were no unrecognized tax benefits as of September 30, 2024. 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 2020 through 2023 tax years are subject to examination as of September 30, 2024. The Company does not expect to record or realize any material unrecognized tax benefits during 2024.
The amortization of the low-income housing credit investments has been reflected as income tax expense of $1.9 million and $1.4 million for the three months ended September 30, 2024 and 2023, respectively, and $5.7 million and $4.1 million for the nine months ended September 30, 2024 and 2023, respectively.
The amount of affordable housing tax credits, amortization, and tax benefits recorded as income tax expense for the three months ended were $1.7 million, $1.9 million, and $0.6 million, respectively. The amount of affordable housing tax credits, amortization, and tax benefits recorded as income tax expense for the nine months ended September 30, 2024 were $5.1 million, $5.7 million and $1.7 million, respectively. The carrying value of the investment in affordable housing credits is $81.3 million at September 30, 2024, compared to $87.1 million at December 31, 2023 and is included in the Other assetsline item on the unaudited Consolidated Statements of Financial Condition.
12. 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, 2024 and December 31, 2023 by level in the valuation hierarchy (as described above):
September 30, 2024
(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 $ - $ 455,483 $ - $ 455,483
FNMA MBS - 2,939,887 - 2,939,887
FHLMC MBS - 111,807 - 111,807
GNMA MBS - 43,823 - 43,823
GSE agency notes - 186,119 - 186,119
Other assets - 166,339 56 166,395
Total assets measured at fair value on a recurring basis $ - $ 3,903,458 $ 56 $ 3,903,514
Liabilities measured at fair value on a recurring basis:
Other liabilities $ - $ 133,020 $ 8,285 $ 141,305
Assets measured at fair value on a nonrecurring basis:
Other investments $ - $ - $ 14,322 $ 14,322
Other real estate owned - - 1,301 1,301
Loans held for sale - 42,121 - 42,121
Total assets measured at fair value on a nonrecurring basis $ - $ 42,121 $ 15,623 $ 57,744
December 31, 2023
(Dollars in thousands) Quoted
Prices in
Active
Markets for
Identical
Asset
(Level 1) 		Significant
Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3) 		Total Fair
Value
Assets measured at fair value on a recurring basis:
Available-for-sale securities:
CMO $ - $ 464,619 $ - $ 464,619
FNMA MBS - 3,042,350 - 3,042,350
FHLMC MBS - 115,532 - 115,532
GNMA MBS - 43,340 - 43,340
GSE agency notes - 180,696 - 180,696
Other assets - 153,569 78 153,647
Total assets measured at fair value on a recurring basis $ - $ 4,000,106 $ 78 $ 4,000,184
Liabilities measured at fair value on a recurring basis:
Other liabilities $ - $ 137,616 $ 14,026 $ 151,642
Assets measured at fair value on a nonrecurring basis
Other investments $ - $ - $ 15,206 $ 15,206
Other real estate owned - - 1,569 1,569
Loans held for sale - 29,268 - 29,268
Total assets measured at fair value on a nonrecurring basis $ - $ 29,268 $ 16,775 $ 46,043
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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, 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 price changes in orderly transactions for the identical or a similar investment of the same issuer during the reporting period.
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, foreign exchange forward contracts, 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 foreign exchange forward contracts and 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) as well as equity method investments.
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, foreign exchange forward contracts, and risk participation agreements (see discussion in "Fair Value of Financial Assets and Liabilities" section above).
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.
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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 $6.0 million at September 30, 2024 and $7.3 million at December 31, 2023, 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
Other liabilities include the fair value of interest rate products, derivatives on the residential mortgage held for sale loan pipeline, foreign exchange forward contracts, risk participation agreements, and derivative related to the sale of certain Visa Class B common shares (see discussion in "Fair Value of Financial Assets and Liabilities" section above).
Financial instruments measured at fair value using significant unobservable inputs (Level 3)
The following tables provide a description of the valuation techniques and significant unobservable inputs for the Company's financial instruments classified as Level 3 as of September 30, 2024 and December 31, 2023:
(Dollars in thousands) September 30, 2024
Financial Instrument Fair Value Valuation Technique(s) Unobservable Input Range
(Weighted Average)
Other investments $ 14,322 Observed market comparable transactions Period of observed transactions
December 2023
Other real estate owned 1,301 Fair market value of collateral Costs to sell
10.0%-20.0% (19.3%)
Other assets (Risk participation agreements purchased) 56
Credit Valuation Adjustment
CDS Spread and Loss Given Default (LGD)
CDS spread: 110 - 360 bps (189 bps)
LGD: -% - 30% (30%)
Other liabilities (Risk participation agreements sold) 112
Credit Valuation Adjustment
CDS Spread and Loss Given Default (LGD)
CDS spread: 1 - 250 bps (213 bps)
LGD: 30%
Other liabilities (Financial derivative related to sales of certain Visa Class B shares) 8,173 Discounted cash flow Timing of Visa litigation resolution
2.75 years or 2Q 2027
(Dollars in thousands) December 31, 2023
Financial Instrument Fair Value Valuation Technique(s) Unobservable Input Range
(Weighted Average)
Other investments $ 15,206 Observed market comparable transactions Period of observed transactions December 2023
Other real estate owned 1,569 Fair market value of collateral Costs to sell
10.0% - 20.0% (18.1%)
Other assets (Risk participation agreements purchased) 78
Credit Valuation Adjustment
CDS Spread and Loss Given Default (LGD)
CDS spread: 110 - 360 bps (195 bps)
LGD: -% - 30% (30%)
Other liabilities (Risk participation agreements sold) 3
Credit Valuation Adjustment
CDS Spread and Loss Given Default (LGD)
CDS spread: 1 - 250 bps (95 bps)
LGD: 30%
Other liabilities (Financial derivative related to sales of certain Visa Class B shares) 14,023 Discounted cash flow Timing of Visa litigation resolution
1.00 - 4.75 years (3.06 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, 2024 December 31, 2023
(Dollars in thousands) Fair Value
Measurement 		Book Value Fair Value Book Value Fair Value
Financial assets:
Cash, cash equivalents, and restricted cash Level 1 $ 990,918 $ 990,918 $ 1,092,900 $ 1,092,900
Investment securities available-for-sale Level 2 3,737,119 3,737,119 3,846,537 3,846,537
Investment securities held-to-maturity, net Level 2 1,026,305 958,969 1,058,557 985,931
Other investments Level 3 16,976 16,976 17,434 17,434
Loans, held for sale Level 2 42,121 42,121 29,268 29,268
Loans and leases, net(1)
Level 3 13,124,684 13,360,280 12,583,202 12,514,431
Stock in FHLB of Pittsburgh Level 2 17,497 17,497 15,398 15,398
Accrued interest receivable Level 2 87,360 87,360 85,979 85,979
Other assets Levels 2, 3 166,395 166,395 153,647 153,647
Financial liabilities:
Deposits Level 2 $ 16,427,031 $ 16,418,398 $ 16,474,086 $ 16,449,198
Borrowed funds Level 2 1,075,161 1,093,335 895,076 912,760
Standby letters of credit
Level 3 675 675 814 814
Accrued interest payable Level 2 73,418 73,418 46,684 46,684
Other liabilities Levels 2, 3 141,305 141,305 151,642 151,642
(1)Includes reverse mortgage loans.
At September 30, 2024 and December 31, 2023 the Company had no commitments to extend credit measured at fair value.
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13. 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 Company does not use derivative financial instruments for proprietary or speculative trading.
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, 2024.
