NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 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 two wholly owned subsidiaries: Beneficial Equipment Finance Corporation (BEFC) and 1832 Holdings, Inc., and one majority-owned subsidiary, NewLane Finance Company (NewLane Finance®).
Overview
Founded in 1832, the Bank is one of the ten oldest bank and trust companies continuously operating under the same name in the United States (U.S.). The Company provides residential and commercial real estate, commercial and consumer lending services, as well as retail deposit and cash management services. The banking business is commercial lending funded primarily by customer-generated deposits. In addition, the Company offers a variety of wealth management and trust services to 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 112 offices located in Pennsylvania (52), 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 captive insurance through its subsidiary, Prime Protect.
Basis of Presentation
In preparing the unaudited Consolidated Financial Statements, the Company is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Amounts subject to significant estimates include the allowance for credit losses (including loans and leases held for investment, investment securities available-for-sale and held-to-maturity), 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.
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 June 30, 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 transaction due to reference rate reform.
There was no accounting guidance pending adoption at June 30, 2021.
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 June 30,
|
|
Six Months Ended June 30,
|
|
(Dollars in thousands)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Bailment fees
|
$
|
3,320
|
|
|
$
|
3,080
|
|
|
$
|
6,379
|
|
|
$
|
8,161
|
|
|
Interchange fees
|
3,485
|
|
|
5,631
|
|
|
6,540
|
|
|
11,247
|
|
|
Other card and ATM fees
|
762
|
|
|
595
|
|
|
1,453
|
|
|
1,257
|
|
|
Total credit/debit card and ATM income
|
$
|
7,567
|
|
|
$
|
9,306
|
|
|
$
|
14,372
|
|
|
$
|
20,665
|
|
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 due to the impact of the Durbin Amendment on 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 with respect to debit transactions for banks that, together with their affiliates, have 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 June 30,
|
|
Six Months Ended June 30,
|
|
(Dollars in thousands)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Trust fees
|
$
|
10,808
|
|
|
$
|
7,308
|
|
|
$
|
20,572
|
|
|
$
|
14,262
|
|
|
Wealth management and advisory fees
|
4,552
|
|
|
3,621
|
|
|
9,041
|
|
|
7,629
|
|
|
Total investment management and fiduciary income
|
$
|
15,360
|
|
|
$
|
10,929
|
|
|
$
|
29,613
|
|
|
$
|
21,891
|
|
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.
Deposit service charges
The following table presents the components of deposit service charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
(Dollars in thousands)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Service fees
|
$
|
3,553
|
|
|
$
|
2,919
|
|
|
$
|
6,975
|
|
|
$
|
6,130
|
|
|
Return and overdraft fees
|
1,504
|
|
|
1,134
|
|
|
3,082
|
|
|
3,466
|
|
|
Other deposit service fees
|
262
|
|
|
122
|
|
|
722
|
|
|
226
|
|
|
Total deposit service charges
|
$
|
5,319
|
|
|
$
|
4,175
|
|
|
$
|
10,779
|
|
|
$
|
9,822
|
|
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 June 30,
|
|
Six Months Ended June 30,
|
|
(Dollars in thousands)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Managed service fees
|
$
|
4,504
|
|
|
$
|
3,724
|
|
|
$
|
8,113
|
|
|
$
|
7,755
|
|
|
Currency preparation
|
1,160
|
|
|
919
|
|
|
2,108
|
|
|
1,759
|
|
|
ATM loss protection
|
628
|
|
|
571
|
|
|
1,250
|
|
|
1,218
|
|
|
Miscellaneous products and services
|
2,341
|
|
|
766
|
|
|
5,847
|
|
|
2,201
|
|
|
Total other income
|
$
|
8,633
|
|
|
$
|
5,980
|
|
|
$
|
17,318
|
|
|
$
|
12,933
|
|
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.
4. EARNINGS (LOSS) PER SHARE
The following table shows the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
(Dollars and shares in thousands, except per share data)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to WSFS
|
$
|
95,667
|
|
|
$
|
(7,111)
|
|
|
$
|
160,749
|
|
|
$
|
3,816
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average basic shares
|
47,529
|
|
|
50,655
|
|
|
47,519
|
|
|
50,871
|
|
|
Dilutive potential common shares (1)
|
163
|
|
|
—
|
|
|
156
|
|
|
40
|
|
|
Weighted average fully diluted shares
|
47,692
|
|
|
50,655
|
|
|
$
|
47,675
|
|
|
$
|
50,911
|
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
2.01
|
|
|
$
|
(0.14)
|
|
|
$
|
3.38
|
|
|
$
|
0.08
|
|
|
Diluted
|
$
|
2.01
|
|
|
$
|
(0.14)
|
|
|
$
|
3.37
|
|
|
$
|
0.07
|
|
|
Outstanding common stock equivalents having no dilutive effect
|
—
|
|
|
48
|
|
|
1
|
|
|
15
|
|
(1) For the three months ended June 30, 2020, the effect of 14 thousand dilutive potential common shares were excluded from the computation of diluted net loss per common share, as these shares would have been antidilutive due to the net loss reported in this period
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
(Dollars in thousands)
|
|
Amortized Cost
|
|
Gross
Unrealized
Gain
|
|
Gross
Unrealized
Loss
|
|
Allowance for Credit Losses
|
|
Fair
Value
|
|
Available-for-Sale Debt Securities
|
|
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligation (CMO)
|
|
$
|
620,242
|
|
|
$
|
7,532
|
|
|
$
|
9,355
|
|
|
$
|
—
|
|
|
$
|
618,419
|
|
|
Fannie Mae (FNMA) MBS
|
|
2,310,453
|
|
|
36,274
|
|
|
16,940
|
|
|
—
|
|
|
2,329,787
|
|
|
Freddie Mac (FHLMC) MBS
|
|
163,691
|
|
|
8,529
|
|
|
222
|
|
|
—
|
|
|
171,998
|
|
|
Ginnie Mae (GNMA) MBS
|
|
21,713
|
|
|
736
|
|
|
47
|
|
|
—
|
|
|
22,402
|
|
|
Government-sponsored enterprises (GSEs) agency notes
|
|
231,867
|
|
|
—
|
|
|
7,894
|
|
|
—
|
|
|
223,973
|
|
|
|
|
$
|
3,347,966
|
|
|
$
|
53,071
|
|
|
$
|
34,458
|
|
|
$
|
—
|
|
|
$
|
3,366,579
|
|
|
Held-to-Maturity Debt Securities(1)
|
|
|
|
|
|
|
|
|
|
|
|
State and political subdivisions
|
|
$
|
94,630
|
|
|
$
|
4,140
|
|
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
98,765
|
|
|
Foreign bonds
|
|
501
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
501
|
|
|
|
|
$
|
95,131
|
|
|
$
|
4,140
|
|
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
99,266
|
|
(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 June 30, 2021, which are offset in Accumulated other comprehensive income. At the time of transfer, there was no allowance for credit loss on the available-for-sale securities. Subsequent to transfer, the securities were evaluated for credit loss.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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 June 30, 2021 and December 31, 2020 are presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale
|
|
|
|
Amortized
|
|
Fair
|
|
(Dollars in thousands)
|
|
Cost
|
|
Value
|
|
June 30, 2021 (1)
|
|
|
|
|
|
Within one year
|
|
$
|
—
|
|
|
$
|
—
|
|
|
After one year but within five years
|
|
70,221
|
|
|
73,851
|
|
|
After five years but within ten years
|
|
227,815
|
|
|
232,840
|
|
|
After ten years
|
|
3,049,930
|
|
|
3,059,888
|
|
|
|
|
$
|
3,347,966
|
|
|
$
|
3,366,579
|
|
|
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.
The scheduled maturities of held-to-maturity debt securities at June 30, 2021 and December 31, 2020 are presented in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity
|
|
|
|
Amortized
|
|
Fair
|
|
(Dollars in thousands)
|
|
Cost
|
|
Value
|
|
June 30, 2021 (1)
|
|
|
|
|
|
Within one year
|
|
$
|
1,126
|
|
|
$
|
1,126
|
|
|
After one year but within five years
|
|
1,948
|
|
|
1,999
|
|
|
After five years but within ten years
|
|
40,620
|
|
|
42,066
|
|
|
After ten years
|
|
51,437
|
|
|
54,075
|
|
|
|
|
$
|
95,131
|
|
|
$
|
99,266
|
|
|
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 4.6 years at June 30, 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 $1.8 billion and $1.3 billion were pledged as collateral for retail customer repurchase agreements, municipal deposits, and other obligations as of June 30, 2021 and December 31, 2020, respectively.
During the six months ended June 30, 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 six months ended June 30, 2020, the Company sold $109.6 million of debt securities categorized as available-for-sale resulting in $2.6 million of realized gains and no realized losses.
As of June 30, 2021 and December 31, 2020, the Company's debt securities portfolio had remaining unamortized premiums of $65.8 million and $60.4 million, respectively, and unaccreted discounts of $5.2 million and $2.6 million, respectively.
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 June 30, 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
|
|
$
|
240,709
|
|
|
$
|
9,355
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
240,709
|
|
|
$
|
9,355
|
|
|
FNMA MBS
|
|
1,234,215
|
|
|
16,939
|
|
|
1,547
|
|
|
1
|
|
|
1,235,762
|
|
|
16,940
|
|
|
FHLMC MBS
|
|
10,340
|
|
|
214
|
|
|
3,152
|
|
|
8
|
|
|
13,492
|
|
|
222
|
|
|
GNMA MBS
|
|
2,204
|
|
|
47
|
|
|
—
|
|
|
—
|
|
|
2,204
|
|
|
47
|
|
|
GSE agency notes
|
|
223,973
|
|
|
7,894
|
|
|
—
|
|
|
—
|
|
|
223,973
|
|
|
7,894
|
|
|
|
|
$
|
1,711,441
|
|
|
$
|
34,449
|
|
|
$
|
4,699
|
|
|
$
|
9
|
|
|
$
|
1,716,140
|
|
|
$
|
34,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 June 30, 2021, available-for-sale debt securities for which the amortized cost basis exceeded fair value totaled $1.7 billion. Total unrealized losses on these securities were $34.5 million at June 30, 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 June 30, 2021.
