What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-02-28 · 105 added, 124 removed, 381 unchanged (38% of the section changed)

9 unchanged sentences

“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 December 31, 2022, we had seven consolidated subsidiaries:

WSFS Bank, WSFS Wealth Management, LLC (Powdermill ® ), WSFS Capital Management, LLC (West Capital), Cypress Capital Management, LLC (Cypress), WSFS SPE Services, LLC, The Bryn Mawr Trust Company of Delaware (BMT-DE), and 601 Perkasie, LLC.

As of December 31, 2023, 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.

We also had three unconsolidated subsidiaries, WSFS Capital Trust III, Royal Bancshares Capital Trust I, and Royal Bancshares Capital Trust II.

1 unchanged sentence

Beneficial Equipment Finance Corporation (BEFC) and 1832 Holdings, Inc., and one majority-owned subsidiary, NewLane Finance Company (NewLane Finance ® ).

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

On April 1, 2022, WSFS completed the merger of Christiana Trust Company of Delaware ® and BMT-DE.

The combined organization will retain and operate under The Bryn Mawr Trust Company of Delaware name.

Additionally on April 1, 2022, Bryn Mawr Equipment Finance, Inc.

merged with and into BEFC.

On April 29, 2022, KCMI Capital, Inc.

(KCMI), a specialized commercial lending unit acquired in the BMBC merger and not core to our overall lending strategy, was sold at par value for $55.5 million.

Finally, on June 30, 2022, the business of BMT Insurance Advisors (BMTIA), was sold to Patriot Growth Services, LLC.

On January 1, 2023, WSFS completed the merger and brand conversion of West Capital and Cypress and has renamed the combined entity Bryn Mawr Capital Management, LLC.

Bryn Mawr Capital Management, LLC is registered as an investment advisor with the U.S.

On January 1, 2023, WSFS completed the merger and brand conversion of WSFS Capital Management, LLC (West Capital) and Cypress Capital Management, LLC and renamed the combined entity Bryn Mawr Capital Management, LLC.

BMCM is registered as an investment advisor with the U.S.

Securities and Exchange Commission and is a wholly-owned subsidiary of WSFS.

Our banking business had a total loan and lease portfolio of $11.9 billion as of December 31, 2022, which was funded primarily through commercial relationships and retail and customer generated deposits.

In the third quarter of 2023, BMCM expanded its business in Southern Delaware and established a new presence in Boca Raton, Florida with the acquisition of a registered investment advisory firm's business based in Rehoboth Beach, Delaware.

Our banking business had a total loan and lease portfolio of $12.8 billion as of December 31, 2023, which was funded primarily through commercial relationships and consumer and customer generated deposits.

We have built a $9.9 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.

4 unchanged sentences

Cash Connect ® services non-bank and WSFS-branded ATMs and smart safes nationwide, and manages approximately $1.9 billion in total cash and services approximately 33,000 non-bank ATMs and 8,700 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, ATM processing equipment sales and deposit safe cash logistics.

Cash Connect ® also supports approximately 650 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 through multiple integrated businesses.

Cash Connect ® also supports 590 owned or branded ATMs for WSFS Bank Customers, which is one of the largest branded ATM networks in our market.

Combined, these businesses had $84.3 billion of AUM and AUA at December 31, 2023.

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.

The Bryn Mawr Trust Company of Delaware, formed by the merger of BMT-DE and Christiana Trust DE on April 1, 2022, 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.

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 fee-only arrangements, net interest income and other fee-only services such as estate administration, trust tax planning and custody.

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.

As of December 31, 2022, we service our customers primarily from our 119 offices located in Pennsylvania (61), Delaware (39), New Jersey (17) Virginia (1) and Nevada (1), our ATM network, our website at www.wsfsbank.com , and our mobile apps.

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 December 31, 2023, we service our customers primarily from our 114 offices located in Pennsylvania (57), Delaware (40), New Jersey (14), Florida (1), Nevada (1) and Virginia (1), our ATM network, our website at www.wsfsbank.com , and our mobile app.

Notable Items Impacting Results of Operations, Financial Condition and Business Outlook

Notable items in 2023 include the following:

• BMBC Merger

◦ The merger was completed on January 1, 2022 with the purchase price consideration of $908.0 million and $497.2 million in net assets acquired resulted in $410.8 million of goodwill recognized, as adjusted.

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

◦ We recorded $65.2 million of corporate development and restructuring expenses during the year ended December 31, 2022, primarily related to the BMBC Merger.

• Balance Sheet

◦ During the year ended December 31, 2022, $1.1 billion of available-for-sale (AFS) mortgage-backed securities (MBS), or 19% of the AFS portfolio, were designated as held-to-maturity (HTM) to limit the capital impact from the rising interest rate environment.

