WSFS Financial Corporation — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed February 28, 2023. WSFS is a Delaware-based savings and loan holding company focused on community banking, cash logistics, and wealth management. It reported $19.9 billion in assets and $64.5 billion in wealth-management assets under management and administration at year-end.
Financial results and position
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Total revenue, interest and noninterest income | $963.9 million | $641.8 million |
| Net interest income | $662.9 million | $433.6 million |
| Net interest margin | 3.71% | 3.23% |
| Provision for (recovery of) credit losses | $48.1 million | $(117.1) million |
| Noninterest expense | $574.3 million | $378.5 million |
| Net income attributable to WSFS | $222.4 million | $271.4 million |
| Diluted earnings per share | $3.49 | $5.69 |
- Management reported GAAP return on assets of 1.09% and non-GAAP core return on assets of 1.32%. Core net income was $270.7 million; it excludes specified equity gains, a Visa derivative valuation adjustment, and corporate development and restructuring expenses.
- Total assets rose 26% to $19.9 billion. Net loans and leases were $11.8 billion, up approximately $4.0 billion, primarily reflecting the Bryn Mawr Bank Corporation (BMBC) acquisition and consumer partnership growth.
- Deposits ended at $16.2 billion, versus $13.2 billion a year earlier. The filing attributes the increase primarily to $4.1 billion of acquired BMBC deposits, partly offset by customer balance declines. Estimated uninsured deposits were $9.3 billion, up from $7.5 billion.
- Cash, cash equivalents, and restricted cash fell to $837.3 million from $1.53 billion. FY 2022 cash provided by operating activities was $480.9 million; investing activities used $137.4 million and financing activities used $1.04 billion. Financing outflows included deposit reductions and $200.1 million of share repurchases.
- Year-end borrowings included $350 million of FHLB advances, $90.4 million of trust preferred borrowings, and $248.2 million of senior and subordinated debt. The Bank’s capital ratios remained above well-capitalized thresholds: CET1 12.86%, total risk-based capital 13.84%, and Tier 1 leverage 10.29%. The parent company held $205.8 million in cash.
Material changes and notable items
- WSFS completed the BMBC acquisition on January 1, 2022, issuing $908.0 million of consideration. It acquired $3.5 billion of loans and leases, $4.1 billion of deposits, and $23.6 billion of AUM/AUA, and recorded $410.8 million of goodwill. Integration and restructuring costs were $65.2 million. Bank technology, branding, and branch conversion were completed in Q1; further technology integration was expected to continue into 2024.
- Net income declined despite higher net interest income and noninterest income. The comparison was affected by 2021’s $117.1 million credit-loss reserve release, 2022’s $48.1 million provision, acquisition-related expenses, and a $15.0 million legal-settlement recovery recorded in 2021.
- Net interest income increased 53%, supported by the expanded balance sheet and rising rates. Net interest margin increased 48 basis points. Noninterest income grew to $260.1 million, including higher wealth-management and Cash Connect revenue; mortgage banking income fell to $7.3 million from $23.2 million.
- Accumulated other comprehensive loss widened to $675.8 million, substantially reflecting unrealized market-value losses on securities as rates rose. During 2022, WSFS reclassified $1.1 billion of available-for-sale securities to held-to-maturity; available-for-sale securities had $741.5 million of unrealized losses at year-end. Management attributed the losses to interest-rate changes, not credit deterioration, and said it did not intend or expect to be required to sell the securities before recovery.
- The allowance for credit losses increased to $151.9 million from $94.5 million; the allowance was 1.17% of gross loans and leases, versus 1.19%. Nonperforming assets rose to $43.4 million from $33.1 million, while nonperforming assets were 0.22% of total assets.
Outlook, risks, and contingencies
- The filing gives no specific earnings, revenue, or margin guidance. Management described plans to grow relationship-based commercial and consumer lending, deposits, NewLane leasing, Cash Connect, and Wealth Management, while continuing investment in digital delivery and technology.
- Management noted that the Federal Reserve raised rates by 425 basis points in 2022 and indicated further increases could occur in 2023. WSFS’s asset-sensitive position may benefit net interest income from rising rates, but deposit repricing, funding costs, borrower stress, and securities values remain important uncertainties. A modeled 100-basis-point increase indicated a 6.1% increase in net interest income; a 100-basis-point decrease indicated a 6.8% decline.
- Key exposures include commercial real estate, construction and land development, commercial and industrial lending, local-market concentration, and consumer credit partnerships. The filing also highlights competition for deposits, the high level of uninsured deposits, liquidity and funding access, integration execution, cybersecurity and third-party service-provider risks, Cash Connect cash-control risks, regulatory requirements, and the transition from LIBOR to alternative benchmarks.
- At year-end, WSFS had $2.8 billion of commitments to extend credit and $11.9 million of reserves for unfunded commitments. The company reported no material changes or additions to significant pending legal proceedings beyond routine matters.
- On February 15, 2023, after year-end, WSFS redeemed $30 million of subordinated notes due 2025. KPMG issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded disclosure controls were effective.
Important facts for investors to verify
- How much of 2022’s earnings and margin performance is sustainable after separating BMBC acquisition effects, purchase-accounting accretion, merger costs, and the prior-year reserve release?
- Whether deposits remain stable and funding costs rise as the $9.3 billion estimated uninsured deposit base competes for yield, and how available borrowing facilities and securities liquidity compare with potential outflows.
- Whether the $741.5 million of unrealized available-for-sale securities losses and the securities transferred to held-to-maturity create any constraints on liquidity, capital, or future earnings.
- Whether credit quality, particularly in commercial real estate, construction and land development, consumer partnerships, and past-due consumer loans, deteriorates and requires higher provisions.
- Whether BMBC integration delivers expected cost savings and revenue benefits, and whether further integration spending or technology work through 2024 affects results.
- Progress and any remaining exposure in the LIBOR-to-SOFR transition, including affected loans, derivatives, and debt instruments.