Fair Values of Derivative Instruments
(Dollars in thousands) Count Notional Balance Sheet Location Derivatives
(Fair Value)
Derivatives designated as hedging instruments:
Interest rate swaps 18 $ 1,500,000 Other assets $ 32,323
Total $ 1,500,000 $ 32,323
Derivatives not designated as hedging instruments:
Interest rate swaps $ 2,875,981 Other assets $ 131,543
Interest rate swaps 2,875,981 Other liabilities (131,543)
Interest rate lock commitments with customers 67,991 Other assets 1,071
Interest rate lock commitments with customers 390 Other liabilities (2)
Forward sale commitments 14,548 Other assets 42
Forward sale commitments 58,479 Other liabilities (258)
FX forwards 34,636 Other assets 1,360
FX forwards 33,204 Other liabilities (1,217)
Risk participation agreements sold 102,449 Other liabilities (112)
Risk participation agreements purchased 89,053 Other assets 56
Financial derivatives related to
sales of certain Visa Class B shares 		55,358 Other liabilities (8,173)
Total derivatives $ 7,708,070 $ 25,090
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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 December 31, 2023.
Fair Values of Derivative Instruments
(Dollars in thousands) Count Notional Balance Sheet Location Derivatives
(Fair Value)
Derivatives designated as hedging instruments:
Interest rate swaps 9 $ 750,000 Other assets $ 15,578
Total $ 750,000 $ 15,578
Derivatives not designated as hedging instruments:
Interest rate swaps $ 2,428,306 Other assets $ 136,924
Interest rate swaps 2,383,443 Other liabilities (136,924)
Interest rate lock commitments with customers 34,651 Other assets 637
Forward sale commitments 1,000 Other assets 1
Forward sale commitments 37,348 Other liabilities (283)
FX forwards 15,812 Other assets 429
FX forwards 13,064 Other liabilities (409)
Risk participation agreements sold 103,648 Other liabilities (3)
Risk participation agreements purchased 116,804 Other assets 78
Financial derivatives related to
sales of certain Visa Class B shares 		113,177 Other liabilities (14,023)
Total derivatives $ 5,997,253 $ 2,005
Effect of Derivative Instruments on the Income Statement
The table below presents the effect of the derivative financial instruments on the unaudited Consolidated Statements of Income for the three and nine months ended September 30, 2024 and September 30, 2023.
Amount of Loss Recognized in OCI on Derivative (Effective Portion) Amount of Loss Recognized in OCI on Derivative (Effective Portion) Location of Loss Reclassified from Accumulated OCI into Income (Effective Portion)
(Dollars in thousands) Three Months Ended September 30, Nine Months Ended September 30,
Derivatives in Cash Flow Hedging Relationships 2024 2023 2024 2023
Interest rate options $ 10,722 $ (1,608) $ 3,702 $ (2,752) Interest income
Total $ 10,722 $ (1,608) $ 3,702 $ (2,752)
Amount of Gain (Loss) Recognized in Income Amount of Gain (Loss) Recognized in Income Location of Gain (Loss) Recognized in Income
(Dollars in thousands) Three Months Ended September 30, Nine Months Ended September 30,
Derivatives not designated as hedging instruments 2024 2023 2024 2023
Interest rate swaps and options $ 2,774 $ 3,427 $ 7,928 $ 7,397 Other income
Interest rate lock commitments with customers 143 (171) 399 116 Mortgage banking activities, net
Forward sale commitments (977) 595 (733) $ 660 Mortgage banking activities, net
FX forwards 91 97 370 126 Other income
Risk participation agreements (62) (317) (97) (330) Other income
Total $ 1,969 $ 3,631 $ 7,867 $ 7,969
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Derivatives Designated as Hedging Instruments:
Cash Flow Hedges of Interest Rate Risk
The Company's objectives in using interest rate derivatives are to add stability to interest income and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate options, including floors, caps, collars, or swaps as part of its interest rate risk management strategy. Interest rate options designated as cash flow hedges involve the receipt of fixed amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount.
The Company has agreements with certain derivative counterparties that contain a provision under which, if it defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. The Company also has agreements with certain derivative counterparties that contain a provision where if it fails to maintain its status as a well-capitalized or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.
As of September 30, 2024, the Company had 18 interest rate floors purchased at an aggregate premium of $29.7 million with an aggregate notional amount of $1.5 billion to hedge variable cash flows associated with a variable rate loan pool through the third quarter of 2027. Changes to the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecast transaction affects earnings. If the Company determines that a cash flow hedge is no longer highly effective, future changes in the fair value of the hedging instrument would be reported in earnings. As of September 30, 2024, the Company determined the cash flow hedges remain highly effective. During the three and nine months ended September 30, 2024, $1.3 million and $3.1 million, respectively, of amortization expense on the premium was reclassified into interest income compared to $0.4 million and $0.6 million during the three and nine months ended September 30, 2023, respectively. The Company does not expect any unrealized gains or losses related to cash flow hedges to be reclassified into earnings in the next twelve months.
Derivatives Not Designated as Hedging Instruments:
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, 2024, 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.
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, 2024, there were no fair value adjustments related to credit quality.
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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."
Swap Guarantees
The Company entered into agreements with one unrelated financial institution whereby that financial institution entered into interest rate derivative contracts (interest rate swap transactions) directly with customers referred to them by the Company. Under the terms of the agreements, the financial institution has 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, 2024 and December 31, 2023, there were 161 and 188 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 $0.7 billion at September 30, 2024 and December 31, 2023. At September 30, 2024, the swap transactions remaining maturities ranged from under 1 year to 11 years. At September 30, 2024, one of these customer swaps was in a paying position to third parties for less than $0.1 million, with our swap guarantees having a fair value of $6.0 million. At December 31, 2023, none of these customer swaps were in a paying position to third parties, with the Company's swap guarantees having a fair value of $7.3 million. For both periods, none of the Company's customers were in default of the swap agreements.
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 $3.7 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, 2024, it could have been required to settle its obligations under the agreements at the termination value.
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14. 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 consumer customers. Commercial and Consumer Banking 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 smart safes nationwide. The balance sheet category Cash in non-owned ATMsincludes 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. Bryn Mawr Trust®is our predominant Private Wealth Management brand, providing advisory, investment management and trustee services to institutions, affluent and high-net-worth individuals. Private Wealth Management, which includes Private Banking, serves high-net-worth clients and institutions by providing trustee and advisory services, financial planning, customized investment strategies, brokerage products such as annuities and customized banking services including credit and deposit products tailored to its clientele. Private Wealth Management includes businesses that operate under the bank's charter, through a broker/dealer and as a registered investment advisor (RIA). It generates revenue through fee-only arrangements, net interest income and other fee-only services such as estate administration, trust tax planning and custody. Powdermill®is a multi-family office specializing in providing independent solutions to high-net-worth individuals, families and corporate executives through a coordinated, centralized approach.
The Bryn Mawr Trust Company of Delaware provides personal trust and fiduciary services to families and individuals across the U.S. and internationally. WSFS Institutional Services®provides trustee, agency, bankruptcy administration, custodial and commercial domicile services to institutional, corporate clients and special purpose vehicles.