• Credit Metrics

◦ There was an increase in the allowance for credit losses (ACL) of $57.4 million during the year ended December 31, 2022, primarily due to an initial ACL of $49.6 million recorded in connection with the BMBC Merger.

The initial $49.6 million ACL recorded includes $23.5 million related to non-purchase credit deteriorated (PCD) loans, or the initial provision for credit loss recorded, and $26.1 million related to PCD loans, which did not have an initial income statement impact, but adjusted the amortized cost basis of the loans at acquisition (i.e., a balance sheet gross-up).

• WSFS completed the redemption of the $30.0 million of fixed-to-floating rate subordinated notes due 2025 (the 2025 Notes) acquired from Bryn Mawr Trust.

The 2025 Notes were redeemed at a price of 100%, plus accrued and unpaid interest through the date of redemption.

• There was an increase in the allowance for credit losses (ACL) of $34.3 million during the year ended December 31, 2023, primarily due to net loan growth across the CRE, Consumer and commercial small business leasing portfolios as well as higher provisions on our CRE, commercial small business leasing, and Upstart portfolios and the elder care portfolio within C&I.

See “Results of Operations - Provision/Allowance for Credit Losses (ACL)” for further information.

• Other Notable Items

◦ During 2022, WSFS repurchased 4,151,117 shares of common stock under the Company's share repurchase program at an average price of $46.78 per share, for an aggregate purchase price of $194.2 million

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

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

◦ We recognized a $6.0 million unrealized gain on our equity investment in cred.ai, a Philadelphia-based fintech partner that provides a mobile-based everyday card spending experience.

◦ We contributed a total of $3.0 million to the WSFS CARES Foundation during 2022.

• We realized a $9.5 million gain on our equity investment in Spring EQ, a digital home equity origination platform, which was sold during the fourth quarter.

• Recorded an income tax charge of $7.1 million from our decision to surrender $65.5 million of previously acquired BOLI policies.

This resulted from recent changes in the interest rate environment lowering our yields on these long-term assets and the termination of a stable value protection wrap policy.

We expect to deploy the net proceeds from the surrender into higher yielding interest-earning assets or payoff wholesale funding.

• Recorded a $5.1 million expense for the FDIC Special Assessment charged to recover losses to the Deposit Insurance Fund related to the closures of certain banks in 2023.

• We contributed $4.9 million to the WSFS CARES Foundation to enhance community support activities, which included a one-time $2.0 million special contribution in the fourth quarter.

• During 2023, WSFS repurchased 1,247,178 shares of common stock under the Company's share repurchase program at an average price of $41.52 per share, for an aggregate purchase price of $51.8 million and paid dividends on our common stock of $36.7 million, returning total capital to shareholders of $88.5 million.

• 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 13.72% and 13.17%, respectively, and total risk-based capital of 14.96% and 15.23%, respectively.

• BMCM expanded into southern Delaware and established a new presence in Boca Raton, Florida, after an acquisition of a woman-founded, owned and managed registered investment advisory firm based in Rehoboth Beach, Delaware.

• In June, we held our first-ever "We Stand for Service Day", during which approximately 1,200 of our Associates provided nearly 5,000 hours of service to more than 80 nonprofit and community organizations across the Greater Philadelphia, Southern New Jersey and Delaware region.

FINANCIAL CONDITION

1 unchanged sentence

These increases are primarily comprised of the following (in descending order of magnitude):

• Net loans and leases, excluding loans held for sale, increased $4.0 billion, primarily driven by the $3.5 billion of loans and leases acquired in the BMBC Merger and an increase of $457.0 million from our consumer partnerships, partially offset by the initial $49.6 million ACL recorded in connection with the BMBC Merger .

• Goodwill and intangible assets increased $410.8 million and $54.2 million, respectively, primarily due to the BMBC Merger.

See Notes 3 and 11 to the Consolidated Financial Statements for additional information.

• Other assets increased $399.1 million primarily due to a $201.6 million increase on our tax asset related to unrealized losses on AFS securities and $153.6 million of BMT acquired assets.

• Total cash and cash equivalents decreased $695.7 million, primarily due to decreased deposits and increased lending activity, offset by cash acquired in the BMBC Merger.

• Net loans and leases, excluding loans held for sale, increased $823.2 million, primarily driven by growth of $450.1 million in commercial mortgages, $201.2 million in consumer loans driven by our consumer partnerships and $108.8 million in residential.

• Total cash and cash equivalents increased $255.6 million, primarily due to increased deposits.

