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What changed in WSFS FINANCIAL CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of WSFS FINANCIAL CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+343 added−356 removedSource: 10-K (2024-02-29) vs 10-K (2023-02-28)

Top changes in WSFS FINANCIAL CORP's 2023 10-K

343 paragraphs added · 356 removed · 274 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

138 edited+30 added−38 removed169 unchanged
Biggest changeThe number of owned and branded ATMs was 686 as of December 31, 2022. • Continuing strong growth in commercial and consumer lending by: ◦ Offering local decision-making by seasoned banking professionals with significant local market experience. ◦ Executing our community banking model that combines stellar experiences with the banking products and services our business customers demand. ◦ Continuing to grow our NewLane Finance ® leasing business. ◦ Adding seasoned lending professionals that have helped us win customers in our Delaware, southeastern Pennsylvania and southern New Jersey markets. ◦ Leveraging our strategic lending partnerships, including Spring EQ, LLC, Upstart, LendKey Technologies, Inc, and Cred Technologies (cred.ai). • Continuing to grow deposits by: ◦ Offering products through an expanded and updated branch network, increasing our market presence in Philadelphia, southeastern Pennsylvania and southern New Jersey. ◦ Providing a stellar experience to our Customers. ◦ Further expanding our Commercial, Small Business, and Wealth Management Customer relationships with deposit and cash management products. ◦ Finding creative ways to build deposit market share such as targeted marketing programs. • Continuing investment in our franchise to increase adoption and usage of digital channels aligned with our strategy by ◦ Enabling business outcomes through optimizing and leveraging the full capabilities of current and future Delivery Transformation and Technology investments to increase Associate efficiencies and improve the overall Customer experience. ◦ Building out Salesforce to support our customer relationship management with focus on change management, adoption and governance ◦ Increased Control, Transparency, Automation & Efficiencies through platform integrations, enhancements and bot implementations ◦ Advancing how we use data, the deployment of artificial intelligence, and predictive modeling to create operational efficiencies and redesign business models ◦ Continue to build upon people, process and controls within a focus on Information Security and Fraud prevention • Seeking targeted, strategic opportunities in our non-banking businesses while we focus on optimizing our recent franchise investments. 10 Disciplined Cost Management We maintain a disciplined cost management strategy while continuing to make prudent investments in our businesses through the lens of our Strategic Plan.
Biggest changeThe number of owned or branded ATMs was 590 as of December 31, 2023. • Continuing strong growth in commercial and consumer lending by: ◦ Offering local decision-making by seasoned banking professionals with significant local market experience. ◦ Executing our community banking model that combines stellar experiences with the banking products and services our business customers demand. ◦ Continuing to grow our NewLane Finance ® leasing business. ◦ Adding seasoned lending professionals that have helped us win customers in our Delaware, southeastern Pennsylvania and southern New Jersey markets. ◦ Leveraging our strategic partnerships, including Spring EQ, LLC, Upstart, LendKey Technologies, Inc, and Cred Technologies (cred.ai). • Continuing to grow deposits by: ◦ Providing a stellar experience to our Customers and offering products through our branch network, increasing our market presence in Delaware, southeastern Pennsylvania and southern New Jersey. ◦ Further expanding our Commercial and Small Business Customer relationships with deposit and cash management products. ◦ Expanding services within WSFS Institutional Services ® and increasing cross-sell opportunities within Private Wealth Management. ◦ Finding creative ways to build deposit market share such as targeted marketing programs. • Enhancing our capabilities to serve the needs of our Customers through our Capital Markets division by: ◦ Making strategic investments to build our Interest Rate Derivatives, Foreign Exchange, and Trade Finance lines of business. ◦ Employing products and services that enable customers to better manage their own market risk exposures, providing additional sources of non-interest fee income for the Company. ◦ Making continued investments in a team of highly experienced markets personnel and improved technology solutions. ◦ Delivering the capabilities of a globally capable financial institution with a locally headquartered team that is fully embedded in the WSFS culture. • Seeking targeted, strategic opportunities in our non-banking businesses while we focus on optimizing our recent franchise investments. 10 • Continuing investment in our franchise to increase adoption and usage of digital channels aligned with our strategy by ◦ Enabling business outcomes through optimizing and leveraging the full capabilities of current and future investments in our franchise to increase Associate efficiencies and improve the overall Customer experience. ◦ Building out Salesforce to support our customer relationship management with focus on change management, adoption and governance ◦ Increased control, transparency, automation & efficiencies through platform integrations, enhancements and bot implementations ◦ Advancing how we use data, the deployment of artificial intelligence, and predictive modeling to create operational efficiencies and redesign business models ◦ Continue to build upon people, processes and controls within a focus on information security and fraud prevention Disciplined Cost Management We maintain a disciplined cost management strategy while continuing to make prudent investments in our businesses through the lens of our Strategic Plan.
WSFS Bank also offers a broad variety of consumer loan products, retail securities and insurance brokerage services through our retail branches, and mortgage and title services through WSFS Mortgage ® . Our WSFS Mortgage ® business is a mortgage banking company and abstract and title company specializing in a variety of residential mortgage and refinancing solutions.
WSFS Bank also offers a broad variety of consumer loan products, retail securities and insurance brokerage services through our branches, and mortgage and title services through WSFS Mortgage ® . Our WSFS Mortgage ® business is a mortgage banking company and abstract and title company specializing in a variety of residential mortgage and refinancing solutions.
Our partnership with Upstart allowed us to expand our personal loan offerings to a wider, more inclusive Customer base while diversifying our business and creating more digital-friendly Customer experiences. • LendKey Technologies, Inc.: A digital lending platform that specializes in student loans and student loan refinancing. • Cred Technologies (cred.ai): A Philadelphia-based fintech company that provides a high-tech, mobile-first everyday card spending experience.
Our partnership with Upstart allowed us to expand our personal loan offerings to a wider, more inclusive Customer base while diversifying our business and creating more digital-friendly Customer experiences. • LendKey Technologies, Inc.: A digital lending platform that specializes in student loans and student loan refinancing. 11 • Cred Technologies (cred.ai): A Philadelphia-based fintech company that provides a high-tech, mobile-first everyday card spending experience.
Department of the Treasury, the Financial Crimes Enforcement Network (FinCEN), but compliance by individual institutions is also overseen by their primary federal regulator, which in the Bank's case is the OCC. Bank Secrecy Act and anti-money laundering compliance has been a special focus of the OCC and the other federal banking agencies in recent years.
Department of the Treasury, the Financial Crimes Enforcement Network (FinCEN), but compliance by individual institutions is also overseen by their primary federal regulator, which in the Bank's case is the OCC. 29 Bank Secrecy Act and anti-money laundering compliance has been a special focus of the OCC and the other federal banking agencies in recent years.
We continue to execute our current Board-approved share repurchase plans, as well as any future Board-approved share repurchase plans, including opportunistically repurchasing shares, based on current valuation levels, above our stated practice of returning a minimum of 35% of annual core net income to stockholders through dividends and share repurchases.
We continue to execute our current Board-approved share repurchase plans, as well as any future Board-approved share repurchase plans, including opportunistically repurchasing shares, based on current valuation levels, above our stated practice of returning a minimum of 35% of annual net income to stockholders through dividends and share repurchases.
We originate a variety of consumer credit products including home improvement loans, home equity lines of credit, automobile loans, unsecured lines of credit and other secured and unsecured personal installment loans. Fee Income from Lending Activities We earn fee income from lending activities, including fees for originating, servicing and selling loans and loan participations.
We originate a variety of consumer credit products including home equity loans, home equity lines of credit, automobile loans, unsecured lines of credit and other secured and unsecured personal installment loans. Fee Income from Lending Activities We earn fee income from lending activities, including fees for originating, servicing and selling loans and loan participations.
We plan to continue to grow by: • Developing talented, service-focused Associates: We have successfully recruited Associates with strong ties to, and the passion to serve, their communities to enhance our service in existing markets and to provide a strong start in new communities.
We plan to continue to grow by: • Recruiting and developing talented, service-focused Associates: We have successfully recruited Associates with strong ties to, and the passion to serve, their communities to enhance our service in existing markets and to provide a strong start in new communities.
The capital and common securities of the Trusts are subject to mandatory redemption upon the maturity or call of the junior subordinated debentures held by each. Unless earlier dissolved, the Trusts will dissolve on December 15, 2034.
The capital and common securities of the RBC Trusts are subject to mandatory redemption upon the maturity or call of the junior subordinated debentures held by each. Unless earlier dissolved, the RBC Trusts will dissolve on December 15, 2034.
Segment Information For financial reporting purposes, our business has three segments: WSFS Bank, Cash Connect ® and Wealth Management. The WSFS Bank segment provides loans and leases and other financial products to commercial and consumer customers.
Segment Information For financial reporting purposes, our business has three segments: WSFS Bank, Cash Connect ® and Wealth Management. The WSFS Bank segment provides loans and leases, deposits and other financial products to commercial and consumer customers.
(3) Includes hybrid adjustable-rate mortgages. 14 Commercial Lending Pursuant to section 5(c) of the Home Owners’ Loan Act (HOLA), federal savings banks are generally permitted to invest up to 400% of their total regulatory capital in nonresidential real estate loans and up to 20% of their assets in commercial loans, but no more than 10% may be in loans that do not qualify as small business loans.
(2) Includes hybrid adjustable-rate mortgages. 14 Commercial Lending Pursuant to section 5(c) of the Home Owners’ Loan Act (HOLA), federal savings banks are generally permitted to invest up to 400% of their total regulatory capital in nonresidential real estate loans and up to 20% of their assets in commercial loans, but no more than 10% may be in loans that do not qualify as small business loans.
In addition, pursuant to the Dodd-Frank Act, the capital rules for savings and loan holding companies are no less stringent than those that apply to their subsidiary savings associations. 24 Dividends The principal sources of the Company’s cash are debt issuances and dividends from the Bank, supplemented by dividends from its other operating subsidiaries (including Powdermill ® , Bryn Mawr Capital Management, LLC, The Bryn Mawr Trust Company of Delaware, and WSFS SPE Services, LLC).
In addition, pursuant to the Dodd-Frank Act, the capital rules for savings and loan holding companies are no less stringent than those that apply to their subsidiary savings associations. 23 Dividends The principal sources of the Company’s cash are debt issuances and dividends from the Bank, supplemented by dividends from its other operating subsidiaries (including Bryn Mawr Capital Management, LLC, Powdermill ® , WSFS SPE Services, LLC and The Bryn Mawr Trust Company of Delaware).
The FDIC adopted a restoration plan in September 2020, which it amended in June 2022, to restore the DIF reserve ratio to at least 1.35% by September 30, 2028. 28 On October 18, 2022 the FDIC adopted a final rule to increase initial base deposit insurance assessment rates for insured depository institutions by 2 basis points, beginning with the first quarterly assessment period of 2023.
The FDIC adopted a restoration plan in September 2020, which it amended in June 2022, to restore the DIF reserve ratio to at least 1.35% by September 30, 2028. 27 On October 18, 2022 the FDIC adopted a final rule to increase initial base deposit insurance assessment rates for insured depository institutions by 2 basis points, beginning with the first quarterly assessment period of 2023.
The law authorizes the Federal Reserve to grant additional exceptions by regulation or order. 26 Regulatory Capital Requirements The regulatory capital rules require savings associations and their holding companies to maintain minimum levels of common equity Tier 1 capital equal to at least 4.5% of risk-weighted assets, Tier 1 capital equal to at least 6% of risk-weighted assets, total capital (the aggregate of Tier 1 and Tier 2 capital) equal to at least 8% of risk-weighted assets, and a leverage ratio of Tier 1 capital to average total consolidated assets equal to at least 4%.
The law authorizes the Federal Reserve to grant additional exceptions by regulation or order. 25 Regulatory Capital Requirements The regulatory capital rules require savings associations and their holding companies to maintain minimum levels of common equity Tier 1 capital equal to at least 4.5% of risk-weighted assets, Tier 1 capital equal to at least 6% of risk-weighted assets, total capital (the aggregate of Tier 1 and Tier 2 capital) equal to at least 8% of risk-weighted assets, and a leverage ratio of Tier 1 capital to average total consolidated assets equal to at least 4%.
The rights of holders of common securities of the Trusts are subordinate to the rights of the holders of capital securities only in the event of a default; otherwise, the common securities’ economic and voting rights are pari passu with the capital securities.
The rights of holders of common securities of the RBC Trusts are subordinate to the rights of the holders of capital securities only in the event of a default; otherwise, the common securities’ economic and voting rights are pari passu with the capital securities.
Our current portfolio lending activity is concentrated on small- to mid-sized businesses in the mid-Atlantic region of the U.S., primarily in Delaware, southeastern Pennsylvania, southern New Jersey, Maryland and northern Virginia. Based on current market conditions, we expect our focus on growing commercial and industrial loans and other relationship-based commercial loans to continue during the remainder of 2023 and beyond.
Our current portfolio lending activity is concentrated on small- to mid-sized businesses in the mid-Atlantic region of the U.S., primarily in Delaware, southeastern Pennsylvania, southern New Jersey, Maryland and northern Virginia. Based on current market conditions, we expect our focus on growing commercial and industrial loans and other relationship-based commercial loans to continue during the remainder of 2024 and beyond.
If a savings association falls below any one of these floors, it becomes undercapitalized and subject to a variety of restrictions on its operations. There is no tangible capital requirement under prompt corrective action. As of December 31, 2022, the Bank met all of the prerequisites for well-capitalized status.
If a savings association falls below any one of these floors, it becomes undercapitalized and subject to a variety of restrictions on its operations. There is no tangible capital requirement under prompt corrective action. As of December 31, 2023, the Bank met all of the prerequisites for well-capitalized status.
For additional information regarding FHLB stock, see Note 13 to the Consolidated Financial Statements. 19 Trust Preferred Borrowings In 2005, the Company issued $67.0 million of aggregate principal amount of Pooled Floating Rate Securities at a variable interest rate of 177 basis points over the three-month LIBOR rate.
For additional information regarding FHLB stock, see Note 12 to the Consolidated Financial Statements. 19 Trust Preferred Borrowings In 2005, the Company issued $67.0 million of aggregate principal amount of Pooled Floating Rate Securities at a variable interest rate of 177 basis points over the three-month LIBOR rate.
To accomplish this, our Risk Management Administration and Credit and Asset Recovery departments monitor the asset quality of our loans and real estate portfolios and reports such information to the Retail Credit Quality Committee, Credit Policy Committee, the Finance Division, and the Audit Committee of our Board of Directors. 18 SOURCES OF FUNDS We manage our liquidity risk and funding needs through our Treasury function and our Asset/Liability Committee.
To accomplish this, our Risk Management Administration and Credit and Asset Recovery departments monitor the asset quality of our loans and real estate portfolios and reports such information to the Consumer Credit Quality Committee, Credit Policy Committee, the Finance Division, and the Audit Committee of our Board of Directors. 18 SOURCES OF FUNDS We manage our liquidity risk and funding needs through our Treasury function and our Asset/Liability Committee.
The Company has fully and unconditionally guaranteed all of the obligations of the Trusts, including any distributions and payments on liquidation or redemption of the capital securities.
The 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.
Noncompliance with the Investment Advisers Act or other federal and state securities laws and regulations could result in investigations, sanctions, disgorgement, fines and reputation damage. 25 Regulation of WSFS Bank General As a federally chartered savings association the Bank is subject to regulation, examination and supervision by the OCC.
Noncompliance with the Investment Advisers Act or other federal and state securities laws and regulations could result in investigations, sanctions, disgorgement, fines and reputation damage. 24 Regulation of WSFS Bank General As a federally chartered savings association the Bank is subject to regulation, examination and supervision by the OCC.
