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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
 
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 001-35638
WSFS FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-2866913
(State or other jurisdiction of Incorporation or organization) (I.R.S. Employer Identification Number)
500 Delaware Ave,
Wilmington, Delaware, 19801
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (302) 792-6000
Not Applicable
(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.01 per share WSFS Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files).    Yes  x    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer   x    Accelerated filer ☐
Non-accelerated filer   ☐    Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  x

Number of shares outstanding of the issuer's common stock, as of the latest practicable date: 47,532,042 shares as of May 3, 2021.



WSFS FINANCIAL CORPORATION
FORM 10-Q
TABLE OF CONTENTS
 
  PART I. Financial Information Page
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income for the Three Months Ended March 31, 2021 and 2020
5
6
7
8
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020
9
11
Item 2.
48
Item 3.
62
Item 4.
62
PART II. Other Information
Item 1.
62
Item 1A.
62
Item 2.
64
Item 3.
64
Item 4.
64
Item 5.
64
Item 6.
65

2
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, and exhibits hereto, contains estimates, predictions, opinions, projections and other “forward-looking statements” as that phrase is defined in the Private Securities Litigation Reform Act of 1995. Such statements include, without limitation, references to the Company’s predictions or expectations of future business or financial performance as well as its goals and objectives for future operations, financial and business trends, business prospects and management’s outlook or expectations for earnings, revenues, expenses, capital levels, liquidity levels, asset quality or other future financial or business performance, strategies or expectations. The words “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project” and similar expressions, among others, generally identify forward-looking statements. Such forward-looking statements are based on various assumptions (some of which may be beyond the Company’s control) and are subject to risks and uncertainties (which change over time) and other factors which could cause actual results to differ materially from those currently anticipated. Such risks and uncertainties include, but are not limited to:
•difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the markets in which the Company operates and in which its loans are concentrated, including possible declines in housing markets, an increase in unemployment levels and slowdowns in economic growth, including as a result of the novel coronavirus (COVID-19) pandemic;
•possible additional loan losses and impairment of the collectability of loans, particularly as a result of the COVID-19 pandemic and the policies and programs implemented by the Coronavirus Aid, Relief, and Economic Security Act, as amended (CARES Act), including its automatic loan forbearance provisions and the Company's Paycheck Protection Program (PPP) lending activities;
•additional credit, fraud and litigation risks associated with our PPP lending activities;
•the economic and financial impact of federal, state and local emergency orders and other actions taken in response to the COVID-19 pandemic;
•the continuation of these conditions related to the COVID-19 pandemic, including whether due to a resurgence or additional waves of COVID-19 infections, particularly as the geographic areas in which we operate continue to re-open, and how quickly and to what extent normal economic and operating conditions can resume, especially as a vaccine becomes widely available;
•the Company’s level of nonperforming assets and the costs associated with resolving problem loans including litigation and other costs and complying with government-imposed foreclosure moratoriums;
•changes in market interest rates, which may increase funding costs and reduce earning asset yields and thus reduce margin;
•the impact of changes in interest rates and the credit quality and strength of underlying collateral and the effect of such changes on the market value of the Company’s investment securities portfolio;
•the credit risk associated with the substantial amount of commercial real estate, construction and land development and commercial and industrial loans in the Company's loan portfolio;
•the extensive federal and state regulation, supervision and examination governing almost every aspect of the Company’s operations and potential expenses associated with complying with such regulations;
•the Company’s ability to comply with applicable capital and liquidity requirements (including the effect of the transition to the Current Expected Credit Losses (CECL) methodology for allowances and related adjustments), including its ability to generate liquidity internally or raise capital on favorable terms;
•possible changes in trade, monetary and fiscal policies and stimulus programs, laws and regulations and other activities of governments, agencies, and similar organizations, and the uncertainty of the short- and long-term impacts of such changes;
•any impairments of the Company's goodwill or other intangible assets;
•conditions in the financial markets, including the destabilized economic environment caused by the COVID-19 pandemic, that may limit the Company’s access to additional funding to meet its liquidity needs;
•the intention of the United Kingdom's Financial Conduct Authority (FCA) to cease support of London Inter-Bank Offered Rate (LIBOR) and the transition to an alternative reference interest rate, such as the Secured Overnight Funding Rate (SOFR), including methodologies for calculating the rate that are different from the LIBOR methodology and changed language for existing and new floating or adjustable rate contracts;
•the success of the Company's growth plans, including its plans to grow the commercial small business leasing portfolio and residential mortgage, small business and Small Business Administration (SBA) portfolios;
•the Company’s ability to successfully integrate and fully realize the cost savings and other benefits of its acquisitions, manage risks related to business disruption following those acquisitions, and post-acquisition Customer acceptance of the Company’s products and services and related Customer disintermediation, including its pending acquisition of Bryn Mawr Trust Company (Bryn Mawr);
3
•the Company’s ability to complete the pending merger with Bryn Mawr on the terms proposed, which are subject to a number of conditions, risks and uncertainties, including the possibility that the proposed acquisition does not close when expected or at all because all conditions to closing are not received or satisfied on a timely basis or at all, the failure to close for any other reason, diversion of management time on merger-related issues, risks relating to the potential dilutive effect of shares of the Company’s common stock to be issued in the acquisition of Bryn Mawr, and the reaction to the acquisition of Bryn Mawr of the companies’ customers, employees and counterparties;
•negative perceptions or publicity with respect to the Company generally and, in particular, the Company’s trust and wealth management business;
•failure of the financial and operational controls of the Company’s Cash Connect® division;
•adverse judgments or other resolution of pending and future legal proceedings, and cost incurred in defending such proceedings;
•the Company's reliance on third parties for certain important functions, including the operation of its core systems, and any failures by such third parties;
•system failures or cybersecurity incidents or other breaches of the Company’s network security, particularly given widespread remote working arrangements;
•the Company’s ability to recruit and retain key Associates;
•the effects of problems encountered by other financial institutions that adversely affect the Company or the banking industry generally;
•the effects of weather and natural disasters such as floods, droughts, wind, tornadoes and hurricanes as well as effects from geopolitical instability, public health crises and man-made disasters including terrorist attacks;
•the effects of regional or national civil unrest (including any resulting branch or ATM closures or damage);
•possible changes in the speed of loan prepayments by the Company’s Customers and loan origination or sales volumes;
•possible changes in the speed of prepayments of mortgage-backed securities due to changes in the interest rate environment, particularly as a result of the COVID-19 pandemic, and the related acceleration of premium amortization on prepayments in the event that prepayments accelerate;
•regulatory limits on the Company’s ability to receive dividends from its subsidiaries and pay dividends to its stockholders;
•any reputation, credit, interest rate, market, operational, litigation, legal, liquidity, regulatory and compliance risk resulting from developments related to any of the risks discussed above; and
•other risks and uncertainties, including those discussed herein under the heading “Risk Factors” and in other documents filed by the Company with the Securities and Exchange Commission (SEC) from time to time.
The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. The Company disclaims any duty to revise or update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company for any reason, except as specifically required by law.

As used in this Quarterly Report on Form 10-Q, the terms “WSFS”, “the Company”, “registrant”, “we”, “us”, and “our” mean WSFS Financial Corporation and its subsidiaries, on a consolidated basis, unless the context indicates otherwise.

The following are registered trademarks of the Company: Cash Connect®, Christiana Trust Company of Delaware®, NewLane Finance®, Powdermill® Financial Solutions, West Capital Management®, WSFS Institutional Services®, WSFS Mortgage® and WSFS Wealth® Investments. Any other trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.

4

WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

  Three Months Ended March 31,
(Dollars in thousands, except per share and share data) 2021 2020
Interest income:
Interest and fees on loans and leases $ 108,852  $ 119,202 
Interest on mortgage-backed securities 10,704  13,219 
Interest and dividends on investment securities:
Taxable 701  15 
Tax-exempt 748  911 
Other interest income 276  508 
121,281  133,855 
Interest expense:
Interest on deposits 4,496  14,637 
Interest on Federal Home Loan Bank advances 5  830 
Interest on senior debt 2,266  1,179 
Interest on federal funds purchased —  470 
Interest on trust preferred borrowings 324  586 
Interest on other borrowings 5  3 
7,096  17,705 
Net interest income 114,185  116,150 
(Recovery of) provision for credit losses (20,160) 56,646 
Net interest income after (recovery of) provision for credit losses 134,345  59,504 
Noninterest income:
Credit/debit card and ATM income 6,805  11,359 
Investment management and fiduciary income 14,253  10,962 
Deposit service charges 5,460  5,647 
Mortgage banking activities, net 8,600  3,471 
Loan and lease fee income 3,485  1,119 
Securities gains, net 329  693 
Unrealized gains on equity investments, net —  668 
Bank owned life insurance income 205  (25)
Other income 8,685  6,953 
47,822  40,847 
Noninterest expense:
Salaries, benefits and other compensation 53,138  45,346 
Occupancy expense 8,460  7,666 
Equipment expense 7,391  4,964 
Data processing and operations expenses 3,385  3,078 
Professional fees 3,856  4,600 
Marketing expense 992  951 
FDIC expenses 1,069  (54)
Loan workout and other credit costs 1,120  453 
Corporate development expense 2,095  1,341 
Restructuring expense (265) — 
Other operating expense 14,378  20,151 
95,619  88,496 
Income before taxes 86,548  11,855 
Income tax provision 21,407  1,288 
Net income $ 65,141  $ 10,567 
Less: Net income (loss) attributable to noncontrolling interest 59  (360)
Net income attributable to WSFS $ 65,082  $ 10,927 
Earnings per share:
Basic $ 1.37  $ 0.21 
Diluted $ 1.36  $ 0.21 
Weighted average shares of common stock outstanding:
Basic 47,509,205  51,086,316 
Diluted 47,792,108  51,164,224 

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
5
WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
 
Three Months Ended March 31,
(Dollars in thousands) 2021 2020
Net income $ 65,141  $ 10,567 
Less: Net income (loss) attributable to noncontrolling interest 59  (360)
Net income attributable to WSFS 65,082  10,927 
Other comprehensive (loss) income:
Net change in unrealized (losses) gains on investment securities available-for-sale
Net unrealized (losses) gains arising during the period, net of tax (benefit) expense of $(21,972) and $14,538, respectively
(69,589) 46,036 
Less: reclassification adjustment for net gains on sales realized in net income, net of tax expense of $79 and $166, respectively
(250) (527)
(69,839) 45,509 
Net change in securities held-to-maturity
Amortization of unrealized gain on securities reclassified to held-to-maturity, net of tax expense of $5 and $21, respectively
(16) (65)
Net change in unfunded pension liability
Change in unfunded pension liability related to unrealized (loss) gain, prior service cost and transition obligation, net of tax (benefit) expense of $(5) and $1, respectively
(16) 4 
Net change in cash flow hedge
Net unrealized gain arising during the period, net of tax expense of $— and $501, respectively
—  1,585 
Amortization of unrealized gain on terminated cash flow hedges, net of tax benefit of $35 and $—, respectively
(111) — 
(111) 1,585 
Net change in equity method investments
Net change in other comprehensive income of equity method investments, net of tax expense of $86, and $—, respectively
273  — 
Total other comprehensive (loss) income (69,709) 47,033 
Total comprehensive (loss) income $ (4,627) $ 57,960 
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
6
WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)

(Dollars in thousands, except per share and share data) March 31, 2021 December 31, 2020
Assets:
Cash and due from banks $ 1,628,773  $ 1,244,705 
Cash in non-owned ATMs 428,180  402,339 
Interest-bearing deposits in other banks including collateral (restricted cash) of $7,000 at March 31, 2021 and $7,390 December 31, 2020, respectively
7,208  7,691 
Total cash, cash equivalents, and restricted cash 2,064,161  1,654,735 
Investment securities, available-for-sale (amortized cost of $3,000,986 at March 31, 2021 and $2,450,265 at December 31, 2020
2,987,885  2,529,057 
Investment securities, held-to-maturity, net of allowance for credit losses of $5 at March 31, 2021 and $6 at December 31, 2020 (fair value $107,629 at March 31, 2021 and $116,421 at December 31, 2020)
103,523  111,741 
Other investments 10,227  9,541 
Loans, held for sale at fair value 155,447  197,541 
Loans and leases, net of allowance for credit losses of $204,818 at March 31, 2021 and $228,804 at December 31, 2020
8,373,766  8,795,935 
Bank owned life insurance 32,255  32,051 
Stock in Federal Home Loan Bank (FHLB) of Pittsburgh at cost 5,506  5,771 
Other real estate owned 2,068  3,061 
Accrued interest receivable 43,159  44,335 
Premises and equipment 94,309  96,556 
Goodwill 472,828  472,828 
Intangible assets 81,873  84,558 
Other assets 303,445  296,204 
Total assets $ 14,730,452  $ 14,333,914 
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing $ 3,857,610  $ 3,415,021 
Interest-bearing 8,426,090  8,441,643 
Total deposits 12,283,700  11,856,664 
FHLB advances —  6,623 
Trust preferred borrowings 67,011  67,011 
Senior debt 246,734  246,617 
Other borrowed funds 21,456  20,390 
Accrued interest payable 4,153  1,450 
Other liabilities 338,944  345,679 
Total liabilities 12,961,998  12,544,434 
Stockholders’ Equity:
Common stock $0.01 par value, 90,000,000 shares authorized; issued 57,589,330 at March 31, 2021 and 57,575,783 at December 31, 2020
576  576 
Capital in excess of par value 1,054,291  1,053,022 
Accumulated other comprehensive (loss) income (13,702) 56,007 
Retained earnings 1,036,797  977,414 
Treasury stock at cost, 10,086,936 shares at March 31, 2021 and 9,819,627 shares at December 31, 2020
(307,321) (295,293)
Total stockholders’ equity of WSFS 1,770,641  1,791,726 
Noncontrolling interest (2,187) (2,246)
Total stockholders' equity 1,768,454  1,789,480 
Total liabilities and stockholders' equity $ 14,730,452  $ 14,333,914 

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
7
WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Three Months Ended March 31, 2021
(Dollars in thousands, except per share and share amounts) Shares Common Stock Capital in Excess of Par Value Accumulated Other Comprehensive (Loss) Income Retained Earnings Treasury Stock Total Stockholders' Equity of WSFS Non-controlling Interest Total Stockholders' Equity
Balance, December 31, 2020 57,575,783  $ 576  $ 1,053,022  $ 56,007  $ 977,414  $ (295,293) $ 1,791,726  $ (2,246) $ 1,789,480 
Net income —  —  —  —  65,082  —  65,082  59  65,141 
Other comprehensive loss —  —  —  (69,709) —  —  (69,709) —  (69,709)
Cash dividend, $0.12 per share
—  —  —  —  (5,699) —  (5,699) —  (5,699)
Issuance of common stock including proceeds from exercise of common stock options 13,547  —  115  —  —  —  115  —  115 
Stock-based compensation expense —  —  1,155  —  —  —  1,155  —  1,155 
Repurchases of common stock (1)
—  —  (1) —  —  (12,028) (12,029) —  (12,029)
Balance, March 31, 2021 57,589,330  $ 576  $ 1,054,291  $ (13,702) $ 1,036,797  $ (307,321) $ 1,770,641  $ (2,187) $ 1,768,454 
(1)Repurchase of common stock includes 267,309 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors, and 20 shares withheld to cover tax liabilities.

Three Months Ended March 31, 2020
(Dollars in thousands, except per share and share amounts) Shares Common Stock Capital in Excess of Par Value Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Total Stockholders' Equity of WSFS Non-controlling Interest Total Stockholders' Equity
Balance, December 31, 2019 57,435,658  $ 575  $ 1,049,064  $ 23,501  $ 917,377  $ (140,211) $ 1,850,306  $ (815) $ 1,849,491 
Cumulative change in accounting principle —  —  —  —  (30,368) —  (30,368) —  (30,368)
Balance, January 1, 2020 (as adjusted for change in accounting principle) 57,435,658  575  1,049,064  23,501  887,009  (140,211) 1,819,938  (815) 1,819,123 
Net income (loss) —  —  —  —  10,927  —  10,927  (360) 10,567 
Other comprehensive income —  —  —  47,033  —  —  47,033  —  47,033 
Cash dividend, $0.12 per share
—  —  —  —  (6,160) —  (6,160) —  (6,160)
Issuance of common stock including proceeds from exercise of common stock options 70,640  1  990  —  —  —  991  —  991 
Stock-based compensation expense —  —  604  —  —  —  604  —  604 
Repurchases of common shares (1)
—  —  —  —  —  (38,739) (38,739) —  (38,739)
Balance, March 31, 2020 57,506,298  $ 576  $ 1,050,658  $ 70,534  $ 891,776  $ (178,950) $ 1,834,594  $ (1,175) $ 1,833,419 
(1)Repurchase of common stock includes 1,004,348 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors.