• Total investment securities decreased $299.6 million:

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

◦ Investment securities, available-for-sale decreased $1.1 billion, primarily due to the designation of AFS MBS to HTM as mentioned above, repayments of $1.0 billion and decreased market values on available-for-sale securities of $696.9 million.

These decreases were partially offset by $1.2 billion in purchases and $500.4 million acquired in the BMBC merger.

• Loans held for sale decreased $70.4 million during the twelve months ended December 31, 2022 driven by a combination of lower origination volume and higher loans sales in our mortgage banking business during the year ended December 31, 2022.

◦ Investment securities, available-for-sale decreased $246.5 million, primarily due to repayments of $354.8 million, partially offset by increased market values on available-for-sale securities of $83.7 million and $27.7 million in purchases.

• Bank-owned life insurance decreased $59.2 million primarily due to our decision to surrender certain previously-acquired BOLI policies in 2023.

Total liabilities increased $0.4 billion, or 2%, to $18.1 billion at December 31, 2023 compared to the prior year, primarily comprised of the following (in descending order of magnitude):

• Total deposits increased $3.0 billion, primarily driven by $4.1 billion of deposits assumed in the BMBC Merger, partially offset by declines due to a reduction in customer balances spread across most business lines.

• Other liabilities increased $417.2 million primarily due to a net increase of $298.5 million in collateral held on derivatives and derivative liabilities driven by rising interest rates and $124.6 million of BMT acquired liabilities, partially offset by $34.5 million lower accrued expenses reflecting the timing of settlement for debt security trades.

• Federal Home Loan Bank advances of $350.0 million were held over year end compared to none at December 31, 2021.

• Senior and subordinated debt increased $100.2 million due to the addition of subordinated notes assumed in the BMBC Merger.

• Other borrowed funds increased $547.8 million primarily due to $565.0 million borrowed from the Bank Term Funding Program (BTFP) as a result of favorable terms and pricing.

• Total deposits increased $270.5 million, primarily driven by a $236.6 million increase in trust deposits.

• FHLB advances decreased $350.0 million due to the repayment of fixed rate FHLB term advances as part of our routine balance sheet management.

• Other liabilities decreased $68.2 million primarily due to a net decrease of $65.3 million in collateral held on derivatives and derivative liabilities driven by changes in interest rates.

• Senior and subordinated debt decreased $29.8 million due to the redemption of the 2025 Notes.

Stockholders’ equity increased $272.5 million to $2.5 billion at December 31, 2023 compared to the prior year.

The increase was primarily due to $908.0 million of WSFS common shares issued in connection with the BMBC Merger and earnings of $222.4 million during the year, partially offset by a decrease of $638.1 million in accumulated other comprehensive loss from market value decreases on investment securities resulting from the current rising interest rate environment, and significant levels of capital return to shareholders including $200.1 million from the repurchase of shares of common stock under our stock repurchase plan and shares withheld to cover tax liabilities, and the payment of dividends on our common stock of $35.7 million.

The increase was primarily due to earnings of $269.2 million during the year and a decrease of $81.9 million in accumulated other comprehensive loss from market value increases on investment securities, partially offset by significant levels of capital return to shareholders including $54.6 million from the repurchase of shares of common stock under our stock repurchase plan and shares withheld to cover tax liabilities, and the payment of dividends on our common stock of $36.7 million.

We repurchased 1,247,178 and 4,151,117 shares of our common stock in 2023 and 2022, respectively.

4 unchanged sentences

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.

PPP loans receive a zero percent risk weighting under the regulators' capital rules.

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.

11 unchanged sentences

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 deposit programs, loan repayments, FHLB borrowings, repurchase agreements, access to the Federal Reserve Discount Window, and access to the brokered deposit market as well as other wholesale funding avenues.

Funding sources to support growth and meet our liquidity needs include cash from operations, commercial, consumer, wealth and trust deposit programs, loan repayments, FHLB borrowings, repurchase agreements, BTFP borrowings, 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 December 31, 2022, the Corporation has $0.8 billion in cash, cash equivalents, and restricted cash.

Additionally, the maximum borrowing capacity with the FHLB was $4.9 billion with an unused borrowing availability of $4.6 billion.

Borrowing availability at the Federal Reserve Discount Window was $736.2 million, and borrowing availability through the overnight fed funds lines totaled $1.0 billion.

During the year ended December 31, 2022, cash, cash equivalents and restricted cash decreased $0.7 billion to $0.8 billion from $1.5 billion as of December 31, 2021.

As of December 31, 2023, the Company has $1.1 billion in cash, cash equivalents, and restricted cash.