As of December 31, 2022, WSFS had three unconsolidated subsidiaries, WSFS Capital Trust III (the Trust), Royal Bancshares Capital Trust I, and Royal Bancshares Capital Trust II . • The Trust was formed in 2005 to issue $67.0 million aggregate principal amount of Pooled Floating Rate Capital Securities.
As of December 31, 2023, WSFS had three unconsolidated subsidiaries, WSFS Capital Trust III (the Trust), Royal Bancshares Capital Trust I, and Royal Bancshares Capital Trust II . • The Trust was formed in 2005 to issue $67.0 million aggregate principal amount of Pooled Floating Rate Capital Securities.
The Trusts were utilized for the sole purpose of issuing and selling capital securities representing preferred beneficial interests.
The RBC Trusts were utilized for the sole purpose of issuing and selling capital securities representing preferred beneficial interests.
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, WSFS Bank has been in operation for more than 190 years.
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, WSFS Bank has been in operation for more than 191 years.
Management incentives are, in large part, based on driving performance of ROA as well as return on average tangible common equity (ROTCE), which is a non-GAAP financial measure, and EPS growth. More details on management incentive plans will be included in the proxy statement for our 2023 Annual Meeting of Stockholders.
Management incentives are, in large part, based on driving performance of ROA as well as return on average tangible common equity (ROTCE), which is a non-GAAP financial measure, and EPS. More details on management incentive plans will be included in the proxy statement for our 2024 Annual Meeting of Stockholders.
Among these are: • Retained earnings • Commercial, consumer, wealth and trust deposits • Loan repayments • Investment securities • Federal funds purchased • Federal Home Loan Bank (FHLB) borrowings • Federal Reserve Discount Window access • Brokered deposits • Trust preferred borrowings • Senior and subordinated debt Our branch strategy has been focused on expanding our market penetration and retail footprint in Delaware, southeastern Pennsylvania and southern New Jersey and attracting new customers in part to provide additional deposit growth.
Among these are: • Retained earnings • Commercial, consumer, wealth and trust deposits • Loan repayments • Investment securities • Federal funds purchased • Federal Reserve Bank Term Funding Program (BTFP) • Federal Home Loan Bank (FHLB) borrowings • Federal Reserve Discount Window access • Brokered deposits • Trust preferred borrowings • Senior and subordinated debt Our branch strategy has been focused on expanding our market penetration and retail footprint in Delaware, southeastern Pennsylvania and southern New Jersey and attracting new customers in part to provide additional deposit growth.
Federal Home Loan Bank Advances As a member of the FHLB, we are able to obtain FHLB advances. At December 31, 2022, we had $350.0 million FHLB advances compared to no FHLB advances at December 31, 2021.
Federal Home Loan Bank Advances As a member of the FHLB, we are able to obtain FHLB advances. At December 31, 2023, we had no FHLB advances compared to $350.0 million of FHLB advances at December 31, 2022.
Subsequent to the Beneficial acquisition, the leasing operations of BEFC were combined with NewLane Finance ® , described below. • 1832 Holdings, Inc. was formed to hold certain debt and equity investment securities. • 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.
Subsequent to the Beneficial acquisition, BEFC ceased origination of new leases and its leasing operations were combined with NewLane Finance ® , described below. • 1832 Holdings, Inc. was formed to hold certain debt and equity investment securities. • 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.
As such, we have concluded that we need to stay nimble as we transform our delivery channels to meet these new expectations. Our transformation includes optimizing our physical branch network and making strategic investments in meaningful technology solutions, supported by specialized talent.
As such, we have concluded that we need to stay nimble as we transform our delivery channels to meet these new expectations. Our continued investment includes optimizing our physical branch network and making strategic investments in meaningful technology solutions, supported by specialized talent.
Each of Trust I and Trust II issued an aggregate principal amount of $12.5 million of capital securities initially bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each Trust to an unaffiliated investment vehicle and an aggregate principal amount of $387.0 thousand of common securities bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each Trust to the Company.
Each of Trust I and Trust II issued an aggregate principal amount of $12.5 million of capital securities initially bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each Trust to an unaffiliated investment vehicle and an aggregate principal amount of $0.4 million of common securities bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each Trust to the Company.
These leases included initial average deal sizes of approximately $29 thousand, with yields ranging from 5% to 25% and initial maturity terms of 12 to 84 months.
These leases included initial average deal sizes of approximately $28 thousand, with yields ranging from 5% to 25% and initial maturity terms of 12 to 84 months.
These relationships generally range in amounts of up to $82.6 million with an average loan balance in the portfolio of $1.4 million, and terms ranging from less than one year to ten years. The loans generally carry variable interest rates indexed to our WSFS prime rate, “Wall Street” prime rate or SOFR.
These relationships generally range in amounts of up to $100.0 million with an average loan balance in the portfolio of $1.4 million, and terms ranging from less than one year to ten years. The loans generally carry variable interest rates indexed to our WSFS prime rate, “Wall Street” prime rate or SOFR.
The majority of our commercial and commercial mortgage loans are concentrated in Delaware and Pennsylvania. We offer commercial mortgage loans on multi-family properties and on other commercial real estate. Generally, loan-to-value ratios for these loans do not exceed 80% of appraised value at origination. Our commercial mortgage portfolio was $3.4 billion at December 31, 2022.
The majority of our commercial and commercial mortgage loans are concentrated in Delaware and Pennsylvania. We offer commercial mortgage loans on multi-family properties and on other commercial real estate. Generally, loan-to-value ratios for these loans do not exceed 80% of appraised value at origination. Our commercial mortgage portfolio was $3.8 billion at December 31, 2023.
The change in rate for the first adjustment date could be higher than the typical limited rate change of two percentage points at each subsequent adjustment date.
The change in rate for the first adjustment date could be higher than the typical limited rate change of two percentage points per annum at each subsequent adjustment date.
Federal law limits the Bank’s extensions of credit to any one borrower to 15% of our unimpaired capital (approximately $323.3 million), and an additional 10% if the additional extensions of credit are secured by readily marketable collateral. Extensions of credit include outstanding loans as well as contractual commitments to advance funds, such as standby letters of credit.
Federal law limits the Bank’s extensions of credit to any one borrower to 15% of our unimpaired capital (approximately $355.5 million), and an additional 10% if the additional extensions of credit are secured by readily marketable collateral. Extensions of credit include outstanding loans as well as contractual commitments to advance funds, such as standby letters of credit.
In total, these product lines represented approximately 37% of total consumer loans. Typically, maximum loan to value (LTV) limits are 85% for primary residences and 70% for all other properties. At December 31, 2022, we had $1.4 billion in total commitments for home equity lines of credit.
In total, these product lines represented approximately 34% of total consumer loans. Typically, maximum loan to value (LTV) limits are 85% for primary residences and 70% for all other properties. At December 31, 2023, we had $1.4 billion in total commitments for home equity lines of credit.
Usually, the maximum rate on these loans is five percent above the initial interest rate. We underwrite adjustable-rate loans under standards consistent with private mortgage insurance and secondary market underwriting criteria. We do not originate adjustable-rate mortgages with payment limitations that could produce negative amortization.
Usually, the maximum rate on these loans is 5.0% above the initial interest rate. We underwrite adjustable-rate loans under standards consistent with private mortgage insurance and secondary market underwriting criteria. We do not originate adjustable-rate mortgages with payment limitations that could produce negative amortization.
The capital ratios for the Bank and the Company, as of December 31, 2022, indicate regulatory capital levels in excess of the regulatory minimums and the levels necessary for the Bank to be considered “well capitalized.” 27 Prompt Corrective Action All banks and savings associations are subject to a “prompt corrective action” regime.
The capital ratios for the Bank and the Company, as of December 31, 2023, indicate regulatory capital levels in excess of the regulatory minimums and the levels necessary for the Bank to be considered “well-capitalized.” 26 Prompt Corrective Action All banks and savings associations are subject to a “prompt corrective action” regime.
These loans do not close in our name and we process them as a reverse mortgage broker. During 2022 and 2021, we originated $0.8 million and $1.8 million in reverse mortgages, respectively. Our consumer lending activity is conducted through our branch offices, our partnerships with Spring EQ, Upstart, and LendKey and referrals from other parts of our business.
These loans do not close in our name and we process them as a reverse mortgage broker. During 2023 and 2022, we originated $3.3 million and $0.8 million in reverse mortgages, respectively. Our consumer lending activity is conducted through our branch offices, our website, our partnerships with Spring EQ, Upstart, and LendKey and referrals from other parts of our business.
Since the outbreak of the COVID-19 pandemic, the amount of total estimated insured deposits has grown very rapidly while the funds in the DIF have grown at a normal rate, causing the DIF reserve ratio to fall below the statutory minimum of 1.35%.
Since the outbreak of the COVID-19 pandemic, the amount of total estimated insured deposits has grown very rapidly while the funds in the FDIC's Deposit Insurance Fund (DIF) have grown at a normal rate, causing the DIF reserve ratio to fall below the statutory minimum of 1.35%.
We have built a $9.3 billion commercial loan and lease portfolio by recruiting seasoned commercial lenders in our markets, offering the high level of service and flexibility typically associated with a community bank and through acquisitions. We fund this business primarily with deposits generated through commercial relationships and consumer deposits, as well as through our digital banking platforms.
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. We fund our lending businesses primarily with deposits generated through commercial relationships and consumer deposits, as well as through our digital banking platforms.
The junior subordinated debentures are the sole assets of Trusts, mature on December 15, 2034, and may be called at par by the Company any time. The Company records its investments in the Trusts’ common securities of $387.0 thousand each as investments in unconsolidated entities and records dividend income upon declaration by Trust I and Trust II.
The junior subordinated debentures are the sole assets of the RBC Trusts, mature on December 15, 2034, and may be called at par by the Company any time. 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.
Our focus on this differentiation strategy supports our core franchise with a mix of organic and acquisition-related growth and builds value for our stockholders. Since December 31, 2018, our commercial loans and leases, which exclude loans held-for-sale, have grown 133% from $4.0 billion to $9.3 billion at December 31, 2022.
Our focus on this differentiation strategy supports our core franchise with a mix of organic and acquisition-related growth and builds value for our stockholders. Since December 31, 2018, our commercial loans and leases, which exclude loans held-for-sale, have grown 146% from $4.0 billion to $9.9 billion at December 31, 2023.
Adjustments are generally based upon a margin (as of December 31, 2022, ranging from 2.50% to 2.75% for the U.S Treasury, and 2.75% for the Standard Overnight Finance Rate) over the weekly average yield on U.S. Treasury securities adjusted to a constant maturity, as published by the Board of Governors of the Federal Reserve System (the Federal Reserve).
Adjustments are generally based upon a margin (as of December 31, 2023, ranging from 2.75% for the U.S Treasury, and 2.75% to 3.00% for the Standard Overnight Finance Rate) over the weekly average yield on U.S. Treasury securities adjusted to a constant maturity, as published by the Board of Governors of the Federal Reserve System (the Federal Reserve).
Census Bureau - Quick Facts 2020 - 2021 DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS’ EQUITY Condensed average balance sheets for each of the last two years and analyses of net interest income and changes in net interest income due to changes in volume and rate are presented in “Results of Operations” included in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 12 CREDIT EXTENSION ACTIVITIES Over the past several years we have focused on growing the more profitable, relationship-oriented segments of our loan portfolio.
Census Bureau - Quick Facts 2020 - 2022 DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS’ EQUITY Condensed average balance sheets for each of the last two years and analyses of net interest income and changes in net interest income due to changes in volume and rate are presented in “Results of Operations” included in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 12 CREDIT EXTENSION ACTIVITIES Over the past several years we have focused on growing the more profitable, relationship-oriented segments of our loan portfolio as well as growing our consumer portfolio primarily through our consumer partnerships.
Most loan fees are not recognized in our Consolidated Statements of Income immediately, but are deferred as adjustments to yield in accordance with GAAP, and are reflected in interest income over the expected life of the loan. Those fees represented interest income of $12.1 million, $25.4 million and $23.5 million during 2022, 2021 and 2020 respectively.
Most loan fees are not recognized in our Consolidated Statements of Income immediately, but are deferred as adjustments to yield in accordance with GAAP, and are reflected in interest income over the expected life of the loan. Those fees represented interest income of $8.8 million, $12.1 million and $25.4 million during 2023, 2022 and 2021 respectively.
To reduce our exposure on certain types of these loans, and/or to maintain relationships within internal lending limits, at times we will sell a portion of our commercial loan portfolio, typically through loan participations. Commercial loan sales totaled $201.6 million and $58.6 million in 2022 and 2021, respectively.
To reduce our exposure on certain types of these loans, and/or to maintain relationships within internal lending limits, at times we will sell a portion of our commercial loan portfolio, typically through loan participations. Commercial loan sales totaled $261.5 million and $201.6 million in 2023 and 2022, respectively.
We received $0.3 million in dividends from the FHLB during 2022 compared to $0.1 million during 2021.
We received $1.1 million in dividends from the FHLB during 2023 compared to $0.3 million during 2022.
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 ® 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.
At December 31, 2022, no relationships exceeded the $100.0 million “House Limit.” Residential and Consumer: During 2022, we originated $493.5 million of residential loans, a decrease compared to $976.9 million in 2021. From time to time, we have purchased whole loans and loan participations in accordance with our ongoing asset and liability management objectives.
At December 31, 2023, no relationships exceeded the $100.0 million “House Limit.” Residential and Consumer: During 2023, we originated $343.7 million of residential loans, a decrease compared to $493.5 million in 2022. From time to time, we have purchased whole loans and loan participations in accordance with our ongoing asset and liability management objectives.
Commercial: We originate commercial mortgage and commercial loans through our commercial lending division and SBA loan program. Commercial loans are made for working capital, financing equipment acquisitions, business expansion and other business purposes. During 2022, we originated $2.3 billion of commercial and commercial mortgage loan exposures compared to $1.5 billion in 2021.
Commercial: We originate commercial mortgage and commercial loans through our commercial lending division and SBA loan program. Commercial loans are made for working capital, financing equipment acquisitions, business expansion and other business purposes. During 2023, we originated $2.4 billion of commercial and commercial mortgage loan exposures compared to $2.3 billion in 2022.
The average size of a loan in the commercial mortgage portfolio is $1.0 million and only 28 loans are greater than $12.0 million, with five loans greater than $24.0 million. We offer commercial construction loans to developers.
The average size of a loan in the commercial mortgage portfolio is $1.1 million and only 46 loans are greater than $12.0 million, with eight loans greater than $24.0 million. We offer commercial construction loans to developers.
(4) Excludes $43.0 million and $113.3 million of commercial and industrial loans and residential loans held for sale at December 31, 2022 and 2021, respectively. 13 The following table shows the remaining contractual maturity and rate sensitivity of the loan portfolio by loan category as of December 31, 2022.
(3) Excludes $29.3 million and $43.0 million of commercial and industrial loans and residential loans held for sale at December 31, 2023 and 2022, respectively. 13 The following table shows the remaining contractual maturity and rate sensitivity of the loan portfolio by loan category as of December 31, 2023.
Small business and middle market commercial loans that include specialty-lending products, including small business leases and SBA loans, comprise the remainder of our commercial portfolio. As of December 31, 2022, our small business and SBA loans include loan exposures up to $3.3 million and $2.7 million, respectively.
Small business and middle market commercial loans that include specialty-lending products, including small business leases and SBA loans, comprise the remainder of our commercial portfolio. As of December 31, 2023, our small business and SBA loans include loan exposures up to $1.4 million and $2.7 million, respectively.