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
8
WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Three Months Ended March 31,
(Dollars in thousands) 2021 2020
Operating activities:
Net income $ 65,141  $ 10,567 
Adjustments to reconcile net income to net cash provided by operating activities:
(Recovery of) provision for credit losses (20,160) 56,646 
Depreciation of premises and equipment, net 3,090  4,572 
Accretion of fees and discounts, net (16,472) (13,273)
Amortization of intangible assets 2,651  2,764 
Amortization of right of use lease asset 3,100  4,834 
Decrease in operating lease liability (4,113) (4,466)
Income from mortgage banking activities, net (8,600) (3,471)
Gain on sale of securities, net (329) (693)
Gain on sale of other real estate owned and valuation adjustments, net (45) — 
Stock-based compensation expense 1,155  604 
Unrealized gain on equity investments, net —  (668)
Deferred income tax expense (benefit) 11,052  (3,020)
Decrease (increase) in accrued interest receivable 1,176  (1,040)
Decrease (increase) in other assets 1,569  10,913 
Origination of loans held for sale (246,127) (167,485)
Proceeds from sales of loans held for sale 275,181  163,415 
(Increase) decrease in value of bank owned life insurance (204) 201 
Increase in capitalized interest, net (911) (1,024)
Increase in accrued interest payable 2,703  2,694 
(Decrease) increase in other liabilities (207) 352 
Net cash provided by operating activities $ 69,650  $ 62,422 
Investing activities:
Repayments, maturities and calls of investment securities held-to-maturity $ 8,030  $ 3,535 
Sale of investment securities available-for-sale 9,332  30,641 
Purchases of investment securities available-for-sale (748,317) (162,826)
Repayments of investment securities available-for-sale 185,002  83,532 
Net decrease (increase) in loans 481,294  (59,232)
Purchases of stock of Federal Home Loan Bank of Pittsburgh —  (145,399)
Redemptions of stock of Federal Home Loan Bank of Pittsburgh 265  132,509 
Sales of other real estate owned 1,148  131 
Investment in premises and equipment (1,270) (2,531)
Sales of premises and equipment 427  42 
Net cash used in investing activities $ (64,089) $ (119,598)

9
Three Months Ended March 31,
(Dollars in thousands) 2021 2020
Financing activities:
Net increase in demand and saving deposits $ 646,348  $ 169,387 
Decrease in time deposits (64,861) (84,456)
(Decrease) increase in brokered deposits (153,386) 37,215 
Receipts from FHLB advances —  5,037,296 
Repayments of FHLB advances (6,623) (5,030,000)
Receipts from federal funds purchased —  7,665,475 
Repayments of federal funds purchased —  (7,760,475)
Cash dividend (5,699) (6,160)
Issuance of common stock including proceeds from exercise of common stock options 115  991 
Repurchases of common shares (12,029) (38,739)
Net cash provided by (used in) financing activities $ 403,865  $ (9,466)
Increase (decrease) in cash, cash equivalents, and restricted cash 409,426  (66,642)
Cash, cash equivalents, and restricted cash at beginning of period 1,654,735  571,752 
Cash, cash equivalents, and restricted cash at end of period $ 2,064,161  $ 505,110 
Supplemental disclosure of cash flow information:
Cash paid during the period for:
     Interest $ 4,393  $ 15,011 
     Income taxes 2,572  792 
Non-cash information:
Loans transferred to other real estate owned 376  2,350 
Loans transferred to portfolio from held-for-sale at fair value 5,149  6,399 
Impact of ASC 326 Adoption:
Allowance for credit losses on held-to-maturity debt securities —  (8)
Allowance for credit losses on loans and leases —  (35,855)
Deferred tax assets —  8,461 
Allowance for credit losses on unfunded lending commitments —  (2,966)
Retained earnings —  30,368 
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
10
WSFS FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2021
(UNAUDITED)
1. BASIS OF PRESENTATION
General
These unaudited Consolidated Financial Statements include the accounts of WSFS Financial Corporation (the Company or WSFS), Wilmington Savings Fund Society, FSB (WSFS Bank or the Bank), WSFS Wealth Management, LLC (Powdermill®), WSFS Capital Management, LLC (West Capital), Cypress Capital Management, LLC (Cypress), Christiana Trust Company of Delaware® (Christiana Trust DE) and WSFS SPE Services, LLC. The Company also has one unconsolidated subsidiary, WSFS Capital Trust III. WSFS Bank has three wholly owned subsidiaries: Beneficial Equipment Finance Corporation (BEFC), WSFS Investment Group, Inc. (WSFS Wealth® Investments), and 1832 Holdings, Inc., and one majority-owned subsidiary, NewLane Finance Company (NewLane Finance®).
Overview
Founded in 1832, the Bank is one of the ten oldest bank and trust companies continuously operating under the same name in the United States (U.S.). The Company provides residential and commercial real estate, commercial and consumer lending services, as well as retail deposit and cash management services. The core banking business is commercial lending funded primarily by customer-generated deposits. In addition, the Company offers a variety of wealth management and trust services to personal and corporate customers. The Federal Deposit Insurance Corporation (FDIC) insures the customers’ deposits to their legal maximums. The Company serves its customers primarily from 111 offices located in Pennsylvania (51), Delaware (42), New Jersey (16), Virginia (1) and Nevada (1), its ATM network, website at www.wsfsbank.com and mobile app. Information on the website is not incorporated by reference into this Quarterly Report on Form 10-Q.
The Company's leasing business is conducted by NewLane Finance®. NewLane Finance® originates small business leases and provides commercial financing to businesses nationwide, targeting various equipment categories including technology, software, office, medical, veterinary and other areas. In addition, NewLane Finance® offers insurance through its subsidiary, Prime Protect, which commenced operations during the fourth quarter of 2020.
Basis of Presentation
In preparing the unaudited Consolidated Financial Statements, the Company is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Amounts subject to significant estimates include the allowance for credit losses (including loans and leases held for investment, investment securities available-for-sale and held-to-maturity), lending-related commitments, goodwill, intangible assets, post-retirement benefit obligations, the fair value of financial instruments, and income taxes. Among other effects, changes to these estimates could result in future impairments of investment securities, goodwill and intangible assets, the establishment of additional allowance and lending-related commitment reserves as well as increased post-retirement benefits expense.
The Company's accounting and reporting policies conform to Generally Accepted Accounting Principles in the U.S. (GAAP), prevailing practices within the banking industry for interim financial information and Rule 10-01 of SEC Regulation S-X (Rule 10-01). Rule 10-01 does not require us to include all information and notes that would be required in audited financial statements. Certain prior period amounts have been reclassified to conform with current period presentation. Operating results for the periods presented are not necessarily indicative of the results that may be expected for any future quarters or for the year ending December 31, 2021. These unaudited, interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in the Annual Report on Form 10-K for the year ended December 31, 2020 (the 2020 Annual Report on Form 10-K) that was filed with the SEC on March 1, 2021 and is available at www.sec.gov or on the website at www.wsfsbank.com. All significant intercompany accounts and transactions were eliminated in consolidation.





11
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES:
The significant accounting policies used in preparation of the Consolidated Financial Statements are disclosed in the Company's 2020 Annual Report on Form 10-K. Those significant accounting policies remain unchanged at March 31, 2021.
RECENT ACCOUNTING PRONOUNCEMENTS
Accounting Guidance Adopted in 2021
ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes: In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The guidance adds new amendments to simplify income tax accounting and removes certain exceptions and modifies the accounting for certain income tax transactions. The guidance is effective for annual periods beginning after December 15, 2020. Early adoption is permitted. Adoption is required on a prospective, modified-retrospective or retrospective basis, depending on the amendment. The Company adopted this standard on January 1, 2021, on a prospective basis with no impact to the Consolidated Financial Statements at the time of adoption.

ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the Interactions between Topic 321, Topic 323, and Topic 815: In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The new guidance clarifies that observable transactions under the measurement alternative method (ASC 321) should be considered when applying or discontinuing the equity method of accounting (ASC 323). The guidance also clarifies that certain non-derivative forward contracts and purchase call options to acquire securities, should be measured at fair value before settlement or exercise. The guidance is effective for annual periods beginning after December 15, 2020. Early adoption is permitted. Use of the prospective method is required. The Company adopted this standard on January 1, 2021, on a prospective basis with no impact to the Consolidated Financial Statements at the time of adoption.

ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope: In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. The new guidance expands and clarifies the scope of ASU No. 2020-04 to include derivatives affected by changes in interest rates used for margining, discounting, or contract price alignment, commonly referred to as the “discounting transaction.” Derivatives impacted by the discounting transaction will be eligible for certain optional expedients and exceptions related to contract modifications and hedge accounting as defined in Topic 848. The guidance is effective upon issuance through December 31, 2022 and there was no impact to the Company at the time the guidance became effective. The Company will apply this guidance to any derivatives affected by the discounting transition due to reference rate reform.

There was no accounting guidance pending adoption at March 31, 2021.




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3. NONINTEREST INCOME
Credit/debit card and ATM income
The following table presents the components of credit/debit card and ATM income:
Three Months Ended March 31,
(Dollars in thousands) 2021 2020
Bailment fees $ 3,059  $ 5,081 
Interchange fees 3,055  5,616 
Other card and ATM fees 691  662 
Total credit/debit card and ATM income $ 6,805  $ 11,359 
Credit/debit card and ATM income is composed of bailment fees, interchange fees, and other card and ATM fees. Bailment fees are earned from bailment arrangements with customers. Bailment arrangements are legal relationships in which property is delivered to another party without a transfer of ownership. The party who transferred the property (the bailor) retains ownership interest of the property. In the event that the bailee files for bankruptcy protection, the property is not included in the bailee's assets. The bailee pays an agreed-upon fee for the use of the bailor's property in exchange for the bailor allowing use of the assets at the bailee's site. Bailment fees are earned from cash that is made available for customers' use at an offsite location, such as cash located in an ATM at a customer's place of business. These fees are typically indexed to a market interest rate. This revenue stream generates fee income through monthly billing for bailment services.
Credit/debit card and ATM income also includes interchange fees. Interchange fees are paid by a merchant's bank to a bank that issued a debit or credit card used in a transaction to compensate the issuing bank for the value and benefit the merchant receives from accepting electronic payments. These revenue streams generate fee income at the time a transaction occurs and are recorded as revenue at the time of the transaction. Interchange income decreased from the impact of the Durbin amendment on the first quarter of 2021 results. The Durbin Amendment is a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that established a cap on interchange fees for banks with over $10 billion in assets, and became effective for the Company on July 1, 2020.
Investment management and fiduciary income
The following table presents the components of investment management and fiduciary income:
Three Months Ended March 31,
(Dollars in thousands) 2021 2020
Trust fees $ 9,764  $ 6,954 
Wealth management and advisory fees 4,489  4,008 
Total investment management and fiduciary income $ 14,253  $ 10,962 
Investment management and fiduciary income is composed of trust fees and wealth management and advisory fees. Trust fees are based on revenue earned from custody, escrow and trustee services on structured finance transactions; indenture trustee, administrative agent and collateral agent services to institutions and corporations; commercial domicile and independent director services; and investment and trustee services to families and individuals across the U.S. Most fees are flat fees, except for a portion of personal and corporate trustee fees where the Company earns a percentage on the assets under management. This revenue stream primarily generates fee income through monthly, quarterly and annual billings for services provided.
Wealth management and advisory fees consists of fees from Cypress, West Capital, Powdermill® and WSFS Wealth® Investments. Wealth management and advisory fees are based on revenue earned from services including asset management, financial planning, family office, and brokerage. The fees are based on the market value of assets, are assessed as a flat fee, or are brokerage commissions. This revenue stream primarily generates fee income through quarterly and annual billing for the services.

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Deposit service charges
The following table presents the components of deposit service charges:
Three Months Ended March 31,
(Dollars in thousands) 2021 2020
Service fees $ 3,422  $ 3,211 
Return and overdraft fees 1,578  2,332 
Other deposit service fees 460  104 
Total deposit service charges $ 5,460  $ 5,647 
Deposit service charges includes revenue earned from core deposit products, certificates of deposit, and brokered deposits. The Company generates fee revenues from deposit service charges primarily through service charges and overdraft fees. Service charges consist primarily of monthly account maintenance fees, cash management fees, foreign ATM fees and other maintenance fees. All of these revenue streams generate fee income through service charges for monthly account maintenance and similar items, transfer fees, late fees, overlimit fees, and stop payment fees. Revenue is recorded at the time of the transaction.
Other income
The following table presents the components of other income:
Three Months Ended March 31,
(Dollars in thousands) 2021 2020
Managed service fees $ 3,609  $ 4,031 
Currency preparation 948  840 
ATM loss protection 622  647 
Miscellaneous products and services 3,506  1,435 
Total other income $ 8,685  $ 6,953 
Other income consists of managed service fees, which are primarily courier fees related to cash management, currency preparation, ATM loss protection and other miscellaneous products and services offered by the Bank. These fees are primarily generated through monthly billings or at the time of the transaction.
Arrangements with multiple performance obligations
The Company's contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers.
Practical expedients and exemptions
The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed.

See Note 15 for further information about the disaggregation of noninterest income by segment.
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4. EARNINGS PER SHARE
The following table shows the computation of basic and diluted earnings per share:
Three Months Ended March 31,
(Dollars and shares in thousands, except per share data) 2021 2020
Numerator:
Net income attributable to WSFS $ 65,082  $ 10,927 
Denominator:
Weighted average basic shares 47,509  51,086 
Dilutive potential common shares 283  78 
Weighted average fully diluted shares 47,792  51,164 
Earnings per share:
Basic $ 1.37  $ 0.21 
Diluted $ 1.36  $ 0.21 
Outstanding common stock equivalents having no dilutive effect 3  10 

Basic earnings per share is calculated by dividing Net income attributable to WSFS by the weighted-average basic shares outstanding. Diluted earnings per share is calculated by dividing Net income attributable to WSFS by the weighted-average fully diluted shares outstanding, using the treasury stock method. Fully diluted shares include the adjustment for the dilutive effect of common stock awards, which include outstanding stock options and unvested restricted stock units from the 2013 Incentive Plan and the 2018 Incentive Plan.
5. INVESTMENTS
Debt Securities
The following tables detail the amortized cost, allowance for credit losses and the estimated fair value of the Company's investments in available-for-sale and held-to-maturity debt securities. None of the Company's investments in debt securities are classified as trading.
March 31, 2021
(Dollars in thousands) Amortized Cost Gross
Unrealized
 Gain 		Gross
Unrealized
 Loss 		Allowance for Credit Losses Fair
Value
Available-for-Sale Debt Securities
CMO $ 564,055  $ 5,604  $ 15,223  $ —  $ 554,436 
FNMA MBS 1,997,140  35,151  34,246  —  1,998,045 
FHLMC MBS 182,271  8,941  759  —  190,453 
GNMA MBS 25,011  907  83  —  25,835 
GSE agency notes 232,509  —  13,393  —  219,116 
$ 3,000,986  $ 50,603  $ 63,704  $ —  $ 2,987,885 
Held-to-Maturity Debt Securities(1)
State and political subdivisions $ 103,027  $ 4,107  $ —  $ 5  $ 107,129 
Foreign bonds 501  —  1  —  500 
$ 103,528  $ 4,107  $ 1  $ 5  $ 107,629 
(1)Held-to-maturity securities transferred from available-for-sale are included in held-to-maturity at amortized cost basis at the time of transfer. The amortized cost of transferred held-to-maturity securities included net unrealized gains of $0.3 million at March 31, 2021, which are offset in Accumulated other comprehensive (loss) income. At the time of transfer, there was no allowance for credit loss on the available-for-sale securities. Subsequent to transfer, the securities were evaluated for credit loss.

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December 31, 2020
(Dollars in thousands) Amortized Cost Gross
Unrealized
 Gain 		Gross
Unrealized
 Loss 		Allowance for Credit Losses Fair
Value
Available-for-Sale Debt Securities
CMO $ 461,819  $ 9,949  $ 443  $ —  $ 471,325 
FNMA MBS 1,544,105  55,747  882  —  1,598,970 
FHLMC MBS 190,856  12,142  105  —  202,893 
GNMA MBS 22,716  1,046  —  —  23,762 
GSE agency notes 230,769  1,987  649  —  232,107 
$ 2,450,265  $ 80,871  $ 2,079  $ —  $ 2,529,057 
Held-to-Maturity Debt Securities(1)
State and political subdivisions $ 111,246  $ 4,678  $ —  $ 6  $ 115,918 
Foreign bonds 501  2  —  —  503 
$ 111,747  $ 4,680  $ —  $ 6  $ 116,421 
(1)Held-to–maturity securities transferred from available-for-sale are included in held-to-maturity at fair value at the time of transfer. The amortized cost of transferred held-to-maturity securities included net unrealized gains of $0.4 million at December 31, 2020, which are offset in Accumulated other comprehensive (loss) income. At the time of transfer, there was no allowance for credit loss on the available-for-sale securities. Subsequent to transfer, the securities were evaluated for credit loss.
The scheduled maturities of available-for-sale debt securities at March 31, 2021 and December 31, 2020 are presented in the table below:
  Available-for-Sale
  Amortized Fair
(Dollars in thousands) Cost Value
March 31, 2021 (1)
Within one year $ —  $ — 
After one year but within five years 57,993  60,781 
After five years but within ten years 233,748  235,304 
After ten years 2,709,245  2,691,800 
$ 3,000,986  $ 2,987,885 
December 31, 2020 (1)
Within one year $ —  $ — 
After one year but within five years 37,852  39,985 
After five years but within ten years 239,845  251,874 
After ten years 2,172,568  2,237,198 
$ 2,450,265  $ 2,529,057 
(1)Actual maturities could differ from contractual maturities.









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The scheduled maturities of held-to-maturity debt securities at March 31, 2021 and December 31, 2020 are presented in the table below:
  Held-to-Maturity
  Amortized Fair
(Dollars in thousands) Cost Value
March 31, 2021 (1)
Within one year $ 1,135  $ 1,140 
After one year but within five years 971  985 
After five years but within ten years 41,075  42,558 
After ten years 60,347  62,946 
$ 103,528  $ 107,629 
December 31, 2020 (1)
Within one year $ 1,144  $ 1,154 
After one year but within five years 972  990 
After five years but within ten years 35,967  37,317 
After ten years 73,664  76,960 
$ 111,747  $ 116,421 
(1)Actual maturities could differ from contractual maturities.
MBS may have expected maturities that differ from their contractual maturities. These differences arise because issuers may have the right to call securities and borrowers may have the right to prepay obligations with or without prepayment penalty. The estimated weighted average duration of MBS was 5.0 years at March 31, 2021.
The held-to-maturity debt securities are not collateral-dependent securities as these are general obligation bonds issued by cities, states, counties, or other local and foreign governments.
Investment securities with fair market values aggregating $1.4 billion and $1.3 billion were pledged as collateral for retail customer repurchase agreements, municipal deposits, and other obligations as of March 31, 2021 and December 31, 2020, respectively.
During the three months ended March 31, 2021, the Company sold $9.3 million of debt securities categorized as available-for-sale, resulting in $0.3 million of realized gains and no realized losses. During the three months ended March 31, 2020, the Company sold $30.6 million of debt securities categorized as available-for-sale resulting in $0.7 million of realized gains and no realized losses.
As of March 31, 2021 and December 31, 2020, the Company's debt securities portfolio had remaining unamortized premiums of $66.1 million and $60.4 million, respectively, and unaccreted discounts of $3.4 million and $2.6 million, respectively.
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For debt securities in an unrealized loss position and an allowance has not been recorded, the table below shows the gross unrealized losses and fair value by investment category and length of time that individual debt securities were in a continuous unrealized loss position at March 31, 2021.
  Duration of Unrealized Loss Position    
  Less than 12 months 12 months or longer Total
  Fair Unrealized Fair Unrealized Fair Unrealized
(Dollars in thousands) Value Loss Value Loss Value Loss
Available-for-sale debt securities:
CMO $ 288,625  $ 15,223  $ —  $ —  $ 288,625  $ 15,223 
FNMA MBS 1,241,199  34,243  4,330  3  1,245,529  34,246 
FHLMC MBS 17,936  759  —  —  17,936  759 
GNMA MBS 4,969  83  —  —  4,969  83 
GSE agency notes 219,116  13,393  —  —  219,116  13,393 
$ 1,771,845  $ 63,701  $ 4,330  $ 3  $ 1,776,175  $ 63,704 
Held-to-maturity debt securities:
Foreign bonds $ 500  $ 1  $ —  $ —  $ 500  $ 1 
$ 500  $ 1  $ —  $ —  $ 500  $ 1 

For debt securities in an unrealized loss position, the table below shows the gross unrealized losses and fair value by investment category and length of time that individual debt securities were in a continuous unrealized loss position at December 31, 2020.