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The following tables show segment results for the three and nine months ended September 30, 2024 and 2023:
Three Months Ended September 30, 2024 Three Months Ended September 30, 2023
(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 $ 267,430 $ - $ 5,954 $ 273,384 $ 245,520 $ - $ 5,619 $ 251,139
Noninterest income 21,338 31,805 37,015 90,158 18,371 21,231 33,066 72,668
Total external customer revenues 288,768 31,805 42,969 363,542 263,891 21,231 38,685 323,807
Inter-segment revenues:
Interest income 8,587 293 28,414 37,294 7,213 340 27,011 34,564
Noninterest income 8,901 468 227 9,596 7,384 499 190 8,073
Total inter-segment revenues 17,488 761 28,641 46,890 14,597 839 27,201 42,637
Total revenue 306,256 32,566 71,610 410,432 278,488 22,070 65,886 366,444
External customer expenses:
Interest expense 86,768 - 9,112 95,880 60,133 - 8,404 68,537
Noninterest expenses 118,219 24,481 21,023 163,723 105,655 15,524 18,510 139,689
Provision for (release of) credit losses 18,426 - (4) 18,422 18,544 - (130) 18,414
Total external customer expenses 223,413 24,481 30,131 278,025 184,332 15,524 26,784 226,640
Inter-segment expenses:
Interest expense 28,707 4,885 3,702 37,294 27,351 4,068 3,145 34,564
Noninterest expenses 695 1,571 7,330 9,596 689 1,391 5,993 8,073
Total inter-segment expenses 29,402 6,456 11,032 46,890 28,040 5,459 9,138 42,637
Total expenses 252,815 30,937 41,163 324,915 212,372 20,983 35,922 269,277
Income before taxes $ 53,441 $ 1,629 $ 30,447 $ 85,517 $ 66,116 $ 1,087 $ 29,964 $ 97,167
Income tax provision 21,108 22,904
Consolidated net income 64,409 74,263
Net (loss) income attributable to noncontrolling interest (26) 97
Net income attributable to WSFS $ 64,435 $ 74,166
Supplemental Information
Capital expenditures for the period ended $ 2,896 $ 124 $ 618 $ 3,638 $ 1,131 $ - $ 10 $ 1,141
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Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023
(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 $ 782,950 $ - $ 17,293 $ 800,243 $ 703,210 $ - $ 16,081 $ 719,291
Noninterest income 60,198 89,155 108,260 257,613 46,610 59,402 96,654 202,666
Total external customer revenues 843,148 89,155 125,553 1,057,856 749,820 59,402 112,735 921,957
Inter-segment revenues:
Interest income 23,132 1,119 84,606 108,857 20,037 1,058 72,686 93,781
Noninterest income 24,662 1,381 698 26,741 21,545 1,455 389 23,389
Total inter-segment revenues 47,794 2,500 85,304 135,598 41,582 2,513 73,075 117,170
Total revenue 890,942 91,655 210,857 1,193,454 791,402 61,915 185,810 1,039,127
External customer expenses:
Interest expense 241,528 - 31,484 273,012 152,582 - 19,733 172,315
Noninterest expenses 335,488 70,358 62,717 468,563 314,751 43,562 55,674 413,987
Provision for credit losses 53,046 - 328 53,374 62,589 - 666 63,255
Total external customer expenses 630,062 70,358 94,529 794,949 529,922 43,562 76,073 649,557
Inter-segment expenses:
Interest expense 85,725 12,308 10,824 108,857 73,744 11,478 8,559 93,781
Noninterest expenses 2,079 4,630 20,032 26,741 1,844 4,221 17,324 23,389
Total inter-segment expenses 87,804 16,938 30,856 135,598 75,588 15,699 25,883 117,170
Total expenses 717,866 87,296 125,385 930,547 605,510 59,261 101,956 766,727
Income before taxes $ 173,076 $ 4,359 $ 85,472 $ 262,907 $ 185,892 $ 2,654 $ 83,854 $ 272,400
Income tax provision 63,567 66,880
Consolidated net income 199,340 205,520
Net (loss) income attributable to noncontrolling interest (129) 272
Net income attributable to WSFS $ 199,469 $ 205,248
Supplemental Information
Capital expenditures for the period ended $ 9,289 $ 247 $ 1,059 $ 10,595 $ 2,943 $ - $ 10 $ 2,953
The following table shows significant components of segment net assets as of September 30, 2024 and December 31, 2023:
September 30, 2024 December 31, 2023
(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 $ 585,912 $ 366,675 $ 38,331 $ 990,918 $ 600,483 $ 443,431 $ 48,986 $ 1,092,900
Goodwill 753,586 - 132,312 885,898 753,586 - 132,312 885,898
Other segment assets 18,574,502 17,097 436,794 19,028,393 18,191,585 15,654 408,635 18,615,874
Total segment assets $ 19,914,000 $ 383,772 $ 607,437 $ 20,905,209 $ 19,545,654 $ 459,085 $ 589,933 $ 20,594,672
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15. 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 to GSEs such as FHLMC, FNMA, and on a more limited basis, 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 Goodwill and intangible assetson 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 three repurchases during the nine months ended September 30, 2024 for an aggregate of $0.7 million and one repurchase for $0.8 million during the same period in 2023.
Unfunded Lending Commitments
At September 30, 2024 and December 31, 2023, the allowance for credit losses of unfunded lending commitments was $12.8 million and $12.1 million, respectively. A provision expense of $1.3 million and $0.7 million was recognized during the three and nine months ended September 30, 2024, respectively, compared to a provision expense of $0.1 million and $0.2 million during the three and nine months ended September 30, 2023, respectively.
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16. CHANGE IN ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss 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 and actuarial gains and losses on defined benefit pension plans. Changes to accumulated other comprehensive loss are presented, net of tax, as a component of stockholders' equity. Amounts that are reclassified out of accumulated other comprehensive loss are recorded on the unaudited Consolidated Statements of Income either as a gain or loss. Changes to accumulated other comprehensive loss 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 		Net change in equity method investments Total
Balance, June 30, 2024 $ (549,039) $ (84,046) $ (4,790) $ (5,423) $ 420 $ (642,878)
Other comprehensive income (loss) 128,223 - (4) 10,722 4 138,945
Less: Amounts reclassified from accumulated other comprehensive loss - 3,965 (49) - - 3,916
Net current-period other comprehensive income (loss) 128,223 3,965 (53) 10,722 4 142,861
Balance, September 30, 2024 $ (420,816) $ (80,081) $ (4,843) $ 5,299 $ 424 $ (500,017)
Balance, June 30, 2023 $ (550,890) $ (99,945) $ (4,571) $ (1,115) $ 462 $ (656,059)
Other comprehensive (loss) income (127,523) - (3) (1,608) 192 (128,942)
Less: Amounts reclassified from accumulated other comprehensive loss - 4,366 (48) (28) - 4,290
Net current-period other comprehensive (loss) income (127,523) 4,366 (51) (1,636) 192 (124,652)
Balance, September 30, 2023 $ (678,413) $ (95,579) $ (4,622) $ (2,751) $ 654 $ (780,711)
(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, 2023 $ (499,932) $ (91,523) $ (4,614) $ 1,597 $ 481 $ (593,991)
Other comprehensive income (loss) 79,116 - (81) 3,702 (57) 82,680
Less: Amounts reclassified from accumulated other comprehensive loss - 11,442 (148) - - 11,294
Net current-period other comprehensive income (loss) 79,116 11,442 (229) 3,702 (57) 93,974
Balance, September 30, 2024 $ (420,816) $ (80,081) $ (4,843) $ 5,299 $ 424 $ (500,017)
Balance, December 31, 2022 $ (563,533) $ (108,503) $ (4,482) $ 108 $ 566 $ (675,844)
Other comprehensive (loss) income (114,880) - 2 (2,752) 88 (117,542)
Less: Amounts reclassified from accumulated other comprehensive loss - 12,924 (142) (107) - 12,675
Net current-period other comprehensive (loss) income (114,880) 12,924 (140) (2,859) 88 (104,867)
Balance, September 30, 2023 $ (678,413) $ (95,579) $ (4,622) $ (2,751) $ 654 $ (780,711)
(1)Includes amortization of net gain for cash flow hedges terminated as of April 1, 2020.