We hold certain fixed-rate mortgage loans for investment, consistent with our current asset/liability management strategies and our relationship-based lending philosophy. 17 At December 31, 2022, we serviced $286.4 million of residential first mortgage loans and reverse mortgage loans for others, compared to $91.5 million at December 31, 2021.
We hold certain fixed-rate mortgage loans for investment, consistent with our current asset/liability management strategies and our relationship-based lending philosophy. 17 At December 31, 2023, we serviced $248.3 million of residential first mortgage loans and reverse mortgage loans for others, compared to $286.4 million at December 31, 2022.
At December 31, 2022, the construction portfolio included $53.2 million of “land hold” loans, which are land loans not currently being developed. Commercial and industrial and owner-occupied commercial loans include loans for working capital, financing equipment and real estate acquisitions, business expansion and other business purposes.
At December 31, 2023, the construction portfolio included $101.6 million of “land hold” loans, which are land loans not currently being developed. Commercial and industrial and owner-occupied commercial loans include loans for working capital, financing equipment and real estate acquisitions, business expansion and other business purposes.
Performance Expectations and Alignment with Stockholder Priorities We are focused on high-performing, long-term financial goals. We define “high-performing” as the top quintile of a relevant peer group in return on assets (ROA).
Performance Expectations and Alignment with Stockholder Priorities We are focused on high-performing, long-term financial goals. We define “high-performing” as the top quintile of a relevant peer group in key financial metrics.
As a member of the FHLB, we are required to purchase and hold shares of capital stock in the FHLB and we were in compliance with this requirement with a stock investment in FHLB of $24.1 million as of December 31, 2022 and with $6.1 million at December 31, 2021.
As a member of the FHLB, we are required to purchase and hold shares of capital stock in the FHLB and we were in compliance with this requirement with a stock investment in FHLB of $15.4 million as of December 31, 2023 and with $24.1 million at December 31, 2022.
Privacy and Cybersecurity Several federal statutes and regulations require savings associations (as well as banks and other financial institutions) to take several steps to protect nonpublic consumer financial information. The Bank has prepared a privacy policy, which it must disclose to consumers annually.
We are evaluating the impact of the proposal. Privacy and Cybersecurity Several federal statutes and regulations require savings associations (as well as banks and other financial institutions) to take several steps to protect nonpublic consumer financial information. The Bank has prepared a privacy policy, which it must disclose to consumers annually.
Combined, these businesses had $64.5 billion of AUM and AUA at December 31, 2022. 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.
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.
Our commercial small business leases generated through NewLane Finance ® , finance critical equipment through advanced technologies, a customer-centric approach and transparent business lending practices. The commercial small business leases portfolio was $559.0 million, or 5% of total loans, at December 31, 2022.
Our commercial small business leases generated through NewLane Finance ® , finance critical equipment through advanced technologies, a customer-centric approach and transparent business lending practices. The commercial small business leases portfolio was $623.6 million, or 5% of total loans, at December 31, 2023.
These amounts represent gross contract amounts and do not necessarily reflect amounts outstanding on those loans. We also periodically buy loan participations from other banks. Commercial loan participation purchases totaled $241.9 million and $50.6 million in 2022 and 2021, respectively.
These amounts represent gross contract amounts and do not necessarily reflect amounts outstanding on those loans. We also periodically buy loan participations from other banks. Commercial loan participation purchases totaled $264.2 million and $241.9 million in 2023 and 2022, respectively.
We significantly invest in our culture and engagement as they underpin all that we do at WSFS, including attracting, inspiring and retaining our Associates, delivering stellar Customer experiences and strengthening the well-being of our communities as evidenced by our Vision: "We envision a day when everyone will thrive." Our strategy, “Engaged Associates, living our culture, enriching the Communities we serve” builds upon that principal. 6 Our strategy in action starts a virtuous cycle whereby, as we do better, our community does better and as our community does better, we do better.
We significantly invest in our culture and engagement as they underpin all that we do at WSFS, including attracting, inspiring and retaining our Associates, delivering stellar Customer experiences and strengthening the well-being of our communities as evidenced by our Vision: "We envision a day when everyone will thrive." Our strategy, “Engaged Associates, living our culture, enriching the Communities we serve” builds upon that principal.
At December 31, 2022, our commercial and industrial and owner-occupied commercial loan portfolios were $4.4 billion and represented 37% of our total loan and lease portfolio. These loans are diversified by industry, with no industry representing more than 18% of the portfolio.
At December 31, 2023, our commercial and industrial and owner-occupied commercial loan portfolios were $4.4 billion and represented 35% of our total loan and lease portfolio. These loans are diversified by industry, with no industry representing more than 12% of the portfolio.
The 2030 Notes may be redeemed beginning December 15, 2025 at 100% of principal plus accrued and unpaid interest. In connection with the BMBC Merger, the Company assumed $30.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2025 (the 2025 Notes) which were issued in a private placement to institutional accredited investors on August 6, 2015.
The 2030 Notes may be redeemed beginning December 15, 2025 at 100% of principal plus accrued and unpaid interest. The Company assumed $30.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2025 (the 2025 Notes) from Bryn Mawr Bank Corporation, which were issued in a private placement to institutional accredited investors on August 6, 2015.
WSFS Bank had one majority-owned subsidiary, NewLane Finance Company (NewLane Finance ® ). • BEFC was acquired during the Beneficial Bancorp, Inc. (Beneficial) acquisition and is in the business of leasing small equipment and fixed assets.
WSFS Bank had one majority-owned subsidiary, NewLane Finance Company (NewLane Finance ® ). • BEFC, a small equipment and fixed assets leasing company, was acquired during the Beneficial Bancorp, Inc. (Beneficial) acquisition.
Engagement and Culture Our business model is designed using the science of Human Sigma, which is built on a foundation of engagement. Our model begins with Associates (employees) who take ownership for their responsibilities and impact; as such, they are more likely to consistently perform at a higher level.
Engagement and Culture Our business model is built on a foundation of engagement. Our model begins with Associates (employees) who take ownership for their responsibilities and impact; as such, they are more likely to consistently perform at a higher level.
As a result of the new rule, the FDIC insurance costs of insured depository institutions, including the Bank, will generally increase The FDIC may terminate the deposit insurance of any insured depository institution, including the Bank, if it determines after a hearing that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, order or any condition imposed by an agreement with the FDIC.
The FDIC may terminate the deposit insurance of any insured depository institution, including the Bank, if it determines after a hearing that the institution has engaged or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, order or any condition imposed by an agreement with the FDIC.
As of December 31, 2022, Cash Connect ® also supports approximately 650 owned and branded ATMs for WSFS Bank, which has one of the largest branded ATM networks in our market. 4 Wealth Management 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.
As of December 31, 2023, Cash Connect ® also supports 590 owned or branded ATMs for WSFS Bank, which has one of the largest branded ATM networks in our market. 4 Wealth Management 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.
There were no purchases in 2022 related to our Community Reinvestment Act (CRA) obligations compared to $2.3 million of purchases in 2021. We sell most newly originated mortgage loans in the secondary market to generate fee income and to manage our overall balance sheet mix. Residential loan sales totaled $498.1 million in 2022 and $965.7 million in 2021.
There were no purchases in 2023 or 2022 related to our Community Reinvestment Act (CRA) obligations. We sell most newly originated mortgage loans in the secondary market to generate fee income and to manage our overall balance sheet mix. Residential loan sales totaled $195.7 million in 2023 and $498.1 million in 2022.
At December 31, 2022, we had $233.7 million of residential first mortgage loans serviced by others. We also serviced residential first mortgage loans and reverse mortgage loans for our own portfolio totaling $528.2 million and $546.7 million at December 31, 2022 and 2021, respectively. We offer government-insured reverse mortgages to our customers.
At December 31, 2023, we had $211.3 million of residential first mortgage loans serviced by others, compared to $233.7 million at December 31, 2022. We also serviced residential first mortgage loans and reverse mortgage loans for our own portfolio totaling $659.4 million and $528.2 million at December 31, 2023 and 2022, respectively. We offer government-insured reverse mortgages to our customers.
They have entrusted this capital to us with the expectation that it will earn an appropriate return relative to the risks we take. Mindful of this balance, we prudently, but aggressively, manage our capital.
They have entrusted this capital to us with the expectation that it will earn an appropriate return relative to the risks we take. Mindful of this balance, we prudently, but aggressively, manage our capital. Maintaining prudent capital levels is key to our operating philosophy.
The CFPB also has authority to establish rules prohibiting unfair, deceptive, or abusive acts or practices. 29 Debit Card Interchange Fees The Federal Reserve has issued rules under the Electronic Fund Transfer Act, as amended by a section of the Dodd-Frank Act, known as the Durbin Amendment, to limit interchange fees that an issuer with $10 billion or more in assets, such as the Bank, may receive or charge for an electronic debit card transaction.
Debit Card Interchange Fees The Federal Reserve has issued rules under the Electronic Fund Transfer Act, as amended by a section of the Dodd-Frank Act, known as the Durbin Amendment, to limit interchange fees that an issuer with $10 billion or more in assets, such as the Bank, may receive or charge for an electronic debit card transaction.
In addition to its focus on stellar customer experiences, WSFS Bank has continued to fuel growth and remain a leader in our community. We are a relationship-focused, locally-managed, community banking institution.
In addition to its focus on stellar customer experiences, WSFS Bank has continued to fuel growth and remain a leader in our community. We are a relationship-focused and locally-managed community banking and wealth franchise, complemented by nationwide businesses.
The student loans portfolio also includes loans acquired from past acquisitions, which are U.S. government guaranteed with little risk of credit loss. 16 Our in-house originations consist primarily of home equity lines of credit and installment loans. At December 31, 2022, home equity lines of credit outstanding totaled $495.8 million and installment loans totaled $179.9 million.
The student loans portfolio also includes loans acquired from past acquisitions, which are U.S. government guaranteed with little risk of credit loss. 16 Our in-house originations consist primarily of home equity lines of credit and installment loans. At December 31, 2023, home equity lines of credit outstanding totaled $466.4 million and installment loans totaled $221.0 million.
For the year ended December 31, 2022, WSFS reported ROA of 1.09%. Core ROA, which excludes non-core items and is a non-GAAP financial measure, was 1.32% for the year ended December 31, 2022.
For the year ended December 31, 2023, WSFS reported ROA of 1.33%. Core ROA, which excludes non-core items and is a non-GAAP financial measure, was 1.38% for the year ended December 31, 2023.
WSFS Bank offers: • One primary point of contact: Each of our relationship managers is responsible for understanding his or her Customers’ needs and bringing together the right resources in WSFS Bank to meet those needs. • A customized approach to serving our Customers: We believe that this gives us an advantage over our competitors who are too large or centralized to offer customized products or services. • Products and services that our Customers value: This includes a broad array of banking, cash management and trust and wealth management products, as well as a legal lending limit high enough to meet the credit needs of our Customers, especially as they grow. • Rapid response and a company that is easy to do business with: Our Customers tell us this is an important differentiator from larger, in-market competitors. 8 Our Diversified Business Balance Sheet Management We put a great deal of focus on actively managing our balance sheet.
WSFS Bank offers: • One primary point of contact: Each of our relationship managers is responsible for understanding their Customers’ needs and bringing together the right resources in WSFS Bank to meet those needs. • A customized approach to serving our Customers: We believe that this gives us an advantage over our competitors who are too large or centralized to offer customized products or services. • Products and services that our Customers value: This includes a broad array of banking, treasury management, capital markets and trust and wealth management products, as well as a legal lending limit high enough to meet the credit needs of our Customers, especially as they grow. • Rapid response and a company that is easy to do business with: Our Customers tell us this is an important differentiator from larger in-market competitors. 8 Our Diversified Business Diversified Revenue Streams With over 25 discrete lines of business, our diversified revenue model is a key differentiator for the Company.
On a very limited basis, we have originated or purchased loans with loan-to-value ratios exceeding 80% without a private mortgage insurance requirement or government guarantee. Any such loans are originated for sale into the secondary market. At December 31, 2022, the balance of all such loans was approximately $66.0 million.
On a limited basis, we have originated loans with loan-to-value ratios exceeding 80% without a private mortgage insurance requirement or government guarantee. Any such loans are either originated for sale into the secondary market or held for investment. At December 31, 2023, the balance of all such loans was approximately $123.9 million.
In connection with the BMBC Merger, the Company assumed $70.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2027 (the 2027 Notes) which were issued by BMBC in an underwritten public offering on December 13, 2017.
The Company assumed $70.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes due 2027 (the 2027 Notes) from Bryn Mawr Bank Corporation, which were issued by Bryn Mawr Bank Corporation in an underwritten public offering on December 13, 2017.
There were two loans repurchased in 2022 for $0.8 million, and no repurchases in 2021 and 2020. Consumer Lending The Company has focused on diversifying our consumer credit products to meet our Customers’ needs, with over 50% of the portfolio from our fintech lending partnerships.
There was one loan repurchased in 2023 for $0.8 million, two repurchased in 2022 for $0.8 million, and none repurchased in 2021. Consumer Lending The Company has focused on diversifying our consumer credit products to meet our Customers’ needs, with over 50% of the portfolio from our fintech lending partnerships.
Although WSFS owns an aggregate of $774.0 thousand of the common securities of Trust I and Trust II, the Trusts are not consolidated into the Corporation’s Consolidated Financial Statements as the Corporation is not deemed to be the primary beneficiary of these entities.
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFailures in, or breaches of, our computer systems and network infrastructure, or those of our third party vendors or other service providers, including as a result of cyber-attacks, could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses.
Biggest changeFailures in, or breaches of, our computer systems, software and networks, or those of our third-party vendors or other service providers, including as a result of cyber-attacks, cybersecurity breaches and other disruptions, could disrupt our business or operations or those of our Customers and counterparties, result in the disclosure or misuse of confidential or proprietary information, result in supervisory liability or regulatory enforcement action, damage our reputation, result in a loss of Customers and business, result in a loss of confidence in the security of our systems, products and services, increase our costs and cause losses to us.
Model risk refers to the possibility of unintended business outcomes arising from the design, implementation or use of models. 1. Market Risk Difficult market conditions and unfavorable economic trends could adversely affect our industry and our business. We are exposed to downturns in the Delaware and Greater Philadelphia region, Mid-Atlantic and overall U.S. economy and housing markets.
Model risk refers to the possibility of unintended business outcomes arising from the design, implementation or use of models. 1. Market Risk Difficult market conditions and unfavorable economic trends could adversely affect our industry and our business. We are exposed to downturns in the Greater Philadelphia and Delaware region, Mid-Atlantic and overall U.S. economy and housing markets.
Significant increases in the level of our nonperforming assets from the current level, or greater than anticipated costs to resolve these credits, will have an adverse effect on our earnings. Our loan portfolio includes a substantial amount of commercial mortgage, construction and land development and commercial and industrial loans.
Significant increases in the level of our nonperforming assets from the current level, or greater than anticipated costs to resolve these credits, will have an adverse effect on our earnings. Our loan portfolio includes a substantial amount of commercial mortgage, commercial and industrial, and construction and land development loans.