  Duration of Unrealized Loss Position    
  Less than 12 months 12 months or longer Total
  Fair Unrealized Fair Unrealized Fair Unrealized
(Dollars in thousands) Value Loss Value Loss Value Loss
Available-for-sale debt securities:
CMO $ 183,983  $ 443  $ —  $ —  $ 183,983  $ 443 
FNMA MBS 289,338  879  4,355  3  293,693  882 
FHLMC MBS 5,191  105  —  —  5,191  105 
GSE agency notes 101,016  649  —  —  101,016  649 
$ 579,528  $ 2,076  $ 4,355  $ 3  $ 583,883  $ 2,079 
At March 31, 2021, available-for-sale debt securities for which the amortized cost basis exceeded fair value totaled $1.8 billion. Total unrealized losses on these securities were $63.7 million at March 31, 2021. The Company does not have the intent to sell, nor is it more likely than not it will be required to sell these securities before it is able to recover the amortized cost basis. The unrealized losses are the result of changes in market interest rates subsequent to purchase, not credit loss, as these are highly rated agency securities with no expected credit loss, in the event of a default. As a result, there is no allowance for credit losses recorded for available-for-sale debt securities as of March 31, 2021.
At March 31, 2021 and December 31, 2020, held-to-maturity debt securities had an amortized cost basis of $103.5 million and $111.7 million, respectively. The held-to-maturity debt security portfolio primarily consists of highly rated municipal bonds. The Company monitors credit quality of its debt securities through credit ratings. The following table summarizes the amortized cost of debt securities held-to-maturity as of March 31, 2021, aggregated by credit quality indicator:
(Dollars in thousands) State and political subdivisions Foreign bonds
A+ rated or higher $ 102,901  $ 501 
Not rated 126  — 
Ending balance $ 103,027  $ 501 

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The following table summarizes the amortized cost of debt securities held-to-maturity as of December 31, 2020, aggregated by credit quality indicator:
(Dollars in thousands) State and political subdivisions Foreign bonds
A+ rated or higher $ 110,959  $ 501 
Not rated 287  — 
Ending balance $ 111,246  $ 501 
The Company reviewed its held-to-maturity debt securities by major security type for potential credit losses. There was no activity in the allowance for credit losses for foreign bond debt securities for the three months ended March 31, 2021 and 2020. The following table presents the activity in the allowance for credit losses for state and political subdivisions debt securities for the three months ended March 31, 2021 and 2020:
Three months ended March 31,
(Dollars in thousands) 2021 2020
Allowance for credit losses:
Beginning balance $ 6  $ — 
Impact of adoption ASC 326 —  8 
Provision for credit losses (1) — 
Charge-offs, net —  — 
Ending balance $ 5  $ 8 
Accrued interest receivable of $0.9 million and $1.1 million as of March 31, 2021 and December 31, 2020, respectively, for held-to-maturity debt securities were excluded from the evaluation of allowance for credit losses. There were no nonaccrual or past due held-to-maturity debt securities as of March 31, 2021 and December 31, 2020.
Equity Investments
The Company had equity investments with a fair value of $10.2 million and $9.5 million as of March 31, 2021 and December 31, 2020, respectively. There were no unrealized gains or losses recorded on the Company's equity investments during the three months ended March 31, 2021. During the three months ended March 31, 2020, the Company recorded unrealized gains on its remaining investment in Visa Class B shares of $3.0 million and an impairment loss of $2.3 million in the investment of Spring EQ, which were recorded in Unrealized gain on equity investment, net in the Consolidated Statements of Income.
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6. LOANS
The following table shows the Company's loan and lease portfolio by category:  
(Dollars in thousands) March 31, 2021 December 31, 2020
Commercial and industrial(1)
$ 2,398,535  $ 2,700,418 
Owner-occupied commercial 1,333,989  1,332,727 
Commercial mortgages 1,975,966  2,086,062 
Construction 784,101  716,275 
Commercial small business leases 264,937  248,885 
Residential(2)
681,022  774,455 
Consumer(3)
1,140,034  1,165,917 
8,578,584  9,024,739 
Less:
Allowance for credit losses 204,818  228,804 
Net loans and leases $ 8,373,766  $ 8,795,935 
(1) Includes PPP loans of $526.8 million at March 31, 2021 and $751.2 million at December 31, 2020.
(2) Includes reverse mortgages at fair value of $9.4 million at March 31, 2021 and $10.1 million at December 31, 2020.
(3) Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
Accrued interest receivable on loans and leases was $36.1 million and $37.6 million at March 31, 2021 and December 31, 2020, respectively. Accrued interest receivable on loans and leases was excluded from the evaluation of allowance for credit losses.

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7. ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY INFORMATION
The following tables provide the activity of allowance for credit losses and loan balances for the three months ended March 31, 2021 and 2020. During the first quarter of 2021, the decrease to the allowance for credit losses was primarily due to positive economic developments in our forecasts and improved credit quality metrics with declines in our problem assets, nonperforming assets and delinquencies.
(Dollars in thousands)
Commercial and Industrial(1)
Owner-occupied
Commercial 		Commercial
Mortgages 		Construction
Residential(2)
Consumer(3)
Total
Three months ended March 31, 2021
Allowance for credit losses
Beginning balance $ 150,875  $ 9,615  $ 31,071  $ 12,190  $ 6,893  $ 18,160  $ 228,804 
Charge-offs (5,052) —  —  —  —  (424) (5,476)
Recoveries 1,140  90  14  —  140  266  1,650 
Provision (credit) (21,093) (88) (540) 2,097  (1,331) 795  (20,160)
Ending balance $ 125,870  $ 9,617  $ 30,545  $ 14,287  $ 5,702  $ 18,797  $ 204,818 
Period-end allowance allocated to:
Loans evaluated on an individual basis $ 1  $ —  $ 11  $ —  $ —  $ —  $ 12 
Loans evaluated on a collective basis 125,869  9,617  30,534  14,287  5,702  18,797  204,806 
Ending balance $ 125,870  $ 9,617  $ 30,545  $ 14,287  $ 5,702  $ 18,797  $ 204,818 
Period-end loan balances:
Loans evaluated on an individual basis
$ 20,902  $ 5,118  $ 4,280  $ 72  $ 5,649  $ 2,313  $ 38,334 
Loans evaluated on a collective basis 2,642,570  1,328,871  1,971,686  784,029  665,931  1,137,721  8,530,808 
Ending balance
$ 2,663,472  $ 1,333,989  $ 1,975,966  $ 784,101  $ 671,580  $ 1,140,034  $ 8,569,142 
(1)Includes commercial small business leases and PPP loans.
(2)Period-end loan balance excludes reverse mortgages at fair value of $9.4 million.
(3)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.


(Dollars in thousands)
Commercial and Industrial(1)
Owner -
occupied
Commercial 		Commercial
Mortgages 		Construction
Residential(2)
Consumer(3)
Total
Three months ended March 31, 2020
Allowance for credit losses
Beginning balance, prior to adoption of ASC 326 $ 22,849  $ 4,616  $ 7,452  $ 3,891  $ 1,381  $ 7,387  $ 47,576 
Impact of adopting ASC 326(4)
19,747  (1,472) 1,662  681  7,522  7,715  35,855 
Charge-offs (3,064) (283) (51) —  (143) (914) (4,455)
Recoveries 2,847  125  29  5  91  354  3,451 
Provision (credit) 23,392  6,555  17,508  621  2,742  5,828  56,646 
Ending balance $ 65,771  $ 9,541  $ 26,600  $ 5,198  $ 11,593  $ 20,370  $ 139,073 
Period-end allowance allocated to:
Individually evaluated for impairment $ 20  $ —  $ —  $ —  $ —  $ —  $ 20 
Collectively evaluated for impairment 65,751  9,541  26,600  5,198  11,593  20,370  139,053 
Ending balance $ 65,771  $ 9,541  $ 26,600  $ 5,198  $ 11,593  $ 20,370  $ 139,073 
Period-end loan balances:
Individually evaluated for impairment
$ 8,843  $ 4,818  $ 4,691  $ 96  $ 6,152  $ 2,295  $ 26,895 
Collectively evaluated for impairment 2,289,529  1,308,375  2,218,426  626,157  949,613  1,115,991  8,508,091 
Ending balance
$ 2,298,372  $ 1,313,193  $ 2,223,117  $ 626,253  $ 955,765  $ 1,118,286  $ 8,534,986 
(1)Includes commercial small business leases.
(2)Period-end loan balance excludes reverse mortgages at fair value of $15.8 million.
(3)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
(4)The impact of adopting ASC 326 includes $0.1 million for the initial allowance on loans purchased with credit deterioration.

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The following tables show nonaccrual and past due loans presented at amortized cost at the date indicated:
March 31, 2021
(Dollars in thousands) 30–89 Days
Past Due and
Still 
Accruing 		Greater 
Than
90 Days
Past Due and
Still Accruing 		Total Past
Due
And Still
Accruing 		Accruing
Current
Balances
Nonaccrual Loans(1)
Total
Loans
Commercial and industrial(2)
$ 22,976  $ 352  $ 23,328  $ 2,619,507  $ 20,637  $ 2,663,472 
Owner-occupied commercial 1,491  —  1,491  1,328,474  4,024  1,333,989 
Commercial mortgages 4,229  84  4,313  1,970,011  1,642  1,975,966 
Construction —  —  —  784,101  —  784,101 
Residential(3)
967  750  1,717  666,690  3,173  671,580 
Consumer(4)
10,618  6,492  17,110  1,120,608  2,316  1,140,034 
Total
$ 40,281  $ 7,678  $ 47,959  $ 8,489,391  $ 31,792  $ 8,569,142 
% of Total Loans 0.47  % 0.09  % 0.56  % 99.07  % 0.37  % 100  %
(1)Nonaccrual loans with an allowance totaled $11 thousand.
(2)Includes commercial small business leases and PPP loans.
(3)Residential accruing current balances excludes reverse mortgages at fair value of $9.4 million.
(4)Includes $14.9 million of delinquent, but still accruing, U.S. government-guaranteed student loans that carry little risk of credit loss.

December 31, 2020
(Dollars in thousands) 30–89 Days
Past Due and
Still 
Accruing 		Greater 
Than
90 Days
Past Due and
Still Accruing 		Total Past
Due
And Still
Accruing 		Accruing
Current
Balances
Nonaccrual Loans(1)
Total
Loans
Commercial and industrial(2)
$ 7,313  $ 3,652  $ 10,965  $ 2,924,522  $ 13,816  $ 2,949,303 
Owner-occupied commercial 3,120  892  4,012  1,323,355  5,360  1,332,727 
Commercial mortgages 5,944  1,090  7,034  2,061,853  17,175  2,086,062 
Construction 371  —  371  715,904  —  716,275 
Residential(3)
3,049  25  3,074  758,072  3,247  764,393 
Consumer(4)
8,355  11,035  19,390  1,144,217  2,310  1,165,917 
Total(4)
$ 28,152  $ 16,694  $ 44,846  $ 8,927,923  $ 41,908  $ 9,014,677 
% of Total Loans 0.31  % 0.19  % 0.50  % 99.04  % 0.46  % 100  %
(1)Nonaccrual loans with an allowance totaled $13 thousand
(2)Includes commercial small business leases and PPP loans.
(3)Residential accruing current balances excludes reverse mortgages, at fair value of $10.1 million.
(4)Includes $18.2 million of delinquent, but still accruing, U.S. government-guaranteed student loans that carry little risk of credit loss.
The following table presents the amortized cost basis of nonaccruing collateral-dependent loans by class at March 31, 2021 and December 31, 2020:
March 31, 2021 December 31, 2020
(Dollars in thousands) Property
Equipment and other
Property
Equipment and other
Commercial and industrial(1)
$ 12,099  $ 8,538  $ 10,646  $ 3,170 
Owner-occupied commercial 4,024  —  5,360  — 
Commercial mortgages 1,642  —  17,175  — 
Construction —  —  —  — 
Residential(2)
3,173  —  3,247  — 
Consumer(3)
2,301  15  2,294  16 
Total $ 23,239  $ 8,553  $ 38,722  $ 3,186 
(1)Includes commercial small business leases.
(2)Excludes reverse mortgages at fair value.
(3)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
Interest income of $0.2 million was recognized on individually reviewed loans during the three months ended March 31, 2021 and 2020, respectively.
22
As of March 31, 2021, there were 24 residential loans and 26 commercial loans in the process of foreclosure. The total outstanding balance on these loans was $1.4 million and $12.6 million, respectively. As of December 31, 2020, there were 27 residential loans and 23 commercial loans in the process of foreclosure. The total outstanding balance on these loans was $1.9 million and $12.8 million, respectively. Loan workout and OREO expenses were $0.5 million during the three months ended March 31, 2021, and $0.7 million during three months ended March 31, 2020. Loan workout and OREO expenses are included in Loan workout and other credit costs on the Consolidated Statement of Income.
Credit Quality Indicators
Below is a description of each of the risk ratings for all commercial loans:
 
•Pass. These borrowers currently show no indication of deterioration or potential problems and their loans are considered fully collectible.
•Special Mention. Borrowers have potential weaknesses that deserve management’s close attention. Borrowers in this category may be experiencing adverse operating trends, for example, declining revenues or margins, high leverage, tight liquidity, or increasing inventory without increasing sales. These adverse trends can have a potential negative effect on the borrower’s repayment capacity. These assets are not adversely classified and do not expose the Bank to significant risk that would warrant a more severe rating. Borrowers in this category may also be experiencing significant management problems, pending litigation, or other structural credit weaknesses.
•Substandard or Lower. Borrowers have well-defined weaknesses that require extensive oversight by management. Borrowers in this category may exhibit one or more of the following: inadequate debt service coverage, unprofitable operations, insufficient liquidity, high leverage, and weak or inadequate capitalization. Relationships in this category are not adequately protected by the sound financial worth and paying capacity of the obligor or the collateral pledged on the loan, if any. A distinct possibility exists that the Bank will sustain some loss if the deficiencies are not corrected. In addition, some borrowers in this category could have the added characteristic that the possibility of loss is extremely high. Current circumstances in the credit relationship make collection or liquidation in full highly questionable. Such impending events include: perfecting liens on additional collateral, obtaining collateral valuations, an acquisition or liquidation preceding, proposed merger, or refinancing plan.
Residential and Consumer Loans
The residential and consumer loan portfolios are monitored on an ongoing basis using delinquency information and loan type as credit quality indicators. These credit quality indicators are assessed in the aggregate in these relatively homogeneous portfolios. Loans that are greater than 90 days past due are generally considered nonperforming and placed on nonaccrual status.

23
The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for credit losses as of March 31, 2021.
Term Loans Amortized Cost Basis by Origination Year
2021 2020 2019 2018 2017
Prior
Revolving loans amortized cost basis Revolving loans converted to term Total
(Dollars in thousands)
Commercial and industrial(1):
Risk Rating
Pass(2)
$ 112,581  $ 986,574  $ 383,055  $ 274,606  $ 151,043  $ 187,874  $ 5,709  $ 143,889  $ 2,245,331 
Special mention 1,550  815  37,613  28,668  942  18,648  —  34,036  122,272 
Substandard or Lower 7,034  71,567  58,994  56,330  50,763  43,356  62  7,763  295,869 
$ 121,165  $ 1,058,956  $ 479,662  $ 359,604  $ 202,748  $ 249,878  $ 5,771  $ 185,688  $ 2,663,472 
Owner-occupied commercial:
Risk Rating
Pass $ 40,014  $ 232,324  $ 212,673  $ 84,860  $ 142,445  $ 363,429  $ —  $ 121,496  $ 1,197,241 
Special mention 778  1,174  5,835  1,705  9,044  6,757  —  14,262  39,555 
Substandard or Lower —  7,459  15,518  14,427  19,915  29,062  —  10,812  97,193 
$ 40,792  $ 240,957  $ 234,026  $ 100,992  $ 171,404  $ 399,248  $ —  $ 146,570  $ 1,333,989 
Commercial mortgages:
Risk Rating
Pass $ 109,202  $ 353,005  $ 267,193  $ 170,932  $ 243,730  $ 537,153  $ —  $ 182,473  $ 1,863,688 
Special mention 1,265  8,246  1,760  1,203  21,144  7,689  —  1,860  43,167 
Substandard or Lower —  13,312  25,631  2,236  1,575  25,837  —  520  69,111 
$ 110,467  $ 374,563  $ 294,584  $ 174,371  $ 266,449  $ 570,679  $ —  $ 184,853  $ 1,975,966 
Construction:
Risk Rating
Pass $ 39,632  $ 224,919  $ 212,469  $ 178,058  $ 11,294  $ 10,487  $ —  $ 79,160  $ 756,019 
Special mention 7,921  —  —  —  3,515  —  —  —  11,436 
Substandard or Lower 4,200  282  9,662  —  100  73  —  2,329  16,646 
$ 51,753  $ 225,201  $ 222,131  $ 178,058  $ 14,909  $ 10,560  $ —  $ 81,489  $ 784,101 
Residential(3):
Risk Rating
Performing $ 1,380  $ 31,174  $ 20,546  $ 58,477  $ 72,036  $ 482,317  $ —  $ —  $ 665,930 
Nonperforming(4)
—  113  —  —  63  5,474  —  —  5,650 
$ 1,380  $ 31,287  $ 20,546  $ 58,477  $ 72,099  $ 487,791  $ —  $ —  $ 671,580 
Consumer(5):
Risk Rating
Performing $ 19,777  $ 259,801  $ 116,173  $ 228,290  $ 55,206  $ 85,986  $ 364,272  $ 7,880  $ 1,137,385 
Nonperforming(6)
—  —  33  629  226  —  1,379  382  2,649 
$ 19,777  $ 259,801  $ 116,206  $ 228,919  $ 55,432  $ 85,986  $ 365,651  $ 8,262  $ 1,140,034 
(1)Includes commercial small business leases.
(2)Includes $526.8 million of PPP loans.
(3)Excludes reverse mortgages at fair value.
(4)Includes troubled debt restructured mortgages performing in accordance with the loans' modified terms and are accruing interest.
(5)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
(6)Includes troubled debt restructured home equity installment loans performing in accordance with the loans' modified terms and are accruing interest.