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The unaudited Consolidated Statements of Income were impacted by components of other comprehensive income (loss) as shown in the tables below:
Three Months Ended September 30, Affected line item in unaudited Consolidated Statements of Income
(Dollars in thousands) 2024 2023
Net unrealized holding losses on securities transferred between available-for-sale and held-to-maturity:
Amortization of net unrealized losses to income during the period 5,217 5,745 Net interest income
Income taxes (1,252) (1,379) Income tax provision
Net of tax 3,965 4,366
Amortization of defined benefit pension plan-related items:
Prior service credits
(19) (19)
Actuarial gains (46) (44)
Total before tax (65) (63) Salaries, benefits and other compensation
Income taxes 16 15 Income tax provision
Net of tax (49) (48)
Net unrealized gains on terminated cash flow hedges:
Amortization of net unrealized gains to income during the period - (37) Interest and fees on loans and leases
Income taxes - 9 Income tax provision
Net of tax - (28)
Total reclassifications $ 3,916 $ 4,290
Nine Months Ended September 30, Affected line item in unaudited Consolidated Statements of Income
2024 2023
Net unrealized holding losses on securities transferred between available-for-sale and held-to-maturity:
Amortization of net unrealized losses to income during the period 15,055 17,005 Net interest income
Income taxes (3,613) (4,081) Income tax provision
Net of tax 11,442 12,924
Amortization of defined benefit pension plan-related items:
Prior service credits
(57) (57)
Actuarial gains (138) (130)
Total before tax (195) (187) Salaries, benefits and other compensation
Income taxes 47 45 Income tax provision
Net of tax (148) (142)
Net unrealized gains on terminated cash flow hedges:
Amortization of net unrealized gains to income during the period - (141) Interest and fees on loans and leases
Income taxes - 34 Income tax provision
Net of tax - (107)
Total reclassifications $ 11,294 $ 12,675
17. 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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18. SUBSEQUENT EVENTS
The Company evaluated subsequent events in accordance with ASC Topic 855 and determined that the following qualifies as a non-recognized subsequent event:
Repayment of Borrowed Funds
On October 11, 2024 and October 18, 2024, WSFS Bank executed repayments of advances under the Bank Term Funding Program (BTFP) totaling $700.0 million of principal and $25.1 million of accrued interest. The Bank has no borrowings remaining under the BTFP.
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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 $20.9 billion in assets and $87.2 billion in assets under management (AUM) and assets under administration (AUA) at September 30, 2024, 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 192 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, 2024, we had six consolidated subsidiaries: WSFS Bank, The Bryn Mawr Trust Company of Delaware (BMT-DE), Bryn Mawr Capital Management, LLC (BMCM), WSFS Wealth Management, LLC (Powdermill®), WSFS SPE Services, LLC, 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®).
Our banking business had a total loan and lease portfolio of $13.3 billion as of September 30, 2024, which was funded primarily through commercial relationships and consumer and customer generated deposits. We have built a $10.2 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 smart safes nationwide, and manages approximately $1.6 billion in total cash and services approximately 32,400 non-bank ATMs and 9,700 smart safes nationwide. Cash Connect®provides related services such as online reporting and ATM cash management, predictive cash ordering and reconcilement services, armored carrier management, loss protection, and deposit safe cash logistics. Cash Connect® also supports 569 owned or branded ATMs for WSFS Bank Customers, which is one of the largest branded ATM networks in our market.
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. Combined, these businesses had $87.2 billionof AUM and AUA at September 30, 2024.
Bryn Mawr Trust®is our predominant Private Wealth Management brand, providing advisory, investment management and trustee services to institutions, affluent and high-net-worth individuals. Private Wealth Management serves high-net-worth clients and institutions by providing trustee and advisory services, financial planning, customized investment strategies, brokerage products such as annuities and traditional banking services such as credit and deposit products tailored to its clientele. Private Wealth Management includes businesses that operate under the Bank's charter, through a broker/dealer and as a registered investment advisor (RIA). It generates revenue through a percentage fee based on account assets, fee-only arrangements, net interest income and other fee-only services such as estate administration, trust tax planning and custody. Powdermill®is a multi-family office specializing in providing independent solutions to high-net-worth individuals, families and corporate executives through a coordinated, centralized approach.
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BMT-DE provides personal trust and fiduciary services to families and individuals across the U.S. and internationally. WSFS Institutional Services®provides trustee, agency, bankruptcy administration, custodial and commercial domicile services to institutional, corporate clients and special purpose vehicles.
As of September 30, 2024, we service our customers primarily from 114 offices located in Pennsylvania (57), Delaware (39), New Jersey (14), Florida (2) Nevada (1) and Virginia (1), our ATM network, our website at www.wsfsbank.comand our mobile app.
Highlights and Other Notables Items for Three and Nine Months Ended September 30, 2024
•Three Months Ended September 30, 2024
◦The Wealth Management business completed the conversion of its trust accounting system and Client portal as part of the Bryn Mawr Trust integration plan.
◦During the quarter, WSFS Associates surpassed the Bank's 2024 volunteer commitment goal of 24,000 hours of service.
◦During the quarter, WSFS recognized $2.3 million in revenue from our partnership with Spring EQ related to the annual earnout from the previously announced sale, recognized within Other incomeon the unaudited Consolidated Statements of Income.
◦WSFS repurchased 266,672 shares of common stock under the Company's share repurchase programsat an average price of $51.82per share, for an aggregate purchase price of approximately $13.8 million.
◦The Board of Directors approved a $0.15 per share quarterly cash dividend.
◦The Bank and the Company continue to be well above well-capitalized across all measures of regulatory capital, with total common equity Tier 1 capital of 13.46% and 13.56%, respectively, and total risk-based capital of 14.71% and 15.61%, respectively.
•Nine Months Ended September 30, 2024
◦Net loans and leases grew $541.5 million, or 6% annualized, compared to December 31, 2023.
◦The allowance for credit losses (ACL) on loans and leases increased $11.4 million when compared to December 31, 2023, primarily due to higher provision on our commercial mortgages portfolio.
◦During the nine months ended September 30, 2024, WSFS had capital returns of $101.5 million to stockholders, comprised of $74.5 million from share repurchases and $27.0 millionfrom quarterly dividends.
◦WSFS recorded a $0.9 millionexpense for the final FDIC Special Assessment received during the year.
◦During the year, WSFS recognized $4.3 million of nonrecurring income from our partnership with Spring EQ, comprised of the $2.3 million annual earnout mentioned above and post-close distributions of $2.0 million related to the sale of our equity investment in Spring EQ that occurred in the fourth quarter of 2023.
◦As a result of the Visa Class B exchange program, (i) a $3.4 million gain resulting from the reduction of our Visa B derivative liability established from our previous sale of 360,000 shares in 2Q 2020 and (ii) a $0.1 million gain on the liquidation of a portion of our remaining equity investment.
◦In July 2024, Moody's Investor Services reaffirmed the Company's investment-grade issuer rating of Baa2 with a stable outlook. The ratings reaffirmation reflects the benefits of our diversified business model, our strong capital levels, earnings, liquidity, and asset quality.
◦During the year, we held our second annual "We Stand for Service Day", during which nearly 1,500 of our Associates volunteered at more than 130 community organizations across the Greater Philadelphia, Southern New Jersey and Delaware region.
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FINANCIAL CONDITION
Total assets increased $310.5 million to $20.9 billion at September 30, 2024 compared to December 31, 2023. This increase is primarily comprised of the following:
•Net loans and leases held for investment increased $541.5 million, primarily due to increases of $125.9 million in consumer loans primarily from Spring EQ home equity loans, $117.6 million in owner-occupied commercial loans, $99.2 million in commercial and industrial loans and $70.1 million in residential mortgage loans. Commercial mortgages increased $347.9 million with a corresponding decrease of $229.7 million in construction due to the migration of construction loans to permanent commercial mortgages.
•Total investment securities decreased $141.7 million:
◦Investment securities, available-for-sale decreased $109.4 million, primarily due to repayments, maturities and calls of $262.8 million, partially offset by increased market values of $104.1 million and purchases of $51.6 million.
◦Investment securities, held-to-maturity decreased $32.3 million, primarily due to repayments, maturities and calls of $45.8 million, partially offset by $11.2 million of amortization of net unrealized losses on available-for-sale securities transferred to held-to-maturity.
•Total cash and cash equivalents decreased $102.0 million, due to loan growth and a shift to external funding sources in our Cash Connect®business, partially offset by an increase in wholesale funding.
Total liabilities increased $113.3 million to $18.2 billion at September 30, 2024 compared to December 31, 2023. This increase is primarily comprised of the following:
•Other borrowed funds increased $136.6 million, primarily due to $135.0 million borrowed from the Bank Term Funding Program (BTFP) as a result of favorable terms and pricing.
•Federal Home Loan Bank advances increased $43.2 million due to favorable pricing terms.
•Accrued interest payable increased $26.7 million due to the timing of interest payments on BTFP borrowings.
•Brokered deposits decreased $51.7 million due to a shift in funding sources.
•Other liabilities decreased $46.4 million, primarily due to a decrease of $54.4 million in collateral held on derivatives and derivative liabilities, partially offset by an increase of $5.7 million in our lease liabilities related to new leases and extensions.
For further information, see "Notes to the Consolidated Financial Statements (Unaudited).
LIQUIDITY AND CAPITAL RESOURCES
Capital Resources
Stockholders' equity of WSFS increased $200.6 million between December 31, 2023 and September 30, 2024. This increase was primarily due to $199.5 million of earnings and a decrease of $94.0 million in accumulated other comprehensive loss driven by market value increases on available-for-sale mortgage-backed securities, partially offset by $74.5 million from the repurchase of shares of common stock under our stock repurchase plan and the payment of dividends on our common stock of $27.0 million.
During the three months ended September 30, 2024, our Board of Directors approved a quarterly cash dividend of $0.15 per share of common stock. This dividend will be paid on November 22, 2024 to stockholders of record as of November 8, 2024.
Book value per share of common stock was $45.37 at September 30, 2024, an increase of $4.44 from $40.93 at December 31, 2023. Tangible book value per share of common stock (a non-GAAP financial measure) was $28.56 at September 30, 2024, an increase of $4.23 from $24.33 at December 31, 2023. 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, 2024:
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 $ 2,402,661 14.71 % $ 1,306,575 8.00 % $ 1,633,219 10.00 %
WSFS Financial Corporation 2,549,909 15.61 1,307,069 8.00 1,633,836 10.00
Tier 1 Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB 2,198,431 13.46 979,932 6.00 1,306,575 8.00
WSFS Financial Corporation 2,215,602 13.56 980,301 6.00 1,307,069 8.00
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB 2,198,431 13.46 734,949 4.50 1,061,592 6.50
WSFS Financial Corporation 2,215,602 13.56 735,226 4.50 1,061,993 6.50
Tier 1 Leverage Capital
Wilmington Savings Fund Society, FSB 2,198,431 10.68 823,529 4.00 1,029,411 5.00
WSFS Financial Corporation 2,215,602 10.75 824,057 4.00 1,030,071 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, 2024, 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 $307.4 million in cash to support share repurchases, potential dividends, acquisitions, strategic growth plans and other general corporate purposes.
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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, commercial, consumer, wealth and trust deposits, 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, 2024, the Company had $1.0 billionin cash, cash equivalents, and restricted cash. As of September 30, 2024, our estimated uninsured deposits were $6.1 billion, or 37% of total customer deposits, and our estimated unprotected deposits (uninsured and uncollateralized) were $4.9 billion, or 30% of total customer deposits.
As of September 30, 2024, the Company had a readily available, secured borrowing capacity of $5.6 billion from the FHLB and $2.0 billion through the Federal Reserve Discount Window. In addition, the Company had $1.4 billion in unpledged securities that could be used to support additional borrowings and $0.3 billion of cash deposited with the Federal Reserve Bank.
Our primary cash contractual obligations relate to operating leases, long-term debt, credit obligations, and data processing. At September 30, 2024, we had $219.9 million in total contractual payments for ongoing leases that have remaining lease terms of less than one year to 21 years, which includes renewal options that are exercised at our discretion. For additional information on our operating leases, see Note 8 to the unaudited Consolidated Financial Statements. At September 30, 2024, we had obligations for principal payments on long-term debt including $43.2 million of FHLB advances, $67.0 million for our trust preferred borrowings, due June 1, 2035, $70.0 million of fixed-to-floating rate subordinated notes due 2027, and $150.0 million for our senior debt, due December 15, 2030. At September 30, 2024, we had advances of $700.0 million under the BTFP, due January 2025. On October 11, 2024 and October 18, 2024, WSFS Bank executed repayments of advances under the Bank Term Funding Program (BTFP) totaling $700.0 million of principal and $25.1 million of accrued interest. Royal Bancshares Capital Trust I (Trust I) and Royal Bancshares Capital Trust II (Trust II) (collectively, the RBC Trusts), which were acquired from Bryn Mawr Bank Corporation, were utilized for the sole purpose of issuing and selling capital securities representing preferred beneficial interests. Although WSFS owns an aggregate of $0.8 million of the common securities of Trust I and Trust II, the RBC Trusts are not consolidated into the Company's Consolidated Financial Statements. Inclusive of the fair value marks, WSFS assumed junior subordinated debentures owed to the RBC Trusts with a current carrying value of $11.9 million each, totaling $23.8 million. The Company records its investments in the RBC Trusts' common securities of $0.4 million each as investments in unconsolidated entities and records dividend income upon declaration by Trust I and Trust II. The Company has fully and unconditionally guaranteed all of the obligations of the RBC 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.
Commitments to extend credit provide for financing on predetermined terms as long as the customer continues to meet specific criteria. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being completely drawn upon, the total commitment amounts do not necessarily represent future cash requirements. At September 30, 2024, the Company had total commitments to extend credit of$4.1 billion, which are generally one year commitments.
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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, 2024 December 31, 2023
Nonaccruing loans(1):
Commercial and industrial $ 64,939 $ 29,389
Owner-occupied commercial 6,154 4,862
Commercial mortgages 7,449 22,292
Construction 3,308 12,617
Residential 5,099 2,579
Consumer 3,090 2,446
Total nonaccruing loans(2)
90,039 74,185
Other real estate owned 1,301 1,569
Total nonperforming assets $ 91,340 $ 75,754
Past due loans:
Commercial $ 23,945 $ 1,552
Residential 15 -
Consumer(3)
7,754 10,032
Total past due loans $ 31,714 $ 11,584
Troubled loans:
Commercial $ 158,826 $ 85,330
Residential 309 777
Consumer 7,619 9,161
Total troubled loans $ 166,754 $ 95,268
Ratio of allowance for credit losses to total loans and leases(4)
1.48 % 1.46 %
Ratio of nonaccruing loans to total gross loans and leases(5)
0.68 0.58
Ratio of nonperforming assets to total assets 0.44 0.37
Ratio of allowance for credit losses to nonaccruing loans 219 251
Ratio of allowance for credit losses to total nonperforming assets(6)
216 246
(1)Includes nonaccruing troubled loans.
(2)Includes nonaccrual loans held-for-sale as of December 31, 2023
(3)Includes U.S. government guaranteed student loans with little risk of credit loss.
(4)Represents amortized cost basis for loans and leases.
(5)Total loans exclude loans held for sale and reverse mortgages.
(6)Excludes acquired purchase credit deteriorated loans.
Nonperforming assets increased $15.6 million between December 31, 2023 and September 30, 2024. This increase was primarily driven by the addition of two C&I relationships during the third quarter, partially offset by favorable resolutions and paydowns of multiple loans during the year and a charge-off on a commercial mortgage relationship. The ratio of nonperforming assets to total assets increasedfrom 0.37% at December 31, 2023 to 0.44% at September 30, 2024.
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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) 2024 2023
Beginning balance $ 75,754 $ 43,372
Additions 146,457 75,216
Collections (63,672) (16,487)
Transfers to accrual(1)
(15,430) (20,263)
Charge-offs (51,769) (24,080)
Ending balance $ 91,340 $ 57,758
(1)Includes impact of ASU No. 2022-02 adoption in 2023.
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. The FOMC lowered the federal funds target rate once in 2024 for a total of 50 basis points and increased the target rate four times in 2023 for a total of 100 basis points, and has suggested it may continue lowering interest rates further in 2024. 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, 2024, interest-bearing liabilities exceeded interest-earning assets that mature or reprice within one year (interest-sensitive gap) by $162.4 million. Our interest-sensitive assets as a percentage of interest-sensitive liabilities within the one-year window was 98.25% at September 30, 2024 compared with 99.67% at December 31, 2023. Likewise, the one-year interest-sensitive gap as a percentage of total assets was (0.78)% at September 30, 2024 compared with (0.14)% at December 31, 2023.
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, 2024 and December 31, 2023:
September 30, 2024 December 31, 2023
% 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 13.8% 15.25% 15.7% 22.44%
+200 9.1% 15.73% 10.4% 21.46%
+100 4.4% 16.17% 5.2% 20.41%
+50 2.1% 16.42% 2.6% 19.85%
+25 0.9% 16.48% 1.3% 19.56%
- -% 16.54% -% 19.26%
-25 (1.0)% 16.60% (1.3)% 18.96%
-50 (1.9)% 16.65% (2.6)% 18.64%
-100 (3.4)% 16.50% (4.9)% 18.00%
'-200
(5.7)% 15.90% (9.6)% 16.50%
'-300
(8.1)% 14.40% (14.2)% 14.80%
(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.
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, 2024: Net income for the three months ended September 30, 2024 was $64.4 million, compared to $74.2 million for the three months ended September 30, 2023.
•Net interest income decreased $5.1 million, primarily due to continued deposit mix shift and growth in higher priced deposit products over the past year. See "Net Interest Income" for further information.
•Our provision for credit losses was flat. See "Allowance for Credit Losses" for further information.
•Noninterest income increased $17.5 million, driven by the Cash Connect®, Wealth Management, Core Banking, and Mortgage business lines. Growth in Cash Connect®was driven by bailment Customers added in the fourth quarter of 2023 and first half of 2024. Growth in Wealth Management was driven by growth across all key product lines. We also recognized revenue from our partnership with Spring EQ. See "Noninterest Income" for further information.
•Noninterest expense increased $24.0 million, primarily due to higher salaries and benefits from annual performance-based increases and talent additions in key business lines and Cash Connect®funding costs associated with a shift towards external funding.
•Income tax provision decreased $1.8 million, primarily due to the $11.7 million decrease in pre-tax income, partially offset by higher state income taxes.
Nine months ended September 30, 2024: Net income for the nine months ended September 30, 2024 was $199.5 million, compared to $205.2 million for the nine months ended September 30, 2023.
•Net interest income decreased $19.7 million during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, 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, 2024 decreased $9.9 million compared to the nine months ended September 30, 2023, due to lower losses within our commercial and industrial loan portfolio and our residential and consumer loan portfolios, partially offset by higher losses on our commercial mortgages and commercial small business leases portfolios. See "Allowance for Credit Losses" for further information.
•Noninterest income for the nine months ended September 30, 2024 increased $54.9 million compared to the nine months ended September 30, 2023, primarily due to increases from Cash Connect®, Wealth Management fee income, revenue from our partnership with Spring EQ, a gain on our Visa B derivative liability, mortgage banking activities, and capital markets income. See "Noninterest Income" for further information.
•Noninterest expense increased $54.6 million during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to increases in Cash Connect®funding costs associated with a shift towards external funding and salaries and benefits from annual performance-based increases and talent additions in key business lines. The increase was partially offset by decreases in net corporate development and restructuring costs.
•Income tax provision for the nine months ended September 30, 2024 decreased $3.3 million compared to the nine months ended September 30, 2023, primarily due to the benefit from our low-income housing tax credit investments, solar tax credit investments and research and development tax credits.
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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,
2024 2023
(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 $ 5,246,721 $ 93,594 7.11 % $ 5,107,501 $ 90,098 7.01 %
Commercial real estate loans 4,952,571 89,516 7.19 4,611,968 82,040 7.06
Residential loans 924,830 11,916 5.15 841,510 10,698 5.09
Consumer loans 2,112,423 39,909 7.52 1,940,418 34,972 7.15
Loans held for sale
50,556 1,042 8.20 54,072 1,095 8.03
Total loans and leases 13,287,101 235,977 7.07 12,555,469 218,903 6.92
Mortgage-backed securities(3)
4,354,462 25,348 2.33 4,602,107 26,654 2.32
Investment securities(3)
366,098 2,184 2.62 364,565 2,180 2.64
Other interest-earning assets 709,358 9,875 5.54 251,273 3,402 5.37
Total interest-earning assets $ 18,717,019 $ 273,384 5.82 % $ 17,773,414 $ 251,139 5.61 %
Allowance for credit losses (199,380) (173,052)
Cash and due from banks 189,523 277,780
Cash in non-owned ATMs 387,019 363,131
Bank-owned life insurance 35,689 101,411
Other noninterest-earning assets 1,931,521 1,922,080
Total assets $ 21,061,391 $ 20,264,764
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand $ 2,806,850 $ 9,074 1.29 % $ 2,955,613 $ 7,156 0.96 %
Savings 1,519,457 2,038 0.53 1,750,809 1,521 0.34
Money market 5,125,286 46,686 3.62 4,499,909 34,639 3.05
Customer time deposits 2,061,526 22,849 4.41 1,661,885 12,828 3.06
Total interest-bearing customer deposits 11,513,119 80,647 2.79 10,868,216 56,144 2.05
Brokered deposits - - - 88,594 1,111 4.98
Total interest-bearing deposits 11,513,119 80,647 2.79 10,956,810 57,255 2.07
Federal Home Loan Bank advances 108,196 1,472 5.41 11,576 167 5.72
Trust preferred borrowings 90,753 1,749 7.67 90,557 1,764 7.73
Senior and subordinated debt 218,535 2,446 4.48 218,304 2,453 4.49
Other borrowed funds(4)
816,373 9,566 4.66 604,156 6,898 4.53
Total interest-bearing liabilities $ 12,746,976 $ 95,880 2.99 % $ 11,881,403 $ 68,537 2.29 %
Noninterest-bearing demand deposits 4,979,859 5,248,931
Other noninterest-bearing liabilities 770,572 813,858
Stockholders' equity 2,575,182 2,327,853
Noncontrolling interest (11,198) (7,281)
Total liabilities and stockholders' equity $ 21,061,391 $ 20,264,764
Excess of interest-earning assets over interest-bearing liabilities $ 5,970,043 $ 5,892,011
Net interest income $ 177,504 $ 182,602
Interest rate spread 2.83 % 3.32 %
Net interest margin 3.78 % 4.08 %
(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,
2024 2023
(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 $ 5,136,810 $ 273,125 7.11 % $ 5,038,365 $ 256,915 6.83 %
Commercial real estate loans 4,936,360 265,092 7.17 4,507,845 231,886 6.88
Residential loans 897,325 33,490 4.98 805,424 28,710 4.75
Consumer loans 2,080,780 117,156 7.52 1,899,370 100,015 7.04
Loans held for sale
42,520 2,632 8.27 47,827 2,985 8.34
Total loans and leases 13,093,795 691,495 7.06 12,298,831 620,511 6.75
Mortgage-backed securities(3)
4,388,650 77,029 2.34 4,729,796 81,310 2.29
Investment securities
364,196 6,551 2.66 370,573 6,599 2.71
Other interest-earning assets 607,780 25,168 5.53 279,373 10,871 5.20
Total interest-earning assets $ 18,454,421 $ 800,243 5.80 % $ 17,678,573 $ 719,291 5.45 %
Allowance for credit losses (194,584) (165,807)
Cash and due from banks 179,898 254,702
Cash in non-owned ATMs 323,706 390,474
Bank-owned life insurance 39,834 101,350
Other noninterest-earning assets 1,940,836 1,904,597
Total assets $ 20,744,111 $ 20,163,889
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand $ 2,816,260 $ 24,547 1.16 % $ 3,045,247 $ 18,705 0.82 %
Savings 1,553,451 5,392 0.46 1,895,379 4,119 0.29
Money market 5,161,325 138,509 3.58 4,168,793 81,795 2.62
Customer time deposits 1,945,165 61,509 4.22 1,506,980 29,418 2.61
Total interest-bearing customer deposits 11,476,201 229,957 2.68 10,616,399 134,037 1.69
Brokered deposits 6,114 178 3.89 246,544 8,464 4.59
Total interest-bearing deposits 11,482,315 230,135 2.68 10,862,943 142,501 1.75
Federal Home Loan Bank advances 51,995 2,139 5.50 133,143 5,135 5.16
Trust preferred borrowings 90,704 5,255 7.74 90,510 4,954 7.32
Senior debt 218,478 7,336 4.48 223,192 7,360 4.40
Other borrowed funds(4)
805,090 28,147 4.67 377,050 12,365 4.38
Total interest-bearing liabilities $ 12,648,582 $ 273,012 2.88 % $ 11,686,838 $ 172,315 1.97 %
Noninterest-bearing demand deposits 4,805,047 5,421,479
Other noninterest-bearing liabilities 800,492 753,067
Stockholders' equity 2,499,612 2,307,002
Noncontrolling interest (9,622) (4,497)
Total liabilities and stockholders' equity $ 20,744,111 $ 20,163,889
Excess of interest-earning assets over interest-bearing liabilities $ 5,805,839 $ 5,991,735
Net interest and dividend income $ 527,231 $ 546,976
Interest rate spread 2.92 % 3.48 %
Net interest margin 3.82 % 4.15 %
(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, 2024:During the three months ended September 30, 2024, net interest income decreased $5.1 million from the three months ended September 30, 2023primarily due to continued deposit mix shift and growth in higher priced deposit products. Net interest margin was 3.78% for the third quarter of 2024, a 30 basis point decrease compared to 4.08% for the third quarterof 2023. The decrease was primarily due to an unfavorable decrease of 45 basis points from deposit mix shift and growth in higher priced deposit products, partially offset by an increase of 17 basis points from our loan yields.
Nine months ended September 30, 2024:During the nine months ended September 30, 2024, net interest income decreased $19.7 million from the nine months ended September 30, 2023 due to the reasons noted above. Net interest margin was 3.82% for the nine months ended September 30, 2024, a 33 basis point decrease compared to 4.15% for the nine months ended September 30, 2023. The decrease was due to a 64 basis point decrease from the mix shift and growth in higher yielding products mentioned above, partially offset by a 35 basis point increase from our loan yields.
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, 2024, we recorded a provision for credit losses of $18.4 million, which was flat compared to the provision for credit losses for the three months ended September 30, 2023.
During the nine months ended September 30, 2024, we recorded a provision for credit losses of $53.4 million, a decrease of $9.9 million, compared to the provision for credit losses of $63.3 million for the nine months ended September 30, 2023. This decrease was primarily due to lower losses within our commercial and industrial loan portfolio and our residential and consumer loan portfolios, partially offset by higher losses on our commercial mortgages and commercial small business leases portfolios.
The allowance for credit losses increased to $197.5 million at September 30, 2024 from $186.1 million at December 31, 2023. The ratio of allowance for credit losses to total loans and leases was 1.48% at September 30, 2024 and 1.46% at December 31, 2023.
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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 Owner-
occupied
Commercial 		Commercial
Mortgages 		Construction Commercial Small Business Leases
Residential(1)
Consumer(2)
Total
As of September 30, 2024
Allowance for credit losses $ 56,795 $ 9,787 $ 48,989 $ 8,348 $ 15,374 $ 5,463 $ 52,734 $ 197,490
% of ACL to total ACL 28 % 5 % 25 % 4 % 8 % 3 % 27 % 100 %
Loan portfolio balance $ 2,639,266 $ 2,003,722 $ 4,149,049 $ 805,857 $ 645,421 $ 937,594 $ 2,138,079 $ 13,318,988
% to total loans and leases 20 % 15 % 31 % 6 % 5 % 7 % 16 % 100 %
Three months ended September 30, 2024
Charge-offs $ 11,277 $ 177 $ 205 $ - $ 5,451 $ 8 $ 5,983 $ 23,101
Recoveries (2,481) (4) (79) - (664) (44) (644) (3,916)
Net charge-offs (recoveries) $ 8,796 $ 173 $ 126 $ - $ 4,787 $ (36) $ 5,339 $ 19,185
Average loan balance $ 2,639,118 $ 1,965,881 $ 4,088,430 $ 864,142 $ 641,723 $ 921,843 $ 2,112,423 $ 13,233,560
Ratio of net charge-offs (recoveries) to average gross loans 1.33 % 0.04 % 0.01 % - % 2.97 % (0.02) % 1.01 % 0.58 %
Nine months ended September 30, 2024
Charge-offs $ 13,659 $ 177 $ 5,137 $ - $ 15,191 $ 109 $ 18,259 $ 52,532
Recoveries (5,983) (209) (183) - (2,086) (176) (1,884) (10,521)
Net charge-offs (recoveries) $ 7,676 $ (32) $ 4,954 $ - $ 13,105 $ (67) $ 16,375 $ 42,011
Average loan balance $ 2,584,491 $ 1,917,033 $ 3,945,673 $ 990,687 $ 635,286 $ 894,489 $ 2,080,780 $ 13,048,439
Ratio of net charge-offs (recoveries) to average gross loans 0.40 % NMF 0.17 % - % 2.76 % (0.01) % 1.05 % 0.43 %
(1)Excludes reverse mortgages.
(2)Includes home equity lines of credit, installment loans unsecured lines of credit and education loans.
(Dollars in thousands) Commercial and Industrial Owner-
occupied
Commercial 		Commercial
Mortgages 		Construction Commercial Small Business Leases
Residential(1)
Consumer(2)
Total
As of December 31, 2023
Allowance for credit losses $ 49,394 $ 10,719 $ 36,055 $ 10,762 $ 15,170 $ 5,483 $ 58,543 $ 186,126
% of ACL to total ACL 27 % 6 % 19 % 6 % 8 % 3 % 31 % 100 %
Loan portfolio balance $ 2,540,070 $ 1,886,087 $ 3,801,180 $ 1,035,530 $ 623,622 $ 867,895 $ 2,012,134 $ 12,766,518
% to total loans and leases 19 % 15 % 30 % 8 % 5 % 7 % 16 % 100 %
Year ended December 31, 2023
Charge-offs $ 26,653 $ 184 $ 300 $ 794 $ 15,641 $ 41 $ 22,394 $ 66,007
Recoveries (7,735) (54) (7) (532) (1,986) (260) (1,625) (12,199)
Net charge-offs (recoveries) $ 18,918 $ 130 $ 293 $ 262 $ 13,655 $ (219) $ 20,769 $ 53,808
Average loan balance $ 2,589,147 $ 1,863,542 $ 3,562,070 $ 1,008,768 $ 588,592 $ 817,758 $ 1,922,828 $ 12,352,704
Ratio of net charge-offs (recoveries) to average gross loans 0.73 % 0.01 % 0.01 % 0.03 % 2.32 % (0.03) % 1.08 % 0.44 %
(1)Excludes reverse mortgages.
(2)Includes home equity lines of credit, installment loans unsecured lines of credit and education loans.
See Note 7 to the unaudited Consolidated Financial Statements and "Nonperforming Assets" above for further information.
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Noninterest Income
Three months ended September 30, 2024: During the three months ended September 30, 2024, noninterest income was $90.2 million, an increase of $17.5 million from $72.7 million during the three months ended September 30, 2023. The growth was driven by the Cash Connect®, Wealth Management, Core Banking, and Mortgage business lines. Growth in Cash Connect® of $10.6 million was driven by the addition of bailment Customers during the fourth quarter of 2023 and first half of 2024. Growth in Wealth Management of $3.4 million was driven by growth across all key product lines. We also recognized $2.3 million in revenue from our partnership with Spring EQ related to the annual earnout form the previously announced sale.
Nine months ended September 30, 2024: During the nine months ended September 30, 2024, noninterest income was $257.6 million, an increase of $54.9 million from $202.7 million during the nine months ended September 30, 2023. This increase was primarily driven by $29.8 million from Cash Connect® due to the reason mentioned above, $11.1 million in Wealth Management fees, $4.3 million from our partnership with Spring EQ, comprised of the $2.3 million annual earnout mentioned above and post-close distributions of $2.0 million, a $2.7 million net gain on our Visa B derivative liability established from our previous sale of 360,000 shares in 2Q 2020, $2.3 million from mortgage banking activities, and $2.0 million in capital markets income.
For further information, see Note 3 to the unaudited Consolidated Financial Statements.
Noninterest Expense
Three months ended September 30, 2024: During the three months ended September 30, 2024, noninterest expense was $163.7 million, an increase of $24.0 million from $139.7 million for the three months ended September 30, 2023. The increase was primarily due to $11.7 million from salaries and benefits from annual and performance-based increases and talent additions in key business lines and $9.3 million from other operating expense driven by higher funding costs from Cash Connect® due to a shift towards external funding (which was offset in noninterest income).
Nine months ended September 30, 2024: During the nine months ended September 30, 2024, noninterest expense was $468.6 million, an increase of $54.6 million from $414.0 million for the nine months ended September 30, 2023. The increase was primarily due to $30.1 million in other operating expense driven by higher funding costs from Cash Connect® due to a shift towards external funding and $25.5 million in salaries and benefits, partially offset by a $2.5 million decrease in net corporate development and restructuring costs.
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 $21.1 million and $63.6 million during the three and nine months ended September 30, 2024, respectively, compared to income tax expense of $22.9 million and $66.9 million for the same periods in 2023, respectively.
Our effective tax rate was 24.7% and 24.2% for the three and nine months ended September 30, 2024, respectively, compared to 23.6% and 24.6% for the three and nine months ended September 30, 2023, respectively. The effective tax rate for the three months ended September 30, 2024 increased primarily due to an increase in state income taxes. The effective tax rate for the nine months ended September 30, 2024 decreased primarily due to projected tax benefits from our low-income housing tax credit investments, solar tax credit investments and research and development tax credits.
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, solar 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, tax deficiencies from recognized stock compensation, 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, 2024 December 31, 2023
Stockholders' equity of WSFS $ 2,678,264 $ 2,477,636
Less: Goodwill and other intangible assets 992,163 1,004,560
Tangible common equity (numerator) $ 1,686,101 $ 1,473,076
Shares of common stock outstanding (denominator) 59,033 60,538
Book value per share of common stock $ 45.37 $ 40.93
Goodwill and other intangible assets 16.81 16.58
Tangible book value per share of common stock $ 28.56 $ 24.33
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 2024, 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.
Critical accounting estimates at September 30, 2024 did not significantly change from our critical accounting estimates at December 31, 2023, which are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
RECENT REGULATORY DEVELOPMENTS
Recent regulatory developments at September 30, 2024 did not significantly change from our recent regulatory developments at December 31, 2023, which are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, except as noted below.
Bank Merger Review Standards
In September 2024, the Office of the Comptroller of the Currency ("OCC") finalized a new Policy Statement Regarding Statutory Factors Under the Bank Merger Act (the "Policy Statement"), which outlines factors that the OCC will considering when evaluating a proposed bank merger transaction, including factors related to financial stability, the financial and managerial resources and future prospects of the existing and proposed institutions, and the convenience and needs of the community. The Policy Statement also lists thirteen indicators that will be present in merger applications that are more likely to be approved expeditiously, including that the resulting institution will have total assets less than $50 billion and that the target's total assets are less than 50 percent of the acquirer's total assets. It remains uncertain how the OCC will apply the Policy Statement to particular transactions, and the Policy Statement may make it more difficult and/or costly for us to obtain regulatory approval for an acquisition or otherwise result in more onerous conditions in approval orders than the OCC has previously imposed.
Also in September 2024, the U.S. Department of Justice ("DOJ") withdrew from its 1995 Bank Merger Guidelines and announced that it will instead evaluate the competitive impact of bank mergers using its 2023 Merger Guidelines that apply across all industries. Compared to the 1995 Bank Merger Guidelines, the 2023 Merger Guidelines set forth more stringent concentration limits and add several largely qualitative bases on which the DOJ may challenge a merger. This change in the DOJ's bank merger antitrust policy creates uncertainty regarding the types of transactions that the DOJ may challenge as anticompetitive.
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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, 2024.
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 17 - 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, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the second quarter of 2022, the Board of Directors of the Company approved a share repurchase program authorizing the repurchase 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, 2024.
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, 2024 - July 31, 2024 15,572 $ 54.24 15,572 3,936,192
August 1, 2024 - August 31, 2024 137,000 51.71 137,000 3,799,192
September 1, 2024 - September 30, 2024 114,100 51.63 114,100 3,685,092
Total 266,672 $ 51.82 266,672
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
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Item 5. Other Information
During the period covered by this Quarterly Report on Form 10-Q, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
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, 2024, filed with the SEC on November 6, 2024, 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 6, 2024 /s/ Rodger Levenson
Rodger Levenson
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Date: November 6, 2024 /s/ David Burg
David Burg
Executive Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
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