In particular, we may face the following risks in connection with these events: • An increase in the number of customers unable to repay their loans in accordance with the original terms, which could result in a higher level of loan and lease losses and provision for loan and lease losses; • Decreases in customer deposits; • Impaired ability to assess the creditworthiness of customers as the models and approaches we use to select, manage and underwrite our customers become less predictive of future performance; • Impaired ability to estimate the losses inherent in our credit exposure as the process we use to make such estimates requires difficult, subjective and complex judgments based on forecasts of economic or market conditions that might impair the ability of our customers to repay their loans, and this estimating process becomes less accurate and thus less reliable as economic conditions worsen; • Increases in foreclosures, delinquencies and customer bankruptcies, as well as more restricted access to commercial credit; • Decreases in our Wealth Management segment's AUM portfolios as a result of, among other things, decreases in market value from investment performance losses and customers' increased financial needs; • Downward pressure on our stock price or an impaired ability to access the capital markets or otherwise obtain needed funding on attractive terms or at all; • Changes in the regulatory environment, including regulations promulgated or to be promulgated under federal banking legislation or other new regulations, and changes in accounting standards, could influence recognition of loan and lease losses and our allowance for credit losses, and could result in earlier recognition of loan losses and decreases in capital; and • Increased competition due to intensified consolidation of the financial services industry and competition from non-banks. 32 Changes in interest rates and other factors beyond our control could have an adverse impact on our earnings.
In particular, we may face the following risks in connection with these events: • An increase in the number of customers unable to repay their loans in accordance with the original terms, which could result in a higher level of loan and lease losses and provision for loan and lease losses; • Decreases in customer deposits; • Impaired ability to assess the creditworthiness of customers as the models and approaches we use to select, manage and underwrite our customers become less predictive of future performance; • Impaired ability to estimate the losses inherent in our credit exposure as the process we use to make such estimates requires difficult, subjective and complex judgments based on forecasts of economic or market conditions that might impair the ability of our customers to repay their loans, and this estimating process becomes less accurate and thus less reliable as economic conditions worsen; • Increases in foreclosures, delinquencies and customer bankruptcies, as well as more restricted access to commercial credit; • Decreases in our Wealth Management segment's AUM portfolios as a result of, among other things, decreases in market value from investment performance losses and customers' increased financial needs; • Downward pressure on our stock price or an impaired ability to access the capital markets or otherwise obtain needed funding on attractive terms or at all; • Changes in the regulatory environment, including regulations promulgated or to be promulgated under federal banking legislation or other new regulations, and changes in accounting standards, which could influence recognition of loan and lease losses and our allowance for credit losses, and could result in earlier recognition of loan losses and decreases in capital; and • Increased competition due to intensified consolidation of the financial services industry and competition from non-banks. 31 Changes in interest rates and other factors beyond our control could have an adverse impact on our earnings.
There continues to be uncertainty as to how CFPB's strategies and priorities will impact the Company's business and operations. Any changes by the CFPB in regulatory expectations, interpretations or practices could increase the risk of additional enforcement actions, fines and penalties, which could have an adverse impact on our business, results of operations, and financial condition. 38 5.
There continues to be uncertainty as to how CFPB's strategies and priorities will impact the Company's business and operations. Any changes by the CFPB in regulatory expectations, interpretations or practices could increase the risk of additional enforcement actions, fines and penalties, which could have an adverse impact on our business, results of operations, and financial condition. 5.
If we conclude in the future that a significant portion of our deferred tax assets are not more likely than not to be realized, we will record a valuation allowance, which could adversely affect our financial position, results of operations and regulatory capital ratios. 43 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
If we conclude in the future that a significant portion of our deferred tax assets are not more likely than not to be realized, we will record a valuation allowance, which could adversely affect our financial position, results of operations and regulatory capital ratios. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Failure to comply with these standards, adequately manage these risks or manage the differing interests often involved in the exercise of fiduciary responsibilities could also result in liability. The CFPB has reshaped consumer financial regulations through rulemaking and enforcement of prohibitions against unfair, deceptive or abusive business acts or practices.
Failure to comply with these standards, adequately manage these risks or manage the differing interests often involved in the exercise of fiduciary responsibilities could also result in liability. 36 The CFPB has reshaped consumer financial regulations through rulemaking and enforcement of prohibitions against unfair, deceptive or abusive business acts or practices.
Loans secured by properties where repayment is dependent upon payment of rent by third party tenants or the sale of the property may be impacted by loss of tenants, lower lease rates needed to attract new tenants or the inability to sell a completed project in a timely fashion and at a profit. 34 We are exposed to increased credit losses and credit related expenses in the event of a major natural disaster, public health crisis, other catastrophic event or significant climate change effects.
Loans secured by properties where repayment is dependent upon payment of rent by third party tenants or the sale of the property may be impacted by loss of tenants, lower lease rates needed to attract new tenants or the inability to sell a completed project in a timely fashion and at a profit. 33 We are exposed to increased credit losses and credit related expenses in the event of a major natural disaster, public health crisis, other catastrophic event or significant climate change effects.
Actual outcomes, losses and related expenses of pending legal proceedings may differ materially from assessments and estimates, and may exceed the amount of any reserves we have established, which could adversely affect our reputation, business, financial condition and results of operations. 40 Errors, breakdowns in controls or other mistakes in the provision of services to clients or in carrying out transactions for our own account can subject us to liability, result in losses or negatively affect our earnings in other ways.
Actual outcomes, losses and related expenses of pending legal proceedings may differ materially from assessments and estimates, and may exceed the amount of any reserves we have established, which could adversely affect our reputation, business, financial condition and results of operations. 39 Errors, breakdowns in controls or other mistakes in the provision of services to clients or in carrying out transactions for our own account can subject us to liability, result in losses or negatively affect our earnings in other ways.
Changes we make to the rates offered on our deposit products may affect our profitability and liquidity. 35 The FDIA prohibits an insured bank from accepting brokered deposits or offering interest rates on any deposits significantly higher than the prevailing rate in the bank’s normal market area or nationally (depending upon where the deposits are solicited), unless it is “well capitalized,” or it is “adequately capitalized” and receives a waiver from the FDIC.
Changes we make to the rates offered on our deposit products may affect our profitability and liquidity. 34 The FDIA prohibits an insured bank from accepting brokered deposits or offering interest rates on any deposits significantly higher than the prevailing rate in the bank’s normal market area or nationally (depending upon where the deposits are solicited), unless it is “well-capitalized,” or it is “adequately capitalized” and receives a waiver from the FDIC.
A natural disaster, public health crisis or catastrophic event or other significant climate change effect that either damages or destroys residential or multifamily real estate underlying mortgage loans or REO properties, or negatively affects the ability of borrowers to continue to make payments on loans, could increase our serious delinquency rates and average loan loss severity in the affected areas.
A natural disaster, public health crisis or catastrophic event or other significant climate change effect that either damages or destroys residential or multifamily real estate underlying mortgage loans or real estate owned properties, or negatively affects the ability of borrowers to continue to make payments on loans, could increase our serious delinquency rates and average loan loss severity in the affected areas.
Our ability to attract and retain customers, clients, investors, and highly-skilled management and employees is affected by our reputation and the reputation of the financial services industry as a whole. Adverse developments may result in additional scrutiny or new litigation against us and potential sources of reputational damage are discussed throughout these risk factors.
Our ability to attract and retain customers, clients, investors, and highly-skilled management and Associates is affected by our reputation and the reputation of the financial services industry as a whole. Adverse developments may result in additional scrutiny or new litigation against us and potential sources of reputational damage are discussed throughout these risk factors.
Over the past several years, our earnings have been, and continue to be, significantly impacted by substantial [and rapid] fluctuations in the interest rate environment.
Over the past several years, our earnings have been, and continue to be, significantly impacted by substantial fluctuations in the interest rate environment.
Although we have determined that goodwill and other intangible assets were not impaired during 2022, a significant and sustained decline in our stock price and market capitalization, a significant decline in our expected future cash flows, a significant adverse change in the business climate, slower growth rates or other factors could result in impairment of goodwill or other intangible assets.
Although we have determined that goodwill and other intangible assets were not impaired during 2023, a significant and sustained decline in our stock price and market capitalization, a significant decline in our expected future cash flows, a significant adverse change in the business climate, slower growth rates or other factors could result in impairment of goodwill or other intangible assets.
There are no such restrictions under the FDIA on a bank that is “well capitalized” and at December 31, 2022, the Bank met or exceeded all applicable requirements to be deemed “well capitalized” for purposes of the FDIA. However, the Bank may not continue to meet these requirements.
There are no such restrictions under the FDIA on a bank that is “well-capitalized” and at December 31, 2023, the Bank met or exceeded all applicable requirements to be deemed “well-capitalized” for purposes of the FDIA. However, the Bank may not continue to meet these requirements.
In response to the economic and financial effects of the novel coronavirus (COVID-19) pandemic, the Federal Reserve initially reduced interest rates through 2020 and 2021 and instituted quantitative easing measures as well as domestic and global capital market support programs.
In response to the economic and financial effects of the COVID-19 pandemic, the Federal Reserve initially reduced interest rates through 2020 and 2021 and instituted quantitative easing measures as well as domestic and global capital market support programs.
Any decrease in the value of the underlying collateral will likely decrease the overall value of our securities, affecting equity and possibly impacting earnings. 33 Changes in or questions about the soundness of other financial institutions could adversely affect us.
Any decrease in the value of the underlying collateral will likely decrease the overall value of our securities, affecting equity and possibly impacting earnings. 32 Changes in or questions about the soundness of other financial institutions could adversely affect us.
Such a delay could adversely affect our business, results of operations, or financial condition. 36 We are subject to changes in federal and state banking statutes, regulations and governmental policies, and their interpretation or implementation.
Such a delay could adversely affect our business, results of operations, or financial condition. 35 We are subject to changes in federal and state banking statutes, regulations and governmental policies, and their interpretation or implementation.
Acquisitions, such as our acquisition of Bryn Mawr Trust, involve numerous risks, including difficulties in the integration of the operations, technologies, services and products of the acquired companies, and the diversion of management’s attention from other business concerns.
Acquisitions, such as our acquisition of Bryn Mawr Trust in January 2022, involve numerous risks, including difficulties in the integration of the operations, technologies, services and products of the acquired companies, and the diversion of management’s attention from other business concerns.
In addition, as a publicly-held company, we are subject to the risk of claims under the federal securities laws, and volatility in our stock price and those of other financial institutions increases this risk.
In addition, as a publicly-traded company, we are subject to the risk of claims under the federal securities laws, and volatility in our stock price and those of other financial institutions increases this risk.
In 2022, to curb rising inflation, the Federal Reserve increased the target Federal Funds rate−the interest rate that banks charge each other for overnight lending in order to help maintain the reserve requirements of the Federal Reserve−to a range between 4.25% and 4.5% as of December 2022 and enacted policies to achieve that target range.
In 2022 and 2023, to curb rising inflation, the Federal Reserve increased the target Federal Funds rate−the interest rate that banks charge each other for overnight lending in order to help maintain the reserve requirements of the Federal Reserve−to a range between 5.25% and 5.50% as of December 2023 and enacted policies to achieve that target range.
Banking regulators continue to focus on the models used by banks and bank holding companies in their businesses. The failure or inadequacy of a model may result in increased regulatory scrutiny on us or may result in an enforcement action or proceeding against us by one of our regulators. 9.
Banking regulators continue to focus on the models used by banks and bank holding companies in their businesses. The failure or inadequacy of a model may result in increased regulatory scrutiny on us or may result in an enforcement action or proceeding against us by one of our regulators. 41 Table of Contents 9.
Additionally, the operations of our Cash Connect ® segment depends on us having access to large amounts of cash. Our principal sources of liquidity include customer deposits, FHLB borrowings, brokered certificates of deposit, sales of loans, repayments to the Bank from borrowers and paydowns and sales of investment securities.
Additionally, the operations of our Cash Connect ® segment depends on us having access to large amounts of cash. Our principal sources of liquidity include customer deposits, the Bank Term Funding Program FHLB borrowings, brokered certificates of deposit, sales of loans, repayments to the Bank from borrowers and paydowns and sales of investment securities.
If key personnel were to leave us and equally knowledgeable or skilled personnel are unavailable within WSFS or could not be sourced in the market, our ability to manage our business may be hindered or impaired. 7. Reputation Risk Damage to our reputation could significantly harm our businesses.
If key personnel were to leave us and equally knowledgeable or skilled personnel are unavailable within WSFS or could not be sourced in the market, our ability to manage our business may be hindered or impaired. 40 Table of Contents 7. Reputation Risk Damage to our reputation could significantly harm our businesses.
Credit Risk Significant increases of nonperforming assets, or greater than anticipated costs to resolve these credits, can have an adverse effect on our earnings. Our nonperforming assets, which consist of non-accrual loans, assets acquired through foreclosure and troubled debt restructurings (TDRs) adversely affect our net income in various ways.
Credit Risk Significant increases of nonperforming assets, or greater than anticipated costs to resolve these credits, can have an adverse effect on our earnings. Our nonperforming assets, which consist of non-accrual loans, assets acquired through foreclosure, and restructured loans adversely affect our net income in various ways.
Although we devote significant resources and management focus to ensuring the integrity of our systems through information security and business continuity programs, our facilities and systems, and those of our third-party service providers, are vulnerable to external or internal security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming or human errors, or other similar events.
Although we devote significant resources and Board oversight and management focus to ensuring the integrity of our systems through information security and business continuity programs, our computer systems, software and networks, and those of our third-party service providers, are vulnerable to external or internal security breaches, acts of vandalism, computer viruses or malware, misplaced or lost data, denial-of-service attacks, programming or human errors, or other similar events.
Increases in prepayments on our portfolio will cause our premium amortization to accelerate, lowering the yield on such assets. If this happens, we could experience a decrease in interest income, which may negatively impact our results of operations and financial condition. Future changes in interest rates may reduce the market value of our investment securities.
Increases in prepayments on our portfolio will cause our premium amortization to accelerate, lowering the yield on such assets. If this happens, we could experience a decrease in interest income, which may negatively impact our results of operations and financial condition.
In addition, our operations are dependent upon our ability to protect the computer systems and network infrastructure utilized by us, including our Internet banking activities, against damage from physical break-ins, cybersecurity breaches and other disruptive problems caused by the Internet or other users.
In addition, our operations are dependent upon our ability to protect the computer systems, software and networks utilized by us, including our Internet banking activities, against damage from physical break-ins, cyber-attacks, cybersecurity breaches and other disruptive problems.
Any of these occurrences could have an adverse effect on our business, financial condition and results of operations. 39 Information security risks for financial institutions like us have increased recently in part because of new technologies, the use of the internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others.
Information security risks for financial institutions like us have increased recently in part because of new technologies, the use of the internet, cloud, and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized crime, perpetrators of fraud, hackers, terrorists and others.
If our Cash Connect ® division’s established policies, procedures and controls are inadequate, or not properly executed to prevent or detect a misappropriation of funds, or if a misappropriation of funds is not insured or not fully covered through any insurance maintained by us, our business, results of operations or financial condition could be adversely affected.
If our Cash Connect ® division’s established policies, procedures and controls are inadequate, or not properly executed to prevent or detect a misappropriation of funds, or if a misappropriation of funds is not insured or not fully covered through any insurance maintained by us, our business, results of operations or financial condition could be adversely affected. 37 System failure or cybersecurity breaches of our network security could subject us to increased operating costs as well as litigation and other potential losses.
Changes in Federal Reserve policies, fiscal policy, and our regulatory environment generally are beyond our control, and we are unable to predict what changes may occur or the manner in which any future changes may affect our business, financial condition and results of operations. 37 The intention and actions of the United Kingdom’s FCA to cease support of LIBOR could negatively affect the fair value of our financial assets and liabilities, results of operations and net worth.
Changes in Federal Reserve policies, fiscal policy, and our regulatory environment generally are beyond our control, and we are unable to predict what changes may occur or the manner in which any future changes may affect our business, financial condition and results of operations.