At June 30, 2021 and December 31, 2020, held-to-maturity debt securities had an amortized cost basis of $95.1 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 June 30, 2021, aggregated by credit quality indicator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
State and political subdivisions
|
|
Foreign bonds
|
|
A+ rated or higher
|
|
$
|
94,504
|
|
|
$
|
501
|
|
|
Not rated
|
|
126
|
|
|
—
|
|
|
Ending balance
|
|
$
|
94,630
|
|
|
$
|
501
|
|
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 six months ended June 30, 2021 and 2020. The following table presents the activity in the allowance for credit losses for state and political subdivisions debt securities for the six months ended June 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
Six months ended June 30,
|
|
(Dollars in thousands)
|
|
2021
|
|
2020
|
2021
|
|
2020
|
|
Allowance for credit losses:
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
5
|
|
|
$
|
—
|
|
$
|
6
|
|
|
$
|
—
|
|
|
Impact of adoption ASC 326
|
|
—
|
|
|
8
|
|
—
|
|
|
8
|
|
|
Provision for credit losses
|
|
—
|
|
|
—
|
|
(1)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs, net
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
5
|
|
|
$
|
8
|
|
$
|
5
|
|
|
$
|
8
|
|
Accrued interest receivable of $1.0 million and $1.1 million as of June 30, 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 June 30, 2021 and December 31, 2020.
Equity Investments
The Company had equity investments with a fair value of $15.6 million and $9.5 million as of June 30, 2021 and December 31, 2020, respectively. During the three and six months ended June 30, 2021, the Company recorded an unrealized gain on its remaining investment in Visa Class B shares of $0.2 million and an unrealized gain of $5.1 million on its investment in Social Finance, Inc. (SoFi). During the three months ended June 30, 2020, the Company recorded a net realized gain on sale of Visa Class B shares of $22.1 million, which was recorded in Realized gain on equity investment, net in the Consolidated Statements of Income. During the six months ended June 30, 2020, the Company recorded unrealized gains on its remaining investment in Visa Class B shares of $0.1 million and an impairment loss of $2.3 million in the investment of Spring EQ LLC, which were recorded in Unrealized gain on equity investment, net in the Consolidated Statements of Income.
6. LOANS
The following table shows the Company's loan and lease portfolio by category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Commercial and industrial(1)
|
|
$
|
2,088,040
|
|
|
$
|
2,700,418
|
|
|
Owner-occupied commercial
|
|
1,360,681
|
|
|
1,332,727
|
|
|
Commercial mortgages
|
|
2,024,684
|
|
|
2,086,062
|
|
|
Construction
|
|
779,601
|
|
|
716,275
|
|
|
Commercial small business leases
|
|
291,657
|
|
|
248,885
|
|
|
Residential(2)
|
|
614,432
|
|
|
774,455
|
|
|
Consumer(3)
|
|
1,105,169
|
|
|
1,165,917
|
|
|
|
|
8,264,264
|
|
|
9,024,739
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
|
132,418
|
|
|
228,804
|
|
|
Net loans and leases
|
|
$
|
8,131,846
|
|
|
$
|
8,795,935
|
|
(1) Includes PPP loans of $222.9 million at June 30, 2021 and $751.2 million at December 31, 2020.
(2) Includes reverse mortgages at fair value of $8.4 million at June 30, 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 $32.7 million and $37.6 million at June 30, 2021 and December 31, 2020, respectively. Accrued interest receivable on loans and leases was excluded from the evaluation of allowance for credit losses.
7. ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY INFORMATION
The following tables provide the activity of allowance for credit losses and loan balances for the three and six months ended June 30, 2021 and 2020. During the first half 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 June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
125,870
|
|
|
$
|
9,617
|
|
|
$
|
30,545
|
|
|
$
|
14,287
|
|
|
$
|
5,702
|
|
|
$
|
18,797
|
|
|
$
|
204,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
|
(6,512)
|
|
|
(45)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(521)
|
|
|
(7,078)
|
|
|
Recoveries
|
|
1,379
|
|
|
15
|
|
|
30
|
|
|
—
|
|
|
455
|
|
|
362
|
|
|
2,241
|
|
|
Provision (credit)
|
|
(33,534)
|
|
|
(3,406)
|
|
|
(14,476)
|
|
|
(10,775)
|
|
|
(2,864)
|
|
|
(2,508)
|
|
|
(67,563)
|
|
|
Ending balance
|
|
$
|
87,203
|
|
|
$
|
6,181
|
|
|
$
|
16,099
|
|
|
$
|
3,512
|
|
|
$
|
3,293
|
|
|
$
|
16,130
|
|
|
$
|
132,418
|
|
|
Six months ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
150,875
|
|
|
$
|
9,615
|
|
|
$
|
31,071
|
|
|
$
|
12,190
|
|
|
$
|
6,893
|
|
|
$
|
18,160
|
|
|
$
|
228,804
|
|
|
Charge-offs
|
|
(11,564)
|
|
|
(45)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(945)
|
|
|
(12,554)
|
|
|
Recoveries
|
|
2,519
|
|
|
105
|
|
|
44
|
|
|
—
|
|
|
595
|
|
|
628
|
|
|
3,891
|
|
|
Provision (credit)
|
|
(54,627)
|
|
|
(3,494)
|
|
|
(15,016)
|
|
|
(8,678)
|
|
|
(4,195)
|
|
|
(1,713)
|
|
|
(87,723)
|
|
|
Ending balance
|
|
$
|
87,203
|
|
|
$
|
6,181
|
|
|
$
|
16,099
|
|
|
$
|
3,512
|
|
|
$
|
3,293
|
|
|
$
|
16,130
|
|
|
$
|
132,418
|
|
|
Period-end allowance allocated to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans evaluated on an individual basis
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
Loans evaluated on a collective basis
|
|
87,202
|
|
|
6,181
|
|
|
16,089
|
|
|
3,512
|
|
|
3,293
|
|
|
16,130
|
|
|
132,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
87,203
|
|
|
$
|
6,181
|
|
|
$
|
16,099
|
|
|
$
|
3,512
|
|
|
$
|
3,293
|
|
|
$
|
16,130
|
|
|
$
|
132,418
|
|
|
Period-end loan balances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans evaluated on an individual basis
|
|
$
|
14,446
|
|
|
$
|
3,868
|
|
|
$
|
3,962
|
|
|
$
|
72
|
|
|
$
|
4,994
|
|
|
$
|
2,608
|
|
|
$
|
29,950
|
|
|
Loans evaluated on a collective basis
|
|
2,365,251
|
|
|
1,356,813
|
|
|
2,020,722
|
|
|
779,529
|
|
|
601,064
|
|
|
1,102,561
|
|
|
8,225,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
2,379,697
|
|
|
$
|
1,360,681
|
|
|
$
|
2,024,684
|
|
|
$
|
779,601
|
|
|
$
|
606,058
|
|
|
$
|
1,105,169
|
|
|
$
|
8,255,890
|
|
(1)Includes commercial small business leases and PPP loans.
(2)Period-end loan balance excludes reverse mortgages at fair value of $8.4 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 June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
65,771
|
|
|
$
|
9,541
|
|
|
$
|
26,600
|
|
|
$
|
5,198
|
|
|
$
|
11,593
|
|
|
$
|
20,370
|
|
|
$
|
139,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge-offs
|
|
(2,072)
|
|
|
(53)
|
|
|
—
|
|
|
—
|
|
|
(32)
|
|
|
(667)
|
|
|
(2,824)
|
|
|
Recoveries
|
|
968
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
24
|
|
|
194
|
|
|
1,189
|
|
|
Provision (credit)
|
|
79,558
|
|
|
(532)
|
|
|
11,794
|
|
|
4,928
|
|
|
(2,414)
|
|
|
1,420
|
|
|
94,754
|
|
|
Ending balance
|
|
$
|
144,225
|
|
|
$
|
8,956
|
|
|
$
|
38,397
|
|
|
$
|
10,126
|
|
|
$
|
9,171
|
|
|
$
|
21,317
|
|
|
$
|
232,192
|
|
|
Six months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan 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
|
|
(5,136)
|
|
|
(336)
|
|
|
(51)
|
|
|
—
|
|
|
(175)
|
|
|
(1,581)
|
|
|
(7,279)
|
|
|
Recoveries
|
|
3,815
|
|
|
125
|
|
|
32
|
|
|
5
|
|
|
115
|
|
|
548
|
|
|
4,640
|
|
|
Provision
|
|
102,950
|
|
|
6,023
|
|
|
29,302
|
|
|
5,549
|
|
|
328
|
|
|
7,248
|
|
|
151,400
|
|
|
Ending balance
|
|
$
|
144,225
|
|
|
$
|
8,956
|
|
|
$
|
38,397
|
|
|
$
|
10,126
|
|
|
$
|
9,171
|
|
|
$
|
21,317
|
|
|
$
|
232,192
|
|
|
Period-end allowance allocated to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans evaluated on an individual basis
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
Loans evaluated on a collective basis
|
|
144,207
|
|
|
8,956
|
|
|
38,397
|
|
|
10,126
|
|
|
9,171
|
|
|
21,317
|
|
|
232,174
|
|
|
Ending balance
|
|
$
|
144,225
|
|
|
$
|
8,956
|
|
|
$
|
38,397
|
|
|
$
|
10,126
|
|
|
$
|
9,171
|
|
|
$
|
21,317
|
|
|
$
|
232,192
|
|
|
Period-end loan balances:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans evaluated on an individual basis
|
|
$
|
15,634
|
|
|
$
|
5,425
|
|
|
$
|
4,470
|
|
|
$
|
88
|
|
|
$
|
5,452
|
|
|
$
|
2,464
|
|
|
$
|
33,533
|
|
|
Loans evaluated on a collective basis
|
|
3,151,200
|
|
|
1,331,828
|
|
|
2,161,077
|
|
|
638,416
|
|
|
889,408
|
|
|
1,130,907
|
|
|
9,302,836
|
|
|
Ending balance
|
|
$
|
3,166,834
|
|
|
$
|
1,337,253
|
|
|
$
|
2,165,547
|
|
|
$
|
638,504
|
|
|
$
|
894,860
|
|
|
$
|
1,133,371
|
|
|
$
|
9,336,369
|
|
(1)Includes commercial small business leases and PPP loans.