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The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for credit losses, as of December 31, 2020.
Term Loans Amortized Cost Basis by Origination Year
2020 2019 2018 2017 2016
Prior
Revolving loans amortized cost basis Revolving loans converted to term Total
(Dollars in thousands)
Commercial and industrial(1):
Risk Rating
Pass(2)
$ 1,250,528  $ 448,704  $ 296,594  $ 157,359  $ 97,036  $ 125,361  $ 6,182  $ 136,110  $ 2,517,874 
Special mention 3,040  26,470  28,636  8,482  2,577  16,993  —  34,403  120,601 
Substandard or Lower 82,868  60,227  57,880  50,446  15,151  35,150  63  9,043  310,828 
$ 1,336,436  $ 535,401  $ 383,110  $ 216,287  $ 114,764  $ 177,504  $ 6,245  $ 179,556  $ 2,949,303 
Owner-occupied commercial:
Risk Rating
Pass $ 220,165  $ 225,766  $ 90,515  $ 135,903  $ 123,897  $ 271,086  $ —  $ 123,194  $ 1,190,526 
Special mention 1,525  5,885  1,838  17,578  4,125  1,997  —  14,467  47,415 
Substandard or Lower 3,703  13,426  15,272  19,883  11,581  19,331  —  11,590  94,786 
$ 225,393  $ 245,077  $ 107,625  $ 173,364  $ 139,603  $ 292,414  $ —  $ 149,251  $ 1,332,727 
Commercial mortgages:
Risk Rating
Pass $ 379,592  $ 283,004  $ 240,924  $ 257,809  $ 254,780  $ 375,473  $ —  $ 148,210  $ 1,939,792 
Special mention 8,324  1,774  21,762  21,269  1,274  6,507  —  1,870  62,780 
Substandard or Lower 26,343  25,402  2,253  1,950  3,242  24,300  —  —  83,490 
$ 414,259  $ 310,180  $ 264,939  $ 281,028  $ 259,296  $ 406,280  $ —  $ 150,080  $ 2,086,062 
Construction:
Risk Rating
Pass $ 189,257  $ 214,956  $ 208,981  $ 11,414  $ 7,414  $ 3,645  $ —  $ 66,018  $ 701,685 
Special mention —  —  —  3,515  —  —  —  —  3,515 
Substandard or Lower —  8,648  —  —  —  79  —  2,348  11,075 
$ 189,257  $ 223,604  $ 208,981  $ 14,929  $ 7,414  $ 3,724  $ —  $ 68,366  $ 716,275 
Residential(3):
Risk Rating
Performing $ 42,475  $ 26,309  $ 71,410  $ 85,277  $ 149,643  $ 383,358  $ —  $ —  $ 758,472 
Nonperforming(4)
113  —  —  —  283  5,525  —  —  5,921 
$ 42,588  $ 26,309  $ 71,410  $ 85,277  $ 149,926  $ 388,883  $ —  $ —  $ 764,393 
Consumer(5):
Risk Rating
Performing $ 235,948  $ 134,064  $ 251,087  $ 63,713  $ 44,700  $ 53,717  $ 371,842  $ 8,287  $ 1,163,358 
Nonperforming(6)
—  —  636  232  —  —  1,396  295  2,559 
$ 235,948  $ 134,064  $ 251,723  $ 63,945  $ 44,700  $ 53,717  $ 373,238  $ 8,582  $ 1,165,917 
(1)Includes commercial small business leases.
(2)Includes $751.2 million of PPP loans.
(3)Excludes reverse mortgages at fair value.
(4)Includes troubled debt restructured mortgages performing in accordance with the loans' modified terms and are accruing interest.
(5)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
(6)Includes troubled debt restructured home equity installment loans performing in accordance with the loans' modified terms and are accruing interest.
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Troubled Debt Restructurings (TDRs) 
The following table presents the balance of TDRs as of the indicated dates:
(Dollars in thousands) March 31, 2021 December 31, 2020
Performing TDRs $ 15,684  $ 15,539 
Nonperforming TDRs 3,101  4,601 
Total TDRs $ 18,785  $ 20,140 

Approximately $0.2 million and less than $0.1 million in related reserves have been established for these loans at March 31, 2021 and December 31, 2020, respectively. The following tables present information regarding the types of loan modifications made for the three months ended March 31, 2021 and 2020:
Three months ended March 31, 2021
Contractual payment reduction and term extension Maturity Date Extension Discharged in bankruptcy
Other(1)
Total
Residential —  —  2  —  2 
Consumer —  —  19  —  19 
Total —  —  21  —  21 

Three months ended March 31, 2020
Contractual payment reduction and term extension Maturity Date Extension Discharged in bankruptcy
Other(1)
Total
Commercial and industrial 1  —  —  —  1 
Owner-occupied commercial 1  —  —  —  1 
Commercial mortgages —  1  —  —  1 
Residential —  —  1  1  2 
Consumer —  —  3  2  5 
Total 2  1  4  3  10 
(1)Other includes underwriting exceptions.
Principal balances are generally not forgiven when a loan is modified as a TDR. Nonaccruing restructured loans remain in nonaccrual status until there has been a period of sustained repayment performance, which is typically six months, and repayment is reasonably assured. The following table presents loans modified as TDRs during the three months ended March 31, 2021 and 2020.
Three Months Ended March 31,
2021 2020
(Dollars in thousands) Pre Modification Post Modification Pre Modification Post Modification
Commercial $ —  $ —  $ 20  $ 20 
Owner-occupied commercial —  —  650  650 
Commercial mortgages —  —  110  110 
Residential 167  167  226  226 
Consumer 830  830  247  247 
Total $ 997  $ 997  $ 1,253  $ 1,253 
During the three months ended March 31, 2021, the TDRs set forth in the table above resulted in a less than $0.1 million increase in the allowance for credit losses, and no additional charge-offs. For the three months ended March 31, 2020 the TDRs set forth in the table above resulted in a less than $0.1 million increase in the allowance for credit losses and no additional charge-offs. During the three months ended March 31, 2021, no TDRs defaulted that had received troubled debt modification during the past twelve months, compared to no TDRs during the three months ended March 31, 2020. The TDRs set forth in the table above did not occur as a result of the loan forbearance program under the CARES Act.

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

Lessee

The Company's ongoing leases have remaining lease terms of less than 1 year to 41 years, which includes renewal options that are exercised at its discretion. The Company's lease terms to calculate the lease liability and right of use asset include options to extend the lease when it is reasonably certain that the Company will exercise the option. The lease liability and right of use asset is included in Other liabilities and Other assets, respectively, in the unaudited Consolidated Statement of Financial Condition. Leases with an initial term of 12 months or less are not recorded on the unaudited Consolidated Statement of Financial Condition. Lease expense is recognized on a straight-line basis over the lease term. Operating lease expense is included in Occupancy expense in the unaudited Consolidated Statement of Income. The Company accounts for lease components separately from nonlease components. The Company subleases certain real estate to third parties.

The components of operating lease cost were as follows:
Three months ended
(Dollars in thousands) March 31, 2021 March 31, 2020
Operating lease cost (1)
$ 4,654  $ 4,550 
Sublease income (107) (93)
Net lease cost $ 4,547  $ 4,457 
(1)Includes variable lease cost and short-term lease cost.

Supplemental balance sheet information related to operating leases was as follows:
(Dollars in thousands) March 31, 2021 December 31, 2020
Assets
Right of use assets $ 151,957  $ 150,985 
Total assets $ 151,957  $ 150,985 
Liabilities
Lease liabilities $ 166,410  $ 166,451 
Total liabilities $ 166,410  $ 166,451 
Lease term and discount rate
Weighted average remaining lease term (in years) 19.35 19.36
Weighted average discount rate 4.27  % 4.26  %

Maturities of operating lease liabilities were as follows:
(Dollars in thousands) March 31, 2021
Remaining in 2021 $ 13,009 
2022 17,302 
2023 17,418 
2024 16,181 
2025 16,186 
After 2025 183,588 
Total lease payments 263,684 
Less: Interest (97,274)
Present value of lease liabilities $ 166,410 

27
Supplemental cash flow information related to operating leases was as follows:
Three months ended
(Dollars in thousands) March 31, 2021 March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 4,382  $ 4,667 

Lessor Equipment Leasing

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

The components of direct finance lease income are summarized in the table below:
Three months ended
(Dollars in thousands) March 31, 2021 March 31, 2020
Direct financing leases:
Interest income on lease receivable $ 4,623  $ 3,566 
Interest income on deferred fees and costs, net (318) 94 
Total direct financing lease net interest income $ 4,305  $ 3,660 

Equipment leasing receivables relate to direct financing leases. The composition of the net investment in direct financing leases was as follows:
(Dollars in thousands) March 31, 2021 December 31, 2020
Lease receivables $ 299,445  $ 281,601 
Unearned income (39,179) (36,669)
Deferred fees and costs 4,671  3,953 
Net investment in direct financing leases $ 264,937  $ 248,885 

Future minimum lease payments to be received for direct financing leases were as follows:

(Dollars in thousands) March 31, 2021
Remaining in 2021 $ 72,911 
2022 84,342 
2023 66,683 
2024 45,960 
2025 25,794 
After 2025 3,755 
Total lease payments $ 299,445 

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

WSFS performs its annual goodwill impairment test on October 1 or more frequently if events and circumstances indicate that the fair value of a reporting unit is less than its carrying value. In between annual tests, management performs a qualitative review of goodwill quarterly as part of the Company's review of the overall business to ensure no events or circumstances have occurred that would impact its goodwill evaluation. During the three months ended March 31, 2021, management determined based on its qualitative assessment that it is not more likely than not that the fair values of our reporting units are less than their carrying values. No goodwill impairment exists during the three months ended March 31, 2021.

The following table shows the allocation of goodwill to the reportable operating segments for purposes of goodwill impairment testing: 
(Dollars in thousands) WSFS
Bank 		Cash
Connect 		Wealth
Management 		Consolidated
Company
December 31, 2020 $ 452,629  $ —  $ 20,199  $ 472,828 
Goodwill adjustments —  —  —  — 
March 31, 2021 $ 452,629  $ —  $ 20,199  $ 472,828 
ASC 350 requires that an acquired intangible asset be separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the asset can be sold, transferred, licensed, rented or exchanged, regardless of the acquirer’s intent to do so.
The following table summarizes the Company's intangible assets:
(Dollars in thousands) Gross
Intangible
Assets 		Accumulated
Amortization 		Net
Intangible
Assets 		Amortization Period
March 31, 2021
Core deposits $ 93,811  $ (23,148) $ 70,663  10 years
Customer relationships 15,281  (6,919) 8,362 
7-15 years
Non-compete agreements 221  (201) 20  5 years
Loan servicing rights(1)
5,511  (2,683) 2,828 
10-25 years
Total intangible assets $ 114,824  $ (32,951) $ 81,873 
December 31, 2020
Core deposits $ 95,711  $ (22,727) $ 72,984  10 years
Customer relationships 15,281  (6,600) 8,681 
7-15 years
Non-compete agreements 221  (190) 31  5 years
Loan servicing rights(2)
5,302  (2,440) 2,862 
10-25 years
Total intangible assets $ 116,515  $ (31,957) $ 84,558 
(1)Includes reversal of impairment losses of $0.1 million for the three months ended March 31, 2021.
(2)Includes impairment losses of $0.2 million for the year ended December 31, 2020
The Company recognized amortization expense on intangible assets of $2.7 million for the three months ended March 31, 2021, compared to $2.8 million for the three months ended March 31, 2020.
The following table presents the estimated future amortization expense on intangible assets:  
(Dollars in thousands) March 31, 2021
Remaining in 2021 $ 8,477 
2022 11,116 
2023 10,964 
2024 10,787 
2025 10,535 
Thereafter 29,994 
Total $ 81,873 

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10. DEPOSITS

The following table shows deposits by category:
(Dollars in thousands) March 31, 2021 December 31, 2020
Noninterest-bearing:
Noninterest demand $ 3,857,610  $ 3,415,021 
Total noninterest-bearing $ 3,857,610  $ 3,415,021 
Interest-bearing:
Interest-bearing demand $ 2,659,336  $ 2,635,740 
Savings 1,886,222  1,774,332 
Money market 2,721,647  2,654,439 
Customer time deposits 1,093,984  1,158,845 
Brokered deposits 64,901  218,287 
Total interest-bearing 8,426,090  8,441,643 
Total deposits $ 12,283,700  $ 11,856,664 

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11. ASSOCIATE BENEFIT PLANS
Postretirement Medical Benefits
The Company shares certain costs of providing health and life insurance benefits to eligible retired Associates (employees) and their eligible dependents. Previously, all Associates were eligible for these benefits if they reached normal retirement age while working for the Company. Effective March 31, 2014, the Company changed the eligibility of this plan to include only those Associates who have achieved ten years of service as of March 31, 2014. The Company uses the mortality table issued by the Office of the Actuary of the U.S. Bureau of Census in its calculation.
The Company accounts for its obligations under the provisions of ASC 715, Compensation - Retirement Benefits (ASC 715). ASC 715 requires the recognition of the costs of these benefits over an Associate’s active working career. Amortization of unrecognized net gains or losses resulting from experience different from that assumed and from changes in assumptions is included as a component of net periodic benefit cost over the remaining service period of active employees to the extent that such gains and losses exceed 10% of the accumulated postretirement benefit obligation, as of the beginning of the year. The Company recognizes its service cost in Salaries, benefits and other compensation and the other components of net periodic benefit cost in Other operating expenses in the unaudited Consolidated Statements of Income.
The following table presents the components of net periodic benefit cost related to postretirement medical benefits plan.
Three months ended March 31,
(Dollars in thousands) 2021 2020
Service cost $ 17  $ 15 
Interest cost 13  17 
Prior service cost amortization (19) (19)
Net gain recognition (5) (9)
Net periodic cost (benefit) $ 6  $ 4 

Alliance Associate Pension Plan

During the fourth quarter of 2015, the Company completed the acquisition of Alliance Bancorp, Inc. of Pennsylvania (Alliance). At the time of the acquisition, the Company assumed the Alliance pension plan offered to its current Associates. During the fourth quarter of 2018, the Company notified the Alliance pension plan participants, the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) of its intention to terminate the plan, and received IRS and PBGC approval in the first quarter of 2020. The Company completed the termination and contributed $0.5 million to the plan to settle the obligation in June 30, 2020.
The following table presents the components of net periodic benefit cost related to the Alliance Associate Pension Plan. There was no net periodic benefit cost during the three months ended March 31, 2021.
Three months ended
(Dollars in thousands) March 31, 2020
Service cost $ 10 
Interest cost 63 
Expected return on plan assets (117)
Net periodic cost (benefit) $ (44)


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Beneficial Associate Pension and other postretirement benefits plans
On March 1, 2019, the Company closed its acquisition of Beneficial Bancorp, Inc. (Beneficial). At the time of the acquisition, the Company assumed the pension plan covering certain eligible Beneficial Associates. The plan was frozen in 2008. The following table presents the components of net periodic benefit cost related to the Beneficial pension benefits and other postretirement benefit plans.
Three months ended March 31, 2021
(Dollars in thousands) Pension Benefits Other Postretirement Benefits
Service cost $ —  $ 14 
Interest cost 530  77 
Expected return on plan assets (1,705) — 
Prior service cost amortization —  (3)
Net loss (gain) recognition 6  — 
Net periodic (benefit) cost $ (1,169) $ 88 

Three months ended March 31, 2020
(Dollars in thousands) Pension Benefits Other Postretirement Benefits
Service cost $ —  $ 28 
Interest cost 715  138 
Expected return on plan assets (1,594) — 
Net loss (gain) recognition 1  (15)
Net periodic (benefit) cost $ (878) $ 151 

12. INCOME TAXES
There were no unrecognized tax benefits as of March 31, 2021. The Company records interest and penalties on potential income tax deficiencies as income tax expense. The Company's federal and state tax returns for the 2017 through 2020 tax years are subject to examination as of March 31, 2021. The Company does not expect to record or realize any material unrecognized tax benefits during 2021.
As a result of the adoption of ASC 326 - Credit Losses on January 1, 2020, the tax impact relating to the incremental provision for expected credit losses from financial assets held at amortized cost has been reflected as a credit to retained earnings to reflect the tax impact of increased credit reserves. Accordingly, $8.5 million of such impact has been reflected as an income tax credit and deferred tax asset on the Company's Consolidated Statements of Financial Condition.

Section 2303(b) of the CARES Act provides the Company with an opportunity to carry back net operating losses (NOLs) arising from 2018, 2019 and 2020 to the prior five tax years. The Company has such NOLs reflected on its balance sheet as a portion of its current tax receivables, which were previously valued at the federal corporate income tax rate of 21%. However, the provisions of the CARES Act provide for NOL carryback claims to be calculated based on a rate of 35%, which was the federal corporate tax rate in effect for the carryback years. Consequently, effective March 31, 2020, the Company has revalued the benefit from its NOLs to reflect a 35% tax rate, which resulted in the recognition of an additional $1.8 million income tax benefit and deferred tax asset on the Company's Consolidated Statements of Financial Condition.
The amortization of the low-income housing credit investments has been reflected as income tax expense of $0.9 million and $0.8 million for the three months ended March 31, 2021 and 2020, respectively.
The amount of affordable housing tax credits, amortization and tax benefits recorded as income tax expense for the three months ended March 31, 2021 were $0.9 million, $0.9 million and $0.2 million, respectively. The carrying value of the investment in affordable housing credits is $25.7 million at March 31, 2021, compared to $26.6 million at December 31, 2020.
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13. FAIR VALUE DISCLOSURES OF FINANCIAL ASSETS AND LIABILITIES
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
ASC 820-10, Fair Value Measurement (ASC 820-10) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820-10 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:
•Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.
•Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that are derived principally from or can be corroborated by observable market data by correlation or other means.
•Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
33
The following tables present financial instruments carried at fair value as of March 31, 2021 and December 31, 2020 by level in the valuation hierarchy (as described above):
March 31, 2021
(Dollars in thousands) Quoted
Prices in
Active
Markets for
Identical
Asset
(Level 1) 		Significant
Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3) 		Total Fair
Value
Assets measured at fair value on a recurring basis:
Available-for-sale securities:
CMO $ —  $ 554,436  $ —  $ 554,436 
FNMA MBS —  1,998,045  —  1,998,045 
FHLMC MBS —  190,453  —  190,453 
GNMA MBS —  25,835  —  25,835 
GSE agency notes —  219,116  —  219,116 
Other assets —  11,439  —  11,439 
Total assets measured at fair value on a recurring basis $ —  $ 2,999,324  $ —  $ 2,999,324 
Liabilities measured at fair value on a recurring basis:
Other liabilities $ —  $ 3,912  $ 22,871  $ 26,783 
Assets measured at fair value on a nonrecurring basis:
Other investments $ —  $ —  $ 10,227  $ 10,227 
Other real estate owned —  —  2,068  2,068 
Loans held for sale —  155,447  —  155,447 
Total assets measured at fair value on a nonrecurring basis $ —  $ 155,447  $ 12,295  $ 167,742 

December 31, 2020
(Dollars in thousands) Quoted
Prices in
Active
Markets for
Identical
Asset
(Level 1) 		Significant
Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3) 		Total Fair
Value
Assets measured at fair value on a recurring basis:
Available-for-sale securities:
CMO $ —  $ 471,325  $ —  $ 471,325 
FNMA MBS —  1,598,970  —  1,598,970 
FHLMC MBS —  202,893  —  202,893 
GNMA MBS —  23,762  —  23,762 
GSE agency notes —  232,107  —  232,107 
Other assets —  14,448  —  14,448 
Total assets measured at fair value on a recurring basis $ —  $ 2,543,505  $ —  $ 2,543,505 
Liabilities measured at fair value on a recurring basis:
Other liabilities $ —  $ 8,218  $ 24,039  $ 32,257 
Assets measured at fair value on a nonrecurring basis
Other investments $ —  $ —  $ 9,541  $ 9,541 
Other real estate owned —  —  3,061  3,061 
Loans held for sale —  197,541  —  197,541 
Total assets measured at fair value on a nonrecurring basis $ —  $ 197,541  $ 12,602  $ 210,143 

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Fair value is based on quoted market prices, where available. If such quoted market prices are not available, fair value is based on internally developed models or obtained from third parties that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include unobservable parameters. The Company's valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While the Company believes its valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Available-for-sale securities
Securities classified as available-for-sale are reported at fair value using Level 2 inputs. The Company believes that this Level 2 designation is appropriate under ASC 820-10, as these securities are government sponsored enterprises (GSEs) and Ginnie Mae securities with almost all fixed income securities, none are exchange traded, and all are priced by correlation to observed market data. For these securities the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors.
Other investments
Other investments includes equity investments without readily determinable fair values and equity method investments, which are both categorized as Level 3. The Company’s equity investments without readily determinable fair values are held at cost, and are adjusted for any observable transactions during the reporting period and its equity method investments are initially recorded at cost based on the Company’s percentage ownership in the investee, and are adjusted to reflect the recognition of the Company’s proportionate share of income or loss of the investee based on the investee’s earnings.
Other real estate owned
Other real estate owned consists of loan collateral which has been repossessed through foreclosure or other measures. Initially, foreclosed assets are recorded at the fair value of the collateral less estimated selling costs. Subsequent to foreclosure, valuations are updated periodically and the assets may be marked down further, reflecting a new cost basis. The fair value of other real estate owned was estimated using Level 3 inputs based on appraisals obtained from third parties.
Loans held for sale
The fair value of loans held for sale is based on estimates using Level 2 inputs. These inputs are based on pricing information obtained from wholesale mortgage banks and brokers and applied to loans with similar interest rates and maturities.
Other assets
Other assets include the fair value of interest rate products and derivatives on the residential mortgage held for sale loan pipeline. Valuation of interest rate products is obtained from an independent pricing service and also from the derivative counterparty. Valuation of the derivative related to the residential mortgage held for sale loan pipeline is based on valuation of the loans held for sale portfolio as described above in Loans held for sale.
Other liabilities
Other liabilities include the fair value of interest rate products, derivatives on the residential mortgage held for sale loan pipeline and derivative related to the sale of certain Visa Class B common shares. Valuation of interest rate products is obtained from an independent pricing service and also from the derivative counterparty. Valuation of the derivative related to the residential mortgage held for sale loan pipeline is based on valuation of the loans held for sale portfolio as described above in Loans held for sale. Valuation of the derivative related to the sale of certain Visa Class B common shares is based on: (i) the agreed upon graduated fee structure; (ii) the length of time until the resolution of the Visa covered litigation; and (iii) the estimated impact of dilution in the conversion ratio of Class B shares resulting from changes in the Visa covered litigation.