We outsource certain key functions to external parties, including some that are critical to financial reporting (including our use of hedge accounting), valuations, our mortgage-related investment activity, loan underwriting, and loan servicing. We may enter into other key outsourcing relationships in the future and continue to expand our existing reliance on third-party service providers.
Our use of third-party service providers exposes us to the risk of failures in their operations and their risk and control environments. We outsource certain key functions to external parties, including some that are critical to financial reporting (including our use of hedge accounting), valuations, our mortgage-related investment activity, loan underwriting, and loan servicing.
We are not able to anticipate or implement effective preventive measures against all security breaches of these types, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources. Our early detection and response mechanisms may be thwarted by sophisticated attacks and malware designed to avoid detection.
We are not able to anticipate or implement effective preventive measures against all security breaches of these types, especially because attacks are increasingly sophisticated, change frequently, often not recognized until launched, and can originate from a wide variety of sources. Our early detection and response mechanisms could fail to detect, mitigate or remediate these risks in a timely manner.
Even if the underlying assumptions and historical correlations used in our models are adequate, our models may be deficient due to errors in computer code, bad data, misuse of data, fraud or the use of a model for a purpose outside the scope of the model’s design. 42 Table of Contents As a result, our models may not capture or fully express the risks we face, may suggest that we have sufficient capitalization when we do not, or may lead us to misjudge the business and economic environment in which we will operate.
Even if the underlying assumptions and historical correlations used in our models are adequate, our models may be deficient due to errors in computer code, bad data, misuse of data, fraud or the use of a model for a purpose outside the scope of the model’s design.
We rely on third parties for certain important functions. Any failures by those vendors and service providers could disrupt our business operations or expose us to loss of confidential information or intellectual property. Our use of third-party service providers exposes us to the risk of failures in their operations and their risk and control environments.
Depending on the circumstances giving rise to the breach, this liability may not be subject to a contractual limit or an exclusion of consequential or indirect damages. We rely on third parties for certain important functions. Any failures by those vendors and service providers could disrupt our business operations or expose us to loss of confidential information or intellectual property.
We may not properly ascertain all such risks prior to an acquisition or prior to such a risk impacting us while integrating an acquired company.
We may not properly ascertain all such risks prior to an acquisition or prior to such a risk impacting us while integrating an acquired company. As a result, difficulties encountered with acquisitions could have an adverse effect on our business, financial condition and results of operations.
As a result, difficulties encountered with acquisitions could have an adverse effect on our business, financial condition and results of operations. 41 Furthermore, we must generally receive federal regulatory approval before we can acquire another insured depository institution or its holding company.
Furthermore, we must generally receive federal regulatory approval before we can acquire another insured depository institution or its holding company.
Our security measures, including firewalls and penetration testing, may not prevent or detect future potential losses from system failures or cybersecurity breaches. In the normal course of business, we collect, process, and retain sensitive and confidential information regarding our Customers.
Our security measures, including firewalls and penetration testing, as well as Board oversight and management's assessment, identification and management of cybersecurity risks, may not prevent or detect future potential losses or liabilities from system failures or breaches or cyber-attacks, cybersecurity breaches, or other disruptions.
In 2022, the CFPB has utilized their supervisory and enforcement powers to pursue abusive acts in several industries, including automobile loan servicing, credit card account management, debt collection, the operation of ATMs, mortgage origination, depository account management, and consumer reporting among others.
The CFPB has used its authorities to penalize market participants and/or change market practices in several areas of the financial services industry, including automobile loan servicing, credit card account management, debt collection, small business lending, the operation of ATMs, mortgage origination, depository account management, the charging of late fees or other credit card fees, the charging of overdraft fees and insufficient funds fees on deposit accounts, and consumer reporting, among others.
In particular, the technologies and digital solutions we have introduced as part of our Delivery Transformation initiative, including our enhanced website and personalized messaging app, are susceptible to these events. We and our third-party service providers have experienced all of these events and expect to continue to experience them in the future.
We and our third-party vendors or other service providers have experienced all of these events and expect to continue to experience them in the future. Any of these occurrences could have an adverse effect on our business, financial condition and results of operations.
Removed
The transition to alternative reference interest rate could present operational problems and result in market disruption, including inconsistent approaches for different financial products, as well as disagreements with counterparties. The FCA ceased publishing most LIBOR settings as of January 1, 2022 but will continue to publish five U.S. LIBOR settings through mid-2023.
Added
Future changes in interest rates may reduce the market value of our investment securities, which could impact market confidence in our operations. A series of bank failures in the spring of 2023 was precipitated by losses in the value of securities portfolios due to rising interest rates and subsequent reduction in deposits.
Removed
We expect that the capital and debt markets will cease to use LIBOR as a benchmark, but we cannot predict whether LIBOR will actually cease to be available after its current expiration dates, whether the Secured Overnight Financing Rate (SOFR) will become the market benchmark in its place or what impact such a transition may have on our business, results of operations and financial condition.
Added
We seek to continuously monitor for and nimbly react to any and all such malicious cyber activity, and we develop our systems to protect our technology infrastructure and data from misuse, misappropriation or corruption.
Removed
The selection of SOFR as the alternative reference rate for these products currently presents certain market concerns because SOFR (unlike LIBOR) does not have an inherent term structure or credit risk component.
Added
Senior management gives a quarterly update on cybersecurity to the Risk Committee of our Board of Directors and an annual update to our full Board of Directors.
Removed
A methodology has been developed to calculate SOFR-based term rates, and the Federal Reserve Bank of New York has published such rates daily since early 2020 and encouraged banks to transition away from LIBOR as soon as practicable.
Added
We also experience large volumes of phishing and other forms of social engineering attempted for the purpose of perpetrating fraud against us, our Associates, or our Customers.
Removed
However, the methodology has not been tested for an extended period of time, which may limit market acceptance of the use of SOFR. In addition, SOFR may not be a suitable alternative to LIBOR for all of our financial products, and it is uncertain what other rates might be appropriate for that purpose.
Added
Despite our implementation of protective measures and endeavoring to modify them as circumstances warrant, our computer systems, software and networks may be vulnerable to human error, equipment failure, natural disasters, power loss, unauthorized access, supply chain attacks, distributed denial of service attacks, computer viruses and other malicious code, and other events that could result in significant liability and damage to our reputation, and have an ongoing impact on the security and stability of our operations.
Removed
It is uncertain whether these other indices will remain acceptable alternatives for such products.
Added
In addition, although we maintain insurance coverage that may, subject to terms and conditions, cover certain aspects of cyber and information security risks, such insurance coverage may be insufficient to cover all losses, such as litigation costs or financial losses that exceed our policy limits or are not covered under any of our current insurance policies.
Removed
We have a significant number of financial products, including mortgage loans, mortgage-related securities, other debt securities and derivatives, that are indexed to LIBOR, and we continue to enter into transactions involving such products that will mature after 2021, with appropriate alternative reference rates to take effect after LIBOR's discontinuation, including the use of the WSJ Prime as a LIBOR alternative.
Added
Additionally, like many large enterprises, we have introduced more remote work arrangements for our Associates. The increase in remote work arrangements over the past few years has introduced potential new vulnerabilities to cyber threats. We also face increased cybersecurity risk as we deploy additional technologies and digital solutions, including our website and personalized messaging app.
Removed
We expect that the transition will span several reporting periods through June 2023. The replacement of LIBOR also may result in economic mismatches between different categories of instruments that now consistently rely on the LIBOR benchmark.
Added
We may also face increased cybersecurity risk for a period of time after acquisitions as we transition the acquired entity’s historical systems and networks to our standards. Moreover, any cyber-attack or other security breach may persist for an extended period of time without detection.
Removed
Additionally, inconsistent approaches to a transition from LIBOR to an alternative rate among different market participants and for different financial products may cause market disruption and operational problems, which could adversely affect us, including by exposing us to increased basis risk and resulting costs in connection with remediating these problems, and by creating the possibility of disagreements with counterparties.
Added
We endeavor to design and implement policies and procedures to identify such cyber-attacks or breaches as quickly as possible; however, we expect that any investigation of a cyber-attack or breach would take substantial amounts of time, and that there may be extensive delays before we obtain full and reliable information.
Removed
System failure or cybersecurity breaches of our network security could subject us to increased operating costs as well as litigation and other potential losses.
Added
During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, all of which would further increase the costs and consequences of such an attack or breach. 38 The SEC recently enacted rules, effective as of December 18, 2023, requiring public companies to disclose material cybersecurity incidents that they experience on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and to disclose on annual basis material information regarding their cybersecurity risk management, strategy, and governance.
Removed
Cybersecurity breaches and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us and damage to our reputation, and may discourage current and potential customers from using our Internet banking services.
Added
If we fail to comply with these new requirements we could incur regulatory fines in addition to other adverse consequences to our reputation, business, financial condition and results of operations. We may also be subject to liability under various data protection laws.
Removed
These events could interrupt our business or operations, result in significant legal and financial exposure (including costs associated with remediating any security breaches), supervisory liability, regulatory enforcement action, damage to our reputation, loss of customers and business or a loss of confidence in the security of our systems, products and services.
Added
In the normal course of business, we collect, process, and retain sensitive and confidential information regarding our Customers and Associates, including personal data. As a result, we are subject to numerous laws and regulations designed to protect this information, such as U.S. federal, state and international laws governing the protection of personally identifiable information.
Removed
As we continue to integrate the business of Bryn Mawr Trust, the anticipated benefits of our acquisition of Bryn Mawr Trust, including expected revenue synergies, may not be realized fully, or at all, or may take longer to realize than expected.
Added
These laws and regulations are increasing in complexity and number. If any person, including any of our associates, negligently disregards or intentionally breaches our established controls with respect to client or employee data, or otherwise mismanages or misappropriates such data, we could be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution.
Removed
The Company has incurred and will continue to incur substantial expenses in integrating the business, operations, networks, systems, technology, policies and procedures of Bryn Mawr Trust into its own. As a result of these expenses, we have taken and expect to continue to take charges against our earnings.
Added
In addition, unauthorized disclosure of sensitive or confidential client or employee data, whether through system failure, employee negligence, fraud or misappropriation, could damage our reputation and cause us to lose clients and related revenue. Potential liability in the event of a security breach of client data could be significant.
Removed
The charges taken in connection with our acquisition of Bryn Mawr Trust have been and are expected to be significant, although the aggregate amount and timing of such charges beyond what has already been reported in this report are uncertain at present.
Added
We may enter into other key outsourcing relationships in the future and continue to expand our existing reliance on third-party service providers.
Removed
As with any merger of financial institutions, integration efforts have diverted management attention and resources, and there may be business disruptions that affect our ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of our acquisition of Bryn Mawr Trust.
Added
As a result, our models may not capture or fully express the risks we face, may suggest that we have sufficient capitalization when we do not, or may lead us to misjudge the business and economic environment in which we will operate.
Removed
These integration matters could have an adverse effect on our financial results and the value of our common stock for an undetermined period.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn addition to our branch network, we own or lease office space for 27 other loan production offices and facilities located in Delaware, southeastern Pennsylvania, southern New Jersey, Virginia and Nevada to house operational activities, Cash Connect ® and our Wealth Management businesses. We owned 37 of our banking offices and other facilities while all other locations were leased.
Biggest changeIn addition to our branch network, we own or lease office space for 26 other loan production offices and facilities located in Delaware, southeastern Pennsylvania, southern New Jersey, Florida, Nevada and Virginia to house operational activities, Cash Connect ® and our Wealth Management businesses. We owned 37 of our banking offices and other facilities while all other locations were leased.
ITEM 2. PROPERTIES Our headquarters are located at 500 Delaware Ave., Wilmington, Delaware where we lease 78,432 square feet of space. At December 31, 2022, we conducted our business through 92 banking offices located in Delaware, southeastern Pennsylvania and southern New Jersey.
ITEM 2. PROPERTIES Our headquarters are located at 500 Delaware Ave., Wilmington, Delaware where we lease 78,432 square feet of space. At December 31, 2023, we conducted our business through 88 banking offices located in Delaware, southeastern Pennsylvania and southern New Jersey.
At December 31, 2022, our premises and equipment had a net book value of $115.6 million. All of these properties are generally in good condition and are appropriate for their intended use. While these facilities are adequate to meet our current needs, available space is limited and additional facilities may be required to support future expansion.
At December 31, 2023, our premises and equipment had a net book value of $104.5 million. All of these properties are generally in good condition and are appropriate for their intended use. While these facilities are adequate to meet our current needs, available space is limited and additional facilities may be required to support future expansion.
For additional detail regarding our properties and equipment, see Note 9 to the Consolidated Financial Statements.
For additional detail regarding our properties and equipment, see Note 8 to the Consolidated Financial Statements.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS For information regarding legal proceedings, see Note 25 to the Consolidated Financial Statements.
Biggest changeITEM 3. LEGAL PROCEEDINGS For information regarding legal proceedings, see Note 24 to the Consolidated Financial Statements.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

11 edited+0 added−0 removed2 unchanged
Biggest changeDecember 31, 2017 through December 31, 2022 Cumulative Total Return 2017 2018 2019 2020 2021 2022 WSFS Financial Corporation $ 100 $ 80 $ 94 $ 97 $ 110 $ 100 Dow Jones Total Market Index 100 97 121 133 161 150 Nasdaq Bank Index 100 84 104 96 138 115 KBW Nasdaq Regional Bank Index 100 83 102 93 128 119 ITEM 6. [RESERVED] 46
Biggest changeDecember 31, 2018 through December 31, 2023 Cumulative Total Return 2018 2019 2020 2021 2022 2023 WSFS Financial Corporation $ 100 $ 117 $ 122 $ 137 $ 126 $ 129 Dow Jones Total Market Index 100 125 138 166 155 180 Nasdaq Bank Index 100 124 115 164 138 133 KBW Nasdaq Regional Bank Index 100 124 113 155 144 143 ITEM 6. [RESERVED] 46
The programs are consistent with our intent to return a minimum of 35% of annual core net income to stockholders through dividends and share repurchases while maintaining capital ratios in excess of regulatory minimums and, in the case of the Bank, the “well-capitalized” benchmarks.
The programs are 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 regulatory minimums and, in the case of the Bank, the “well-capitalized” benchmarks.
During the second quarter of 2022, the Board of Directors of the Company approved an additional share repurchase authorization under the program of 6,358,727 shares of common stock, or 10% of its outstanding shares as of June 30, 2022.
During the second quarter of 2022, the Board of Directors approved an additional share repurchase authorization under the program of 6,358,727 shares of common stock, or 10% of its outstanding shares as of June 30, 2022.
Dividends For a discussion of dividend restrictions on our common stock, or of restrictions on dividends from the Company's subsidiaries to the Company, see “Business - Regulation - Regulation of the Company - Dividends” and “Business - Regulation - Regulation of WSFS Bank - Dividends Restrictions.” Securities Authorized for Issuance Under Equity Compensation Plans Shown below is information as of December 31, 2022 with respect to compensation plans under which equity securities of the Registrant are authorized for issuance.
Dividends For a discussion of dividend restrictions on our common stock, or of restrictions on dividends from the Company's subsidiaries to the Company, see “Business - Regulation - Regulation of the Company - Dividends” and “Business - Regulation - Regulation of WSFS Bank - Dividends Restrictions.” Securities Authorized for Issuance Under Equity Compensation Plans Shown below is information as of December 31, 2023 with respect to compensation plans under which equity securities of the Registrant are authorized for issuance.
Cumulative total shareholder return on our common stock or the indices equals the total increase in value since December 31, 2017, assuming reinvestment of all dividends paid into the common stock or the index, respectively. The graph and table were prepared assuming $100 was invested on December 31, 2017 in our common stock and in each of the indices.