Our estimated uninsured deposits were $6.3 billion, or 38% of total customer deposits, and our estimated unprotected deposits (uninsured and uncollateralized) were $4.8 billion, or 29% of total customer deposits.

As of December 31, 2023, the Company had a readily available, secured borrowing capacity of $5.4 billion from the FHLB, $0.6 billion through the Federal Reserve Discount Window, and $1.7 billion through the BTFP.

In addition, the Company had $1.5 billion in unpledged securities that could be used to support additional borrowings and $0.5 billion of cash deposited with the Federal Reserve Bank.

The Company’s readily available, secured borrowing capacity to estimated unprotected deposits ratio is 202%.

During the year ended December 31, 2023, cash, cash equivalents and restricted cash increased $0.3 billion to $1.1 billion from $0.8 billion as of December 31, 2022.

Cash provided by operating activities was $237.0 million, primarily reflecting the cash impact of earnings.

Cash used for investing activities was $137.4 million primarily due to purchases of loans held for investment of $393.2 million, and net purchases of available-for-sale debt securities of $202.4 million.

These outflows were offset by $573.7 million of net cash from the BMBC Merger.

Cash used by financing activities was $1.0 billion, primarily due to a $1.2 billion net decrease in deposits, $200.1 million for repurchases of common stock under the previously announced stock repurchase plan, and common stock dividends of $35.7 million, partially offset by $350.0 million of FHLB advances due to the receipt of fixed rate FHLB term advances as part of our routine balance sheet management.

Cash used for investing activities was $326.3 million primarily due to a $486.8 million net increase in loans and leases and purchases of loans held for investment of $313.4 million.

These outflows were partially offset by net repayments of available-for-sale and held-to-maturity debt securities of $327.1 million and $73.0 million, respectively.

Cash provided by financing activities was $344.9 million, primarily due to the borrowing of $565.0 million from the BTFP and a $252.5 million net increase in deposits, partially offset by $350.0 million for the repayment of fixed rate FHLB term advances, $54.6 million for repurchases of common stock under the previously announced stock repurchase plan, common stock dividends of $36.7 million, and the $30.0 million redemption of the 2025 Notes

Our primary cash contractual obligations relate to operating leases, long-term debt, credit obligations, and data processing.

1 unchanged sentence

For additional information on our operating leases see Note 9 to the Consolidated Financial Statements.

At December 31, 2022, we had $350.0 million of FHLB advances, and obligations for principal payments on long-term debt included $67.0 million for our trust preferred borrowings, due June 1, 2035, and $150.0 million for our senior debt, due December 15, 2030.

In connection with the BMBC Merger, we assumed debt in the form of $30.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2025 and $70.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2027.

We also acquired Royal Bancshares Capital Trust I (Trust I) and Royal Bancshares Capital Trust II (Trust II) (collectively, the Trusts), which were utilized for the sole purpose of issuing and selling capital securities representing preferred beneficial interests.

Although WSFS owns an aggregate of $774.0 thousand of the common securities of Trust I and Trust II, the Trusts are not consolidated into the Company’s Consolidated Financial Statements.

Inclusive of the fair value marks, WSFS assumed junior subordinated debentures owed to the Trusts with a carrying value of $11.7 million each, totaling $23.4 million.

The Company records its investments in the Trusts’ common securities of $387.0 thousand each as investments in unconsolidated entities and records dividend income upon declaration by Trust I and Trust II.

The Company has fully and unconditionally guaranteed all of the obligations of the Trusts, including any distributions and payments on liquidation or redemption of the capital securities.

At December 31, 2023, we had obligations for principal payments on long-term debt including $67.0 million for our trust preferred borrowings, due June 1, 2035, $70.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2027, and $150.0 million for our senior debt, due December 15, 2030.

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 as the Company is not deemed to be the primary beneficiary of these entities.

Inclusive of the fair value marks, WSFS assumed junior subordinated debentures owed to the RBC Trusts with a carrying value of $11.8 million each, totaling $23.6 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.

For additional information regarding long-term debt, see Note 12 to the Consolidated Financial Statements.

20 unchanged sentences

Total nonaccruing loans (1)

74,185 22,802

Other real estate owned 1,569 833

Restructured loans (2)

19,737 14,204

Total nonperforming assets $ 75,754 $ 43,372

1 unchanged sentence

Commercial $ 1,552 $ 1,022

Residential — —

10,032 15,513

Total past due loans $ 11,584 $ 16,535

Troubled loans (4)(5) :

Commercial $ 85,330 $ —

Residential 777 —

Consumer 9,161 —

Total troubled loans $ 95,268 $ —

Ratio of allowance for credit losses to total gross loans and leases (6)

4 unchanged sentences

Ratio of allowance for credit losses to total nonperforming assets (8)

(1) Includes nonaccrual loans held-for-sale.