(2)Period-end loan balance excludes reverse mortgages at fair value of $16.1 million.
(3)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
(4)Includes $0.1 million for the initial allowance on loans purchased with credit deterioration.
The following tables show nonaccrual and past due loans presented at amortized cost at the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 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)
|
|
|
|
$
|
8,160
|
|
|
$
|
482
|
|
|
$
|
8,642
|
|
|
$
|
2,356,794
|
|
|
$
|
14,261
|
|
|
|
|
$
|
2,379,697
|
|
|
Owner-occupied commercial
|
|
|
|
3,817
|
|
|
—
|
|
|
3,817
|
|
|
1,354,083
|
|
|
2,781
|
|
|
|
|
1,360,681
|
|
|
Commercial mortgages
|
|
|
|
3,000
|
|
|
—
|
|
|
3,000
|
|
|
2,020,069
|
|
|
1,615
|
|
|
|
|
2,024,684
|
|
|
Construction
|
|
|
|
7,383
|
|
|
—
|
|
|
7,383
|
|
|
772,218
|
|
|
—
|
|
|
|
|
779,601
|
|
|
Residential(3)
|
|
|
|
1,260
|
|
|
1,093
|
|
|
2,353
|
|
|
600,979
|
|
|
2,726
|
|
|
|
|
606,058
|
|
|
Consumer(4)
|
|
|
|
7,971
|
|
|
6,958
|
|
|
14,929
|
|
|
1,087,599
|
|
|
2,641
|
|
|
|
|
1,105,169
|
|
|
Total
|
|
|
|
$
|
31,591
|
|
|
$
|
8,533
|
|
|
$
|
40,124
|
|
|
$
|
8,191,742
|
|
|
$
|
24,024
|
|
|
|
|
$
|
8,255,890
|
|
|
% of Total Loans
|
|
|
|
0.38
|
%
|
|
0.10
|
%
|
|
0.48
|
%
|
|
99.23
|
%
|
|
0.29
|
%
|
|
|
|
100
|
%
|
(1)Nonaccrual loans with an allowance totaled $10 thousand.
(2)Includes commercial small business leases and PPP loans.
(3)Residential accruing current balances excludes reverse mortgages at fair value of $8.4 million.
(4)Includes $13.6 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 June 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
(Dollars in thousands)
|
|
Property
|
|
|
|
Equipment and other
|
|
Property
|
|
|
|
Equipment and other
|
|
Commercial and industrial(1)
|
|
$
|
11,498
|
|
|
|
|
$
|
2,763
|
|
|
$
|
10,646
|
|
|
|
|
$
|
3,170
|
|
|
Owner-occupied commercial
|
|
2,781
|
|
|
|
|
—
|
|
|
5,360
|
|
|
|
|
—
|
|
|
Commercial mortgages
|
|
1,615
|
|
|
|
|
—
|
|
|
17,175
|
|
|
|
|
—
|
|
|
Construction
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
Residential(2)
|
|
2,726
|
|
|
|
|
—
|
|
|
3,247
|
|
|
|
|
—
|
|
|
Consumer(3)
|
|
2,641
|
|
|
|
|
—
|
|
|
2,294
|
|
|
|
|
16
|
|
|
Total
|
|
$
|
21,261
|
|
|
|
|
$
|
2,763
|
|
|
$
|
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 recognized on individually reviewed loans was $0.2 million during the three months ended June 30, 2021 and 2020, respectively, and $0.4 million during the six months ended June 30, 2021 and 2020, respectively.
As of June 30, 2021, there were 23 residential loans and 23 commercial loans in the process of foreclosure. The total outstanding balance on these loans was $1.3 million and $11.8 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 $0.2 million and $0.7 million during the three and six months ended June 30, 2021, and $1.1 million and $1.8 million during three and six months ended June 30, 2020. Loan workout and OREO expenses are included in Loan workout and other credit costs on the Consolidated Statement of Income (Loss).
Credit Quality Indicators
Below is a description of each of the risk ratings for all commercial loans:
•Pass. These borrowers currently show no indication of deterioration or potential problems and their loans are considered fully collectible.
•Special Mention. These borrowers have potential weaknesses that deserve management’s close attention. Borrowers in this category may be experiencing adverse operating trends, for example, declining revenues or margins, high leverage, tight liquidity, or increasing inventory without increasing sales. These adverse trends can have a potential negative effect on the borrower’s repayment capacity. These assets are not adversely classified and do not expose the Bank to significant risk that would warrant a more severe rating. Borrowers in this category may also be experiencing significant management problems, pending litigation, or other structural credit weaknesses.
•Substandard or Lower. These borrowers have well-defined weaknesses that require extensive oversight by management. Borrowers in this category may exhibit one or more of the following: inadequate debt service coverage, unprofitable operations, insufficient liquidity, high leverage, and weak or inadequate capitalization. Relationships in this category are not adequately protected by the sound financial worth and paying capacity of the obligor or the collateral pledged on the loan, if any. A distinct possibility exists that the Bank will sustain some loss if the deficiencies are not corrected. In addition, some borrowers in this category could have the added characteristic that the possibility of loss is extremely high. Current circumstances in the credit relationship make collection or liquidation in full highly questionable. Such impending events include: perfecting liens on additional collateral, obtaining collateral valuations, an acquisition or liquidation preceding, proposed merger, or refinancing plan.
Residential and Consumer Loans
The residential and consumer loan portfolios are monitored on an ongoing basis using delinquency information and loan type as credit quality indicators. These credit quality indicators are assessed in the aggregate in these relatively homogeneous portfolios. Loans that are greater than 90 days past due are generally considered nonperforming and placed on nonaccrual status.
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 June 30, 2021.
|
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|
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|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
$
|
270,308
|
|
|
$
|
698,723
|
|
|
$
|
347,351
|
|
|
$
|
236,657
|
|
|
$
|
144,007
|
|
|
$
|
172,211
|
|
|
$
|
5,500
|
|
|
$
|
135,762
|
|
|
$
|
2,010,519
|
|
|
Special mention
|
|
13,738
|
|
|
659
|
|
|
28,717
|
|
|
10,786
|
|
|
943
|
|
|
15,035
|
|
|
—
|
|
|
51,343
|
|
|
121,221
|
|
|
Substandard or Lower
|
|
12,307
|
|
|
25,261
|
|
|
65,445
|
|
|
49,864
|
|
|
49,931
|
|
|
36,968
|
|
|
27
|
|
|
8,154
|
|
|
247,957
|
|
|
|
|
$
|
296,353
|
|
|
$
|
724,643
|
|
|
$
|
441,513
|
|
|
$
|
297,307
|
|
|
$
|
194,881
|
|
|
$
|
224,214
|
|
|
$
|
5,527
|
|
|
$
|
195,259
|
|
|
$
|
2,379,697
|
|
|
Owner-occupied commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
145,214
|
|
|
$
|
223,752
|
|
|
$
|
207,609
|
|
|
$
|
75,082
|
|
|
$
|
131,905
|
|
|
$
|
317,070
|
|
|
$
|
—
|
|
|
$
|
130,649
|
|
|
$
|
1,231,281
|
|
|
Special mention
|
|
763
|
|
|
1,124
|
|
|
3,138
|
|
|
482
|
|
|
10,692
|
|
|
10,418
|
|
|
—
|
|
|
14,105
|
|
|
40,722
|
|
|
Substandard or Lower
|
|
—
|
|
|
7,157
|
|
|
13,918
|
|
|
14,330
|
|
|
19,617
|
|
|
25,676
|
|
|
—
|
|
|
7,980
|
|
|
88,678
|
|
|
|
|
$
|
145,977
|
|
|
$
|
232,033
|
|
|
$
|
224,665
|
|
|
$
|
89,894
|
|
|
$
|
162,214
|
|
|
$
|
353,164
|
|
|
$
|
—
|
|
|
$
|
152,734
|
|
|
$
|
1,360,681
|
|
|
Commercial mortgages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
264,232
|
|
|
$
|
314,468
|
|
|
$
|
238,420
|
|
|
$
|
181,718
|
|
|
$
|
224,772
|
|
|
$
|
470,819
|
|
|
$
|
—
|
|
|
$
|
230,137
|
|
|
$
|
1,924,566
|
|
|
Special mention
|
|
—
|
|
|
8,168
|
|
|
1,751
|
|
|
885
|
|
|
21,004
|
|
|
6,179
|
|
|
—
|
|
|
1,849
|
|
|
39,836
|
|
|
Substandard or Lower
|
|
—
|
|
|
13,190
|
|
|
22,470
|
|
|
2,217
|
|
|
1,562
|
|
|
19,797
|
|
|
—
|
|
|
1,046
|
|
|
60,282
|
|
|
|
|
$
|
264,232
|
|
|
$
|
335,826
|
|
|
$
|
262,641
|