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FAIR VALUE OF FINANCIAL INSTRUMENTS
The reported fair values of financial instruments are based on a variety of factors. In certain cases, fair values represent quoted market prices for identical or comparable instruments. In other cases, fair values have been estimated based on assumptions regarding the amount and timing of estimated future cash flows that are discounted to reflect current market rates and varying degrees of risk. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of period-end or that will be realized in the future.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and cash equivalents
For cash and short-term investment securities, including due from banks, federal funds sold or purchased under agreements to resell and interest-bearing deposits with other banks, the carrying amount is a reasonable estimate of fair value.
Investment securities
Investment securities include debt securities classified as held-to-maturity or available-for-sale. Fair value is estimated using quoted prices for similar securities, which the Company obtains from a third party vendor. The Company uses one of the largest providers of securities pricing to the industry and management periodically assesses the inputs used by this vendor to price the various types of securities owned by the Company to validate the vendor’s methodology as described above in available-for-sale securities.
Other investments
Other investments includes equity investments without readily determinable fair values (see discussion in “Fair Value of Financial Assets and Liabilities” section above).
Loans held for sale
Loans held for sale are carried at their fair value (see discussion in “Fair Value of Financial Assets and Liabilities” section above).
Loans and leases
Fair values are estimated for portfolios of loans with similar financial characteristics. Loans and leases are segregated by portfolio segments. For loans that reprice frequently, the book value approximates fair value. The fair values of other types of loans, with the exception of reverse mortgages, are estimated by discounting expected cash flows using the current rates at which similar loans would be made to borrowers with comparable credit ratings and for similar remaining maturities. The fair values of reverse mortgages are based on the net present value of the expected cash flows using a discount rate specific to the reverse mortgages portfolio. The fair value of nonperforming loans is based on recent external appraisals of the underlying collateral, if the loan is collateral dependent. Estimated cash flows, discounted using a rate commensurate with current rates and the risk associated with the estimated cash flows, are used if appraisals are not available. This technique does contemplate an exit price.
Stock in the Federal Home Loan Bank (FHLB) of Pittsburgh
The fair value of FHLB stock is assumed to be equal to its cost basis, since the stock is non-marketable but redeemable at its par value.
Accrued interest receivable
The carrying amounts of interest receivable approximate fair value.

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

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Deposits
The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, money market and interest-bearing demand deposits, is assumed to be equal to the amount payable on demand. The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using rates currently offered for deposits with comparable remaining maturities.
Borrowed funds
Rates currently available to the Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.
Off-balance sheet instruments
The fair value of off-balance sheet instruments, including swap guarantees of $12.8 million at both March 31, 2021 and December 31, 2020, respectively, and standby letters of credit, approximates the recorded net deferred fee amounts. Because letters of credit are generally not assignable by either the Company or the borrower, they only have value to the Company and the borrower. In determining the fair value of the swap guarantees, the Company assesses the underlying credit risk exposure for each borrower in a paying position to the third-party financial institution.
Accrued interest payable
The carrying amounts of interest payable approximate fair value.
Other liabilities
Other liabilities include the fair value of interest rate products, derivatives on the residential mortgage held for sale loan pipeline, and derivative related to the sale of certain Visa Class B common shares (see discussion in “Fair Value of Financial Assets and Liabilities” section above).
Assets measured at fair value using significant unobservable inputs (Level 3)
The following table provides a description of the valuation technique and significant unobservable inputs for the Company's assets classified as Level 3 and measured at fair value on a nonrecurring basis:
March 31, 2021
Financial Instrument Fair Value Valuation Technique(s) Unobservable Input Range (Weighted Average)
Other investments $ 10,227  Observed market comparable transactions Period of observed transactions
July 2020
Other real estate owned 2,068  Fair market value of collateral Costs to sell
10.0%
Other liabilities 22,871  Discounted cash flow Timing of the resolution of the Visa litigation
2.50 - 7.50 years (5.25 years or 4Q 2025)





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The book value and estimated fair value of the Company's financial instruments are as follows:
 
March 31, 2021 December 31, 2020
(Dollars in thousands) Fair Value
Measurement 		Book Value Fair Value Book Value Fair Value
Financial assets:
Cash, cash equivalents, and restricted cash Level 1 $ 2,064,161  $ 2,064,161  $ 1,654,735  $ 1,654,735 
Investment securities available-for-sale Level 2 2,987,885  2,987,885  2,529,057  2,529,057 
Investment securities held-to-maturity, net Level 2 103,523  107,629  111,741  116,421 
Other investments Level 3 10,227  10,227  9,541  9,541 
Loans, held for sale Level 2 155,447  155,447  197,541  197,541 
Loans and leases, net(1)
Level 3 8,373,766  8,550,651  8,795,935  9,130,003 
Stock in FHLB of Pittsburgh Level 2 5,506  5,506  5,771  5,771 
Accrued interest receivable Level 2 43,159  43,159  44,335  44,335 
Other assets Level 2 11,439  11,439  14,448  14,448 
Financial liabilities:
Deposits Level 2 12,283,700  12,292,473  11,856,664  11,868,897 
Borrowed funds Level 2 335,201  323,927  340,641  340,106 
Standby letters of credit
Level 3 552  552  630  630 
Accrued interest payable Level 2 4,153  4,153  1,450  1,450 
Other liabilities Levels 2, 3 26,783  26,783  32,257  32,257 
 (1) Includes reverse mortgage loans.
At March 31, 2021 and December 31, 2020 the Company had no commitments to extend credit measured at fair value.
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14. DERIVATIVE FINANCIAL INSTRUMENTS
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both economic conditions and its business operations. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.
Fair Values of Derivative Instruments
The table below presents the fair value of derivative financial instruments as well as their location on the unaudited Consolidated Statements of Financial Condition as of March 31, 2021.
Fair Values of Derivative Instruments
(Dollars in thousands) Notional Balance Sheet Location Derivatives
(Fair Value)
Derivatives not designated as hedging instruments:
Interest rate products $ 58,287  Other assets $ 3,464 
Interest rate products 58,287  Other liabilities (3,702)
Risk participation agreements 4,333  Other liabilities (6)
Interest rate lock commitments with customers 253,235  Other assets 4,889 
Interest rate lock commitments with customers 14,433  Other liabilities (144)
Forward sale commitments 259,014  Other assets 3,086 
Forward sale commitments 19,755  Other liabilities (60)
Financial derivatives related to
sales of certain Visa Class B shares 		113,177  Other liabilities (22,871)
Total derivatives $ 780,521  $ (15,344)
 
The table below presents the fair value of derivative financial instruments as well as their location on the Consolidated Statements of Financial Condition as of December 31, 2020.
Fair Values of Derivative Instruments
(Dollars in thousands) Notional Balance Sheet Location Derivatives
(Fair Value)
Derivatives not designated as hedging instruments:
Interest rate products $ 61,326  Other assets $ 5,369 
Interest rate products 61,326  Other liabilities (5,851)
Risk participation agreements 4,372  Other liabilities (10)
Interest rate lock commitments with customers 244,037  Other assets 8,496 
Interest rate lock commitments with customers 8,413  Other liabilities (117)
Forward sale commitments 50,705  Other assets 583 
Forward sale commitments 258,186  Other liabilities (2,240)
Financial derivatives related to
sales of certain Visa Class B shares 		113,177  Other liabilities (24,039)
Total derivatives $ 801,542  $ (17,809)

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Derivatives Designated as Hedging Instruments:
Cash Flow Hedges of Interest Rate Risk
The Company's objectives in using interest rate derivatives are to add stability to interest income and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of fixed amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount.
Changes to the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecast transaction affects earnings. During the first half of 2020, such derivatives were used to hedge the variable cash flows associated with a variable rate loan pool.
In April 2020, the Company terminated its three interest rate derivatives that were designated as cash flow hedges for a net gain of $1.3 million. At this point, hedge accounting was discontinued, and the net gain was recognized in accumulated other comprehensive income (loss). Once a cash flow hedge is discontinued, the net gain or loss that remains in accumulated comprehensive income (loss) is reclassified into earnings when the transaction affects earnings. As the underlying hedged transaction continues to be probable, the $1.3 million net gain will be recognized into earnings on a straight-line basis over each derivative's original contract term. During the next twelve months, the Company estimates that $0.4 million will be reclassified as an increase to interest income. During the three months ended March 31, 2021, $0.1 million was reclassified into interest income.
The table below presents the effect of the cash flow hedges on the unaudited Consolidated Statements of Income for three months ended March 31, 2020.
Amount of Gain Recognized in OCI on Derivative (Effective Portion) Location of Gain Reclassified from Accumulated OCI into Income (Effective Portion)
(Dollars in thousands) Three Months Ended March 31,
Derivatives in cash flow hedging relationships 2020
Interest rate products $ 1,585  Interest income
Total $ 1,585 

Derivatives Not Designated as Hedging Instruments:
Back-to-Back Swap Transactions
The Company entered into agreements with two unrelated financial institutions whereby the Company enters into an interest rate swap transaction with the customer and offsets that transaction with another counterparty. Derivative financial instruments related to back-to-back swaps are recorded at fair value and are not designated as accounting hedges.
Swap Guarantees
The Company entered into agreements with four unrelated financial institutions whereby those financial institutions entered into interest rate derivative contracts (interest rate swap transactions) directly with customers referred to them by the Company. Under the terms of the agreements, those financial institutions have recourse to us for any exposure created under each swap transaction, only in the event that the customer defaults on the swap agreement and the agreement is in a paying position to the third-party financial institution. This is a customary arrangement that allows us to provide access to interest rate swap transactions for our customers without creating the swap ourselves. These swap guarantees are accounted for as credit derivatives.
At March 31, 2021 and December 31, 2020, there were 239 and 234 variable-rate to fixed-rate swap transactions between the third-party financial institutions and the Company's customers, respectively. The initial notional aggregate amount was approximately $1.1 billion at March 31, 2021 compared to $1.1 billion at December 31, 2020. At March 31, 2021, the swap transactions remaining maturities ranged from under 1 year to 15 years. At March 31, 2021, 182 of these customer swaps were in a paying position to third parties for $43.6 million, with our swap guarantees having a fair value of $12.8 million. At December 31, 2020, 231 of these customer swaps were in a paying position to third parties for $81.6 million, with our swap guarantees having a fair value of $12.8 million. However, for both periods, none of the Company's customers were in default of the swap agreements.

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Derivative Financial Instruments from Mortgage Banking Activities
Derivative financial instruments related to mortgage banking activities are recorded at fair value and are not designated as accounting hedges. This includes commitments to originate certain fixed-rate residential mortgage loans to customers, also referred to as interest rate lock commitments. The Company may also enter into forward sale commitments to sell loans to investors at a fixed price at a future date and trade asset-backed securities to mitigate interest rate risk.
The table below presents the effect of the derivative financial instruments on the unaudited Consolidated Statements of Income for the three months ended March 31, 2021 and March 31, 2020.
Amount of Gain or (Loss) Recognized in Income Location of Gain or (Loss) Recognized in Income
(Dollars in thousands) Three Months Ended March 31,
Derivatives not designated as hedging instruments 2021 2020
Interest rate lock commitments with customers $ (3,264) $ 3,049  Mortgage banking activities, net
Forward sale commitments 6,123  (4,045) Mortgage banking activities, net
Total $ 2,859  $ (996)

Credit-risk-related Contingent Features
The Company has agreements with certain derivative counterparties that contain a provision under which, if it defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.
The Company has minimum collateral posting thresholds with certain of its derivative counterparties, and has posted collateral of $6.8 million in securities and $7.0 million in cash against its obligations under these agreements. If the Company had breached any of these provisions at March 31, 2021, it could have been required to settle its obligations under the agreements at the termination value.
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15. SEGMENT INFORMATION
As defined in ASC 280, Segment Reporting (ASC 280), an operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the enterprise’s chief operating decision makers to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. The Company evaluates performance based on pretax net income relative to resources used, and allocate resources based on these results. The accounting policies applicable to the Company's segments are those that apply to its preparation of the accompanying unaudited Consolidated Financial Statements. Based on these criteria, the Company has identified three segments: WSFS Bank, Cash Connect®, and Wealth Management.
The WSFS Bank segment provides financial products to commercial and retail customers. Retail and Commercial Banking, Commercial Real Estate Lending and other banking business units are operating departments of WSFS Bank. These departments share the same regulator, the same market, many of the same customers and provide similar products and services through the general infrastructure of the Bank. Accordingly, these departments are not considered discrete segments and are appropriately aggregated in the WSFS Bank segment.
The Company's Cash Connect® segment provides ATM vault cash, smart safe and other cash logistics services through strategic partnerships with several of the largest networks, manufacturers and service providers in the ATM industry. Cash Connect® services non-bank and WSFS-branded ATMs and retail safes nationwide. The balance sheet category Cash in non-owned ATMs includes cash from which fee income is earned through bailment arrangements with customers of Cash Connect®.
The Wealth Management segment provides a broad array of planning and advisory services, investment management, trust services, and credit and deposit products to individual, corporate, and institutional clients through multiple integrated businesses. WSFS Wealth® Investments provides financial advisory services along with insurance and brokerage products. Cypress, a registered investment adviser, is a fee-only wealth management firm managing a “balanced” investment style portfolio focused on preservation of capital and generating current income. West Capital, a registered investment adviser, is a fee-only wealth management firm operating under a multi-family office philosophy to provide customized solutions to institutions and high-net-worth individuals. The trust division of WSFS, comprised of WSFS Institutional Services® and Christiana Trust DE, provides trustee, agency, bankruptcy administration, custodial and commercial domicile services to institutional and corporate clients. Christiana Trust DE also provides personal trust and fiduciary services to families and individuals across the U.S. Powdermill® is a multi-family office specializing in providing independent solutions to high-net-worth individuals, families and corporate executives through a coordinated, centralized approach. WSFS Wealth Client Management serves high-net-worth clients by delivering credit and deposit products and partnering with other Wealth Management units to provide comprehensive solutions to clients.





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The following tables show segment results for the three months ended March 31, 2021 and 2020:
  Three Months Ended March 31, 2021 Three Months Ended March 31, 2020
(Dollars in thousands) WSFS Bank
Cash
Connect®
Wealth
Management 		Total WSFS Bank
Cash
Connect®
Wealth
Management 		Total
Statements of Income
External customer revenues:
Interest income $ 119,131  $ —  $ 2,150  $ 121,281  $ 131,309  $ —  $ 2,546  $ 133,855 
Noninterest income 23,348  9,702  14,772  47,822  18,072  11,679  11,096  40,847 
Total external customer revenues 142,479  9,702  16,922  169,103  149,381  11,679  13,642  174,702 
Inter-segment revenues:
Interest income 844  269  2,695  3,808  1,943  —  2,849  4,792 
Noninterest income 3,695  286  401  4,382  2,907  229  173  3,309 
Total inter-segment revenues 4,539  555  3,096  8,190  4,850  229  3,022  8,101 
Total revenue 147,018  10,257  20,018  177,293  154,231  11,908  16,664  182,803 
External customer expenses:
Interest expense 6,904  —  192  7,096  16,747  —  958  17,705 
Noninterest expenses 80,544  7,298  7,777  95,619  73,085  8,223  7,188  88,496 
(Recovery of) provision for credit losses (19,593) —  (567) (20,160) 55,034  —  1,612  56,646 
Total external customer expenses 67,855  7,298  7,402  82,555  144,866  8,223  9,758  162,847 
Inter-segment expenses:
Interest expense 2,964  180  664  3,808  2,849  954  989  4,792 
Noninterest expenses 687  1,087  2,608  4,382  402  741  2,166  3,309 
Total inter-segment expenses 3,651  1,267  3,272  8,190  3,251  1,695  3,155  8,101 
Total expenses 71,506  8,565  10,674  90,745  148,117  9,918  12,913  170,948 
Income before taxes $ 75,512  $ 1,692  $ 9,344  $ 86,548  $ 6,114  $ 1,990  $ 3,751  $ 11,855 
Income tax provision 21,407  1,288 
Consolidated net income 65,141  10,567 
Net loss attributable to noncontrolling interest 59  (360)
Net income attributable to WSFS $ 65,082  $ 10,927 
Supplemental Information
Capital expenditures for the period ended $ 1,270  $ —  $ —  $ 1,270  $ 2,282  $ 211  $ 38  $ 2,531 

The following table shows significant components of segment net assets as of March 31, 2021 and December 31, 2020:
  March 31, 2021 December 31, 2020
(Dollars in thousands) WSFS Bank
Cash
Connect®
Wealth
Management 		Total WSFS Bank
Cash
Connect®
Wealth
Management 		Total
Statements of Financial Condition
Cash and cash equivalents $ 1,627,674  $ 423,406  $ 13,081  $ 2,064,161  $ 1,246,394  $ 397,878  $ 10,463  $ 1,654,735 
Goodwill 452,629  —  20,199  472,828  452,629  —  20,199  472,828 
Other segment assets 11,952,186  7,576  233,701  12,193,463  11,963,345  6,997  236,009  12,206,351 
Total segment assets $ 14,032,489  $ 430,982  $ 266,981  $ 14,730,452  $ 13,662,368  $ 404,875  $ 266,671  $ 14,333,914 