(2) Accruing loans only, which includes acquired nonimpaired loans.

2 unchanged sentences

government guaranteed student loans with little risk of credit loss.

(4) Loans with certain modifications (as prescribed in ASU No.

2022-02) to borrowers experiencing financial difficulty.

(5) Includes troubled loan held-for-sale.

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

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

(5) Excludes acquired impaired loans.

(6) Balance excludes COVID-19 modifications.

(8) Excludes acquired PCD loans.

Nonperforming assets increased $32.4 million between December 31, 2022 and December 31, 2023.

This increase was primarily due to the transfer in of one commercial relationship totaling $5.5 million and one CRE relationship totaling $2.6 million during the period.

These inflows were partially offset by a partial charge-off on the CRE relationship of $0.5 million, several smaller payoffs and the continued collection of principal payments on the majority of these loans.

This increase was primarily due to the transfer in of seven commercial relationships totaling $61.1 million and two CRE relationships totaling $19.4 million during the period.

These inflows were partially offset by partial charge-offs on some of the C&I relationships totaling $20.7 million, several smaller payoffs and the continued collection of principal payments on the majority of these loans.

The ratio of nonperforming assets to total assets slightly increased from 0.22% at December 31, 2022 to 0.37% at December 31, 2023.

6 unchanged sentences

Transfers to accrual (1)

(20,263) (922)

Charge-offs (38,067) (5,587)

Ending balance $ 75,754 $ 43,372

(1) Includes impact of ASU No.

2022-02 adoption.

The timely identification of problem loans is a key element in our strategy to manage our loan portfolio.

5 unchanged sentences

2022 compared with 2021

For a discussion of our results for the year ended December 31, 2021 compared to the year ended December 31, 2020, please see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022.

For a discussion of our results for the year ended December 31, 2022 compared to the year ended December 31, 2021, please see "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 28, 2023.

2023 compared with 2022

We recorded net income attributable to WSFS of $222.4 million, or $3.49 per diluted common share, for the year ended December 31, 2022, a decrease of $49.1 million compared to $271.4 million, or $5.69 per diluted common share, for the year ended December 31, 2021.

• Net interest income for the year ended December 31, 2022 was $662.9 million, an increase of $229.2 million compared to 2021, primarily due to an increase from the balance sheet size and mix from the BMBC Merger and the benefits of our asset-sensitive balance sheet, offset by lower purchase accounting accretion and the impact of PPP loans.

We recorded net income attributable to WSFS of $269.2 million, or $4.40 per diluted common share, for the year ended December 31, 2023, a increase of $46.8 million compared to $222.4 million, or $3.49 per diluted common share, for the year ended December 31, 2022.

• Net interest income for the year ended December 31, 2023 was $725.1 million, an increase of $62.2 million compared to 2022, primarily due to the the benefits of our asset-sensitive balance sheet and an increase from the balance sheet size and mix.

The increase was partially offset by lower purchase accounting accretion.

See “Net Interest Income” for further information.

• Our provision for credit losses increased $165.2 million in 2022, primarily due to the release of ACL reserves that occurred in 2021 as a result of positive economic forecasts following the impact of the COVID-19 pandemic and the initial provision for credit losses recorded in connection with the BMBC Merger.

• Our provision for credit losses increased $40.0 million in 2023, primarily due to higher provisions on our CRE, commercial small business leasing, and Upstart portfolios as well as our elder care portfolio within C&I.

See “Provision/Allowance for Credit Losses” for further information.

• Noninterest income increased $74.7 million in 2022, primarily due to increased Wealth Management revenue that is primarily attributable to the BMBC Merger, Cash Connect ® , higher other banking fees, and capital markets income, partially offset by a decline in our mortgage banking business.

• Noninterest income increased $29.7 million in 2023, primarily due to increases in income from Cash Connect ® , Wealth Management fee income, a realized gain from our investment in Spring EQ, and capital markets income.

These increases were partially offset by decreases in other banking fees and mortgage banking activities, and unrealized gains on equity investments and income from BMTIA (business sold in 2022).

See “Noninterest Income” for further information.

• Noninterest expense increased $195.8 million in 2022, primarily due to higher costs after the BMBC Merger.

These increases include salaries and benefits, net corporate development and restructuring costs, variable operating costs, and equipment, occupancy, and intangibles expense.

In addition, 2021 included the previously disclosed Charter Oak legal settlement recovery.