Cumulative total shareholder return on our common stock or the indices equals the total increase in value since December 31, 2018, assuming reinvestment of all dividends paid into the common stock or the index, respectively. The graph and table were prepared assuming $100 was invested on December 31, 2018 in our common stock and in each of the indices.
Share Repurchases: During the first quarter of 2020, the Board of Directors approved a share repurchase program authorizing the repurchase of 7,594,977 shares, or 15% of our outstanding shares as of March 31, 2020.
Share Repurchases: During the first quarter of 2020, the Board of Directors approved a share repurchase program authorizing the repurchase of 7,594,977 shares, or 15% of our outstanding shares as of March 31, 2020. This repurchase program was completed during the first quarter of 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Registrant’s Common Equity and Related Stockholder Matters Our common stock is traded on the Nasdaq Global Select Market under the symbol “WSFS.” At February 23, 2023, we had 3,595 registered common stockholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Registrant’s Common Equity and Related Stockholder Matters Our common stock is traded on the Nasdaq Global Select Market under the symbol “WSFS.” At February 26, 2024, we had 3,404 registered common stockholders of record.
Equity Compensation Plan Information (a) (b) (c) Number of Securities to be issued upon exercise of outstanding options, warrants and rights Weighted-Average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by stockholders (1) 356,315 $ 42.92 869,838 Equity compensation plans not approved by stockholders N/A N/A N/A Total 356,315 $ 42.92 869,838 (1) Plans approved by stockholders include the 2013 Incentive Plan and the 2018 Incentive Plan.
Equity Compensation Plan Information (a) (b) (c) Number of Securities to be issued upon exercise of outstanding options, warrants and rights Weighted-Average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Equity compensation plans approved by stockholders (1) 252,851 $ 43.49 3,313,543 Equity compensation plans not approved by stockholders N/A N/A N/A Total 252,851 $ 43.49 3,313,543 (1) Plans approved by stockholders include the 2013 Incentive Plan and the 2018 Incentive Plan.
During the three months ended December 31, 2022, the Company had 361,980 shares of common stock repurchased under the current share repurchase programs.
During the three months ended December 31, 2023, the Company had 241,000 shares of common stock repurchased under the current share repurchase programs.
Month Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Number of Shares that May Yet Be Purchased Under the Programs October 1, 2022 - October 31, 2022 361,980 $ 47.76 361,980 6,588,771 November 1, 2022 - November 30, 2022 — — — 6,588,771 December 1, 2022 - December 31, 2022 — — — 6,588,771 Total 361,980 47.76 361,980 45 COMPARATIVE STOCK PERFORMANCE GRAPH The graph and table which follow show the yearly percentage change in the cumulative total shareholder return on our common stock over the last five years compared with the cumulative total shareholder return of the Dow Jones Total Market Index, the Nasdaq Bank Index and KBW Nasdaq Regional Bank Index over the same period as obtained from Bloomberg L.P.
Month Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Maximum Number of Shares that May Yet Be Purchased Under the Programs October 1, 2023 - October 31, 2023 — $ — — 5,582,593 November 1, 2023 - November 28, 2023 169,000 38.49 169,000 5,413,593 December 1, 2023 - December 31, 2023 72,000 41.50 72,000 5,341,593 Total 241,000 39.39 241,000 45 COMPARATIVE STOCK PERFORMANCE GRAPH The graph and table which follow show the yearly percentage change in the cumulative total shareholder return on our common stock over the last five years compared with the cumulative total shareholder return of the Dow Jones Total Market Index, the Nasdaq Bank Index and KBW Nasdaq Regional Bank Index over the same period as obtained from Bloomberg L.P.
The closing market price of our common stock at February 23, 2023 was $49.69.
The closing market price of our common stock at February 26, 2024 was $41.81.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSee “Noninterest Expense” for further information. 54 Table of Contents Net Interest Income The following table provides information regarding the average balances of, and yields/rates on, interest-earning assets and interest-bearing liabilities during the periods indicated: Year Ended December 31, 2022 2021 (Dollars in thousands) Average Balance Interest & Dividends Yield/ Rate (1) Average Balance Interest & Dividends Yield/ Rate (1) Assets: Interest-earning assets: Loans: (2) Commercial loans and leases $ 4,875,265 $ 253,293 5.21 % $ 3,801,816 $ 183,782 4.84 % Commercial mortgage loans 4,281,768 203,611 4.76 2,770,241 113,979 4.11 Residential 790,650 35,420 4.48 636,443 42,063 6.61 Consumer 1,543,704 86,743 5.62 1,134,569 49,330 4.35 Loans held for sale 65,927 3,687 5.59 118,803 4,094 3.45 Total loans and leases 11,557,314 582,754 5.05 8,461,872 393,248 4.65 Mortgage-backed securities (3) 5,151,469 106,606 2.07 3,340,001 55,802 1.67 Investment securities (3) 338,979 6,899 2.39 321,599 5,524 1.94 Other interest-earning assets 878,097 7,556 0.86 1,320,229 1,795 0.14 Total interest-earning assets 17,925,859 703,815 3.94 13,443,701 456,369 3.40 Allowance for credit losses (140,916) (161,770) Cash and due from banks 243,579 144,778 Cash in non-owned ATMs 551,108 454,803 Bank owned life insurance 100,725 32,818 Other noninterest-earning assets 1,783,340 989,590 Total assets $ 20,463,695 $ 14,903,920 Liabilities and stockholders’ equity: Interest-bearing liabilities: Interest-bearing deposits: Interest-bearing demand $ 3,377,321 $ 7,441 0.22 % $ 2,655,887 $ 2,262 0.09 % Money market 3,918,756 13,536 0.35 2,740,573 3,218 0.12 Savings 2,265,721 965 0.04 1,912,568 586 0.03 Customer time deposits 1,103,336 5,626 0.51 1,065,137 7,332 0.69 Total interest-bearing customer deposits 10,665,134 27,568 0.26 8,374,165 13,398 0.16 Brokered deposits 36,461 613 1.68 70,090 1,525 2.18 Total interest-bearing deposits 10,701,595 28,181 0.26 8,444,255 14,923 0.18 Federal Home Loan Bank advances 12,841 538 4.19 184 5 2.72 Trust preferred borrowings 90,337 3,482 3.85 67,011 1,274 1.90 Senior and subordinated debt 248,389 8,246 3.32 192,243 6,497 3.38 Other borrowed funds (4) 47,076 478 1.02 21,661 21 0.10 Total interest-bearing liabilities 11,100,238 40,925 0.37 8,725,354 22,720 0.26 Noninterest-bearing demand deposits 6,376,459 4,008,140 Other noninterest-bearing liabilities 590,814 323,715 Stockholders’ equity of WSFS 2,398,871 1,848,904 Noncontrolling interest (2,687) (2,193) Total liabilities and stockholders’ equity $ 20,463,695 $ 14,903,920 Excess of interest-earning assets over interest-bearing liabilities $ 6,825,621 $ 4,718,347 Net interest and dividend income $ 662,890 $ 433,649 Interest rate spread 3.57 % 3.14 % Net interest margin 3.71 % 3.23 % (1) Weighted average yields for tax-exempt securities and loans have been computed on a tax-equivalent basis.
Biggest changeSee “Noninterest Expense” for further information. 54 Table of Contents Net Interest Income The following table provides information regarding the average balances of, and yields/rates on, interest-earning assets and interest-bearing liabilities during the periods indicated: Year Ended December 31, 2023 2022 (Dollars in thousands) Average Balance Interest & Dividends Yield/ Rate (1) Average Balance Interest & Dividends Yield/ Rate (1) Assets: Interest-earning assets: Loans: (2) Commercial loans and leases $ 5,041,280 $ 346,389 6.88 % $ 4,875,265 $ 253,293 5.21 % Commercial mortgage loans 4,570,839 317,603 6.95 4,281,768 203,611 4.76 Residential 820,600 38,886 4.74 790,650 35,420 4.48 Consumer 1,922,827 138,510 7.20 1,543,704 86,743 5.62 Loans held for sale 47,424 3,883 8.19 65,927 3,687 5.59 Total loans and leases 12,402,970 845,271 6.82 11,557,314 582,754 5.05 Mortgage-backed securities (3) 4,640,646 107,555 2.32 5,151,469 106,606 2.07 Investment securities (3) 367,026 8,783 2.71 338,979 6,899 2.39 Other interest-earning assets 282,462 14,913 5.28 878,097 7,556 0.86 Total interest-earning assets 17,693,104 976,522 5.53 17,925,859 703,815 3.94 Allowance for credit losses (169,140) (140,916) Cash and due from banks 256,984 243,579 Cash in non-owned ATMs 392,007 551,108 Bank owned life insurance 98,935 100,725 Other noninterest-earning assets 1,931,147 1,783,340 Total assets $ 20,203,037 $ 20,463,695 Liabilities and stockholders’ equity: Interest-bearing liabilities: Interest-bearing deposits: Interest-bearing demand $ 3,019,050 $ 26,671 0.88 % $ 3,377,321 $ 7,441 0.22 % Money market 4,317,810 122,168 2.83 3,918,756 13,536 0.35 Savings 1,832,601 5,733 0.31 2,265,721 965 0.04 Customer time deposits 1,571,682 45,184 2.87 1,103,336 5,626 0.51 Total interest-bearing customer deposits 10,741,143 199,756 1.86 10,665,134 27,568 0.26 Brokered deposits 214,608 10,064 4.69 36,461 613 1.68 Total interest-bearing deposits 10,955,751 209,820 1.92 10,701,595 28,181 0.26 Federal Home Loan Bank advances 103,268 5,348 5.18 12,841 538 4.19 Trust preferred borrowings 90,534 6,736 7.44 90,337 3,482 3.85 Senior and subordinated debt 221,975 9,815 4.42 248,389 8,246 3.32 Other borrowed funds (4) 442,197 19,700 4.46 47,076 478 1.02 Total interest-bearing liabilities 11,813,725 251,419 2.13 11,100,238 40,925 0.37 Noninterest-bearing demand deposits 5,306,511 6,376,459 Other noninterest-bearing liabilities 787,573 590,814 Stockholders’ equity of WSFS 2,300,467 2,398,871 Noncontrolling interest (5,239) (2,687) Total liabilities and stockholders’ equity $ 20,203,037 $ 20,463,695 Excess of interest-earning assets over interest-bearing liabilities $ 5,879,379 $ 6,825,621 Net interest and dividend income $ 725,103 $ 662,890 Interest rate spread 3.40 % 3.57 % Net interest margin 4.11 % 3.71 % (1) Weighted average yields for tax-exempt securities and loans have been computed on a tax-equivalent basis.
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.
We have built a $9.3 billion commercial loan and lease portfolio by recruiting seasoned commercial lenders in our markets, offering the high level of service and flexibility typically associated with a community bank and through acquisitions.
We 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.
These changes, both within and outside the Control’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.
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.
For a description of certain financial instruments to which we are party and which expose us to certain credit risk not recognized in our financial statements, see Note 18 to the Consolidated Financial Statements. 62 CRITICAL ACCOUNTING ESTIMATES The discussion and analyses of the financial condition and results of operations are based on the Consolidated Financial Statements, which are prepared in conformity with U.S.
For a description of certain financial instruments to which we are party and which expose us to certain credit risk not recognized in our financial statements, see Note 17 to the Consolidated Financial Statements. 62 CRITICAL ACCOUNTING ESTIMATES The discussion and analyses of the financial condition and results of operations are based on the Consolidated Financial Statements, which are prepared in conformity with U.S.
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. Securities and Exchange Commission and is a wholly-owned subsidiary of WSFS.
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.
For additional information regarding commitments to extend credit, see Note 18 to the Consolidated Financial Statements. 51 Table of Contents NONPERFORMING ASSETS Nonperforming assets include nonaccruing loans, OREO and restructured loans. Nonaccruing loans are those on which we no longer accrue interest.
For additional information regarding commitments to extend credit, see Note 17 to the Consolidated Financial Statements. 51 Table of Contents NONPERFORMING ASSETS Nonperforming assets include nonaccruing loans, OREO and restructured loans. Nonaccruing loans are those on which we no longer accrue interest.
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, WSFS Bank has been in operation for more than 190 years.
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, WSFS Bank has been in operation for more than 191 years.
Segment financial information for the years ended December 31, 2022, 2021 and 2020 is provided in Note 22 to the Consolidated Financial Statements. 60 Table of Contents ASSET/LIABILITY MANAGEMENT Our primary asset/liability management goal is to optimize long term net interest income opportunities within the constraints of managing interest rate risk, ensuring adequate liquidity and funding and maintaining a strong capital base.
Segment financial information for the years ended December 31, 2023, 2022 and 2021 is provided in Note 21 to the Consolidated Financial Statements. 60 Table of Contents ASSET/LIABILITY MANAGEMENT Our primary asset/liability management goal is to optimize long term net interest income opportunities within the constraints of managing interest rate risk, ensuring adequate liquidity and funding and maintaining a strong capital base.
At December 31, 2022, the Bank was in compliance with regulatory capital requirements and all of its regulatory ratios exceeded “well-capitalized” regulatory benchmarks.
At December 31, 2023, the Bank was in compliance with regulatory capital requirements and all of its regulatory ratios exceeded “well-capitalized” regulatory benchmarks.
Failure to meet minimum capital requirements can initiate certain mandatory actions and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Regulators have established five capital tiers: well-capitalized, adequately-capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized.
Failure to meet minimum capital requirements can initiate certain mandatory actions and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. 49 Table of Contents Regulators have established five capital tiers: well-capitalized, adequately-capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized.
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.
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.
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 ® 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.
Combined, these businesses had $64.5 billion of AUM and AUA at December 31, 2022. 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.
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.
At December 31, 2022, we had $241.3 million in total contractual payments for ongoing leases that have remaining lease terms of less than one year to 39 years, which includes renewal options that are exercised at our discretion. For additional information on our operating leases see Note 10 to the Consolidated Financial Statements.
At December 31, 2023, we had $211.3 million in total contractual payments for ongoing leases that have remaining lease terms of less than one year to 22 years, which includes renewal options that are exercised at our discretion. For additional information on our operating leases see Note 9 to the Consolidated Financial Statements.
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 13 to the Consolidated Financial Statements. At December 31, 2022, the Company had total commitments to extend credit of $2.8 billion, which are generally one year commitments.
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. At December 31, 2023, the Company had total commitments to extend credit of $4.1 billion, which are generally one year commitments.
In addition, and not included in the Bank's capital, the holding company held $205.8 million in cash to support potential dividends, acquisitions and strategic growth plans.
In addition, and not included in the Bank's capital, the holding company held $197.3 million in cash to support potential dividends, acquisitions and strategic growth plans.
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.
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, 2023, the Company has $1.1 billion in cash, cash equivalents, and restricted cash.
Cash Connect ® also supports approximately 650 branded ATMs for WSFS Bank Customers, which is one of the largest branded ATM networks in our market. 47 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. 47 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.
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.
The interest rate environment materially increased vault operating expenses, resulting in a full-year 2022 ROA for the Cash Connect ® segment of 1.01%, a decrease of 67 bps in comparison with full-year 2021. Cash Connect ® had $1.7 billion in total cash managed at December 31, 2022 and 2021.
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 $1.9 billion in total cash managed at December 31, 2023 and $1.7 billion at December 31, 2022.
(2) Excludes reverse mortgages. (3) Includes home equity lines of credit, installment loans unsecured lines of credit and education loans. 58 Table of Contents Noninterest Income Noninterest income increased $74.7 million to $260.1 million in 2022 from $185.5 million in 2021.