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16. COMMITMENTS AND CONTINGENCIES
Secondary Market Loan Sales
The Company typically sells newly originated residential mortgage loans in the secondary market to mortgage loan aggregators and on a more limited basis, to government sponsored enterprise (GSEs) such as FHLMC, FNMA, and the FHLB. Loans held for sale are reflected on the unaudited Consolidated Statements of Financial Condition at fair value with changes in the value reflected in the unaudited Consolidated Statements of Income. Gains and losses are recognized at the time of sale. The Company periodically retains the servicing rights on residential mortgage loans sold which results in monthly service fee income. The mortgage servicing rights are included in Intangible assets in the unaudited Consolidated Statements of Financial Condition. Otherwise, the Company sells loans with servicing released on a nonrecourse basis. Rate-locked loan commitments that the Company intends to sell in the secondary market are accounted for as derivatives under ASC 815, Derivatives and Hedging (ASC 815).
The Company does not sell loans with recourse, except for standard loan sale contract provisions covering violations of representations and warranties and, under certain circumstances, early payment default by the borrower. These are customary repurchase provisions in the secondary market for residential mortgage loan sales. These provisions may include either an indemnification from loss or the repurchase of the loans. Repurchases and losses have been rare and no provision is made for losses at the time of sale. There were no repurchases during the three months ended March 31, 2021 and 2020.
Unfunded Lending Commitments
At March 31, 2021 and December 31, 2020, the allowance for credit losses of unfunded lending commitments were $8.9 million and $8.2 million, respectively. A provision for unfunded lending commitments of $0.6 million was recognized during the three months ended March 31, 2021, and a credit for unfunded lending commitments of $0.2 million was recognized during the three months ended March 31, 2020.
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17. CHANGE IN ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Accumulated other comprehensive (loss) income includes unrealized gains and losses on available-for-sale investments, unrealized gains and losses on cash flow hedges, as well as unrecognized prior service costs, transition costs, and actuarial gains and losses on defined benefit pension plans. Changes to accumulated other comprehensive (loss) income are presented, net of tax, as a component of stockholders’ equity. Amounts that are reclassified out of accumulated other comprehensive (loss) income are recorded on the unaudited Consolidated Statement of Income either as a gain or loss.
Changes to accumulated other comprehensive (loss) income by component are shown, net of taxes, in the following tables for the period indicated:
(Dollars in thousands) Net change in
investment
securities
available-for-sale 		Net change
in investment securities
held-to-maturity 		Net
change in
defined
benefit
plan
Net change in
fair value of
derivatives
used for cash
flow hedges (1)
Net change in equity method investments Total
Balance, December 31, 2020 $ 59,882  $ 276  $ (4,788) $ 646  $ (9) $ 56,007 
Other comprehensive (loss) income before reclassifications (69,589) —  —  —  273  (69,316)
Less: Amounts reclassified from accumulated other comprehensive (loss) income (250) (16) (16) (111) —  (393)
Net current-period other comprehensive (loss) income (69,839) (16) (16) (111) 273  (69,709)
Balance, March 31, 2021 $ (9,957) $ 260  $ (4,804) $ 535  $ 264  $ (13,702)
Balance, December 31, 2019 $ 26,927  $ 468  $ (3,317) $ (577) $ —  $ 23,501 
Other comprehensive income before reclassifications 46,036  —  36  1,585  —  47,657 
Less: Amounts reclassified from accumulated other comprehensive income (527) (65) (32) —  —  (624)
Net current-period other comprehensive income (loss) 45,509  (65) 4  1,585  —  47,033 
Balance, March 31, 2020 $ 72,436  $ 403  $ (3,313) $ 1,008  $ —  $ 70,534 
(1)Cash flow hedges were terminated as of April 1, 2020

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The unaudited Consolidated Statements of Income were impacted by components of other comprehensive income as shown in the tables below:
Three Months Ended March 31, Affected line item in unaudited Consolidated Statements of Income
(Dollars in thousands) 2021 2020
Securities available for sale:
Realized gains on securities transactions $ (329) $ (693) Securities gains, net
Income taxes 79  166  Income tax provision
Net of tax $ (250) $ (527)
Net unrealized holding gains on securities transferred between available-for-sale and held-to-maturity:
Amortization of net unrealized gains to income during the period $ (21) $ (85) Interest and dividends on investment securities
Income taxes 5  20  Income tax provision
Net of tax $ (16) $ (65)
Amortization of defined benefit pension plan-related items:
Prior service credits
$ (22) $ (19)
Actuarial losses (gains) 1  (23)
Total before tax $ (21) $ (42) Salaries, benefits and other compensation
Income taxes 5  10  Income tax provision
Net of tax $ (16) $ (32)
Net unrealized gains on terminated cash flow hedges:
Amortization of net unrealized gains to income during the period $ (146) $ —  Interest and fees on loans and leases
Income taxes 35  —  Income tax provision
Net of tax $ (111) $ — 
Total reclassifications $ (393) $ (624)

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18. RELATED PARTY TRANSACTIONS
In the ordinary course of business, from time to time the Company enters into transactions with related parties, including, but not limited to, its officers and directors. These transactions are made on substantially the same terms and conditions, including interest rates and collateral requirements, as those prevailing at the same time for comparable transactions with other customers. They do not, in the opinion of management, involve greater than normal credit risk or include other features unfavorable to the Company. Any related party loans exceeding $0.5 million require review and approval by the Board of Directors. There were no loans originated to related parties exceeding $0.5 million during the three months ended March 31, 2021 and 2020, respectively.
The outstanding balances of loans to related parties at March 31, 2021 and December 31, 2020 were $0.2 million for both periods. Total deposits from related parties at March 31, 2021 and December 31, 2020 were $7.1 million and $8.3 million, respectively. During the first quarter of 2021, there were no new loan and credit line advances to related parties and repayments were less than $0.1 million.
19. LEGAL AND OTHER PROCEEDINGS
In accordance with the current accounting standards for loss contingencies, the Company establishes reserves for litigation-related matters that arise in the ordinary course of its business activities when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss can be reasonably estimated. Litigation claims and proceedings of all types are subject to many uncertain factors that generally cannot be predicted with assurance. In addition, the Company's defense of litigation claims may result in legal fees, which it expenses as incurred.
As previously disclosed, on February 27, 2018, the Company entered into a settlement agreement with Universitas Education, LLC (Universitas) to resolve arbitration claims related to services provided by Christiana Bank and Trust Company (CB&T) prior to its acquisition by WSFS in December 2010. In accordance with the litigation settlement, the Company paid Universitas $12.0 million to fully settle the claims. During the third quarter of 2018, WSFS recovered $7.9 million in settlement and legal costs from insurance carriers that provided coverage relating to the Universitas matter. WSFS is pursuing all of its rights and remedies to recover the remaining amounts relating to the Universitas proceeding, including the Universitas settlement payment, legal fees and related costs, by enforcing the indemnity right in the 2010 purchase agreement by which WSFS acquired CB&T.
In March 2017, Nature’s Healing Trust (NHT) filed a complaint against WSFS Bank in the Delaware Court of Chancery. NHT asserts that WSFS Bank failed to provide timely notice concerning the possible lapse of two life settlement policies (aggregate face amount of $6.3 million) held in the trust. NHT asserts claims against WSFS Bank for breach of contract, breach of fiduciary duty, and negligence, and seeks the face value of the policies. WSFS Bank disputes the factual allegations and denies liability. WSFS Bank has, in accordance with its normal procedures, notified its insurance carriers of a possible claim. WSFS Bank is vigorously defending itself in this matter and believes it has valid factual and legal defenses.
There were no material changes or additions to other significant pending legal or other proceedings involving the Company other than those arising out of routine operations.
20. SUBSEQUENT EVENTS
The Company evaluated subsequent events in accordance with ASC Topic 855 and determined that the following qualifies as a non-recognized subsequent event:
Repayment of the 2016 Senior Notes
On May 7, 2021, the WSFS Board of Directors approved the Company's repayment of $100.0 million of senior notes due 2026 (the 2016 senior notes). The 2016 senior notes mature on June 15, 2026 and have a fixed coupon rate of 4.50% from issuance to but excluding June 15, 2021 and a variable coupon rate of three month LIBOR plus 3.30% from June 15, 2021 until maturity. The 2016 senior notes may be redeemed beginning on June 15, 2021 at 100% of principal plus accrued and unpaid interest. During the second quarter of 2021, the Company expects to incur additional interest expense of $1.1 million to recognize the remaining unamortized debt issuance costs associated with the 2016 senior notes.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
WSFS Financial Corporation (the Company or WSFS) is a savings and loan holding company headquartered in Wilmington, Delaware. Substantially all of our assets are held by our subsidiary, Wilmington Savings Fund Society, FSB (WSFS Bank or the Bank), one of the ten oldest bank and trust companies in the United States (U.S.) continuously operating under the same name. With $14.7 billion in assets and $24.7 billion in assets under management (AUM) and assets under administration (AUA) at March 31, 2021, WSFS Bank is the oldest and largest locally-managed bank and trust company headquartered in the Delaware and Greater Philadelphia region. As a federal savings bank that was formerly chartered as a state mutual savings bank, WSFS Bank enjoys a broader scope of permissible activities than most other financial institutions. A fixture in the community, we have been in operation for more than 189 years. In addition to our focus on stellar customer experience, we have continued to fuel growth and remain a leader in our community. We are a relationship-focused, locally-managed, community banking institution. Our mission is simple: “We Stand for Service.” Our strategy of “Engaged Associates, living our culture, making a better life for all we serve” focuses on exceeding customer expectations, delivering stellar experiences and building customer advocacy through highly-trained, relationship-oriented, friendly, knowledgeable and empowered Associates.
We have six consolidated subsidiaries: WSFS Bank, WSFS Wealth Management, LLC (Powdermill®), WSFS Capital Management, LLC (West Capital), Cypress Capital Management, LLC (Cypress), Christiana Trust Company of Delaware® (Christiana Trust DE) and WSFS SPE Services, LLC. We also have one unconsolidated subsidiary, WSFS Capital Trust III. WSFS Bank has three wholly owned subsidiaries: Beneficial Equipment Finance Corporation (BEFC), WSFS Investment Group, Inc. (WSFS Wealth® Investments), and 1832 Holdings, Inc., and one majority-owned subsidiary, NewLane Finance Company (NewLane Finance®).
Our banking business had a total loan and lease portfolio of $8.6 billion as of March 31, 2021, which was funded primarily through commercial relationships and retail and customer generated deposits. We have built a $6.8 billion commercial loan and lease portfolio by recruiting seasoned commercial lenders in our markets, offering the high level of service and flexibility typically associated with a community bank and through acquisitions. We also offer a broad variety of consumer loan products, retail securities and insurance brokerage through our retail branches, and mortgage and title services through our branches and WSFS Mortgage®. WSFS Mortgage® is a mortgage banking company specializing in a variety of residential mortgage and refinancing solutions. Our leasing business is conducted by NewLane Finance®. NewLane Finance® originates small business leases and provides commercial financing to businesses nationwide, targeting various equipment categories including technology, software, office, medical, veterinary and other areas. In addition, NewLane Finance® offers insurance through its subsidiary, Prime Protect, which commenced operations during the fourth quarter of 2020.
Our Cash Connect® business is a premier provider of ATM vault cash, smart safe (safes that automatically accept, validate, record and hold cash in a secure environment) and other cash logistics services through strategic partnerships with several of the largest networks, manufacturers and service providers in the ATM industry. Cash Connect® services non-bank and WSFS-branded ATMs and retail safes nationwide in the U.S. Cash Connect® manages over $1.7 billion in total cash and services approximately 28,100 non-bank ATMs and approximately 4,900 smart safes nationwide. Cash Connect® provides related services such as online reporting and ATM cash management, predictive cash ordering and reconcilement services, armored carrier management, loss protection, ATM processing equipment sales and deposit safe cash logistics. Cash Connect® also supports 625 branded ATMs for WSFS Bank Customers, which has one of the largest branded ATM networks in our market.
Our Wealth Management business provides a broad array of planning and advisory services, investment management, trust services, and credit and deposit products to individual, corporate, and institutional clients through multiple integrated businesses. Combined, these businesses had $24.7 billion of AUM and AUA at March 31, 2021. WSFS Wealth® Investments provides financial advisory services along with insurance and brokerage products. Cypress, a registered investment adviser, is a fee-only wealth management firm managing a “balanced” investment style portfolio focused on preservation of capital and generating current income. West Capital, a registered investment adviser, is a fee-only wealth management firm operating under a multi-family office philosophy to provide customized solutions to institutions and high-net-worth individuals. The trust division of WSFS, comprised of WSFS Institutional Services®, and Christiana Trust DE provides trustee, agency, bankruptcy administration, custodial and commercial domicile services to institutional and corporate clients. Christiana Trust DE also provides personal trust and fiduciary services to families and individuals across the U.S. Powdermill® is a multi-family office specializing in providing independent solutions to high-net-worth individuals, families and corporate executives through a coordinated, centralized approach. WSFS Wealth Client Management serves high-net-worth clients by delivering credit and deposit products and partnering with other Wealth Management businesses to provide comprehensive solutions to clients.
As of March 31, 2021, we service our customers primarily from 111 offices located in Pennsylvania (51), Delaware (42), New Jersey, (16), Virginia (1) and Nevada (1), our ATM network, our website at www.wsfsbank.com and our mobile app.
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Highlights for First Quarter 2021
Results through the first quarter of 2021 and other notable items include the following:
•On March 9, 2021, WSFS signed an Agreement and Plan of Merger (the Merger Agreement) with Bryn Mawr Bank Corporation (Bryn Mawr), a Pennsylvania corporation and the parent holding company of The Bryn Mawr Trust Company, a Pennsylvania chartered bank and wholly owned subsidiary of Bryn Mawr (Bryn Mawr Bank). Under the terms and subject to the conditions of the Merger Agreement, among other things, (i) Bryn Mawr will merge with and into WSFS, with WSFS continuing as the surviving corporation (the Merger), and (ii) simultaneously with the Merger, Bryn Mawr Bank will merge with and into WSFS Bank, with WSFS Bank continuing as the surviving bank. The Merger is subject to customary conditions and regulatory approvals, and is currently expected to close early in the fourth quarter of 2021. We recorded $1.8 million of corporate development and restructuring expense primarily related to the pending Merger during the first quarter of 2021.
•We recorded a reduction in the allowance for credit losses (ACL) of $24.0 million during the three months ended March 31, 2021 as a result of continued improving credit trends and economic forecasts.
•We continued to participate in the regulatory relief programs offered as a result of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, as amended, including the Paycheck Protection Program (PPP). Activity during the first quarter of 2021 included the following:
◦Support for nearly $300 million of second round PPP loans to over 1,800 WSFS and non-WSFS Customers, which generated $2.2 million of referral fees during the first quarter of 2021 through our partnership with third party providers.
◦Loan forgiveness for first round PPP loans of $231.4 million. As of March 31, 2021, there was $526.8 million of PPP loans in our loan portfolio.
◦See "Financial Condition, Capital Resources and Liquidity - Financial Condition" and "Recent Regulatory Developments" for further details on PPP.
•We were ranked number 10 on the Forbes 12th Annual America's Best Banks list and received The Gallup Exceptional Workplace Award for the fifth time.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
Financial Condition
Total assets increased $396.5 million to $14.7 billion at March 31, 2021 compared to December 31, 2020. This increase is primarily comprised of the following:
•Investment securities, available-for-sale increased $458.8 million during the three months ended March 31, 2021 primarily due to $748.3 million in purchases partially offset by repayments of $185.0 million, decreased market-values on available-for-sale securities of $69.8 million and sales of $9.3 million.
•Cash and cash equivalents increased $409.4 million, primarily reflecting excess cash held due to increased deposits related to PPP loans, additional government stimulus and reduced levels of customer spending.
•Net loans and leases, excluding loans held for sale, decreased $422.2 million, reflecting a $231.4 million decline in PPP loans due to forgiveness of round one PPP loans, a $203.5 million decline in residential and commercial real estate loans, primarily due to non-relationship run-off portfolios primarily acquired from the Beneficial acquisition, and lower commercial loan demand resulting from higher levels of borrower liquidity. Our allowance for credit losses decreased by $24.0 million due to positive economic developments in our forecasts and improved credit quality metrics with declines in our problem assets, nonperforming assets and delinquencies.
•Loans held for sale decreased $42.1 million during the three months ended March 31, 2021 driven by a large commercial loan sale and a combination of lower origination volume and higher loans sales in our mortgage banking business during the quarter.