|
|
$
|
184,820
|
|
|
$
|
247,338
|
|
|
$
|
496,795
|
|
|
$
|
—
|
|
|
$
|
233,032
|
|
|
$
|
2,024,684
|
|
|
Construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
137,727
|
|
|
$
|
208,583
|
|
|
$
|
149,019
|
|
|
$
|
142,891
|
|
|
$
|
11,236
|
|
|
$
|
9,283
|
|
|
$
|
—
|
|
|
$
|
93,945
|
|
|
$
|
752,684
|
|
|
Special mention
|
|
7,931
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,515
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,446
|
|
|
Substandard or Lower
|
|
4,988
|
|
|
—
|
|
|
4,967
|
|
|
—
|
|
|
98
|
|
|
71
|
|
|
—
|
|
|
5,347
|
|
|
15,471
|
|
|
|
|
$
|
150,646
|
|
|
$
|
208,583
|
|
|
$
|
153,986
|
|
|
$
|
142,891
|
|
|
$
|
14,849
|
|
|
$
|
9,354
|
|
|
$
|
—
|
|
|
$
|
99,292
|
|
|
$
|
779,601
|
|
|
Residential(3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
|
$
|
11,589
|
|
|
$
|
35,330
|
|
|
$
|
17,243
|
|
|
$
|
43,732
|
|
|
$
|
61,268
|
|
|
$
|
431,902
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
601,064
|
|
|
Nonperforming(4)
|
|
—
|
|
|
112
|
|
|
—
|
|
|
—
|
|
|
63
|
|
|
4,819
|
|
|
—
|
|
|
—
|
|
|
4,994
|
|
|
|
|
$
|
11,589
|
|
|
$
|
35,442
|
|
|
$
|
17,243
|
|
|
$
|
43,732
|
|
|
$
|
61,331
|
|
|
$
|
436,721
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
606,058
|
|
|
Consumer(5):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Rating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
|
$
|
65,016
|
|
|
$
|
231,337
|
|
|
$
|
98,951
|
|
|
$
|
214,502
|
|
|
$
|
47,934
|
|
|
$
|
75,185
|
|
|
$
|
362,142
|
|
|
$
|
7,147
|
|
|
$
|
1,102,214
|
|
|
Nonperforming(6)
|
|
—
|
|
|
361
|
|
|
33
|
|
|
619
|
|
|
193
|
|
|
—
|
|
|
1,351
|
|
|
398
|
|
|
2,955
|
|
|
|
|
$
|
65,016
|
|
|
$
|
231,698
|
|
|
$
|
98,984
|
|
|
$
|
215,121
|
|
|
$
|
48,127
|
|
|
$
|
75,185
|
|
|
$
|
363,493
|
|
|
$
|
7,545
|
|
|
$
|
1,105,169
|
|
(1)Includes commercial small business leases.
(2)Includes $222.9 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.
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.
Troubled Debt Restructurings (TDRs)
The following table presents the balance of TDRs as of the indicated dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Performing TDRs
|
|
$
|
14,997
|
|
|
$
|
15,539
|
|
|
Nonperforming TDRs
|
|
2,694
|
|
|
4,601
|
|
|
Total TDRs
|
|
$
|
17,691
|
|
|
$
|
20,140
|
|
Approximately $0.2 million and less than $0.1 million in related reserves have been established for these loans at June 30, 2021 and December 31, 2020, respectively. The following tables present information regarding the types of loan modifications made for the three and six months ended June 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2021
|
|
Six months ended June 30, 2021
|
|
|
|
Contractual payment reduction and term extension
|
|
Maturity Date Extension
|
|
Discharged in bankruptcy
|
|
Other(1)
|
|
Total
|
|
Contractual payment reduction and term extension
|
|
Maturity Date Extension
|
|
Discharged in bankruptcy
|
|
Other(1)
|
|
Total
|
|
Commercial and industrial
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Owner-occupied commercial
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Commercial mortgages
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Construction
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Residential
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
Consumer
|
|
—
|
|
|
—
|
|
|
3
|
|
|
1
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
1
|
|
|
21
|
|
|
Total
|
|
—
|
|
|
—
|
|
|
3
|
|
|
1
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
22
|
|
|
1
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2020
|
|
Six months ended June 30, 2020
|
|
|
|
Contractual payment reduction and term extension
|
|
Maturity Date Extension
|
|
Discharged in bankruptcy
|
|
Other(1)
|
|
Total
|
|
Contractual payment reduction and term extension
|
|
Maturity Date Extension
|
|
Discharged in bankruptcy
|
|
Other(1)
|
|
Total
|
|
Commercial and industrial
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
Owner-occupied commercial
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
Commercial mortgages
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
—
|
|
|
—
|
|
|
3
|
|
|
1
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
2
|
|
|
6
|
|
|
Consumer
|
|
—
|
|
|
—
|
|
|
4
|
|
|
1
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
3
|
|
|
10
|
|
|
Total
|
|
2
|
|
|
—
|
|
|
7
|
|
|
2
|
|
|
11
|
|
|
4
|
|
|
1
|
|
|
11
|
|
|
5
|
|
|
21
|
|
(1)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 tables present loans modified as TDRs during the three and six months ended June 30, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021
|
|
|
|
|
|
Six Months Ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Pre Modification
|
|
Post Modification
|
|
|
|
|
|
Pre Modification
|
|
Post Modification
|
|
|
|
|
|
Commercial
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
Owner-occupied commercial
|
|
—
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Commercial mortgages
|
|
—
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
—
|
|
|
—
|
|
|
|
|
|
|
166
|
|
|
166
|
|
|
|
|
|
|
Consumer
|
|
155
|
|
|
155
|
|
|
|
|
|
|
839
|
|
|
839
|
|
|
|
|
|
|
Total(1)(2)
|
|
$
|
155
|
|
|
$
|
155
|
|
|
|
|
|
|
$
|
1,005
|
|
|
$
|
1,005
|
|
|
|
|
|
(1)During the three and six months ended June 30, 2021, the TDRs set forth in the table above resulted in a less than $0.1 million increase in the allowance for credit losses for both periods, and no additional charge-offs in either period. During the three and six months ended June 30, 2021, no TDRs defaulted that had received troubled debt modification during the past twelve months.
(2)The TDRs set forth in the table above did not occur as a result of the loan forbearance program under the CARES Act.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020
|
|
Six Months Ended June 30, 2020
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Pre Modification
|
|
Post Modification
|
|
Pre Modification
|
|
Post Modification
|
|
Commercial
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31
|
|
|
$
|
31
|
|
|
Owner-occupied commercial
|
|
567
|
|
|
567
|
|
|
1,216
|
|
|
1,216
|
|
|
Commercial mortgages
|
|
—
|
|
|
—
|
|
|
104
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
905
|
|
|
905
|
|
|
1,126
|
|
|
1,126
|
|
|
Consumer
|
|
245
|
|
|
245
|
|
|
459
|
|
|
459
|
|
|
Total(1)(2)
|
|
$
|
1,717
|
|
|
$
|
1,717
|
|
|
$
|
2,936
|
|
|
$
|
2,936
|
|
(1)During the three and six months ended June 30, 2020 the TDRs set forth in the table above resulted in a less than $0.1 million increase and a $0.1 million increase in the allowance for credit losses, respectively, and no additional charge-offs in either period. During the three and six months ended June 30, 2020, no TDRs defaulted that had received troubled debt modification during the past twelve months.
(2)The TDRs set forth in the table above did not occur as a result of the loan forbearance program under the CARES Act.
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
|
|
Six months ended
|
|
(Dollars in thousands)
|
|
June 30, 2021
|
|
June 30, 2020
|
|
June 30, 2021
|
|
June 30, 2020
|
|
Operating lease cost (1)
|
|
$
|
4,789
|
|
|
$
|
4,950
|
|
|
$
|
9,443
|
|
|
$
|
9,500
|
|
|
Sublease income
|
|
(90)
|
|
|
(93)
|
|
|
(197)
|
|
|
(186)
|
|
|
Net lease cost
|
|
$
|
4,699
|
|
|
$
|
4,857
|
|
|
$
|
9,246
|
|
|
$
|
9,314
|
|
(1)Includes variable lease cost and short-term lease cost.