(2) Excludes reverse mortgages. (3) Includes home equity lines of credit, installment loans unsecured lines of credit and education loans. 58 Table of Contents Noninterest Income Noninterest income increased $29.7 million to $289.9 million in 2023 from $260.1 million in 2022.
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.
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.
The Company's economic forecast considers the general health of the economy, the interest rate environment, real estate pricing and market risk The ACL may increase or decrease due to changes in economic conditions affecting borrowers and macroeconomic variables that our financial assets are more susceptible to, including unforeseen events such as natural disasters and pandemics, new information regarding existing financial assets, identification of additional problems assets, the fair value of underlying collateral, and other factors.
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.
During 2022, the Cash Connect ® segment focused on expanding smart safe and ATM managed services to increase fee income while optimizing funding source composition and operational efficiency in the rapidly rising interest rate environment..
Cash Connect ® Segment The Cash Connect ® segment income before taxes decreased to $4.2 million in 2023 from $7.3 million in 2022. During 2023, the Cash Connect ® segment focused on expanding smart safe and ATM managed services to increase fee income while optimizing funding source composition and operational efficiency in the rapidly rising interest rate environment.
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.
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 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.
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.
Further, the tax expense associated with nondeductible acquisition costs in 2022 decreased compared to 2021. Nondeductible acquisition costs of $1.8 million were recognized during the year ended December 31, 2022 compared to $3.9 million incurred in 2021.
Further, the tax expense associated with nondeductible acquisition costs in 2023 decreased compared to 2022. There were no nondeductible acquisition costs during the year ended December 31, 2023 compared to $1.8 million incurred in 2022.
The calculation of expected credit losses is determined using a single scenario third-party economic forecast to adjust the calculated historical loss rates of the portfolio segments to incorporate the effects of current and future economic conditions.
See Note 7 to the Consolidated Financial Statements, for further discussion of the ACL. The calculation of expected credit losses is determined using a single scenario third-party economic forecast to adjust the calculated historical loss rates of the portfolio segments to incorporate the effects of current and future economic conditions.
The Bank’s December 31, 2022 common equity Tier 1 capital ratio of 12.86%, Tier 1 capital ratio of 12.86%, total risk based capital ratio of 13.84% and Tier 1 leverage capital ratio of 10.29%, all remain substantially in excess of “well-capitalized” regulatory benchmarks, the highest regulatory capital rating.
The Bank’s December 31, 2023 common equity Tier 1 capital ratio of 13.72%, Tier 1 capital ratio of 13.72%, total risk based capital ratio of 14.96% and Tier 1 leverage capital ratio of 10.92%, all remain substantially in excess of “well-capitalized” regulatory benchmarks, the highest regulatory capital rating.
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. Cash provided by operating activities was $480.9 million, primarily reflecting the cash impact of earnings.
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.
WSFS Institutional Services ® ended 2022 as the securitization industry's fifth most active trustee for U.S. ABS and MBS according to Asset-Backed Alert’s ABS Database.
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.
With $19.9 billion in assets and $64.5 billion in assets under management (AUM) and assets under administration (AUA) at December 31, 2022, WSFS Bank is the oldest and largest locally-managed bank and trust company headquartered in the Greater Philadelphia and Delaware region.
With $20.6 billion in assets and $84.3 billion in assets under management (AUM) and assets under administration (AUA) at December 31, 2023, WSFS Bank is the oldest and largest locally-managed bank and trust company headquartered in the Greater Philadelphia and Delaware region.
In general, this system uses guidelines established by federal regulation. 53 Table of Contents RESULTS OF OPERATIONS 2021 compared with 2020 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. 2022 compared with 2021 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.
In general, this system uses guidelines established by federal regulation. 53 Table of Contents RESULTS OF OPERATIONS 2022 compared with 2021 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 $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.
For further information on our regulatory capital requirements, refer to our Capital Resources discussion below. 49 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Capital Resources 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.
LIQUIDITY AND CAPITAL RESOURCES Capital Resources 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.
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.
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.
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.
Wealth Management Segment 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.
Stockholders’ equity increased $266.0 million to $2.2 billion at December 31, 2022 compared to the prior year.
Stockholders’ equity increased $272.5 million to $2.5 billion at December 31, 2023 compared to the prior year.
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.
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, 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.
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.
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 effective tax rates for the years ended December 31, 2022 and 2021 were 25.9% and 24.1%, respectively.
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.
Cash Connect ® services non-bank and WSFS-branded ATMs and smart safes nationwide, and manages approximately $1.7 billion in total cash and services approximately 26,300 non-bank ATMs and 7,500 smart safes nationwide.
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.
(4) Includes federal funds purchased. 55 Table of Contents 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.
(4) Includes federal funds purchased. 55 Table of Contents 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.
The effective tax rate for year ended December 31, 2022 increased primarily due to higher state income taxes associated with the BMBC Merger. 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.
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.
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.
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.
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.
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. 50 Table of Contents Our primary cash contractual obligations relate to operating leases, long-term debt, credit obligations, and data processing.
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 50 Table of Contents Our primary cash contractual obligations relate to operating leases, long-term debt, credit obligations, and data processing.
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.
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.
The following table shows our nonperforming assets and past due loans at the dates indicated: At December 31, (Dollars in thousands) 2022 2021 Nonaccruing loans: Commercial and industrial $ 6,770 $ 8,211 Owner-occupied commercial 386 811 Commercial mortgages 5,159 2,070 Construction 5,143 12 Residential 3,199 3,125 Consumer 2,145 2,380 Total nonaccruing loans 22,802 16,609 Other real estate owned 833 2,320 Restructured loans (1)(6) 19,737 14,204 Total nonperforming assets $ 43,372 $ 33,133 Past due loans: Commercial $ 1,022 $ 1,357 Residential — — Consumer (2) 15,513 8,634 Total past due loans $ 16,535 $ 9,991 Ratio of allowance for credit losses to total gross loans and leases (3) 1.17 % 1.19 % Ratio of nonaccruing loans to total gross loans and leases (4) 0.19 0.21 Ratio of nonperforming assets to total assets 0.22 0.21 Ratio of allowance for credit losses to nonaccruing loans 666 569 Ratio of allowance for credit losses to total nonperforming assets (5) 350 285 (1) Accruing loans only, which includes acquired nonimpaired loans.
The following table shows our nonperforming assets and past due loans at the dates indicated: At December 31, (Dollars in thousands) 2023 2022 Nonaccruing loans: Commercial and industrial $ 29,389 $ 6,770 Owner-occupied commercial 4,862 386 Commercial mortgages 22,292 5,159 Construction 12,617 5,143 Residential 2,579 3,199 Consumer 2,446 2,145 Total nonaccruing loans (1) 74,185 22,802 Other real estate owned 1,569 833 Restructured loans (2) — 19,737 Total nonperforming assets $ 75,754 $ 43,372 Past due loans: Commercial $ 1,552 $ 1,022 Consumer (3) 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) 1.35 % 1.17 % Ratio of nonaccruing loans to total gross loans and leases (7) 0.58 0.19 Ratio of nonperforming assets to total assets 0.37 0.22 Ratio of allowance for credit losses to nonaccruing loans 251 666 Ratio of allowance for credit losses to total nonperforming assets (8) 246 350 (1) Includes nonaccrual loans held-for-sale.
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.
The following tables detail the allocation of the ACL and show our net charge-offs (recoveries) by portfolio category: (Dollars in thousands) Commercial and Industrial (1) Owner- occupied Commercial Commercial Mortgages Construction Residential (2) Consumer (3) Total As of December 31, 2022 Allowance for credit losses $ 59,394 $ 6,019 $ 21,473 $ 6,987 $ 4,668 $ 53,320 $ 151,861 % of ACL to total ACL 39 % 4 % 14 % 5 % 3 % 35 % 100 % Loan portfolio balance $ 3,134,326 $ 1,809,582 $ 3,351,084 $ 1,044,049 $ 759,465 $ 1,810,930 $ 11,909,436 % to total loans and leases 26 % 15 % 28 % 9 % 7 % 15 % 100 % Year ended December 31, 2022 Charge-offs $ 19,004 $ 179 $ 581 $ — $ 186 $ 7,520 $ 27,470 Recoveries 6,112 278 223 2,567 665 793 10,638 Net charge-offs (recoveries) $ 12,892 $ (99) $ 358 $ (2,567) $ (479) $ 6,727 $ 16,832 Average loan balance $ 3,043,836 $ 1,831,428 $ 3,319,687 $ 962,082 $ 787,273 $ 1,543,704 $ 11,488,010 Ratio of net charge-offs (recoveries) to average gross loans 0.42 % (0.01) % 0.01 % (0.27) % (0.06) % 0.44 % 0.15 % (Dollars in thousands) Commercial and Industrial (1) Owner- occupied Commercial Commercial Mortgages Construction Residential (2) Consumer (3) Total As of December 31, 2021 Allowance for credit losses $ 49,967 $ 4,574 $ 11,623 $ 1,903 $ 3,352 $ 23,088 $ 94,507 % of ACL to total ACL 53 % 5 % 12 % 2 % 4 % 24 % 100 % Loan portfolio balance $ 2,270,319 $ 1,341,707 $ 1,881,510 $ 687,213 $ 542,733 $ 1,158,573 $ 7,882,055 % to total loans and leases 28 % 17 % 24 % 9 % 7 % 15 % 100 % Year ended December 31, 2021 Charge-offs $ 23,592 $ 83 $ 73 $ 2,473 $ — $ 2,094 $ 28,315 Recoveries 8,756 160 269 — 789 1,131 11,105 Net charge-offs (recoveries) $ 14,836 $ (77) $ (196) $ 2,473 $ (789) $ 963 $ 17,210 Average loan balance $ 2,463,933 $ 1,337,883 $ 1,994,995 $ 775,246 $ 628,411 $ 1,134,569 $ 8,335,037 Ratio of net charge-offs (recoveries) to average gross loans 0.60 % (0.01) % (0.01) % 0.32 % (0.13) % 0.08 % 0.21 % (1) Includes commercial small business leases and PPP loans.
The following tables detail the allocation of the ACL and show our net charge-offs (recoveries) by portfolio category: (Dollars in thousands) Commercial and Industrial (1) Owner- occupied Commercial Commercial Mortgages Construction Residential (2) Consumer (3) Total As of December 31, 2023 Allowance for credit losses $ 64,564 $ 10,719 $ 36,055 $ 10,762 $ 5,483 $ 58,543 $ 186,126 % of ACL to total ACL 35 % 6 % 19 % 6 % 3 % 31 % 100 % Loan portfolio balance $ 3,163,692 $ 1,886,087 $ 3,801,180 $ 1,035,530 $ 867,895 $ 2,012,134 $ 12,766,518 % to total loans and leases 24 % 15 % 30 % 8 % 7 % 16 % 100 % Year ended December 31, 2023 Charge-offs $ 42,294 $ 184 $ 300 $ 794 $ 41 $ 22,394 $ 66,007 Recoveries 9,721 54 7 532 260 1,625 12,199 Net charge-offs (recoveries) $ 32,573 $ 130 $ 293 $ 262 $ (219) $ 20,769 $ 53,808 Average loan balance $ 3,177,739 $ 1,863,542 $ 3,562,070 $ 1,008,768 $ 817,758 $ 1,922,828 $ 12,352,704 Ratio of net charge-offs (recoveries) to average gross loans 1.03 % 0.01 % 0.01 % 0.03 % (0.03) % 1.08 % 0.44 % (Dollars in thousands) Commercial and Industrial (1) Owner- occupied Commercial Commercial Mortgages Construction Residential (2) Consumer (3) Total As of December 31, 2022 Allowance for credit losses $ 59,394 $ 6,019 $ 21,473 $ 6,987 $ 4,668 $ 53,320 $ 151,861 % of ACL to total ACL 39 % 4 % 14 % 5 % 3 % 35 % 100 % Loan portfolio balance $ 3,134,326 $ 1,809,582 $ 3,351,084 $ 1,044,049 $ 759,465 $ 1,810,930 $ 11,909,436 % to total loans and leases 26 % 15 % 28 % 9 % 7 % 15 % 100 % Year ended December 31, 2022 Charge-offs $ 19,004 $ 179 $ 581 $ — $ 186 $ 7,520 $ 27,470 Recoveries 6,112 278 223 2,567 665 793 10,638 Net charge-offs (recoveries) $ 12,892 $ (99) $ 358 $ (2,567) $ (479) $ 6,727 $ 16,832 Average loan balance $ 3,043,836 $ 1,831,428 $ 3,319,687 $ 962,082 $ 787,273 $ 1,543,704 $ 11,488,010 Ratio of net charge-offs (recoveries) to average gross loans 0.42 % (0.01) % 0.01 % (0.27) % (0.06) % 0.44 % 0.15 % (1) Includes commercial small business leases and PPP loans.
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 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.
Nonaccruing Troubled Debt Restructurings (TDRs) are included in their respective categories of nonaccruing loans. (2) Includes delinquent, but still accruing, U.S. government guaranteed student loans with little risk of credit loss (3) Represents amortized cost basis for loans, leases and held-to-maturity securities. (4) Total loans exclude loans held for sale and reverse mortgages. (5) Excludes acquired impaired loans.
(2) Accruing loans only, which includes acquired nonimpaired loans. Nonaccruing Troubled Debt Restructurings (TDRs) are included in their respective categories of nonaccruing loans. (3) Includes delinquent, but still accruing, U.S. 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.
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.
Net interest margin increased 40 bps to 4.11% in 2023 from 3.71% in 2022. 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.
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.
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.
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.
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.
In addition, 2021 included a previously disclosed $15.0 million recovery of legal settlement associated with Charter Oak. Income Taxes We recorded $78.0 million of income tax expense for the year ended December 31, 2022 compared to $86.1 million for the year ended December 31, 2021.
Income Taxes 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.
We repurchased 4,151,117 and 267,309 shares of our common stock in 2022 and 2021, respectively. We held 14,310,085 shares and 10,086,936 shares of our common stock as treasury shares at December 31, 2022 and 2021, respectively.
We repurchased 1,247,178 and 4,151,117 shares of our common stock in 2023 and 2022, respectively. We held 15,557,263 shares and 14,310,085 shares of our common stock as treasury shares at December 31, 2023 and 2022, respectively. For further information on our regulatory capital requirements, refer to our Capital Resources discussion below.
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.
See “Provision/Allowance for Credit Losses” for further information. • 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.
(2) Includes a tax-equivalent income adjustment related to municipal bonds. 56 Table of Contents Investment Securities The following table details the maturity and weighted average yield of the available-for-sale investment portfolio as of December 31, 2022: (Dollars in thousands) Maturing During 2023 Maturing From 2024 Through 2027 Maturing From 2028 Through 2032 Maturing After 2032 Total Collateralized mortgage obligations (CMO) Amortized cost $ — $ 24,810 $ 70,629 $ 513,395 $ 608,834 Weighted average yield — % 2.19 % 2.05 % 1.86 % 1.89 % Fannie Mae (FNMA) mortgage-backed securities (MBS) Amortized cost — 57,558 202,105 3,563,373 3,823,036 Weighted average yield — % 2.25 % 2.23 % 1.97 % 1.99 % Freddie Mac (FHLMC) MBS Amortized cost — 647 45,260 89,647 135,554 Weighted average yield — % 2.45 % 2.46 % 3.05 % 2.85 % Ginnie Mae (GNMA) MBS Amortized cost — — 758 38,358 39,116 Weighted average yield — % — % 3.03 % 2.89 % 2.90 % Government-sponsored enterprises (GSE) Amortized cost — — 147,025 80,985 228,010 Weighted average yield — % — % 1.27 % 1.32 % 1.29 % Total amortized cost $ — $ 83,015 $ 465,777 $ 4,285,758 $ 4,834,550 Weighted average yield — % 2.24 % 1.93 % 1.97 % 1.97 % As of December 31, 2022, WSFS does not have any tax-exempt securities within the available-for-sale investment portfolio.