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Total liabilities increased $417.6 million to $13.0 billion at March 31, 2021 compared to December 31, 2020. This increase is primarily comprised of the following:
•Total deposits increased by $427.0 million, primarily due to an increase in customer funding, reflecting elevated deposits from our Customers who received PPP loans, the impact of government stimulus checks and reduced levels of customer spending during the COVID-19 pandemic. The ratio of loans to customer deposits was 70% at March 31, 2021 reflecting significant liquidity capacity.
•FHLB advances decreased $6.6 million due to maturities during the first quarter of 2021.
For further information, see "Notes to the Consolidated Financial Statements (Unaudited)."
Capital Resources
Stockholders’ equity of WSFS decreased $21.1 million between December 31, 2020 and March 31, 2021. This decrease was primarily due to $69.8 million from the effect of decreased market-values on available-for-sale securities, $12.0 million for the repurchases of 267,309 shares of common stock under our stock repurchase plan, and the payment of dividends on our common stock of $5.7 million. These decreases were partially offset by $65.1 million of income attributable to WSFS for the three months ended March 31, 2021.
During the first quarter of 2021, our Board of Directors approved a quarterly cash dividend of $0.13 per share of common stock, an 8% increase from our cash dividend in the fourth quarter of 2020. This dividend will be paid on May 21, 2021 to stockholders of record as of May 7, 2021.
Book value per share of common stock was $37.27 at March 31, 2021, a decrease of $0.25 from $37.52 at December 31, 2020. Tangible book value per share of common stock (a non-GAAP financial measure) was $25.60 at March 31, 2021, a decrease of $0.25 from $25.85 at December 31, 2020. These decreases in both GAAP and non-GAAP financial measures are due to the reasons described above. We believe tangible book value per common share helps management and investors better understand and assess changes from period to period in stockholders’ equity exclusive of changes in intangible assets. This non-GAAP measure should be considered in addition to results prepared in accordance with Generally Accepted Accounting Principles in the U.S. (GAAP), and is not a substitute for, or superior to, GAAP results. For a reconciliation of tangible book value per common share to book value per share in accordance with GAAP, see "Reconciliation of Non-GAAP Measure to GAAP Measure."
The table below compares the Bank's and the Company’s consolidated capital position to the minimum regulatory requirements as of March 31, 2021:
  Consolidated
Capital 		For Capital
Adequacy Purposes 		To be Well-Capitalized
Under Prompt Corrective
Action Provisions
(Dollars in thousands) Amount Percent Amount Percent Amount Percent
Total Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB $ 1,472,002  14.46  % $ 814,528  8.00  % $ 1,018,161  10.00  %
WSFS Financial Corporation 1,457,952  14.28  816,913  8.00  1,021,141  10.00 
Tier 1 Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB 1,343,903  13.20  610,896  6.00  814,528  8.00 
WSFS Financial Corporation 1,329,485  13.02  612,684  6.00  816,913  8.00 
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB 1,343,903  13.20  458,172  4.50  661,804  6.50 
WSFS Financial Corporation 1,264,485  12.38  459,513  4.50  663,741  6.50 
Tier 1 Leverage Capital
Wilmington Savings Fund Society, FSB 1,343,903  9.82  547,307  4.00  509,080  5.00 
WSFS Financial Corporation 1,329,485  9.71  547,769  4.00  684,711  5.00 
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Under the prompt corrective action regime, regulators have established five capital tiers: well-capitalized, adequately-capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized. A depository institution’s capital tier depends on its capital levels in relation to various relevant capital measures, which include leveraged and risk-based capital measures and certain other factors. Depository institutions that are not classified as well-capitalized are subject to various restrictions regarding capital distributions, payment of management fees, acceptance of brokered deposits and other operating activities.
Regulatory capital requirements for the Bank and the Company include a minimum common equity Tier 1 capital ratio of 4.50% of risk-weighted assets, a Tier 1 capital ratio of 6.00% of risk-weighted assets, a minimum Total capital ratio of 8.00% of risk-weighted assets and a minimum Tier 1 leverage capital ratio of 4.00% of average assets. 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.
As shown in the table above, as of March 31, 2021, the Bank and the Company were in compliance with regulatory capital requirements and exceeded the amounts required to be considered “well-capitalized” as defined in the regulations.
Not included in the Bank’s capital, the Company separately held $223.8 million in cash to support share repurchases, potential dividends, acquisitions, strategic growth plans and other general corporate purposes.
As part of our adoption of CECL in 2020, we elected the Implementation and Transition of the Current Expected Credit Losses Methodology for Allowances and Related Adjustments to the Regulatory Capital Rule and Conforming Amendments to Other Regulations, which permits the Company to phase in the day-one adverse effects on regulatory capital that may result from the adoption of CECL over a three-year period. In addition, the final rule revises the agencies' regulatory capital rule, stress testing rules, and regulatory disclosure requirements to reflect CECL, and makes conforming amendments to other regulations that reference allowance for credit losses.

As a result of the three-year period phase-in related to our CECL adoption, the impact (by bps) to our capital ratios were as follows:
March 31, 2021
(Dollars in thousands) As Reported
Proforma(1)
CECL Impact
Total Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB 14.46  % 14.61  % (0.15) %
WSFS Financial Corporation 14.28  14.43  (0.15)
Tier 1 Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB 13.20  13.35  (0.15)
WSFS Financial Corporation 13.02  13.17  (0.15)
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB 13.20  13.35  (0.15)
WSFS Financial Corporation 12.38  12.54  (0.16)
Tier 1 Leverage Capital
Wilmington Savings Fund Society, FSB 9.82  9.92  (0.10)
WSFS Financial Corporation 9.71  9.81  (0.10)
(1) Excludes the phase-in impact of CECL.



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Liquidity
We manage our liquidity and funding needs through our Treasury function and our Asset/Liability Committee. We have a policy that separately addresses liquidity, and management monitors our adherence to policy limits. Also, liquidity risk management is a primary area of examination by the banking regulators.
Funding sources to support growth and meet our liquidity needs include cash from operations, retail deposit programs, loan repayments, FHLB borrowings, repurchase agreements, access to the Federal Reserve Discount Window, and access to the brokered deposit market as well as other wholesale funding avenues. In addition, we have a large portfolio of high-quality, liquid investments, primarily short-duration mortgage-backed securities, that provide a near-continuous source of cash flow to meet current cash needs, or can be sold to meet larger discrete needs for cash. We believe these sources are sufficient to meet our funding needs as well as maintain required and prudent levels of liquidity over the next twelve months.
During the three months ended March 31, 2021, cash, cash equivalents and restricted cash increased $409.4 million to $2.1 billion from $1.7 billion as of December 31, 2020. Cash provided by operating activities was $69.7 million, primarily reflecting the cash impact of earnings and a $29.1 million increase in net activity for loans held for sale, partially offset by the recovery of credit losses in our ACL of $20.2 million during the three months ended March 31, 2021. Cash used in investing activities was $64.1 million primarily due to net purchases of debt securities of $563.3 million, partially offset by $481.3 million from decreased lending activity related to PPP loan forgiveness and proceeds of $9.3 million from sales of debt securities. Cash provided by financing activities was $403.9 million, primarily due to a $428.1 million net increase in deposits, as a result of the increase in customer funding discussed above, partially offset by $12.0 million for repurchases of common stock under the previously announced stock repurchase plan, $6.6 million for repayment of FHLB advances, and common stock dividends of $5.7 million.

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NONPERFORMING ASSETS
Nonperforming assets include nonaccruing loans, other real estate owned (OREO) and restructured loans. Nonaccruing loans are those on which we no longer accrue interest. Loans are placed on nonaccrual status immediately if, in the opinion of management, collection is doubtful, or when principal or interest is past due 90 days or more and the value of the collateral is insufficient to cover principal and interest. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed and charged against interest income. In addition, the amortization of net deferred loan fees is suspended when a loan is placed on nonaccrual status. Subsequent cash receipts are applied either to the outstanding principal balance or recorded as interest income, depending on management’s assessment of the ultimate collectability of principal and interest. Past due loans are defined as loans contractually past due 90 days or more as to principal or interest payments but which remain in accrual status because they are considered well secured and in the process of collection.
The following table shows our nonperforming assets and past due loans at the dates indicated:
(Dollars in thousands) March 31, 2021 December 31, 2020
Nonaccruing loans:
Commercial and industrial $ 20,637  $ 13,816 
Owner-occupied commercial 4,024  5,360 
Commercial mortgages 1,642  17,175 
Residential 3,173  3,247 
Consumer 2,316  2,310 
Total nonaccruing loans 31,792  41,908 
Other real estate owned 2,068  3,061 
Restructured loans(1)(6)
15,684  15,539 
Total nonperforming assets $ 49,544  $ 60,508 
Past due loans:
Commercial $ 436  $ 5,634 
Residential 750  25 
Consumer (2)
6,492  11,035 
Total past due loans $ 7,678  $ 16,694 
Ratio of allowance for credit losses to total loans and leases(3)
2.36  % 2.51  %
Ratio of nonaccruing loans to total gross loans and leases(4)
0.37  0.46 
Ratio of nonperforming assets to total assets 0.34  0.42 
Ratio of allowance for credit losses to nonaccruing loans 644  546 
Ratio of allowance for credit losses to total nonperforming assets(5)
413  378 
(1)Accruing loans only, which includes acquired nonimpaired loans. Nonaccruing Troubled Debt Restructurings (TDRs) are included in their respective categories of nonaccruing loans.
(2)Includes U.S. government guaranteed student loans with little risk of credit loss.
(3)Represents amortized cost basis for loans, leases and held-to-maturity securities.
(4)Total loans exclude loans held for sale and reverse mortgages.
(5)Excludes acquired impaired loans.
(6)Balance excludes COVID-19 modifications.

Nonperforming assets decreased $11.0 million between December 31, 2020 and March 31, 2021. This decrease was primarily the result of the payoff of one commercial relationship totaling approximately $15.1 million and continued collection activity, including monthly payments and a few modest payoffs. This decrease was partially offset by the move to non-accrual of one commercial relationship totaling approximately $5.6 million (net of a $3.3 million charge-off). The ratio of nonperforming assets to total assets decreased from 0.42% at December 31, 2020 to 0.34% at March 31, 2021.

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The following table summarizes the changes in nonperforming assets during the periods indicated:
Three Months Ended March 31,
(Dollars in thousands) 2021 2020
Beginning balance $ 60,508  $ 39,808 
Additions 13,317  6,674 
Collections (19,604) (5,604)
Transfers to accrual (28) — 
Charge-offs (4,649) (2,733)
Ending balance $ 49,544  $ 38,145 
The timely identification of problem loans is a key element in our strategy to manage our loan portfolio. Problem loans are all criticized, classified and nonperforming loans and other real estate owned. Timely identification enables us to take appropriate action and accordingly, minimize losses. An asset review system established to monitor the asset quality of our loans and investments in real estate portfolios facilitates the identification of problem assets. In general, this system uses guidelines established by federal regulation.
In response to the COVID-19 pandemic, the CARES Act was enacted to provide certain measures to support individuals and businesses in maintaining solvency through monetary relief, including in the form of financing and automatic forbearance. During 2020, we put significant effort into evaluating the needs of our Customers and offering targeted relief through loan modifications, most of which were short-term in duration. At March 31, 2021 and December 31, 2020, COVID-19 related loan modifications were $110.9 million and $114.8 million, respectively.

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INTEREST RATE SENSITIVITY

Our primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on net interest income and capital, while maximizing the yield/cost spread on our asset/liability structure. Interest rates are partly a function of decisions by the Federal Open Market Committee (FOMC) on the target range for the federal funds rate, and these decisions are sometimes difficult to anticipate. In response to the pandemic, in March 2020 the FOMC lowered the range 150 basis points to 0 to 1/4 percent. The FOMC recently indicated that the target range will remain at this level for some time, but the FOMC is not locked into this result. In order to manage the risks associated with changes or possible changes in interest rates, we rely primarily on our asset/liability structure.

Our primary tool for achieving our asset/liability management strategies is to match maturities or repricing periods of interest rate-sensitive assets and liabilities to promote a favorable interest rate spread and mitigate exposure to fluctuations in interest rates. We regularly review our interest rate sensitivity and adjust the sensitivity within acceptable tolerance ranges. At March 31, 2021, interest-earning assets exceeded interest-bearing liabilities that mature or reprice within one year (interest-sensitive gap) by $2.0 billion. Our interest-sensitive assets as a percentage of interest-sensitive liabilities within the one-year window was 135.63% at March 31, 2021 compared with 133.10% at December 31, 2020. Likewise, the one-year interest-sensitive gap as a percentage of total assets was 13.26% at March 31, 2021 compared with 13.07% at December 31, 2020.

Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from interest rate risk inherent in our lending, investing, and funding activities. To that end, we actively monitor and manage our interest rate risk exposure. One measure, 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. The economic value of the equity ratio is defined as the economic value of the estimated cash flows from assets and liabilities as a percentage of economic value of cash flows from total assets.
The following table shows the estimated impact of immediate changes in interest rates on our net interest margin and economic value of equity ratio at the specified levels at March 31, 2021 and December 31, 2020:
 
March 31, 2021 December 31, 2020
% Change in Interest Rate (Basis Points)
% Change in Net
Interest Margin(1)
Economic Value of Equity(2)
% Change in Net
Interest Margin(1)
Economic Value of Equity(2)
+300 22.3% 19.89% 19.7% 19.10%
+200 14.7% 19.52% 13.1% 18.69%
+100 7.2% 19.08% 6.5% 18.05%
+50 3.5% 18.28% 3.2% 17.59%
+25 1.7% 18.23% 1.5% 17.32%
— —% 18.15% —% 17.04%
-25 (1.4)% 17.93% (1.5)% 16.62%
-50 (2.0)% 17.62% (2.1)% 16.20%
-100 (3.3)% 16.80% (2.8)% 15.16%
'-200(3)
NMF NMF NMF NMF
-300(3)
NMF NMF NMF NMF
(1)The percentage difference between net interest margin in a stable interest rate environment and net interest margin as projected under the various rate change environments.
(2)The economic value of equity ratio in a stable interest rate environment and the economic value of equity ratio as projected under the various rate change environments.
(3)Sensitivity indicated by a decrease of 200 and 300 basis points is not deemed meaningful (NMF) given the low absolute level of interest rates in the periods presented.
We also engage in other business activities that are sensitive to changes in interest rates. For example, mortgage banking revenues and expenses can fluctuate with changing interest rates. These fluctuations are difficult to model and estimate.

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RESULTS OF OPERATIONS
Net income for the three months ended March 31, 2021 was $65.1 million, compared to $10.9 million for the three months ended March 31, 2020.
•Net interest income decreased $2.0 million during the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily due to a lower interest rate environment and a decrease in purchase accounting accretion, partially offset by PPP income. See “Net Interest Income” for further information.
•Our (recovery of) provision for credit losses for the three months ended March 31, 2021 decreased $76.8 million compared to the three months ended March 31, 2020, primarily due to positive economic outlook from our ACL modeling and improved credit quality metrics reflecting overall declines in problem assets, nonperforming assets and delinquencies. See “Allowance for Credit Losses” for further information.
•Noninterest income for the three months ended March 31, 2021 increased $7.0 million compared to the three months ended March 31, 2020, primarily due to the higher revenues generated through our mortgage banking business, trust services and other banking fees in the current period compared to the prior period, partially offset by lower interchange fees from the impact of the Durbin Amendment on the first quarter of 2021 results. See “Noninterest Income” for further information.
•Noninterest expense increased $7.1 million during the three months ended March 31, 2021 compared to the three months ended March 31, 2020 due to increases in salaries and benefits, equipment expense and net corporate development and restructuring costs, partially offset by lower other operating expenses. See “Noninterest Expense” for further information.
•Income tax provision for the three months ended March 31, 2021 increased $20.1 million compared to the three months ended March 31, 2020, primarily due to the $74.7 million increase in pre-tax income.
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Net Interest Income
The following tables provide information concerning the balances, yields and rates on interest-earning assets and interest-bearing liabilities during the periods indicated:
  Three months ended March 31,
  2021 2020
(Dollars in thousands) Average
Balance 		Interest
Yield/
Rate(1)
Average
Balance 		Interest
Yield/
Rate(1)
Assets:
Interest-earning assets:
Loans:(2)
Commercial real estate loans $ 2,803,378  $ 29,191  4.22  % $ 2,808,867  $ 34,292  4.91  %
Residential loans 734,593  12,864  7.00  992,408  13,541  5.46 
Commercial loans and leases 4,138,034  52,620  5.16  3,533,626  55,693  6.35 
Consumer loans 1,159,588  12,836  4.49  1,130,223  14,935  5.31 
Loans held for sale
161,287  1,341  3.37  69,884  741  4.26 
Total loans and leases 8,996,880  108,852  4.91  8,535,008  119,202  5.62 
Mortgage-backed securities(3)
2,507,910  10,704  1.71  1,959,637  13,219  2.70 
Investment securities(3)
336,410  1,449  1.98  131,121  926  3.40 
Other interest-earning assets 1,103,632  276  0.10  76,356  508  2.68 
Total interest-earning assets 12,944,832  $ 121,281  3.81  % 10,702,122  $ 133,855  5.04  %
Allowance for credit losses (226,911) (85,055)
Cash and due from banks 114,725  139,836 
Cash in non-owned ATMs 393,964  335,434 
Bank-owned life insurance 32,155  30,154 
Other noninterest-earning assets 997,444  1,037,033 
Total assets $ 14,256,209  $ 12,159,524 
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand $ 2,572,325  $ 618  0.10  % $ 2,085,229  $ 1,897  0.37  %
Money market 2,682,219  854  0.13  2,152,986  4,090  0.76 
Savings 1,830,781  150  0.03  1,574,215  1,744  0.45 
Customer time deposits 1,117,191  2,377  0.86  1,305,432  5,655  1.74 
Total interest-bearing customer deposits 8,202,516  3,999  0.20  7,117,862  13,386  0.76 
Brokered deposits 136,957  497  1.47  230,423  1,251  2.18 
Total interest-bearing deposits 8,339,473  4,496  0.22  7,348,285  14,637  0.80 
Federal Home Loan Bank advances 736  5  2.76  170,058  830  1.96 
Trust preferred borrowings 67,011  324  1.96  67,011  586  3.52 
Senior debt 246,654  2,266  3.67  98,627  1,179  4.78 
Other borrowed funds(4)
19,656  5  0.10  148,256  473  1.28 
Total interest-bearing liabilities 8,673,530  $ 7,096  0.33  % 7,832,237  $ 17,705  0.91  %
Noninterest-bearing demand deposits 3,490,831  2,166,510 
Other noninterest-bearing liabilities 322,296  326,185 
Stockholders’ equity 1,771,822  1,835,501 
Noncontrolling interest (2,270) (909)
Total liabilities and stockholders’ equity $ 14,256,209  $ 12,159,524 
Excess of interest-earning assets over interest-bearing liabilities $ 4,271,302  $ 2,869,885 
Net interest and dividend income $ 114,185  $ 116,150 
Interest rate spread 3.48  % 4.13  %
Net interest margin 3.59  % 4.38  %
(1)Weighted average yields for tax-exempt securities and loans have been computed on a tax-equivalent basis.
(2)Average balances are net of unearned income and include nonperforming loans.
(3)Includes securities available-for-sale at fair value.
(4)Includes federal funds purchased.