Supplemental balance sheet information related to operating leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
|
|
|
|
Right of use assets
|
|
$
|
150,291
|
|
|
$
|
150,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities
|
|
$
|
165,057
|
|
|
$
|
166,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease term and discount rate
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term (in years)
|
|
19.16
|
|
19.36
|
|
|
|
|
|
|
|
Weighted average discount rate
|
|
4.26
|
%
|
|
4.26
|
%
|
Maturities of operating lease liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
June 30, 2021
|
|
Remaining in 2021
|
|
$
|
8,780
|
|
|
2022
|
|
17,569
|
|
|
2023
|
|
17,692
|
|
|
2024
|
|
16,467
|
|
|
2025
|
|
16,478
|
|
|
After 2025
|
|
183,244
|
|
|
Total lease payments
|
|
260,230
|
|
|
Less: Interest
|
|
(95,173)
|
|
|
Present value of lease liabilities
|
|
$
|
165,057
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information related to operating leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
(Dollars in thousands)
|
|
|
|
|
|
June 30, 2021
|
|
June 30, 2020
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
|
|
|
|
$
|
9,074
|
|
|
$
|
9,328
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Six months ended
|
|
(Dollars in thousands)
|
|
June 30, 2021
|
|
June 30, 2020
|
|
June 30, 2021
|
|
June 30, 2020
|
|
Direct financing leases:
|
|
|
|
|
|
|
|
|
|
Interest income on lease receivable
|
|
$
|
5,102
|
|
|
$
|
3,813
|
|
|
$
|
9,726
|
|
|
$
|
7,379
|
|
|
Interest income on deferred fees and costs, net
|
|
(438)
|
|
|
93
|
|
|
(756)
|
|
|
188
|
|
|
Total direct financing lease net interest income
|
|
$
|
4,664
|
|
|
$
|
3,906
|
|
|
$
|
8,970
|
|
|
$
|
7,567
|
|
Equipment leasing receivables relate to direct financing leases. The composition of the net investment in direct financing leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Lease receivables
|
|
$
|
329,718
|
|
|
$
|
281,601
|
|
|
Unearned income
|
|
(43,808)
|
|
|
(36,669)
|
|
|
Deferred fees and costs
|
|
5,747
|
|
|
3,953
|
|
|
Net investment in direct financing leases
|
|
$
|
291,657
|
|
|
$
|
248,885
|
|
Future minimum lease payments to be received for direct financing leases were as follows:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
June 30, 2021
|
|
Remaining in 2021
|
|
$
|
53,731
|
|
|
2022
|
|
96,910
|
|
|
2023
|
|
78,809
|
|
|
2024
|
|
56,668
|
|
|
2025
|
|
34,903
|
|
|
After 2025
|
|
8,697
|
|
|
Total lease payments
|
|
$
|
329,718
|
|
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 six months ended June 30, 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 six months ended June 30, 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
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
June 30, 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
|
|
June 30, 2021
|
|
|
|
|
|
|
|
|
Core deposits
|
$
|
93,811
|
|
|
$
|
(25,469)
|
|
|
$
|
68,342
|
|
|
10 years
|
|
Customer relationships
|
15,281
|
|
|
(7,238)
|
|
|
8,043
|
|
|
7-15 years
|
|
Non-compete agreements
|
221
|
|
|
(212)
|
|
|
9
|
|
|
5 years
|
|
Loan servicing rights(1)
|
5,639
|
|
|
(2,910)
|
|
|
2,729
|
|
|
10-25 years
|
|
Total intangible assets
|
$
|
114,952
|
|
|
$
|
(35,829)
|
|
|
$
|
79,123
|
|
|
|
|
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 impairment losses of $0.1 million and less than $0.1 million for the three and six months ended June 30, 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 and $5.3 million for the three and six months ended June 30, 2021, compared to $2.8 million and $5.5 million for the three and six months ended June 30, 2020.
The following table presents the estimated future amortization expense on intangible assets:
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
June 30, 2021
|
|
Remaining in 2021
|
$
|
5,647
|
|
|
2022
|
11,132
|
|
|
2023
|
10,980
|
|
|
2024
|
10,800
|
|
|
2025
|
10,544
|
|
|
Thereafter
|
30,020
|
|
|
Total
|
$
|
79,123
|
|
10. DEPOSITS
The following table shows deposits by category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Noninterest-bearing:
|
|
|
|
|
|
|
Noninterest demand
|
|
$
|
4,328,060
|
|
|
$
|
3,415,021
|
|
|
|
|
Total noninterest-bearing
|
|
$
|
4,328,060
|
|
|
$
|
3,415,021
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing:
|
|
|
|
|
|
|
Interest-bearing demand
|
|
$
|
2,633,423
|
|
|
$
|
2,635,740
|
|
|
|
Savings
|
|
1,927,627
|
|
|
1,774,332
|
|
|
|
Money market
|
|
2,722,868
|
|
|
2,654,439
|
|
|
|
|
|
|
|
|
|
|
|
Customer time deposits
|
|
1,052,042
|
|
|
1,158,845
|
|
|
|
Brokered deposits
|
|
62,825
|
|
|
218,287
|
|
|
|
|
Total interest-bearing
|
|
8,398,785
|
|
|
8,441,643
|
|
|
|
|
Total deposits
|
|
$
|
12,726,845
|
|
|
$
|
11,856,664
|
|
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 June 30,
|
|
Six months ended June 30,
|
|
(Dollars in thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Service cost
|
|
$
|
17
|
|
|
$
|
15
|
|
|
$
|
34
|
|
|
$
|
30
|
|
|
Interest cost
|
|
13
|
|
|
17
|
|
|
26
|
|
|
34
|
|
|
Prior service cost amortization
|
|
(19)
|
|
|
(19)
|
|
|
(38)
|
|
|
(38)
|
|
|
Net gain recognition
|
|
(5)
|
|
|
(9)
|
|
|
(10)
|
|
|
(18)
|
|
|
Net periodic cost (benefit)
|
|
$
|
6
|
|
|
$
|
4
|
|
|
$
|
12
|
|
|
$
|
8
|
|
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. In the first quarter of 2020, the Company received Internal Revenue Service and Pension Benefit Guaranty Corporation approval to terminate the plan. As of June 30, 2020, the Company completed the termination and contributed $0.5 million to the plan to settle the obligation.
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 and six months ended June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
(Dollars in thousands)
|
|
|
|
June 30, 2020
|
|
|
|
June 30, 2020
|
|
Service cost
|
|
|
|
$
|
7
|
|
|
|
|
$
|
17
|
|
|
Interest cost
|
|
|
|
42
|
|
|
|
|
105
|
|
|
Expected return on plan assets
|
|
|
|
(79)
|
|
|
|
|
(196)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan settlement loss
|
|
|
|
1,431
|
|
|
|
|
1,431
|
|
|
Net periodic cost (benefit)
|
|
|
|
$
|
1,401
|
|
|
|
|
$
|
1,357
|
|
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 June 30, 2021
|
|
Six months ended June 30, 2021
|
|
(Dollars in thousands)
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
|
Service cost
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
29
|
|
|
Interest cost
|
|
530
|
|
|
77
|
|
|
1,060
|
|
|
154
|
|
|
Expected return on plan assets
|
|
(1,705)
|
|
|
—
|
|
|
(3,410)
|
|
|
—
|
|
|
Prior service cost amortization
|
|
—
|
|
|
(3)
|
|
|
—
|
|
|
(6)
|
|
|
Net loss (gain) recognition
|
|
7
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
Net periodic (benefit) cost
|
|
$
|
(1,168)
|
|
|
$
|
89
|
|
|
$
|
(2,337)
|
|
|
$
|
177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2020
|
|
Six months ended June 30, 2020
|
|
(Dollars in thousands)
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
|
Service cost
|
|
$
|
—
|
|
|
$
|
29
|
|
|
$
|
—
|
|
|
$
|
58
|
|
|
Interest cost
|
|
740
|
|
|
138
|
|
|
1,455
|
|
|
275
|
|
|
Expected return on plan assets
|
|
(1,588)
|
|
|
—
|
|
|
(3,182)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (gain) loss recognition
|
|
1
|
|
|
(16)
|
|
|
2
|
|
|
(32)
|
|
|
Net periodic (benefit) cost
|
|
$
|
(847)
|
|
|
$
|
151
|
|
|
$
|
(1,725)
|
|
|
$
|
301
|
|
12. INCOME TAXES
There were no unrecognized tax benefits as of June 30, 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 June 30, 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 $1.7 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 June 30, 2021 and 2020, respectively, and $1.8 million and $1.6 million of such amortization has been reflected as income tax expense for the six months ended June 30, 2021 and 2020, respectively.
The amount of affordable housing tax credits, amortization and tax benefits recorded as income tax expense for the six months ended June 30, 2021 were $1.8 million, $1.8 million and $0.3 million, respectively. The carrying value of the investment in affordable housing credits is $24.8 million at June 30, 2021, compared to $26.6 million at December 31, 2020.
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.
The following tables present financial instruments carried at fair value as of June 30, 2021 and December 31, 2020 by level in the valuation hierarchy (as described above):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 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
|
|
$
|
—
|
|
|
$
|
618,419
|
|
|
$
|
—
|
|
|
$
|
618,419
|
|
|
FNMA MBS
|
|
—
|
|
|
2,329,787
|
|
|
—
|
|
|
2,329,787
|
|
|
FHLMC MBS
|
|
—
|
|
|
171,998
|
|
|
—
|
|
|
171,998
|
|
|
GNMA MBS
|
|
—
|
|
|
22,402
|
|
|
—
|
|
|
22,402
|
|
|
GSE agency notes
|
|
—
|
|
|
223,973
|
|
|
—
|
|
|
223,973
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
—
|
|
|
8,606
|
|
|
—
|
|
|
8,606
|
|
|
Total assets measured at fair value on a recurring basis
|
|
$
|
—
|
|
|
$
|
3,375,185
|
|
|
$
|
—
|
|
|
$
|
3,375,185
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
$
|
—
|
|
|
$
|
4,464
|
|
|
$
|
22,145
|
|
|
$
|
26,609
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets measured at fair value on a nonrecurring basis:
|
|
|
|
|
|
|
|
|
|
Other investments
|
|
$
|
5,604
|
|
|
$
|
—
|
|
|
$
|
10,044
|
|
|
$
|
15,648
|
|
|
Other real estate owned
|
|
—
|
|
|
—
|
|
|
1,044
|
|
|
1,044
|
|
|
Loans held for sale
|
|
—
|
|
|
113,173
|
|
|
—
|
|
|
113,173
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value on a nonrecurring basis
|
|
$
|
5,604
|
|
|
$
|
113,173
|
|
|
$
|
11,088
|
|
|
$
|
129,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Fair value is based on quoted market prices, where available. If such quoted market prices are not available, fair value is based on internally developed models or obtained from third parties that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include unobservable parameters. The Company's valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While the Company believes its valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Available-for-sale securities
Securities classified as available-for-sale are reported at fair value using Level 2 inputs. The Company believes that this Level 2 designation is appropriate under ASC 820-10, as these securities are GSEs and GNMA securities with almost all fixed income securities, none are exchange traded, and all are priced by correlation to observed market data. For these securities the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors.