(2) Includes a tax-equivalent income adjustment related to municipal bonds. 56 Table of Contents Investment Securities The following table details the maturity and weighted average yield of the available-for-sale investment portfolio as of December 31, 2023: (Dollars in thousands) Maturing During 2024 Maturing From 2025 Through 2028 Maturing From 2029 Through 2033 Maturing After 2033 Total Collateralized mortgage obligations (CMO) Amortized cost $ — $ 25,645 $ 65,192 $ 470,115 $ 560,952 Weighted average yield — % 2.37 % 1.97 % 1.84 % 1.88 % Fannie Mae (FNMA) mortgage-backed securities (MBS) Amortized cost $ — $ 60,147 $ 230,640 $ 3,253,975 $ 3,544,762 Weighted average yield — % 2.38 % 2.05 % 1.99 % 2.00 % Freddie Mac (FHLMC) MBS Amortized cost $ — $ 431 $ 51,704 $ 74,721 $ 126,856 Weighted average yield — % 2.43 % 2.39 % 3.15 % 2.84 % Ginnie Mae (GNMA) MBS Amortized cost $ — $ 1 $ 558 $ 45,774 $ 46,333 Weighted average yield — % 4.79 % 2.98 % 3.39 % 3.38 % Government-sponsored enterprises (GSE) Amortized cost $ — $ — $ 221,861 $ 3,578 $ 225,439 Weighted average yield — % — % 1.30 % 1.44 % 1.30 % Total amortized cost $ — $ 86,224 $ 569,955 $ 3,848,163 $ 4,504,342 Weighted average yield — % 2.38 % 1.78 % 2.01 % 1.99 % As of December 31, 2023, WSFS does not have any tax-exempt securities within the available-for-sale investment portfolio.
The ratio of allowance for credit losses to total loans and leases was 1.17% at December 31, 2022 and 1.19% at December 31, 2021.
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.
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.
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 ratio of nonperforming assets to total assets slightly increased from 0.21% at December 31, 2021 to 0.22% at December 31, 2022. 52 Table of Contents The following table summarizes the changes in nonperforming assets during the periods indicated: Year Ended December 31, (Dollars in thousands) 2022 2021 Beginning balance $ 33,133 $ 60,508 Additions 34,041 45,387 Collections (17,293) (47,477) Transfers to accrual (922) (494) Charge-offs (5,587) (24,791) Ending balance $ 43,372 $ 33,133 The timely identification of problem loans is a key element in our strategy to manage our loan portfolio.
The following table summarizes the changes in nonperforming assets during the periods indicated: Year Ended December 31, (Dollars in thousands) 2023 2022 Beginning balance $ 43,372 $ 33,133 Additions 110,586 34,041 Collections (19,874) (17,293) 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.
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.
Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others.
Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. As of December 31, 2023, the Company believes that its ACL was adequate. For information on Recent Accounting Pronouncements see Note 2 to the Consolidated Financial Statements. 63
Total liabilities increased $3.9 billion, or 28%, to $17.7 billion at December 31, 2022 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.
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): • 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.
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.
See “Noninterest Income” for further information. • 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.
For additional information related to interest rate sensitivity, see "Quantitative and Qualitative Disclosures About Market Risk." The repricing and maturities of our interest-rate sensitive assets and interest-rate sensitive liabilities at December 31, 2022 are shown in the following table: (Dollars in thousands) Less than One Year One to Five Years Five to Fifteen Years Over Fifteen Years Total Interest-rate sensitive assets: Loans (1) : Commercial loans and leases $ 4,350,531 $ 1,406,598 $ 320,488 $ 9,889 $ 6,087,506 Commercial mortgage loans 2,326,449 852,280 181,065 4,115 3,363,909 Residential (2) 143,486 272,254 268,579 91,157 775,476 Consumer 943,251 641,895 202,348 3,451 1,790,945 Loans held for sale 47,994 1,693 2,196 1,460 53,343 Investment securities, available-for-sale 713,092 1,875,009 2,185,852 253,031 5,026,984 Investment securities, held-to-maturity 97,085 312,877 551,571 150,096 1,111,629 Other interest-earning assets 24,116 — — — 24,116 Total interest-rate sensitive assets: $ 8,646,004 $ 5,362,606 $ 3,712,099 $ 513,199 $ 18,233,908 Interest-rate sensitive liabilities: Interest-bearing deposits: Interest-bearing demand $ 1,673,341 $ — $ — $ — $ 1,673,341 Savings 1,209,688 — — — 1,209,688 Money market 2,951,916 — — — 2,951,916 Customer time deposits 863,005 236,343 1,682 — 1,101,030 Trust preferred borrowings 90,442 — — — 90,442 Senior and subordinated debt 100,000 148,169 — — 248,169 Other borrowed funds 155,751 — — — 155,751 Total interest-rate sensitive liabilities: $ 7,394,143 $ 384,512 $ 1,682 $ — $ 7,780,337 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 One-year interest-rate sensitive assets/interest-rate sensitive liabilities 116.93 % One-year interest-rate sensitive gap as a percent of total assets 6.29 % (1) Loan balances exclude nonaccruing loans, deferred fees and costs (2) Includes reverse mortgage loans 61 Table of Contents Generally, during a period of rising interest rates, a positive gap would result in an increase in net interest income while a negative gap would adversely affect net interest income.
For additional information related to interest rate sensitivity, see "Quantitative and Qualitative Disclosures About Market Risk." The repricing and maturities of our interest-rate sensitive assets and interest-rate sensitive liabilities at December 31, 2023 are shown in the following table: (Dollars in thousands) Less than One Year One to Five Years Five to Fifteen Years Over Fifteen Years Total Interest-rate sensitive assets: Loans (1) : Commercial loans and leases $ 4,270,467 $ 1,560,156 $ 360,958 $ 10,148 $ 6,201,729 Commercial mortgage loans 2,637,128 953,519 216,446 5,096 3,812,189 Residential (2) 127,836 301,046 357,615 93,426 879,923 Consumer 944,286 776,008 235,189 33,589 1,989,072 Loans held for sale 26,193 5,283 4,010 — 35,486 Investment securities, available-for-sale 810,582 1,288,020 2,306,782 566,486 4,971,870 Investment securities, held-to-maturity 62,200 241,817 561,770 313,207 1,178,994 Other interest-earning assets 15,398 — — — 15,398 Total interest-rate sensitive assets: $ 8,894,090 $ 5,125,849 $ 4,042,770 $ 1,021,952 $ 19,084,661 Interest-rate sensitive liabilities: Interest-bearing deposits: Interest-bearing demand $ 1,467,765 $ — $ — $ — $ 1,467,765 Savings 882,060 — — — 882,060 Money market 4,088,226 — — — 4,088,226 Customer time deposits 1,695,594 86,290 1,583 — 1,783,467 Trust preferred borrowings 90,638 — — — 90,638 Senior and subordinated debt 70,000 148,400 — — 218,400 Other borrowed funds 629,216 — — 8,498 637,714 Total interest-rate sensitive liabilities: $ 8,923,499 $ 234,690 $ 1,583 $ 8,498 $ 9,168,270 (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 % One-year interest-rate sensitive gap as a percent of total assets (0.14) % (1) Loan balances exclude nonaccruing loans, deferred fees and costs (2) Includes reverse mortgage loans 61 Table of Contents Generally, during a period of rising interest rates, a positive gap would result in an increase in net interest income while a negative gap would adversely affect net interest income.
Year Ended December 31, 2022 vs. 2021 (Dollars in thousands) Volume Yield/Rate Net Interest Income: Loans: Commercial loans and leases (1) $ 54,701 $ 14,810 $ 69,511 Commercial mortgage loans 69,490 20,142 89,632 Residential 8,785 (15,428) (6,643) Consumer 20,674 16,739 37,413 Loans held for sale (2,294) 1,887 (407) Mortgage-backed securities 35,241 15,563 50,804 Investment securities (2) 260 1,115 1,375 Other interest-earning assets (810) 6,571 5,761 Unfavorable 186,047 61,399 247,446 Interest expense: Deposits: Interest-bearing demand 819 4,360 5,179 Money market 1,891 8,427 10,318 Savings 135 244 379 Customer time deposits 258 (1,964) (1,706) Brokered certificates of deposits (617) (295) (912) FHLB advances 528 5 533 Trust preferred borrowings 559 1,649 2,208 Senior and subordinated debt 1,866 (117) 1,749 Other borrowed funds 51 406 457 Favorable 5,490 12,715 18,205 Net change, as reported $ 180,557 $ 48,684 $ 229,241 (1) Includes a tax-equivalent income adjustment related to commercial loans.
Year Ended December 31, 2023 vs. 2022 (Dollars in thousands) Volume Yield/Rate Net Interest Income: Loans: Commercial loans and leases (1) $ 8,940 $ 84,156 $ 93,096 Commercial mortgage loans 14,587 99,405 113,992 Residential 1,369 2,097 3,466 Consumer 24,137 27,630 51,767 Loans held for sale (1,216) 1,412 196 Mortgage-backed securities (11,185) 12,134 949 Investment securities (2) 719 1,165 1,884 Other interest-earning assets (8,192) 15,549 7,357 Favorable 29,159 243,548 272,707 Interest expense: Deposits: Interest-bearing demand (866) 20,096 19,230 Money market 1,539 107,093 108,632 Savings (205) 4,973 4,768 Customer time deposits 3,324 36,234 39,558 Brokered certificates of deposits 6,916 2,535 9,451 FHLB advances 4,654 156 4,810 Trust preferred borrowings 8 3,246 3,254 Senior and subordinated debt (946) 2,515 1,569 Other borrowed funds 13,713 5,509 19,222 Unfavorable 28,137 182,357 210,494 Net change, as reported $ 1,022 $ 61,191 $ 62,213 (1) Includes a tax-equivalent income adjustment related to commercial loans.
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.
These increases are primarily comprised of the following (in descending order of magnitude): • 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, 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.
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.
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.
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.
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.
Removed
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.
Added
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.
Removed
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.
Added
Notable Items Impacting Results of Operations, Financial Condition and Business Outlook Notable items in 2023 include the following: • 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.
Removed
(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.
Added
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.
Removed
Notable Items Impacting Results of Operations, Financial Condition and Business Outlook Notable items in 2022 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.
Added
See “Results of Operations - Provision/Allowance for Credit Losses (ACL)” for further information. • 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+2 added−2 removed3 unchanged
Biggest changeAt December 31, 2022 interest-earning assets exceeded interest-bearing liabilities that mature or reprice within one year (interest-sensitive gap) by $1.3 billion. Our interest-sensitive assets as a percentage of interest-sensitive liabilities within the one-year window was 116.93% at December 31, 2022 compared with 120.40% at December 31, 2021.
Biggest changeOur interest-sensitive assets as a percentage of interest-sensitive liabilities within the one-year window was 99.67% at December 31, 2023 compared with 116.93% at December 31, 2022. In addition, the one-year interest-sensitive gap as a percentage of total assets was (0.14)% at December 31, 2023 compared to 6.29% at December 31, 2022.
The following table shows the estimated impact of immediate changes in interest rates on our net interest margin and economic value of equity at the specified levels at December 31, 2022 and December 31, 2021.
The following table shows the estimated impact of immediate changes in interest rates on our net interest margin and economic value of equity at the specified levels at December 31, 2023 and December 31, 2022.
To that end, we actively monitor and manage our interest rate risk exposure. One measure, which we are required to perform by federal regulation, measures the impact of an immediate change in interest rates in 100 basis point increments on the economic value of equity ratio.
One measure, which we are required to perform by federal regulation, measures the impact of an immediate change in interest rates in 100 basis point increments on the economic value of equity ratio.
Change in Interest Rate (Basis Points) December 31, 2022 December 31, 2021 % Change in Net Interest Margin (1) Economic Value of Equity (2) % Change in Net Interest Margin (1) Economic Value of Equity (2) 300 18.5% 27.54% 25.1% 24.27% 200 12.3% 26.44% 16.6% 23.07% 100 6.1% 25.22% 8.2% 21.76% 50 3.1% 24.56% 4.1% 20.33% 25 1.5% 24.22% 2.0% 20.05% — —% 23.87% —% 19.73% (25) (1.6)% 23.50% (1.4)% 19.28% (50) (3.3)% 23.10% (2.2)% 18.72% (100) (6.8)% 22.20% (3.8)% 17.36% (200) (3) (14.0)% 20.20% NMF NMF (300) (3) (21.2)% 17.90% NMF NMF (1) The percentage difference between net interest income in a stable interest rate environment and net interest margin as projected under the various rate change environments.
Change in Interest Rate (Basis Points) December 31, 2023 December 31, 2022 % Change in Net Interest Margin (1) Economic Value of Equity (2) % Change in Net Interest Margin (1) Economic Value of Equity (2) 300 15.7% 22.44% 18.5% 27.54% 200 10.4% 21.46% 12.3% 26.44% 100 5.2% 20.41% 6.1% 25.22% 50 2.6% 19.85% 3.1% 24.56% 25 1.3% 19.56% 1.5% 24.22% — —% 19.26% —% 23.87% (25) (1.3)% 18.96% (1.6)% 23.50% (50) (2.6)% 18.64% (3.3)% 23.10% (100) (4.9)% 18.00% (6.8)% 22.20% (200) (9.6)% 16.50% (14.0)% 20.20% (300) (14.2)% 14.80% (21.2)% 17.90% (1) The percentage difference between net interest income in a stable interest rate environment and net interest margin as projected under the various rate change environments.
In response to the economic and financial effects of COVID-19, the FOMC reduced interest rates through 2020 and 2021 and instituted quantitative easing measures as well as domestic and global capital market support programs.
In response to the economic and financial effects of COVID-19, the FOMC reduced interest rates through 2020 and 2021 and instituted quantitative easing measures as well as domestic and global capital market support programs. The FOMC raised the federal funds target rate a total of 525 basis points between 2022 and 2023.
The matching of 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 is our primary tool for achieving our asset/liability management strategies. We regularly review our interest rate sensitivity and adjust the sensitivity within acceptable tolerance ranges.
In order to manage the risks associated with changes or possible changes in interest rates, we rely primarily on our asset/liability structure. The matching of 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 is our primary tool for achieving our asset/liability management strategies.
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. 65
(2) The economic value of equity ratio in a stable interest rate environment and the economic value of equity 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.
In addition, the one-year interest-sensitive gap as a percentage of total assets was 6.29% at December 31, 2022 compared to 7.28% at December 31, 2021. 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.
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.
Removed
The FOMC raised the federal funds target rate seven times in 2022 for a total of 425 basis points and 25 basis points in February 2023, and has suggested it may continue raising interest rates further in 2023. In order to manage the risks associated with changes or possible changes in interest rates, we rely primarily on our asset/liability structure.
Added
We regularly review our interest rate sensitivity and adjust the sensitivity within acceptable tolerance ranges. At December 31, 2023 interest-bearing liabilities that mature or reprice within one year exceeded interest-earning assets (interest-sensitive gap) by $29.4 million.
Removed
(2) The economic value of equity ratio in a stable interest rate environment and the economic value of equity projected under the various rate change environments. (3) At December 31, 2021, sensitivity indicated by a decrease of 200 and 300 basis points is deemed not meaningful (NMF) given the low absolute level of interest rates at that time.
Added
These fluctuations are difficult to model and estimate. 64

Other WSFS 10-K year-over-year comparisons