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During the three months ended March 31, 2021, net interest income decreased $2.0 million from the three months ended March 31, 2020 primarily due to the lower rate environment and a $2.9 million decrease in purchase accounting accretion, partially offset by $9.4 million of net interest income from PPP loans which included $7.8 million of fee accretion mainly related to loan forgiveness. Net interest margin was 3.59% for the first quarter of 2021, a 79 basis point decrease compared to 4.38% for the first quarter of 2020 reflecting 39 bps from the significant short-term liquidity increase in customer deposits, a 36 bps net decline from the lower interest rate environment and balance sheet mix, and 16 bps from lower purchase accounting accretion, partially offset by a 12 bps increase from the impact of PPP loans.
Allowance for Credit Losses
We maintain the allowance for credit losses at an appropriate level based on our assessment of estimable and expected losses in the loan portfolio. Our allowance for credit losses is based on our historical loss experience that includes the inherent risk of our loans and various other factors including but not limited to, collateral values, trends in asset quality, level of delinquent loans and concentrations. Further, regional and national economic forecasts are considered in our expected credit losses. Our evaluation is based on a review of the portfolio and requires significant, complex and difficult judgments.
During the three months ended March 31, 2021, we recorded a recovery of credit losses of $20.2 million, a net change of $76.8 million as compared with the provision for credit losses of $56.6 million for the three months ended March 31, 2020. This improvement reflects the positive economic outlook from our ACL modeling and improved credit quality metrics reflecting overall declines in problem assets, nonperforming assets and delinquencies.
The allowance for credit losses decreased to $204.8 million at March 31, 2021 from $228.8 million at December 31, 2020, primarily due to the $20.2 million recovery of credit losses during the three months ended March 31, 2021, as described above. The ratio of allowance for credit losses to total loans and leases was 2.36% at March 31, 2021 and 2.51% at December 31, 2020. During the three months ended March 31, 2021, net charge-offs totaled $3.8 million, compared to $1.0 million during the three months ended March 31, 2020. The ratio of net charge-offs to average gross loans net of unearned income, which excludes loans held for sale and reverse mortgages, was 0.18% (annualized) and 0.09% at March 31, 2021 and December 31, 2020, respectively.
See Note 7 to the unaudited Consolidated Financial Statements and Nonperforming Assets above for further information.
Noninterest Income
During the three months ended March 31, 2021, noninterest income was $47.8 million, an increase of $7.0 million from $40.8 million during the three months ended March 31, 2020. This increase includes a $5.1 million increase in mortgage banking activities due to improved secondary market conditions and increased volume from refinancings resulting from the lower interest rate environment, an increase of $3.3 million in Investment management and fiduciary revenue driven by trust services revenue, and $2.2 million of referral fees related to new PPP loans to be originated in 2021 (known as PPP 2.0) in the current period. Partially offsetting these increases was a $4.6 million decrease in Credit/debit card and ATM income primarily due to a reduction in interchange fees of $2.7 million resulting from the Durbin amendment (effective on July 1, 2020) and a $2.0 million decrease in Cash Connect® driven by the lower interest rate environment compared to the prior period.
For further information, see Note 3 to the unaudited Consolidated Financial Statements.
Noninterest Expense
Noninterest expense for the three months ended March 31, 2021 was $95.6 million, an increase of $7.1 million from $88.5 million for the three months ended March 31, 2020. The increase was primarily due to a $7.8 million increase in Salaries, benefits and other compensation as a result of higher salaries and incentive compensation due to franchise growth, and a $2.4 million increase in Equipment expense due to higher third-party software expenses related to our ongoing delivery transformation initiatives. We also incurred $0.5 million of higher net corporate development and restructuring costs as compared to the prior period driven by increased costs primarily related to our pending Merger with Bryn Mawr. These increases were partially offset by a $5.8 million decrease in Other operating expenses that included a $3.0 million contribution to the WSFS Community Foundation in the prior year.

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Income Taxes
We and our subsidiaries file a consolidated federal income tax return and separate state income tax returns. Income taxes are accounted for in accordance with ASC 740, Income Taxes, which requires the recording of deferred income taxes for tax consequences of temporary differences. We recorded income tax expense of $21.4 million during the three months ended March 31, 2021 compared to income tax expense of $1.3 million for the same period in 2020.
Our effective tax rate was 24.7% for the three months ended March 31, 2021 compared to 10.9% for the same period in 2020. The effective tax rate for the three months ended March 31, 2021 increased primarily due to the $1.8 million in tax benefits recognized during the three months ended March 31, 2020 related to tax law changes contained in the CARES Act, related to the ability to carry back certain acquired net operating losses to prior years where the statutory tax rate was higher than the current statutory tax rate. Further, we incurred $0.4 million of tax expense related to acquisition costs during the three months ended March 31, 2021 whereas none were incurred in the comparable quarter in 2020.
The effective tax rate reflects the recognition of certain tax benefits in the financial statements including those benefits from tax-exempt interest income, federal low-income housing tax credits, and excess tax benefits from recognized stock compensation. These tax benefits are offset by the tax effect of stock-based compensation expense related to incentive stock options, nondeductible acquisition costs and a provision for state income tax expense.
We frequently analyze our projections of taxable income and make adjustments to our provision for income taxes accordingly.
Contractual Obligations
Our contractual obligations at March 31, 2021 did not significantly change from our contractual obligations at December 31, 2020, which are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.
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RECONCILIATION OF NON-GAAP MEASURE TO GAAP MEASURE
The following table provides a reconciliation of tangible book value per share of common stock to book value per share of common stock, the most directly comparable GAAP financial measure. We believe this measure helps management and investors better understand and assess changes from period to period in stockholders’ equity exclusive of changes in intangible assets. This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, and is not a substitute for, or superior to, GAAP results.

(Dollars and share amounts in thousands, except per share amounts) March 31, 2021 December 31, 2020
Stockholders’ equity of WSFS $ 1,770,641  $ 1,791,726 
Less: Goodwill and other intangible assets 554,701  557,386 
Tangible common equity (numerator) $ 1,215,940  $ 1,234,340 
Shares of common stock outstanding (denominator) 47,502  47,756 
Book value per share of common stock $ 37.27  $ 37.52 
Goodwill and other intangible assets 11.67  11.67 
Tangible book value per share of common stock $ 25.60  $ 25.85 

CRITICAL ACCOUNTING ESTIMATES
The preparation of the unaudited Consolidated Financial Statements in accordance with U.S. GAAP requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenue and expenses. We regularly evaluate these estimates and assumptions including those related to the allowance for credit losses, business combinations, deferred taxes, fair value measurements and goodwill and other intangible assets. We base our estimates on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances. These form the basis for making judgments on the carrying value of certain assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Although our current estimates contemplate current economic conditions and how we expect them to change in the future, for the remainder of 2021, it is possible that actual conditions may be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Actual results may differ from these estimates under different assumptions or conditions.
Critical accounting estimates at March 31, 2021 did not significantly change from our critical accounting estimates at December 31, 2020, which are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

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RECENT REGULATORY DEVELOPMENTS
Recent regulatory developments at March 31, 2021 did not significantly change from our recent regulatory developments at December 31, 2020, which are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, except as noted below.
Paycheck Protection Program (PPP)
On March 27, 2020, the CARES Act was enacted, providing wide ranging economic relief for individuals and businesses impacted by COVID-19. These economic relief initiatives included creating and appropriating funds to the PPP to provide for forgivable loans to smaller businesses that use the proceeds of the loans for payroll and certain other qualifying expenses. Subsequent legislation appropriated further funds to the PPP for PPP 2.0 loans and permitted certain PPP borrowers to receive “second draw” loans. Subsequently, the American Rescue Plan Act of 2021, enacted on March 11, 2021, expanded the eligibility criteria for both first and second draw PPP loans and revised the exclusions from payroll costs for purposes of loan forgiveness. The PPP Extension Act of 2021, enacted on March 30, 2021, extended the PPP through May 31, 2021.

In January 2021, WSFS Bank began participating in the PPP 2.0 by outsourcing the processing and servicing of PPP 2.0 loans to third party providers. In the first quarter of 2021, these referrals to third party providers led to nearly $300 million in PPP 2.0 loans to over 1,800 WSFS Customer and non-Customer borrowers and generated $2.2 million of referral fees for WSFS Bank. The PPP 2.0 loans are not originated on our balance sheet; however, the resulting deposits from our Customers obtaining PPP 2.0 loans from other originating lenders affect our financial condition.

Transition from London Inter-Bank Offered Rate (LIBOR)

On March 5, 2021, the United Kingdom Financial Conduct Authority (FCA), which regulates LIBOR, confirmed that the publication of most LIBOR term rates will end on June 30, 2023 (excluding 1-week U.S. LIBOR and 2-month U.S. LIBOR), the publication of which will end on December 31, 2021). Additionally, on April 6, 2021, New York Governor Cuomo signed into law legislation that provides for the substitution of an alternative reference rate, the Secured Overnight Funding Rate (SOFR), in any LIBOR-based contract governed by New York state law that does not include clear fallback language, once LIBOR is discontinued. The Federal Reserve and other federal banking agencies have continued to encourage banks to transition away from LIBOR as soon as practicable.

Given LIBOR’s extensive use across financial markets, the transition away from LIBOR presents various risks and challenges to financial markets and institutions, including the Company. The Company’s commercial and consumer businesses issue, trade, and hold various products that are indexed to LIBOR. As of March 31, 2021, the Company had approximately $2.2 billion of loans and $1.0 billion of derivatives that are utilized for customer guarantees, indexed to LIBOR, that mature after 2021. In addition, the Company had approximately $167.0 million of debt securities outstanding that are indexed to LIBOR (either currently or in the future) as of March 31, 2021. The Company had one investment security totaling $0.5 million, and no repurchase and resale agreements or FHLB advances indexed to LIBOR as of March 31, 2021. In addition, the Company expects that certain of the loans, derivatives, and debt that it would assume in the Merger will be indexed to LIBOR, and thus would increase the Company's exposure to LIBOR-linked products by approximately $2.4 million.

Due to the uncertainty surrounding the future of LIBOR, alternatives, among other factors, the Company expects that its LIBOR transition will span several reporting periods beyond the end of 2021. A cross-functional team from Finance, Lending, Risk and IT is leading our efforts to monitor this activity and evaluate the related risks and potential process changes arising from the transition from LIBOR. This team has completed its initial assessment. The Bank intends to continue its focus on originating new loans and derivatives using alternative benchmark rates to LIBOR. Most recently, the floating rate on our $150 million of senior notes issued in 2020 (due 2030), beginning on December 15, 2025, is based on an alternative benchmark rate (which is expected to be the three-month term SOFR). In 2022 and the first two quarters of 2023, the Bank will focus on migrating its existing LIBOR-linked contracts, including, if applicable, any products assumed through the Merger, to alternative benchmarks. Our variable or floating rate instruments currently use LIBOR and give us discretion to determine a replacement benchmark rate if LIBOR becomes unavailable, and we are still considering the appropriate transition for our legacy contracts.








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Item 3.     Quantitative and Qualitative Disclosures About Market Risk
The information required by this Item is incorporated herein by reference to the information provided in Item 2 Part I (Interest Rate Sensitivity) of this Quarterly Report on Form 10-Q.
Item 4.     Controls and Procedures
 
(a)Evaluation of disclosure controls and procedures. Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934), our principal executive officer and principal financial officer have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q such disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b)Changes in internal control over financial reporting. During the three months ended March 31, 2021, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Part II. OTHER INFORMATION
Item 1.    Legal Proceedings
The information required by this Item is incorporated herein by reference to the information provided in Note 19 – Legal and Other Proceedings to the unaudited Consolidated Financial Statements.

Item 1A. Risk Factors
There have not been any material changes to the risk factors previously disclosed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, previously filed with the Securities and Exchange Commission, except noted as below.
Strategic Risk
Failure of the Merger to be completed, the termination of the Merger Agreement or a significant delay in the consummation of the Merger could negatively impact the Company and Bryn Mawr.
Although we anticipate closing the Merger during the fourth quarter of 2021, the Merger Agreement is subject to a number of conditions which must be fulfilled in order to complete the Merger. These conditions to the consummation of the Merger may not be fulfilled and, accordingly, the Merger may not be completed. In addition, if the Merger is not completed by March 9, 2022, either the Company or Bryn Mawr may choose to terminate the Merger Agreement at any time after that date if the failure to consummate the transactions contemplated by the Merger Agreement is not caused by any breach of the Merger Agreement by the party electing to terminate the Merger Agreement. Further, the outcomes of several lawsuits filed by stockholders of the Company and Bryn Mawr against the Company, Bryn Mawr and their respective boards of directors during the second quarter of 2021 are uncertain and could result in significant costs, management distraction, and/or a delay of or injunction against the Merger.
If the Merger is not consummated, the ongoing business, financial condition and results of operations of the Company may be adversely affected and the market price of our common stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the Merger will be consummated. If the consummation of the Merger is delayed, including by the receipt of a competing acquisition proposal, our business, financial condition and results of operations may be adversely affected.
In addition, we have incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement. If the Merger is not completed, we would have to recognize these expenses without realizing the expected benefits of the Merger. Any of the foregoing, or other risks arising in connection with the failure of or delay in consummating the Merger, including the diversion of management attention from pursuing other opportunities and the constraints in the Merger Agreement on the ability to make significant changes to our ongoing business during the pendency of the Merger, could have a material adverse effect on our business, financial condition and results of operations.

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Additionally, our business may have been adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the Merger, without realizing any of the anticipated benefits of completing the Merger, and the market price of our common stock might decline to the extent that the current market price reflects a market assumption that the Merger will be completed. If the Merger Agreement is terminated and we seek another Merger or business combination, you cannot be certain that we will be able to find a party willing to engage in a transaction on more attractive terms than the Merger.
Combining the Company's and Bryn Mawr's businesses may be more difficult, costly or time consuming than expected and the anticipated benefits and cost savings of the Merger may not be fully realized.
The success of the Merger will depend on, among other things, the combined company’s ability to combine the businesses of the Company and Bryn Mawr. If the combined company is not able to successfully achieve this objective, the anticipated benefits of the Merger may not be realized fully, or at all, or may take longer to realize than expected.
The Company and Bryn Mawr have operated and, until the completion of the Merger, will continue to operate, independently. The success of the Merger, including anticipated benefits and cost savings, will depend, in part, on the successful combination of the businesses of the Company and Bryn Mawr. To realize these anticipated benefits and cost savings, after the completion of the Merger, the Company expects to integrate Bryn Mawr’s business into its own. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the Merger. The loss of key employees could have an adverse effect on the companies’ financial results and the value of their common stock. In addition, the impacts of the COVID-19 pandemic may make it more costly or more difficult to integrate the businesses of WSFS and Bryn Mawr. If the Company experiences difficulties with the integration process, the anticipated benefits of the Merger may not be realized fully, or at all, or may take longer to realize than expected. As with any merger of financial institutions, there also may be business disruptions that cause Bryn Mawr or the Company to lose current customers or cause current customers to remove their accounts from Bryn Mawr or the Company and move their business to competing financial institutions. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on each of Bryn Mawr and the Company during this transition period and for an undetermined period after consummation of the Merger.
The Company expects to incur substantial expenses related to the Merger.
The Company expects to incur substantial expenses in connection with consummation of the Merger and combining the business, operations, networks, systems, technologies, policies and procedures of the two companies. Although the Company and Bryn Mawr have assumed that a certain level of transaction and combination expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of their combination expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Due to these factors, the transaction and combination expenses associated with the Merger could, particularly in the near term, exceed the savings that the combined company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the combination of the businesses following the consummation of the Merger. As a result of these expenses, both the Company and Bryn Mawr expect to take charges against their earnings before and after the completion of the Merger. The charges taken in connection with the Merger are expected to be significant, although the aggregate amount and timing of such charges are uncertain at present.
Regulatory approvals may not be received, may take longer than expected or may impose conditions that are not presently anticipated or cannot be met.
Before the transactions contemplated by the Merger Agreement, including the Merger, may be completed, various approvals must be obtained from bank regulatory authorities. In determining whether to grant these approvals, the applicable regulatory authorities consider a variety of factors, including the competitive impact of the proposal in the relevant geographic markets; financial, managerial and other supervisory considerations of each party; convenience and needs of the communities to be served and the record of the insured depository institution subsidiaries under the Community Reinvestment Act of 1977 and the regulations promulgated thereunder (the Community Reinvestment Act); effectiveness of the parties in combating money laundering activities; and the extent to which the proposal would result in greater or more concentrated risks to the stability of the United States banking or financial system. These regulatory authorities may impose conditions on the granting of such approvals. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying completion of the Merger or of imposing additional costs or limitations on the combined company following the Merger. The regulatory approvals may not be received at all, may not be received in a timely fashion, or may contain conditions on the completion of the Merger that are not anticipated or cannot be met. Furthermore, such conditions or changes may constitute a burdensome condition that may allow WSFS to terminate the Merger Agreement and WSFS may exercise its right to terminate the Merger Agreement. If the consummation of the Merger is delayed, including by a delay in receipt of necessary regulatory approvals, the business, financial condition and results of operations of each of WSFS and Bryn Mawr may also be adversely affected.
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WSFS will be subject to business uncertainties and contractual restrictions while the Merger is pending.
Uncertainty about the effect of the Merger on employees, customers (including depositors and borrowers), suppliers and vendors may have an adverse effect on the business, financial condition and results of operations of WSFS and Bryn Mawr. These uncertainties may impair WSFS’s and Bryn Mawr’s ability to attract, retain and motivate key personnel and customers (including depositors and borrowers) pending the consummation of the Merger, as such personnel and customers may experience uncertainty about their future roles and relationships following the consummation of the Merger. Additionally, these uncertainties could cause customers (including depositors and borrowers), suppliers, vendors and others who deal with WSFS and/or Bryn Mawr to seek to change existing business relationships with WSFS and/or Bryn Mawr or fail to extend an existing relationship with WSFS and/or Bryn Mawr. In addition, competitors may target each party’s existing customers by highlighting potential uncertainties and integration difficulties that may result from the Merger. The pursuit of the Merger and the preparation for the integration may place a burden on each company’s management and internal resources. Any significant diversion of management attention away from ongoing business concerns and any difficulties encountered in the transition and integration process could have a material adverse effect on each company’s business, financial condition and results of operations. In addition, the Merger Agreement restricts each party from taking certain actions without the other party’s consent while the Merger is pending. These restrictions could have a material adverse effect on each party’s business, financial condition and results of operations.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
During the first quarter of 2020, the Board of Directors of the Company approved a new share repurchase program authorizing the repurchase of 7,594,977 shares of common stock, or 15% of its outstanding shares as of March 31, 2020. Under the program, repurchases may be made from time to time in the open market or through negotiated transactions, subject to market conditions and other factors, and in accordance with applicable securities laws. The program is consistent with our intent to return a minimum of 25% of annual net income to stockholders through dividends and share repurchases while maintaining capital ratios in excess of “well-capitalized” regulatory benchmarks.
The following table represents information with respect to repurchases of common stock made by the Company during the three months ended March 31, 2021.
Month
Total Number
of Shares Purchased
Average Price
Paid Per Share 		Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs 		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2021 - January 31, 2021 267,309  $ 44.97  267,309  4,381,161 
February 1, 2021 - February 28, 2021 —  —  —  4,381,161 
March 1, 2021 - March 31, 2021 —  —  —  4,381,161 
Total 267,309  $ 44.97  267,309 

All share repurchases were suspended upon the announcement of the Company signing the Merger Agreement with Bryn Mawr and we expect the repurchases will continue to be suspended until the close of the Merger, which is currently anticipated to close early in the fourth quarter of 2021.

Item 3.    Defaults upon Senior Securities
None.
Item 4.    Mine Safety Disclosures
Not applicable.
Item 5.    Other Information
None.


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Item 6.     Exhibits
 
Exhibit
Number 		   Description of Document
2.1
3.1   
3.2   
10.1
31.1   
31.2   
32   
101.INS    XBRL Instance Document **
101.SCH    XBRL Schema Document **
101.CAL    XBRL Calculation Linkbase Document **
101.LAB    XBRL Labels Linkbase Document **
101.PRE    XBRL Presentation Linkbase Document **
101.DEF    XBRL Definition Linkbase Document **
104
The cover page of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed with the SEC on May 7, 2021, is formatted in Inline XBRL.
* Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any document so furnished.
** Submitted as Exhibits 101 to this Quarterly Report on Form 10-Q are documents formatted in XBRL (Extensible Business Reporting Language). Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  WSFS FINANCIAL CORPORATION
Date: May 7, 2021   /s/ Rodger Levenson
  Rodger Levenson
  Chairman, President and Chief Executive Officer
  (Principal Executive Officer)
Date: May 7, 2021   /s/ Dominic C. Canuso
  Dominic C. Canuso
  Executive Vice President and
  Chief Financial Officer
  (Principal Financial and Accounting Officer)

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