Other investments
Other investments includes equity investments with and without readily determinable fair values and equity method investments, which are categorized as Level 1 and Level 3. The Company's equity investments with a readily determinable fair value are held at fair value. 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The reported fair values of financial instruments are based on a variety of factors. In certain cases, fair values represent quoted market prices for identical or comparable instruments. In other cases, fair values have been estimated based on assumptions regarding the amount and timing of estimated future cash flows that are discounted to reflect current market rates and varying degrees of risk. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of period-end or that will be realized in the future.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash, cash equivalents, and restricted cash
For cash and short-term investment securities, including due from banks, federal funds sold or purchased under agreements to resell and interest-bearing deposits with other banks, the carrying amount is a reasonable estimate of fair value.
Investment securities
Investment securities include debt securities classified as held-to-maturity or available-for-sale. Fair value is estimated using quoted prices for similar securities, which the Company obtains from a third party vendor. The Company uses one of the largest providers of securities pricing to the industry and management periodically assesses the inputs used by this vendor to price the various types of securities owned by the Company to validate the vendor’s methodology as described above in available-for-sale securities.
Other investments
Other investments includes equity investments with and 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).
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 $13.0 million at June 30, 2021 and $12.8 million at 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
Financial Instrument
|
|
Fair Value
|
|
Valuation Technique(s)
|
|
Unobservable Input
|
|
Range (Weighted Average)
|
|
Other investments
|
|
$
|
15,648
|
|
|
Observed market comparable transactions
|
|
Period of observed transactions
|
|
May 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned
|
|
1,044
|
|
|
Fair market value of collateral
|
|
Costs to sell
|
|
10.0%
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
22,145
|
|
|
Discounted cash flow
|
|
Timing of Visa litigation resolution
|
|
2.25 - 7.25 years (5.00 years or 4Q 2025)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The book value and estimated fair value of the Company's financial instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 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
|
|
$
|
2,421,113
|
|
|
$
|
2,421,113
|
|
|
$
|
1,654,735
|
|
|
$
|
1,654,735
|
|
|
Investment securities available-for-sale
|
|
Level 2
|
|
3,366,579
|
|
|
3,366,579
|
|
|
2,529,057
|
|
|
2,529,057
|
|
|
Investment securities held-to-maturity, net
|
|
Level 2
|
|
95,126
|
|
|
99,266
|
|
|
111,741
|
|
|
116,421
|
|
|
Other investments
|
|
Levels 1, 3
|
|
15,648
|
|
|
15,648
|
|
|
9,541
|
|
|
9,541
|
|
|
Loans, held for sale
|
|
Level 2
|
|
113,173
|
|
|
113,173
|
|
|
197,541
|
|
|
197,541
|
|
|
Loans and leases, net(1)
|
|
Level 3
|
|
8,131,846
|
|
|
8,208,084
|
|
|
8,795,935
|
|
|
9,130,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock in FHLB of Pittsburgh
|
|
Level 2
|
|
6,090
|
|
|
6,090
|
|
|
5,771
|
|
|
5,771
|
|
|
Accrued interest receivable
|
|
Level 2
|
|
40,275
|
|
|
40,275
|
|
|
44,335
|
|
|
44,335
|
|
|
Other assets
|
|
Level 2
|
|
8,606
|
|
|
8,606
|
|
|
14,448
|
|
|
14,448
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
Level 2
|
|
12,726,845
|
|
|
12,734,333
|
|
|
11,856,664
|
|
|
11,868,897
|
|
|
Borrowed funds
|
|
Level 2
|
|
236,470
|
|
|
224,106
|
|
|
340,641
|
|
|
340,106
|
|
|
Standby letters of credit
|
|
Level 3
|
|
586
|
|
|
586
|
|
|
630
|
|
|
630
|
|
|
Accrued interest payable
|
|
Level 2
|
|
1,977
|
|
|
1,977
|
|
|
1,450
|
|
|
1,450
|
|
|
Other liabilities
|
|
Levels 2, 3
|
|
26,609
|
|
|
26,609
|
|
|
32,257
|
|
|
32,257
|
|
(1) Includes reverse mortgage loans.
At June 30, 2021 and December 31, 2020 the Company had no commitments to extend credit measured at fair value.
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 June 30, 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
|
|
|
|
$
|
57,781
|
|
|
Other assets
|
|
$
|
3,754
|
|
|
Interest rate products
|
|
|
|
57,781
|
|
|
Other liabilities
|
|
(4,034)
|
|
|
Risk participation agreements
|
|
|
|
4,293
|
|
|
Other liabilities
|
|
(5)
|
|
|
Interest rate lock commitments with customers
|
|
|
|
182,616
|
|
|
Other assets
|
|
4,342
|
|
|
Interest rate lock commitments with customers
|
|
|
|
10,406
|
|
|
Other liabilities
|
|
(202)
|
|
|
Forward sale commitments
|
|
|
|
85,611
|
|
|
Other assets
|
|
510
|
|
|
Forward sale commitments
|
|
|
|
82,268
|
|
|
Other liabilities
|
|
(223)
|
|
Financial derivatives related to
sales of certain Visa Class B shares
|
|
|
|
113,177
|
|
|
Other liabilities
|
|
(22,145)
|
|
|
Total derivatives
|
|
|
|
$
|
593,933
|
|
|
|
|
$
|
(18,003)
|
|
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)
|
|
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 these objectives, 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 2020, the Company terminated its three interest rate derivatives that were designated as cash flow hedges for a net gain of $1.3 million, recognized in accumulated other comprehensive income (loss). Hedge accounting was discontinued, and the net gain 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 $0.3 million will be reclassified as an increase to interest income. During the three and six months ended June 30, 2021, $0.1 million and $0.3 million, respectively, 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 and six months ended June 30, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain Recognized in OCI on Derivative (Effective Portion)
|
|
|
|
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 June 30,
|
|
|
|
Six Months Ended June 30,
|
|
|
|
Derivatives in cash flow hedging relationships
|
|
|
|
2020
|
|
|
|
2020
|
|
|
|
Interest rate products
|
|
|
|
$
|
(25)
|
|
|
|
|
$
|
1,560
|
|
|
Interest income
|
|
Total
|
|
|
|
$
|
(25)
|
|
|
|
|
$
|
1,560
|
|
|
|
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 June 30, 2021 and December 31, 2020, there were 248 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 both June 30, 2021 and December 31, 2020. At June 30, 2021, the swap transactions remaining maturities ranged from under 1 year to 14 years. At June 30, 2021, 206 of these customer swaps were in a paying position to third parties for $50.2 million, with our swap guarantees having a fair value of $13.0 million. At December 31, 2020, 231 of these customer swaps were in a paying position to third parties for $81.6 million, with the Company's 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.
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 and six months ended June 30, 2021 and June 30, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of (Loss) or Gain Recognized in Income
|
|
Amount of (Loss) Recognized in Income
|
|
Location of Gain or (Loss) Recognized in Income
|
|
(Dollars in thousands)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
Derivatives not designated as hedging instruments
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
Interest rate lock commitments with customers
|
|
$
|
(823)
|
|
|
$
|
3,178
|
|
|
$
|
(4,087)
|
|
|
$
|
6,227
|
|
|
Mortgage banking activities, net
|
|
Forward sale commitments
|
|
(2,742)
|
|
|
(2,439)
|
|
|
3,382
|
|
|
$
|
(6,484)
|
|
|
Mortgage banking activities, net
|
|
Total
|
|
$
|
(3,565)
|
|
|
$
|
739
|
|
|
$
|
(705)
|
|
|
$
|
(257)
|
|
|
|
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 $6.5 million in securities and $6.1 million in cash against its obligations under these agreements. If the Company had breached any of these provisions at June 30, 2021, it could have been required to settle its obligations under the agreements at the termination value.
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.