• Noninterest expense decreased $12.7 million in 2023, primarily due to net corporate development and restructuring costs incurred in 2022, partially offset by increases in other operating expenses driven by Cash Connect®, FDIC expenses, salaries and benefits costs, and professional fees.

See “Noninterest Expense” for further information.

53 unchanged sentences

(4) Includes federal funds purchased.

Net interest income increased $229.2 million, or 53%, to $662.9 million in 2022, compared to 2021 primarily due to a $191.2 million increase from the balance sheet size and mix due to the BMBC Merger and $71.9 million from the benefits of our asset-sensitive balance sheet.

Offsetting these increases were $18.5 million lower PPP income and a $15.4 million decrease in purchase accounting accretion.

Net interest income increased $62.2 million, or 9%, to $725.1 million in 2023, compared to 2022 primarily due to a $60.6 million increase from the benefits of our asset-sensitive balance sheet and a $4.0 million increase from the balance sheet size and mix, offset by a $2.4 million decrease in purchase accounting accretion.

Net interest margin increased 40 bps to 4.11% in 2023 from 3.71% in 2022.

The increase was primarily due to 47 bps from the benefits of our asset-sensitive balance sheet and 22 bps increase from balance sheet size and mix due to the BMBC Merger, partially offset by 15 bps from lower purchase accounting accretion and 6 bps from the impact of PPP loans in the prior year.

The increase was primarily due to 24 bps increase from the balance sheet size and mix and 17 bps from the benefits of our asset-sensitive balance sheet, partially offset by 1 bp from lower purchase accounting accretion.

The following table provides certain information regarding changes in net interest income attributable to changes in the volumes of interest-earning assets and interest-bearing liabilities and changes in the rates for the periods indicated.

17 unchanged sentences

Other interest-earning assets (8,192) 15,549 7,357

Unfavorable 186,047 61,399 247,446

Favorable 29,159 243,548 272,707

Interest expense:

8 unchanged sentences

Other borrowed funds 13,713 5,509 19,222

Favorable 5,490 12,715 18,205

Unfavorable 28,137 182,357 210,494

Net change, as reported $ 1,022 $ 61,191 $ 62,213

26 unchanged sentences

We maintain an ACL at an appropriate level based on our assessment of estimable and probable losses in the loan portfolio, which we evaluate in accordance with applicable accounting principles, as discussed further in “Nonperforming Assets.” Our evaluation is based on a review of the portfolio and requires significant, complex and difficult judgments.

For the year ended December 31, 2022, we recorded a provision for credit losses of $48.1 million, a net change of $165.2 million, compared to the recovery of credit losses of $117.1 million in 2021.

The increase was primarily due to the release of ACL reserves in 2021 from positive economic forecasts following the impact of the COVID-19 pandemic and the initial provision for credit losses of $23.5 million recorded in connection with the BMBC Merger.

For the year ended December 31, 2023, we recorded a provision for credit losses of $88.1 million, a net change of $40.0 million, compared to the provision of credit losses of $48.1 million in 2022.

The increase was primarily due to higher provisions on our CRE, commercial small business leasing, and Upstart portfolios as well as our elder care portfolio within C&I.

The ACL was $186.1 million at December 31, 2023 compared to $151.9 million at December 31, 2022.

The increase of the ACL was primarily due to an initial ACL of $49.6 million recorded in connection with the BMBC Merger.

The initial $49.6 million ACL recorded includes $23.5 million related to non-PCD loans, or the initial provision for credit loss recorded, and $26.1 million related to PCD loans, which does not have an initial income statement impact, but adjusts the amortized cost basis of the loans at acquisition (i.e., a balance sheet gross-up).

The increase of the ACL was primarily due to net loan growth across the CRE, Consumer, and commercial small business leasing portfolios and the higher provisions noted above.

The ratio of allowance for credit losses to total loans and leases was 1.35% at December 31, 2023 and 1.17% at December 31, 2022.

Net charge-offs were $53.8 million for the year ended December 31, 2023 compared to $16.8 million for the year-ended December 31, 2022.

The increase in net charge-offs was primarily driven by our Upstart and commercial small business leasing portfolios.

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

32 unchanged sentences

Noninterest income increased $29.7 million to $289.9 million in 2023 from $260.1 million in 2022.

This increase reflects a $61.6 million increase in Wealth Management revenue, of which $55.9 million was attributable to the combination with Bryn Mawr Trust;

$12.7 million from Cash Connect ® driven by the rising rate environment and continued growth in the smart safe space;

$12.5 million in other banking fees, including fees associated with our consumer lending partnerships, gain on sale of SBA loans and traditional bank service fees;

and $7.9 million in capital markets income.