The following tables show segment results for the three and six months ended June 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021
|
|
Three Months Ended June 30, 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
|
|
$
|
110,725
|
|
|
$
|
—
|
|
|
$
|
2,177
|
|
|
$
|
112,902
|
|
|
$
|
123,710
|
|
|
$
|
—
|
|
|
$
|
2,173
|
|
|
$
|
125,883
|
|
|
Noninterest income
|
|
22,282
|
|
|
11,213
|
|
|
15,523
|
|
|
49,018
|
|
|
44,304
|
|
|
9,008
|
|
|
11,063
|
|
|
64,375
|
|
|
Total external customer revenues
|
|
133,007
|
|
|
11,213
|
|
|
17,700
|
|
|
161,920
|
|
|
168,014
|
|
|
9,008
|
|
|
13,236
|
|
|
190,258
|
|
|
Inter-segment revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
842
|
|
|
328
|
|
|
3,031
|
|
|
4,201
|
|
|
937
|
|
|
237
|
|
|
2,442
|
|
|
3,616
|
|
|
Noninterest income
|
|
3,790
|
|
|
316
|
|
|
515
|
|
|
4,621
|
|
|
3,542
|
|
|
188
|
|
|
347
|
|
|
4,077
|
|
|
Total inter-segment revenues
|
|
4,632
|
|
|
644
|
|
|
3,546
|
|
|
8,822
|
|
|
4,479
|
|
|
425
|
|
|
2,789
|
|
|
7,693
|
|
|
Total revenue
|
|
137,639
|
|
|
11,857
|
|
|
21,246
|
|
|
170,742
|
|
|
172,493
|
|
|
9,433
|
|
|
16,025
|
|
|
197,951
|
|
|
External customer expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
5,983
|
|
|
—
|
|
|
170
|
|
|
6,153
|
|
|
11,659
|
|
|
—
|
|
|
468
|
|
|
12,127
|
|
|
Noninterest expenses
|
|
80,480
|
|
|
7,288
|
|
|
8,264
|
|
|
96,032
|
|
|
79,789
|
|
|
6,413
|
|
|
7,233
|
|
|
93,435
|
|
|
(Recovery of) provision for credit losses
|
|
(66,385)
|
|
|
—
|
|
|
(1,178)
|
|
|
(67,563)
|
|
|
93,819
|
|
|
—
|
|
|
935
|
|
|
94,754
|
|
|
Total external customer expenses
|
|
20,078
|
|
|
7,288
|
|
|
7,256
|
|
|
34,622
|
|
|
185,267
|
|
|
6,413
|
|
|
8,636
|
|
|
200,316
|
|
|
Inter-segment expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
3,359
|
|
|
207
|
|
|
635
|
|
|
4,201
|
|
|
2,679
|
|
|
131
|
|
|
806
|
|
|
3,616
|
|
|
Noninterest expenses
|
|
831
|
|
|
1,104
|
|
|
2,686
|
|
|
4,621
|
|
|
535
|
|
|
899
|
|
|
2,643
|
|
|
4,077
|
|
|
Total inter-segment expenses
|
|
4,190
|
|
|
1,311
|
|
|
3,321
|
|
|
8,822
|
|
|
3,214
|
|
|
1,030
|
|
|
3,449
|
|
|
7,693
|
|
|
Total expenses
|
|
24,268
|
|
|
8,599
|
|
|
10,577
|
|
|
43,444
|
|
|
188,481
|
|
|
7,443
|
|
|
12,085
|
|
|
208,009
|
|
|
Income (loss) before taxes
|
|
$
|
113,371
|
|
|
$
|
3,258
|
|
|
$
|
10,669
|
|
|
$
|
127,298
|
|
|
$
|
(15,988)
|
|
|
$
|
1,990
|
|
|
$
|
3,940
|
|
|
$
|
(10,058)
|
|
|
Income tax provision (benefit)
|
|
|
|
|
|
|
|
31,687
|
|
|
|
|
|
|
|
|
(2,247)
|
|
|
Consolidated net income (loss)
|
|
|
|
|
|
|
|
95,611
|
|
|
|
|
|
|
|
|
(7,811)
|
|
|
Net loss attributable to noncontrolling interest
|
|
|
|
|
|
|
|
(56)
|
|
|
|
|
|
|
|
|
(700)
|
|
|
Net income (loss) attributable to WSFS
|
|
|
|
|
|
|
|
$
|
95,667
|
|
|
|
|
|
|
|
|
$
|
(7,111)
|
|
|
Supplemental Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures for the period ended
|
|
$
|
1,735
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,735
|
|
|
$
|
155
|
|
|
$
|
45
|
|
|
$
|
99
|
|
|
$
|
299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021
|
|
Six Months Ended June 30, 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
|
|
$
|
229,856
|
|
|
$
|
—
|
|
|
$
|
4,327
|
|
|
$
|
234,183
|
|
|
$
|
255,019
|
|
|
$
|
—
|
|
|
$
|
4,719
|
|
|
$
|
259,738
|
|
|
Noninterest income
|
|
45,630
|
|
|
20,915
|
|
|
30,295
|
|
|
96,840
|
|
|
62,376
|
|
|
20,687
|
|
|
22,159
|
|
|
105,222
|
|
|
Total external customer revenues
|
|
275,486
|
|
|
20,915
|
|
|
34,622
|
|
|
331,023
|
|
|
317,395
|
|
|
20,687
|
|
|
26,878
|
|
|
364,960
|
|
|
Inter-segment revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
1,686
|
|
|
597
|
|
|
5,726
|
|
|
8,009
|
|
|
2,880
|
|
|
237
|
|
|
5,291
|
|
|
8,408
|
|
|
Noninterest income
|
|
7,485
|
|
|
602
|
|
|
916
|
|
|
9,003
|
|
|
6,449
|
|
|
417
|
|
|
520
|
|
|
7,386
|
|
|
Total inter-segment revenues
|
|
9,171
|
|
|
1,199
|
|
|
6,642
|
|
|
17,012
|
|
|
9,329
|
|
|
654
|
|
|
5,811
|
|
|
15,794
|
|
|
Total revenue
|
|
284,657
|
|
|
22,114
|
|
|
41,264
|
|
|
348,035
|
|
|
326,724
|
|
|
21,341
|
|
|
32,689
|
|
|
380,754
|
|
|
External customer expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
12,887
|
|
|
—
|
|
|
362
|
|
|
13,249
|
|
|
28,406
|
|
|
—
|
|
|
1,426
|
|
|
29,832
|
|
|
Noninterest expenses
|
|
161,024
|
|
|
14,586
|
|
|
16,041
|
|
|
191,651
|
|
|
152,874
|
|
|
14,636
|
|
|
14,421
|
|
|
181,931
|
|
|
(Recovery of) provision for credit losses
|
|
(85,978)
|
|
|
—
|
|
|
(1,745)
|
|
|
(87,723)
|
|
|
148,853
|
|
|
—
|
|
|
2,547
|
|
|
151,400
|
|
|
Total external customer expenses
|
|
87,933
|
|
|
14,586
|
|
|
14,658
|
|
|
117,177
|
|
|
330,133
|
|
|
14,636
|
|
|
18,394
|
|
|
363,163
|
|
|
Inter-segment expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
6,323
|
|
|
387
|
|
|
1,299
|
|
|
8,009
|
|
|
5,528
|
|
|
1,085
|
|
|
1,795
|
|
|
8,408
|
|
|
Noninterest expenses
|
|
1,518
|
|
|
2,191
|
|
|
5,294
|
|
|
9,003
|
|
|
937
|
|
|
1,640
|
|
|
4,809
|
|
|
7,386
|
|
|
Total inter-segment expenses
|
|
7,841
|
|
|
2,578
|
|
|
6,593
|
|
|
17,012
|
|
|
6,465
|
|
|
2,725
|
|
|
6,604
|
|
|
15,794
|
|
|
Total expenses
|
|
95,774
|
|
|
17,164
|
|
|
21,251
|
|
|
134,189
|
|
|
336,598
|
|
|
17,361
|
|
|
24,998
|
|
|
378,957
|
|
|
Income (loss) before taxes
|
|
$
|
188,883
|
|
|
$
|
4,950
|
|
|
$
|
20,013
|
|
|
$
|
213,846
|
|
|
$
|
(9,874)
|
|
|
$
|
3,980
|
|
|
$
|
7,691
|
|
|
$
|
1,797
|
|
|
Income tax provision (benefit)
|
|
|
|
|
|
|
|
53,094
|
|
|
|
|
|
|
|
|
(959)
|
|
|
Consolidated net income
|
|
|
|
|
|
|
|
160,752
|
|
|
|
|
|
|
|
|
2,756
|
|
|
Net income (loss) attributable to noncontrolling interest
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
(1,060)
|
|
|
Net income attributable to WSFS
|
|
|
|
|
|
|
|
160,749
|
|
|
|
|
|
|
|
|
3,816
|
|
|
Supplemental Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures for the period ended
|
|
$
|
3,005
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,005
|
|
|
$
|
2,437
|
|
|
$
|
256
|
|
|
$
|
137
|
|
|
$
|
2,830
|
|
The following table shows significant components of segment net assets as of June 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 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
|
|
$
|
1,945,167
|
|
|
$
|
465,667
|
|
|
$
|
10,279
|
|
|
$
|
2,421,113
|
|
|
$
|
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
|
|
12,007,263
|
|
|
5,845
|
|
|
241,812
|
|
|
12,254,920
|
|
|
11,963,345
|
|
|
6,997
|
|
|
236,009
|
|
|
12,206,351
|
|
|
Total segment assets
|
|
$
|
14,405,059
|
|
|
$
|
471,512
|
|
|
$
|
272,290
|
|
|
$
|
15,148,861
|
|
|
$
|
13,662,368
|
|
|
$
|
404,875
|
|
|
$
|
266,671
|
|
|
$
|
14,333,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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 six months ended June 30, 2021 and 2020.
Unfunded Lending Commitments
At June 30, 2021 and December 31, 2020, the allowance for credit losses of unfunded lending commitments were $8.1 million and $8.2 million, respectively. A provision release of $0.8 million and $0.2 million was recognized during the three and six months ended June 30, 2021, respectively, and a provision expense for unfunded lending commitments of $3.4 million and $3.3 million was recognized during the three and six months ended June 30, 2020, respectively.
17. CHANGE IN ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income includes unrealized gains and losses on available-for-sale investments, unrealized gains and losses on cash flow hedges, as well as unrecognized prior service costs, transition costs, and actuarial gains and losses on defined benefit pension plans. Changes to accumulated other comprehensive income are presented, net of tax, as a component of stockholders’ equity. Amounts that are reclassified out of accumulated other comprehensive income are recorded on the unaudited Consolidated Statement of Income either as a gain or loss.
Changes to accumulated other comprehensive 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, March 31, 2021
|
|
$
|
(9,957)
|
|
|
$
|
260
|
|
|
$
|
(4,804)
|
|
|
$
|
535
|
|
|
$
|
264
|
|
|
$
|
(13,702)
|
|
|
Other comprehensive income (loss) before reclassifications
|
|
24,104
|
|
|
—
|
|
|
(9)
|
|
|
—
|
|
|
—
|
|
|
24,095
|
|
|
Less: Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
(28)
|
|
|
(15)
|
|
|
(112)
|
|
|
—
|
|
|
(155)
|
|
|
Net current-period other comprehensive income (loss)
|
|
24,104
|
|
|
(28)
|
|
|
(24)
|
|
|
(112)
|
|
|
—
|
|
|
23,940
|
|
|
Balance, June 30, 2021
|
|
$
|
14,147
|
|
|
$
|
232
|
|
|
$
|
(4,828)
|
|
|
$
|
423
|
|
|
$
|
264
|
|
|
$
|
10,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2020
|
|
$
|
72,436
|
|
|
$
|
403
|
|
|
$
|
(3,313)
|
|
|
$
|
1,008
|
|
|
$
|
—
|
|
|
$
|
70,534
|
|
|
Other comprehensive income (loss) before reclassifications
|
|
3,703
|
|
|
—
|
|
|
7
|
|
|
(25)
|
|
|
—
|
|
|
3,685
|
|
|
Less: Amounts reclassified from accumulated other comprehensive loss
|
|
(1,450)
|
|
|
(57)
|
|
|
179
|
|
|
(111)
|
|
|
—
|
|
|
(1,439)
|
|
|
Net current-period other comprehensive income (loss)
|
|
2,253
|
|
|
(57)
|
|
|
186
|
|
|
(136)
|
|
|
—
|
|
|
2,246
|
|
|
Balance, June 30, 2020
|
|
$
|
74,689
|
|
|
$
|
346
|
|
|
$
|
(3,127)
|
|
|
$
|
872
|
|
|
$
|
—
|
|
|
$
|
72,780
|
|
|
(1)Cash flow hedges were terminated as of April 1, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Net change in
investment
securities
available for sale
|
|
Net change
in investment securities
held to
maturity
|
|
Net
change in
defined
benefit
plan
|
|
Net change in
fair value of
derivatives
used for cash
flow hedges (1)
|
|
Net change in equity method investments
|
|
Total
|
|
Balance, December 31, 2020
|
|
$
|
59,882
|
|
|
$
|
276
|
|
|
$
|
(4,788)
|
|
|
$
|
646
|
|
|
$
|
(9)
|
|
|
$
|
56,007
|
|
|
Other comprehensive (loss) income before reclassifications
|
|
(45,485)
|
|
|
—
|
|
|
(9)
|
|
|
—
|
|
|
273
|
|
|
(45,221)
|
|
|
Less: Amounts reclassified from accumulated other comprehensive income
|
|
(250)
|
|
|
(44)
|
|
|
(31)
|
|
|
(223)
|
|
|
—
|
|
|
(548)
|
|
|
Net current-period other comprehensive (loss) income
|
|
(45,735)
|
|
|
(44)
|
|
|
(40)
|
|
|
(223)
|
|
|
273
|
|
|
(45,769)
|
|
|
Balance, June 30, 2021
|
|
$
|
14,147
|
|
|
$
|
232
|
|
|
$
|
(4,828)
|
|
|
$
|
423
|
|
|
$
|
264
|
|
|
$
|
10,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
$
|
26,927
|
|
|
$
|
468
|
|
|
$
|
(3,317)
|
|
|
$
|
(577)
|
|
|
$
|
—
|
|
|
$
|
23,501
|
|
|
Other comprehensive income before reclassifications
|
|
49,739
|
|
|
—
|
|
|
43
|
|
|
1,560
|
|
|
—
|
|
|
51,342
|
|
|
Less: Amounts reclassified from accumulated other comprehensive (loss) income
|
|
(1,977)
|
|
|
(122)
|
|
|
147
|
|
|
(111)
|
|
|
—
|
|
|
(2,063)
|
|
|
Net current-period other comprehensive income (loss)
|
|
47,762
|
|
|
(122)
|
|
|
190
|
|
|
1,449
|
|
|
—
|
|
|
49,279
|
|
|
Balance, June 30, 2020
|
|
$
|
74,689
|
|
|
$
|
346
|
|
|
$
|
(3,127)
|
|
|
$
|
872
|
|
|
$
|
—
|
|
|
$
|
72,780
|
|
|
(1)Cash flow hedges were terminated as of April 1, 2020
|
The unaudited Consolidated Statements of Income were impacted by components of other comprehensive income (loss) as shown in the tables below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Affected line item in unaudited Consolidated Statements of Income
|
|
(Dollars in thousands)
|
|
2021
|
|
2020
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
Realized gains on securities transactions
|
|
$
|
—
|
|
|
$
|
(1,908)
|
|
|
Securities gains, net
|
|
Income taxes
|
|
—
|
|
|
458
|
|
|
Income tax provision
|
|
Net of tax
|
|
$
|
—
|
|
|
$
|
(1,450)
|
|
|
|
|
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
|
|
$
|
(37)
|
|
|
$
|
(75)
|
|
|
Interest and dividends on investment securities
|
|
Income taxes
|
|
9
|
|
|
18
|
|
|
Income tax provision
|
|
Net of tax
|
|
$
|
(28)
|
|
|
$
|
(57)
|
|
|
|
|
Amortization of defined benefit pension plan-related items:
|
|
|
|
|
|
|
|
Prior service credits
|
|
$
|
(22)
|
|
|
$
|
(19)
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial losses (gains)
|
|
2
|
|
|
(24)
|
|
|
|
|
Total before tax
|
|
$
|
(20)
|
|
|
$
|
(43)
|
|
|
Salaries, benefits and other compensation
|
|
Income taxes
|
|
5
|
|
|
10
|
|
|
Income tax provision
|
|
Net of tax
|
|
$
|
(15)
|
|
|
$
|
(33)
|
|
|
|
|
Defined benefit pension plan settlement:
|
|
|
|
|
|
|
|
Realized losses on plan settlement
|
|
$
|
—
|
|
|
$
|
279
|
|
|
Other operating expense
|
|
Income taxes
|
|
—
|
|
|
(67)
|
|
|
Income tax provision
|
|
Net of tax
|
|
$
|
—
|
|
|
$
|
212
|
|
|
|
|
Net unrealized gains on terminated cash flow hedges:
|
|
|
|
|
|
|
|
Amortization of net unrealized gains to income during the period
|
|
$
|
(147)
|
|
|
$
|
(146)
|
|
|
Interest and fees on loans and leases
|
|
Income taxes
|
|
35
|
|
|
35
|
|
|
Income tax provision
|
|
Net of tax
|
|
$
|
(112)
|
|
|
$
|
(111)
|
|
|
|
|
Total reclassifications
|
|
$
|
(155)
|
|
|
$
|
(1,439)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
Affected line item in unaudited Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
Realized gains on securities transactions
|
|
$
|
(329)
|
|
|
$
|
(2,601)
|
|
|
Securities gains, net
|
|
Income taxes
|
|
79
|
|
|
624
|
|
|
Income tax provision
|
|
Net of tax
|
|
$
|
(250)
|
|
|
$
|
(1,977)
|
|
|
|
|
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
|
|
$
|
(58)
|
|
|
$
|
(160)
|
|
|
Interest and dividends on investment securities
|
|
Income taxes
|
|
14
|
|
|
38
|
|
|
Income tax provision
|
|
Net of tax
|
|
$
|
(44)
|
|
|
$
|
(122)
|
|
|
|
|
Amortization of defined benefit pension plan-related items:
|
|
|
|
|
|
|
|
Prior service credits
|
|
$
|
(44)
|
|
|
$
|
(38)
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gains
|
|
3
|
|
|
(48)
|
|
|
|
|
Total before tax
|
|
$
|
(41)
|
|
|
$
|
(86)
|
|
|
Salaries, benefits and other compensation
|
|
Income taxes
|
|
10
|
|
|
21
|
|
|
Income tax provision
|
|
Net of tax
|
|
$
|
(31)
|
|
|
$
|
(65)
|
|
|
|
|
Defined benefit pension plan settlement:
|
|
|
|
|
|
|
|
Realized losses on plan settlement
|
|
$
|
—
|
|
|
$
|
279
|
|
|
Other operating expense
|
|
Income taxes
|
|
—
|
|
|
(67)
|
|
|
Income tax provision
|
|
Net of tax
|
|
$
|
—
|
|
|
$
|
212
|
|
|
|
|
Net unrealized gains on terminated cash flow hedges:
|
|
|
|
|
|
|
|
Amortization of net unrealized gains to income during the period
|
|
$
|
(293)
|
|
|
$
|
(146)
|
|
|
Interest and fees on loans and leases
|
|
Income taxes
|
|
70
|
|
|
35
|
|
|
Income tax provision
|
|
Net of tax
|
|
$
|
(223)
|
|
|
$
|
(111)
|
|
|
|
|
Total reclassifications
|
|
$
|
(548)
|
|
|
$
|
(2,063)
|
|
|
|
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. During the three and six months ended June 30, 2021, there were no loans originated to related parties exceeding $0.5 million. During the three and six months ended June 30, 2020, there were two loans originated to related parties exceeding $0.5 million, both of which were sold during the second quarter of 2020.
The outstanding balances of loans to related parties at June 30, 2021 and December 31, 2020 were $0.4 million and $0.2 million, respectively. Total deposits from related parties at June 30, 2021 and December 31, 2020 were $6.7 million and $8.3 million, respectively. During the second 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. During the second quarter of 2021, the court hearing WSFS' claim for indemnification granted WSFS' motion for summary judgement on the issue of liability against the counterparty to the purchase agreement. The court has not yet scheduled trial on damages owed to WSFS.
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 disputed the factual allegations and denied liability.
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:
Resolution of NHT Legal Proceeding
On August 5, 2021, WSFS Bank reached a settlement with NHT. Under the settlement, WSFS will pay no damages, and the parties have agreed to dismiss and release all of their claims against each other. The parties will bear their own attorney's fees and costs.