The increase was partially offset by a $15.9 million decrease in mortgage banking activities primarily resulting from the decline in refinancing originations compared to the historically higher levels in 2021.

This increase reflects a $26.9 million increase from Cash Connect ® driven by the rising rate environment and continued growth in the smart safe space, $10.2 million increase in Wealth Management revenue, a $9.5 million gain realized from our investment in Spring EQ, and $4.0 million in capital markets income.

The increase was partially offset by a $10.6 million decrease in other banking fees, including fees associated with our consumer lending partnerships, gain on sale of SBA loans and traditional bank service fees, and a $2.5 million decrease in mortgage banking activities.

In addition to these decreases, we recognized $6.0 million of unrealized gains on equity investments and $2.6 million from BMTIA in 2022.

Our diverse fee-based businesses support sustainability of noninterest income through economic cycles.

Noninterest Expenses

Noninterest expense increased $195.8 million to $574.3 million in 2022 from $378.5 million in 2021.

The increase was primarily due to higher costs after the BMBC Merger.

These higher costs include salaries and benefits of $69.7 million;

net corporate development and restructuring costs of $52.2 million;

higher variable operating costs of $28.0 million, including $7.3 million from Cash Connect ® ;

and $25.1 million from equipment, occupancy, and intangibles expense.

In addition, 2021 included a previously disclosed $15.0 million recovery of legal settlement associated with Charter Oak.

Noninterest expense decreased $12.7 million to $561.6 million in 2023 from $574.3 million in 2022.

The decrease was primarily due to $61.5 million lower net corporate development and restructuring costs, partially offset by increases of $29.5 million in other operating expense driven by higher variable operating costs from Cash Connect ® , $9.8 million in FDIC expenses which includes the $5.1 million FDIC special assessment charged to recover losses to the Deposit Insurance Fund related to closures of certain banks in 2023, $5.3 million in salaries and benefits costs, and $2.7 million in professional fees.

We recorded $96.2 million of income tax expense for the year ended December 31, 2023 compared to $78.0 million for the year ended December 31, 2022.

The decrease in income tax expense was primarily driven by a decrease in income before taxes of $57.1 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The increase in income tax expense was primarily driven by an increase in income before taxes of $64.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.

The effective tax rates for the years ended December 31, 2023 and 2022 were 26.3% and 25.9%, respectively.

The effective tax rate for year ended December 31, 2022 increased primarily due to higher state income taxes associated with the BMBC Merger.

The effective tax rate for year ended December 31, 2023 increased primarily due to our decision to surrender certain BOLI policies in 2023 that resulted in $7.1 million of tax expense.

In addition, the 2022 effective tax rate reflects the impact of the write-off of $6.7 million of nondeductible goodwill related to the sale of the BMT Insurance Advisors business.

Further, the tax expense associated with nondeductible acquisition costs in 2023 decreased compared to 2022.

Nondeductible acquisition costs of $1.8 million were recognized during the year ended December 31, 2022 compared to $3.9 million incurred in 2021.

There were no nondeductible acquisition costs during the year ended December 31, 2023 compared to $1.8 million incurred in 2022.

The effective tax rate reflects the recognition of certain tax benefits in the financial statements including those benefits from tax-exempt interest income, federal low-income housing/research and development tax credits, and excess tax benefits from recognized stock compensation.

9 unchanged sentences

WSFS Bank Segment

The WSFS Bank segment income before taxes decreased $83.2 million, or 28%, in 2022 compared to 2021 primarily due to a $161.6 million increase in the provision for credit losses due to the release of ACL reserves in 2021 from positive economic forecasts following the impact of the COVID-19 pandemic the initial provision for credit losses of $23.5 million recorded in connection with the BMBC Merger.

In addition, external operating expenses increased $137.7 million, or 42%, reflecting the BMBC Merger.

These increases were partially offset by an increase in external net interest income of $227.9 million, or 54%.

The WSFS Bank segment income before taxes increased $38.9 million, or 18%, in 2023 compared to 2022 primarily due to an $80.0 million increase in net external customer interest income due to the rising interest rate environment and a decrease in external operating expenses of $40.3 million, primarily driven by lower corporate development and restructuring costs, or 9%, partially offset by increases in inter-segment interest expense of $52.2 million and provision for credit losses of $39.6 million.

Cash Connect ® Segment

2 unchanged sentences

The interest rate environment materially increased vault operating expenses, resulting in a full-year 2023 ROA for the Cash Connect ® segment of 0.80%, a decrease of 21bps in comparison with full-year 2022.

Cash Connect ® had $1.7 billion in total cash managed at December 31, 2022 and 2021.

At year-end 2022, Cash Connect ® serviced approximately 26,300 non-bank ATMs and approximately 7,500 retail smart safes nationwide compared to approximately 27,400 non-bank ATMs and approximately 6,300 smart safes at year-end 2021.

Cash Connect ® had $1.9 billion in total cash managed at December 31, 2023 and $1.7 billion at December 31, 2022.

At year-end 2023, Cash Connect ® serviced approximately 33,000 non-bank ATMs compared to approximately 26,300 at year-end 2022 as a result of a large industry participant exiting their ATM cash vault business and approximately 8,700 smart safes nationwide compared to approximately 7,500 smart safes at year-end 2022.

Wealth Management Segment

The Wealth Management segment income before taxes increased $28.9 million in 2022 compared to 2021, primarily attributable to the combination with Bryn Mawr Trust and growth in our institutional trust activity.

At December 31, 2022, Wealth Management had AUA/AUM of $64.5 billion, an 87% increase from 2021 balances.

WSFS Institutional Services ® ended 2022 as the securitization industry's fifth most active trustee for U.S.

The Wealth Management segment income before taxes increased $28.9 million in 2023 compared to 2022, primarily attributable to growth in our institutional trust activity.

At December 31, 2023, Wealth Management had AUA/AUM of $84.3 billion, a 31% increase from 2022 balances.

WSFS Institutional Services ® ended 2023 as the securitization industry's fourth most active trustee by number of deals for U.S.

ABS and MBS according to Asset-Backed Alert’s ABS Database.

34 unchanged sentences

$ 8,923,499 $ 234,690 $ 1,583 $ 8,498 $ 9,168,270

Excess of interest-rate sensitive assets over interest-rate liabilities (interest-rate sensitive gap) $ 1,251,861 $ 4,978,094 $ 3,710,417 $ 513,199 $ 10,453,571

(Shortfall) excess of interest-rate sensitive assets over interest-rate liabilities (interest-rate sensitive gap) $ (29,409) $ 4,891,159 $ 4,041,187 $ 1,013,454 $ 9,916,391

One-year interest-rate sensitive assets/interest-rate sensitive liabilities 99.67 %

39 unchanged sentences

(i) an allowance established on financial assets which share similar risk characteristics collectively evaluated for credit losses (collective basis), and (ii) an allowance established on financial assets which do not share similar risk characteristics with any loan segment and is individually evaluated for credit losses (individual basis).

We consider the determination of the allowance for credit losses to be critical because it requires significant judgment reflecting our best estimate of expected credit losses based on our historical loss experience, current conditions and economic forecasts.

We consider the determination of the ACL to be critical because it requires significant judgment reflecting our best estimate of expected credit losses based on our historical loss experience, current conditions and economic forecasts.

Our evaluation is based upon a continuous review of our financial assets, with consideration given to evaluations resulting from examinations performed by regulatory authorities.

4 unchanged sentences

The ACL may increase or decrease due to changes in economic conditions affecting borrowers and macroeconomic variables that our financial assets are more susceptible to, including unforeseen events such as natural disasters and pandemics, new information regarding existing financial assets, identification of additional problems assets, the fair value of underlying collateral, and other factors.

These changes, both within and outside the Control’s control, may frequently update and have a material impact to our financial results.

These changes, both within and outside the Company’s control, may frequently update and have a material impact to our financial results.

Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses on our financial assets, and therefore the appropriateness of the ACL, could change significantly.

2 unchanged sentences

As of December 31, 2023, the Company believes that its ACL was adequate.

Business Combinations

We account for business combinations under ASC 805, Business Combinations using the acquisition method of accounting and record the identifiable assets acquired, liabilities assumed, consideration paid, and any non-controlling interests of the acquired business at fair value at the acquisition date.

The excess of consideration paid over the fair value of the net assets acquired is recorded as goodwill.

The fair values are preliminary estimates subject to adjustments during the measurement period, which does not exceed one year after acquisition.

The application of business combination principles, including the determination of the fair value of net assets acquired, requires the use of significant estimates and assumptions under ASC 820, Fair Value Measurement.

See Note 3 to the Consolidated Financial Statements.

Determining estimated fair value requires a significant amount of judgment and estimates.

If our assumptions change, or errors are determined in its calculations, the fair value could materially change resulting in an adjustment to our goodwill or identifiable net assets acquired, including identified intangible assets.

As of December 31, 2022, the Company believes that the fair value of the assets acquired, liabilities assumed, consideration paid, and any non-controlling interests of the acquired business at fair value at the acquisition date was appropriately determined in accordance with GAAP.

For information on Recent Accounting Pronouncements see Note 2 to the Consolidated Financial Statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis