UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20172020
OR
 
¨

☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-35638

WSFS FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware22-2866913
(State or other jurisdiction of Incorporation or organization)(I.R.S. Employer Identification Number)
500 Delaware Avenue, Wilmington, Delaware19801
(Address of principal executive offices)(Zip Code)
(302) 792-6000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
500 Delaware Ave,
Wilmington, Delaware, 19801
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (302) 792-6000
Not Applicable
(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareWSFSNasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files),.    Yes  x    No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Large accelerated filerxAccelerated filer¨
Non-accelerated filer
¨ (Do not check if smaller reporting company)
Smaller reporting company¨
Emerging growth company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨☐    No  x
The Registrant had 31,389,882
Number of shares outstanding of the issuer's common stock, par value $0.01 per share, outstanding at November 3, 2017.
as of the latest practicable date: 50,402,351 shares as of October 31, 2020.




WSFS FINANCIAL CORPORATION
FORM 10-Q
TABLE OF CONTENTS
 
PART I. Financial InformationPage
Item 1.Financial Statements (Unaudited)
Consolidated Statements of Income for the Three and Nine Months EndedSeptember 30, 20172020 and 20162019
5
Consolidated Statements of Comprehensive Income for the Three and Nine Months EndedSeptember 30, 20172020 and 20162019
6
Consolidated Statements of Financial Condition as of September 30, 20172020 and December 31, 20162019
7
Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months EndedSeptember 30, 20172020 and 20162019
78
Consolidated Statements of Cash Flows for the Nine Months EndedSeptember 30, 20172020 and 20162019
810
Notes to the Consolidated Financial Statements for the Three and Nine Months EndedSeptember 30, 2017 and 20162020
1012
Item 2.
4661
Item 3.
5978
Item 4.
5978
PART II. Other Information
Item 1.
6078
Item 1A.
6079
Item 2.
6080
Item 3.
6181
Item 4.
6181
Item 5.
6181
Item 6.
6181


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FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, and exhibits thereto,hereto, contains estimates, predictions, opinions, projections and other “forward-looking statements” as that phrase is defined in the Private Securities Litigation Reform Act of 1995. Such statements include, without limitation, references to the Company’s predictions or expectations of future business or financial performance as well as its goals and objectives for future operations, financial and business trends, business prospects and management’s outlook or expectations for earnings, revenues, expenses, capital levels, liquidity levels, asset quality or other future financial or business performance, strategies or expectations. The words “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project” and similar expressions, among others, generally identify forward-looking statements. Such forward-looking statements are based on various assumptions (some of which may be beyond the Company’s control) and are subject to risks and uncertainties (which change over time) and other factors which could cause actual results to differ materially from those currently anticipated. Such risks and uncertainties include, but are not limited to:
those related to •difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the markets in which the Company operates and in which its loans are concentrated, including the effects ofpossible declines in housing markets, an increase in unemployment levels and slowdowns in economic growth;growth, including as a result of the novel coronavirus, or COVID-19, pandemic;
•possible additional loan losses and impairment of the collectability of loans, particularly as a result of the COVID-19 pandemic and the policies and programs implemented by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, including its automatic loan forbearance provisions and the Company's Paycheck Protection Program (PPP) lending activities;
•the economic and financial impact of federal, state and local emergency orders and other actions taken in response to the COVID-19 pandemic;
•the Company’s level of nonperforming assets and the costs associated with resolving problem loans including litigation and other costs;costs and complying with government-imposed foreclosure moratoriums;
possible additional loan losses and impairment in the collectability of loans;
•changes in market interest rates, which may increase funding costs and reduce earning asset yields and thus reduce margin;
•the impact of changes in interest rates and the credit quality and strength of underlying collateral and the effect of such changes on the market value of the Company’s investment securities portfolio;
•the credit risk associated with the substantial amount of commercial real estate, construction and land development and commercial and industrial loans in ourthe Company's loan portfolio;
•the extensive federal and state regulation, supervision and examination governing almost every aspect of the Company’s operations including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations issued in accordance with this statute and potential expenses associated with complying with such regulations;
•the Company’s ability to comply with applicable capital and liquidity requirements (including the finalized Basel III capital standards)effect of the transition to the Current Expected Credit Losses (CECL) methodology for allowances and related adjustments), including ourits ability to generate liquidity internally or raise capital on favorable terms;
•possible changes in trade, monetary and fiscal policies and stimulus programs, laws and regulations and other activities of governments, agencies, and similar organizations;organizations, and the uncertainty of the short- and long-term impacts of such changes;
•any impairments of the Company's goodwill or other intangible assets;
•conditions in the financial markets, including the destabilized economic environment caused by the COVID-19 pandemic, that may limit the Company’s access to additional funding to meet its liquidity needs;
any impairment•the intention of the Company’s goodwillUnited Kingdom's Financial Conduct Authority (FCA) to cease support of London Inter-Bank Offered Rate (LIBOR) and the transition to an alternative reference interest rate, including methodologies for calculating the rate that are different from the LIBOR methodology and changed language for existing and new floating or other intangible assets;adjustable rate contracts;
•
failure of the financial and operational controls of the Company’s Cash Connect® division;
•the success of the Company’sCompany's growth plans, including its plans to grow the commercial small business leasing portfolio and residential mortgage, small business and Small Business Administration (SBA) portfolios;
•the successful integration of past and future acquisitions;
•the Company’s ability to fully realize the cost savings and other benefits of its acquisitions, manage risks related to business disruption following those acquisitions, and post-acquisition customerCustomer acceptance of the Company’s products and services and related customerCustomer disintermediation;
3
Table of Contents
•negative perceptions or publicity with respect to the Company generally and, in particular, the Company’s trust and wealth management business;
•failure of the financial and operational controls of the Company’s Cash Connect® division;
•adverse judgments or other resolution of pending and future legal proceedings, and cost incurred in defending such proceedings;
•the Company's reliance on third parties for certain important functions, including the operation of its core systems, and any failures by such third parties;
•system failurefailures or cybersecurity incidents or other breaches of the Company’s network;network security, particularly given widespread remote working arrangements;
•the Company’s ability to recruit and retain key employees;Associates;
•the effects of problems encountered by other financial institutions that adversely affect the Company or the banking industry generally;
•the effects of weather and natural disasters such as floods, droughts, wind, tornadoes and hurricanes as well as effects from geopolitical instability and man-made disasters including terrorist attacks;
•the effects of regional or national civil unrest (including any resulting branch or ATM closures or damage);
•possible changes in the speed of loan prepayments by the Company’s customersCustomers and loan origination or sales volumes;
•possible changes in the speed of prepayments of mortgage-backed securities due to changes in the interest rate environment, particularly as a result of the COVID-19 pandemic, and the related acceleration of premium amortization on prepayments in the event that prepayments accelerate;
•regulatory limits on the Company’s ability to receive dividends from its subsidiaries and pay dividends to its stockholders;

the effects of •any reputational,reputation, credit, interest rate, market, operational, litigation, legal, liquidity, regulatory and compliance risk resulting from developments related to any of the risks discussed above; and
the effects of •other risks and uncertainties, including those discussed in the Company’s Form 10-K for the year ended December 31, 2016 and other documents filed by the Company with the Securities and Exchange Commission (SEC) from time to time.
We cautionThe Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. The Company disclaims any duty to revise or update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company for any reason, except as specifically required by law.


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


Cash Connect® is ourthe Company's registered trademark. Any other trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.



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WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
(Dollars in thousands, except per share data) (Unaudited)
Interest income:        
Interest and fees on loans $58,504
 $49,849
 $169,258
 $140,394
Interest on mortgage-backed securities 4,955
 3,854
 14,132
 11,658
Interest and dividends on investment securities:        
Taxable 14
 80
 137
 242
Tax-exempt 1,125
 1,134
 3,387
 3,418
Other interest income 412
 420
 1,256
 1,174
  65,010
 55,337
 188,170
 156,886
Interest expense:        
Interest on deposits 3,862
 2,412
 10,278
 6,734
Interest on senior debt 1,807
 2,119
 6,049
 4,236
Interest on Federal Home Loan Bank advances 2,402
 1,225
 6,057
 3,397
Interest on federal funds purchased and securities sold under agreements to repurchase 273
 113
 709
 457
Interest on trust preferred borrowings 500
 415
 1,418
 1,183
Interest on other borrowings 37
 32
 113
 88
  8,881
 6,316
 24,624
 16,095
Net interest income 56,129
 49,021
 163,546
 140,791
Provision for loan losses 2,896
 5,828
 6,901
 7,862
Net interest income after provision for loan losses 53,233
 43,193
 156,645
 132,929
Noninterest income:        
Credit/debit card and ATM income 9,350
 7,776
 26,406
 21,930
Investment management and fiduciary income 8,809
 6,074
 25,683
 17,610
Deposit service charges 4,695
 4,482
 13,652
 13,100
Mortgage banking activities, net 1,756
 2,555
 4,785
 6,025
Securities gains, net 736
 1,040
 1,764
 1,890
Loan fee income 483
 542
 1,483
 1,499
Bank owned life insurance income 546
 255
 1,124
 697
Other income 6,066
 4,862
 17,312
 14,011
  32,441
 27,586
 92,209
 76,762
Noninterest expense:        
Salaries, benefits and other compensation 29,172
 24,804
 86,231
 71,189
Occupancy expense 4,756
 4,335
 14,602
 12,560
Equipment expense 2,922
 2,653
 9,544
 7,642
Professional fees 2,248
 1,554
 6,552
 6,891
Data processing and operations expenses 1,817
 1,500
 5,185
 4,564
Marketing expense 712
 712
 2,268
 2,177
Loan workout and OREO expenses 484
 511
 1,504
 1,059
FDIC expenses 560
 469
 1,683
 2,080
Early extinguishment of debt

 695
 —
 695
 —
Corporate development expense 153
 5,885
 857
 7,003
Other operating expense 10,644
 8,811
 29,275
 24,552
  54,163
 51,234
 158,396
 139,717
Income before taxes 31,511
 19,545
 90,458
 69,974
Income tax provision 10,942
 6,823
 30,382
 24,004
Net income $20,569
 $12,722
 $60,076
 $45,970
Earnings per share:        
Basic $0.65
 $0.42
 $1.91
 $1.54
Diluted $0.64
 $0.41
 $1.86
 $1.50
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
(Dollars in thousands, except per share and share data)(Unaudited)
Interest income:
Interest and fees on loans and leases$110,195 $124,800 $341,657 $340,918 
Interest on mortgage-backed securities11,686 12,989 37,454 35,684 
Interest and dividends on investment securities:
Taxable435 29 552 79 
Tax-exempt830 939 2,648 2,963 
Other interest income224 2,505 797 4,098 
123,370 141,262 383,108 383,742 
Interest expense:
Interest on deposits8,346 16,851 32,815 43,916 
Interest on Federal Home Loan Bank advances445 1,099 1,900 4,495 
Interest on senior debt1,179 1,179 3,538 3,538 
Interest on federal funds purchased0 602 471 2,194 
Interest on trust preferred borrowings347 693 1,417 2,136 
Interest on other borrowings5 5 13 84 
10,322 20,429 40,154 56,363 
Net interest income113,048 120,833 342,954 327,379 
Provision for credit losses2,716 4,121 154,116 23,970 
Net interest income after provision for credit losses110,332 116,712 188,838 303,409 
Noninterest income:
Credit/debit card and ATM income7,251 13,115 27,916 38,307 
Investment management and fiduciary income13,266 10,459 35,157 30,988 
Deposit service charges4,772 6,139 14,594 16,988 
Mortgage banking activities, net11,507 3,152 23,472 8,090 
Loan and lease fee income1,165 823 3,381 2,358 
Securities gains, net3,322 0 5,923 78 
Unrealized gains on equity investments, net104 21,344 761 26,175 
Realized gain on sale of equity investment0 0 22,052 0 
Bank owned life insurance income591 277 1,011 877 
Other income7,193 7,037 20,126 22,478 
49,171 62,346 154,393 146,339 
Noninterest expense:
Salaries, benefits and other compensation48,772 48,914 142,875 133,669 
Occupancy expense8,152 9,085 24,114 24,262 
Equipment expense5,678 5,564 16,401 14,997 
Data processing and operations expenses3,198 3,861 9,337 10,180 
Professional fees4,611 3,180 13,634 7,967 
Marketing expense1,451 1,373 3,617 4,910 
Loss on early extinguishment of debt2,280 0 2,280 0 
FDIC expenses829 (227)1,080 1,435 
Loan workout and other credit costs1,422 846 6,462 2,537 
Corporate development expense428 10,517 4,570 51,090 
Restructuring expense0 8,360 0 14,603 
Other operating expense16,719 18,088 51,101 49,351 
93,540 109,561 275,471 315,001 
Income before taxes65,963 69,497 67,760 134,747 
Income tax provision15,140 15,902 14,181 32,253 
Net income$50,823 $53,595 $53,579 $102,494 
Less: Net loss attributable to noncontrolling interest(322)(287)(1,382)(611)
Net income attributable to WSFS$51,145 $53,882 $54,961 $103,105 
Earnings per share:
Basic$1.01 $1.02 $1.08 $2.13 
Diluted$1.01 $1.02 $1.08 $2.12 
Weighted average shares of common stock outstanding:
Basic50,665,359 52,863,202 50,801,777 48,381,338 
Diluted50,684,493 53,054,368 50,832,085 48,668,460 
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
(Dollars in thousands) (Unaudited) (Unaudited)
Net Income $20,569
 $12,722
 $60,076
 $45,970
Other comprehensive income:        
Net change in unrealized gains on investment securities available for sale        
Net unrealized gains (loss) arising during the period, net of tax expense (benefit) of $761, ($682), $3,498 and $8,668, respectively 1,289
 (1,112) 5,802
 14,143
Less: reclassification adjustment for net gains on sales realized in net income, net of tax expense of $261, $395, $628 and $718, respectively (475) (645) (1,136) (1,172)
  814
 (1,757) 4,666
 12,971
Net change in securities held to maturity        
Amortization of unrealized gain on securities reclassified to held-to-maturity, net of tax expense of $60, $60, $181 and $187, respectively (99) (102) (297) (305)
Net change in unfunded pension liability        
Change in unfunded pension liability related to unrealized (loss) gain, prior service cost and transition obligation, net of tax (benefit) expense of ($15), ($14), ($42) and $266, respectively (22) (20) (67) 436
Net change in cash flow hedge        
Net unrealized gain arising during the period, net of tax expense of $26, $38, $118 and $38, respectively 42
 61
 192
 61
Total other comprehensive income (loss) 735
 (1,818) 4,494
 13,163
Total comprehensive income $21,304
 $10,904
 $64,570
 $59,133

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

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WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITIONCOMPREHENSIVE INCOME
  September 30, 2017 December 31, 2016
(Dollars in thousands, except per share and share data) (Unaudited)
Assets:    
Cash and due from banks $117,343
 $119,929
Cash in non-owned ATMs 612,443
 698,454
Interest-bearing deposits in other banks including collateral of $3,380 at September 30, 2017 and December 31, 2016 3,579
 3,540
Total cash and cash equivalents 733,365
 821,923
Investment securities, available for sale (amortized cost of $816,114 at September 30, 2017 and $807,761 at December 31, 2016) 810,433
 794,543
Investment securities, held to maturity-at cost (fair value of $163,397 at September 30, 2017 and $163,232 at December 31, 2016) 161,721
 164,346
Loans, held for sale at fair value 19,313
 54,782
Loans, net of allowance for loan losses of $40,201 at September 30, 2017 and $39,751 at December 31, 2016 4,670,216
 4,444,375
Bank owned life insurance 102,727
 101,425
Stock in Federal Home Loan Bank of Pittsburgh-at cost 33,277
 38,248
Other real estate owned 3,924
 3,591
Accrued interest receivable 17,789
 17,027
Premises and equipment 48,345
 48,871
Goodwill 166,007
 167,539
Intangible assets 23,109
 23,708
Other assets 85,118
 84,892
Total assets $6,875,344
 $6,765,270
Liabilities and Stockholders’ Equity    
Liabilities:    
Deposits:    
Noninterest-bearing demand $1,357,597
 $1,266,306
Interest-bearing demand 1,057,571
 935,333
Money market 1,347,576
 1,257,520
Savings 557,914
 547,293
Time 305,347
 332,624
Jumbo certificates of deposit – customer 251,782
 260,560
Total customer deposits 4,877,787
 4,599,636
Brokered deposits 173,932
 138,802
Total deposits 5,051,719
 4,738,438
Federal funds purchased and securities sold under agreements to repurchase 70,000
 130,000
Federal Home Loan Bank advances 697,812
 854,236
Trust preferred borrowings 67,011
 67,011
Senior debt 98,116
 152,050
Other borrowed funds 70,369
 64,150
Accrued interest payable 3,882
 1,151
Other liabilities 75,574
 70,898
Total liabilities 6,134,483
 6,077,934
Stockholders’ Equity:    
Common stock $0.01 par value, 65,000,000 shares authorized; issued 56,217,643 at September 30, 2017 and 55,995,219 at December 31, 2016 562
 580
Capital in excess of par value 334,221
 329,457
Accumulated other comprehensive loss (3,123) (7,617)
Retained earnings 680,554
 627,078
Treasury stock at cost, 24,807,145 shares at September 30, 2017 and 24,605,145 shares at December 31, 2016 (271,353) (262,162)
Total stockholders’ equity 740,861
 687,336
Total liabilities and stockholders’ equity $6,875,344
 $6,765,270
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands, except per share and share amounts) Shares Common Stock Capital in Excess of Par Value Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Total Stockholders' Equity
Balance, December 31, 2015 55,945,245
 $560
 $256,435
 $696
 $570,630
 $(247,850) $580,471
Net Income —
 —
 —
 —
 45,970
 —
 45,970
Other comprehensive income —
 —
 —
 13,163
 —
 —
 13,163
Cash dividend, $0.18 per share —
 —
 —
 —
 (5,437) —
 (5,437)
Issuance of common stock including proceeds from exercise of common stock options 174,211
 2
 1,888
 —
 —
 —
 1,890
Stock-based compensation expense —
 —
 2,066
 —
 —
 —
 2,066
Acquisition of Penn Liberty 1,806,748
 18
 66,759
 —
 —
 —
 66,777
Repurchase of common stock, 409,371 shares —
 —
 —
 —
 —
 (12,890) (12,890)
Treasury share adjustment (1)
 (2,022,627) 

 —
 —
 —
 —
 —
Balance, September 30, 2016 55,903,577
 $580
 $327,148
 $13,859
 $611,163
 $(260,740) $692,010
               
Balance, December 31, 2016 55,995,219
 $580
 $329,457
 $(7,617) $627,078
 $(262,162) $687,336
Net Income —
 —
 —
 —
 60,076
 —
 60,076
Other comprehensive income —
 —
 —
 4,494
 —
 —
 4,494
Cash dividend, $0.21 per share —
 —
 —
 —
 (6,600) —
 (6,600)
Issuance of common stock including proceeds from exercise of common stock options 222,424
 2
 2,315
 —
 —
 —
 2,317
Stock-based compensation expense —
 —
 2,449
 —
 —
 —
 2,449
Repurchase of common stock, 204,000 shares —
 (20) —
 —
 —
 (9,191) (9,211)
Balance, September 30, 2017 56,217,643
 $562
 $334,221
 $(3,123) $680,554
 $(271,353) $740,861

(1)
The 2016 Consolidated Statement of Changes in Stockholder's Equity has been revised to reflect an adjustment between shares issued and treasury stock. This reclassification had no impact on shares outstanding, earnings per share or retained earnings.


Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
(Dollars in thousands)(Unaudited)(Unaudited)
Net income$50,823 $53,595 $53,579 $102,494 
Less: Net loss attributable to noncontrolling interest(322)(287)(1,382)(611)
Net income attributable to WSFS51,145 53,882 54,961 103,105 
Other comprehensive (loss) income:
Net change in unrealized (losses) gains on investment securities available-for-sale
Net unrealized (losses) gains arising during the period, net of tax (benefit) expense of $(1,097), $2,911, $14,610 and $14,565, respectively(3,474)9,268 46,264 46,124 
Less: reclassification adjustment for net gains on sales realized in net income, net of tax expense of $797, $0, $1,421, and $19, respectively
(2,525)0 (4,501)(59)
(5,999)9,268 41,763 46,065 
Net change in securities held-to-maturity
Amortization of unrealized gain on securities reclassified to held-to-maturity, net of tax expense of $12, $22, $50, and $78, respectively(39)(70)(161)(247)
Net change in unfunded pension liability
Change in unfunded pension liability related to unrealized loss, prior service cost and transition obligation, net of tax benefit of $8, $11, $15, and $66, respectively(25)(35)(47)(210)
Pension settlement, net of tax expense of $0, $0, $67, and $0, respectively0 0 212 0 
(25)(35)165 (210)
Net change in cash flow hedge
Net unrealized gain arising during the period, net of tax expense of $0, $116, $493, and $633, respectively0 368 1,560 2,005 
Amortization of unrealized gain on terminated cash flow hedges, net of tax benefit of $36, $0, $71, and $0, respectively(113)0 (224)0 
(113)368 1,336 2,005 
Net change in equity method investments
Net change in other comprehensive loss of equity method investments, net of tax benefit of $3, $0, $3, and $0, respectively(9)0 (9)0 
Total other comprehensive (loss) income(6,185)9,531 43,094 47,613 
Total comprehensive income$44,960 $63,413 $98,055 $150,718 
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

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WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 2020December 31, 2019
(Dollars in thousands, except per share and share data)(Unaudited)
Assets:
Cash and due from banks$714,062 $164,021 
Cash in non-owned ATMs347,462 407,524 
Interest-bearing deposits in other banks including collateral (restricted cash) of $11,110 at September 30, 2020 and $0 December 31, 2019, respectively11,396 207 
Total cash, cash equivalents, and restricted cash1,072,920 571,752 
Investment securities, available-for-sale (amortized cost of $2,244,541 at September 30, 2020 and $1,909,483 at December 31, 20192,334,922 1,944,914 
Investment securities, held-to-maturity, net of allowance for credit losses of $7 at September 30, 2020 (fair value $118,113 at September 30, 2020 and $136,625 at December 31, 2019)113,609 133,601 
Other investments10,436 70,046 
Loans, held for sale at fair value152,453 83,872 
Loans and leases, net of allowance for credit losses of $232,726 at September 30, 2020 and $47,576 at December 31, 20199,102,332 8,424,464 
Bank owned life insurance31,717 30,294 
Stock in Federal Home Loan Bank of Pittsburgh at cost6,497 21,097 
Other real estate owned3,000 2,605 
Accrued interest receivable42,801 38,094 
Premises and equipment96,554 104,465 
Goodwill472,828 472,828 
Intangible assets86,978 95,917 
Other assets303,061 262,353 
Total assets$13,830,108 $12,256,302 
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing$3,196,967 $2,189,573 
Interest-bearing8,194,378 7,397,284 
Total deposits11,391,345 9,586,857 
Federal funds purchased0 195,000 
Federal Home Loan Bank advances16,751 112,675 
Trust preferred borrowings67,011 67,011 
Senior debt98,768 98,605 
Other borrowed funds21,764 15,997 
Accrued interest payable8,522 3,103 
Other liabilities364,645 327,563 
Total liabilities11,968,806 10,406,811 
Stockholders’ Equity:
Common stock $0.01 par value, 90,000,000 shares authorized; issued 57,546,564 at September 30, 2020 and 57,435,658 at December 31, 2019576 575 
Capital in excess of par value1,051,627 1,049,064 
Accumulated other comprehensive income66,595 23,501 
Retained earnings923,651 917,377 
Treasury stock at cost, 6,873,120 shares at September 30, 2020 and 5,868,772 shares at December 31, 2019(178,950)(140,211)
Total stockholders’ equity of WSFS1,863,499 1,850,306 
Noncontrolling interest(2,197)(815)
Total stockholders' equity1,861,302 1,849,491 
Total liabilities and stockholders' equity$13,830,108 $12,256,302 

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
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WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Nine Months Ended September 30, 2020
(Dollars in thousands, except per share and share amounts)SharesCommon StockCapital in Excess of Par ValueAccumulated Other Comprehensive IncomeRetained EarningsTreasury StockTotal Stockholders' Equity of WSFSNon-controlling InterestTotal Stockholders' Equity
Balance, December 31, 201957,435,658 $575 $1,049,064 $23,501 $917,377 $(140,211)$1,850,306 $(815)$1,849,491 
Cumulative change in accounting principle (Note 2)— — — — (30,368)— (30,368)— (30,368)
Balance, January 1, 2020 (as adjusted for change in accounting principle)57,435,658 575 1,049,064 23,501 887,009 (140,211)1,819,938 (815)1,819,123 
Net income (loss)— — — — 54,961 — 54,961 (1,382)53,579 
Other comprehensive income— — — 43,094 — — 43,094 — 43,094 
Cash dividend, $0.36 per share— — — — (18,319)— (18,319)— (18,319)
Issuance of common stock including proceeds from exercise of common stock options110,906 1 1,358 — — — 1,359 — 1,359 
Stock-based compensation expense— — 1,954 — — — 1,954 — 1,954 
Repurchases of common shares (1)
— — (749)— — (38,739)(39,488)— (39,488)
Balance, September 30, 202057,546,564 $576 $1,051,627 $66,595 $923,651 $(178,950)$1,863,499 $(2,197)$1,861,302 
Three Months Ended September 30, 2020
(Dollars in thousands, except per share and share amounts)SharesCommon StockCapital in Excess of Par ValueAccumulated Other Comprehensive IncomeRetained EarningsTreasury StockTotal Stockholders' Equity of WSFSNon-controlling InterestTotal Stockholders' Equity
Balance, June 30, 202057,533,236 $576 $1,050,678 $72,780 $878,585 $(178,950)$1,823,669 $(1,875)$1,821,794 
Net income (loss)— — — — 51,145 — 51,145 (322)50,823 
Other comprehensive loss— — — (6,185)— — (6,185)— (6,185)
Cash dividend, $0.12 per share— — — — (6,079)— (6,079)— (6,079)
Issuance of common stock including proceeds from exercise of common stock options13,328 0 368 — — — 368 — 368 
Stock-based compensation expense— — 660 — — — 660 — 660 
Repurchases of common shares (2)
— — (79)— — — (79)— (79)
Balance, September 30, 202057,546,564 $576 $1,051,627 $66,595 $923,651 $(178,950)$1,863,499 $(2,197)$1,861,302 
(1)Repurchase of common stock includes 1,004,348 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors, and 24,884 shares withheld to cover tax liabilities.
(2)Repurchase of common stock includes 2,353 shares withheld to cover tax liabilities.



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Nine Months Ended September 30, 2019
(Dollars in thousands, except per share and share amounts)SharesCommon StockCapital in Excess of Par ValueAccumulated Other Comprehensive Income (Loss)Retained EarningsTreasury StockTotal Stockholders' Equity of WSFSNon-controlling InterestTotal Stockholders' Equity
Balance, December 31, 201856,926,978 $569 $349,810 $(15,394)$791,031 $(305,096)$820,920 $0 $820,920 
Net income (loss)— — — — 103,105 — 103,105 (611)102,494 
Other comprehensive income— — — 47,613 — — 47,613 — 47,613 
Cash dividend, $0.35 per share— — — — (16,208)— (16,208)— (16,208)
Issuance of common stock including proceeds from exercise of common stock options484,843 6 7,334 — — — 7,340 — 7,340 
Re-issuance of treasury stock in connection with the Beneficial merger and related items— — 687,897 — — 262,071 949,968 76 950,044 
Stock-based compensation expense— — 1,994 — — — 1,994 — 1,994 
Repurchases of common shares (1)
— — — — — (57,740)(57,740)— (57,740)
Balance, September 30, 201957,411,821 $575 $1,047,035 $32,219 $877,928 $(100,765)$1,856,992 $(535)$1,856,457 
Three Months Ended September 30, 2019
(Dollars in thousands, except per share and share amounts)SharesCommon StockCapital in Excess of Par ValueAccumulated Other Comprehensive IncomeRetained EarningsTreasury StockTotal Stockholders' Equity of WSFSNon-controlling InterestTotal Stockholders' Equity
Balance, June 30, 201957,239,683 $573 $1,043,065 $22,688 $830,397 $(60,112)$1,836,611 $(223)$1,836,388 
Net income (loss)— — — — 53,882 — 53,882 (287)53,595 
Other comprehensive income— — — 9,531 — — 9,531 — 9,531 
Cash dividend, $0.12 per share— — — — (6,351)— (6,351)— (6,351)
Issuance of common stock including proceeds from exercise of common stock options172,138 2 3,211 — — — 3,213 — 3,213 
Beneficial merger and related items— — 0 — 0 — 0 (25)(25)
Stock-based compensation expense— — 759 — — — 759 — 759 
Repurchases of common shares (2)
— — — — — (40,653)(40,653)— (40,653)
Balance, September 30, 201957,411,821 $575 $1,047,035 $32,219 $877,928 $(100,765)$1,856,992 $(535)$1,856,457 
(1)Repurchase of common stock includes 1,230,640 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors, and 132,993 shares repurchased to cover taxes due on the consideration transferred in the Beneficial acquisition related to the vesting of unrestricted Beneficial stock awards.
(2)Repurchase of common stock includes 959,300 shares repurchased in connection with the Company's share repurchase program approved by the Board of Directors.


The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
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WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Nine Months Ended September 30,
 20202019
(Dollars in thousands)(Unaudited)
Operating activities:
Net income$53,579 $102,494 
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses154,116 23,970 
Depreciation of premises and equipment, net11,322 11,139 
Accretion of fees and discounts, net(40,136)(32,308)
Amortization of intangible assets8,236 8,348 
Amortization of right of use lease asset9,267 19,842 
Decrease in operating lease liability(9,563)(9,999)
Income from mortgage banking activities, net(23,472)(8,090)
Gain on sale of securities, net(5,923)(78)
(Gain) loss on sale of other real estate owned and valuation adjustments, net(102)63 
Stock-based compensation expense1,954 1,994 
Unrealized gain on equity investments, net(761)(26,175)
Realized gain on sale of equity investment(22,052)0 
Deferred income tax (benefit) expense(36,541)6,106 
(Increase) decrease in accrued interest receivable(4,707)729 
(Increase) decrease in other assets(14,032)8,582 
Origination of loans held for sale(663,371)(325,103)
Proceeds from sales of loans held for sale589,993 271,679 
Increase in accrued interest payable5,419 7,581 
Increase in other liabilities39,806 18,014 
Increase in value of bank owned life insurance(1,423)(1,590)
Increase in capitalized interest, net(2,755)(2,698)
Net cash provided by operating activities$48,854 $74,500 
Investing activities:
Purchases of investment securities held to maturity$(6,307)$0 
Repayments, maturities and calls of investment securities held-to-maturity25,430 15,130 
Sale of investment securities available-for-sale198,855 602,467 
Purchases of investment securities available-for-sale(943,710)(800,020)
Repayments of investment securities available-for-sale408,989 170,646 
Net proceeds from sale of Visa Class B shares85,850 0 
Proceeds from bank-owned life insurance surrender0 59,710 
Net (increase) decrease in loans(792,881)125,511 
Net cash from business combinations0 76,072 
Purchases of stock of Federal Home Loan Bank of Pittsburgh(145,399)(176,966)
Redemptions of stock of Federal Home Loan Bank of Pittsburgh159,999 196,777 
Sales of other real estate owned2,014 1,866 
Investment in premises and equipment(3,480)(10,701)
Sales of premises and equipment69 71 
Net cash (used in) provided by investing activities$(1,010,571)$260,563 

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  Nine Months Ended September 30,
  2017 2016
(Dollars in thousands) (Unaudited)
Operating activities:    
Net Income $60,076
 $45,970
Adjustments to reconcile net income to net cash provided by operating activities:    
Provision for loan losses 6,901
 7,862
Depreciation of premises and equipment, net 6,454
 5,587
Amortization of fees and discounts, net 15,002
 13,921
Amortization of intangible assets 2,352
 1,260
Gain on mortgage banking activities, net (4,785) (6,025)
Gain on sale of securities, net (1,764) (1,890)
Loss on sale of other real estate owned and valuation adjustments, net 187
 230
Debt extinguishment cost 695
 —
Deferred income tax expense 3,097
 5,364
Increase in accrued interest receivable (762) (239)
(Increase) decrease in other assets (7,451) 8,028
Origination of loans held for sale (258,962) (252,368)
Proceeds from sales of loans held for sale 284,797
 230,864
Stock-based compensation expense 2,449
 2,253
Increase in accrued interest payable 2,731
 2,857
Increase (decrease) in other liabilities 962
 (2,286)
Increase in value of bank owned life insurance (899) (2,311)
Increase in capitalized interest, net (3,252) (3,834)
Net cash provided by operating activities $107,828
 $55,243
Investing activities:    
Purchases of investment securities held to maturity $—
 $(3,329)
Repayments, maturities and calls of investment securities held to maturity 1,175
 2,840
Sale of investment securities available for sale 415,486
 155,789
Purchases of investment securities available for sale (593,878) (254,993)
Repayments of investment securities available for sale 174,251
 62,798
Proceeds of bank owned life insurance death benefit 371
 —
Net increase in loans (231,955) (141,500)
Net cash for business combinations —
 51,788
Purchases of stock of Federal Home Loan Bank of Pittsburgh (128,159) (57,308)
Redemptions of stock of Federal Home Loan Bank of Pittsburgh 133,130
 51,117
Sales of other real estate owned 4,405
 4,069
Investment in premises and equipment (7,336) (7,677)
Sales of premises and equipment 1,593
 —
Net cash used for investing activities $(230,917) $(136,406)

  Nine Months Ended September 30,
  2017 2016
(Dollars in thousands) (Unaudited)
Financing activities:    
Net increase in demand and saving deposits $320,784
 $221,336
Decrease in time deposits (36,055) (57,383)
Increase (decrease) in brokered deposits 35,079
 (12,091)
Decrease in loan payable (359) (366)
Receipts from FHLB advances 109,432,123
 90,314,153
Repayments of FHLB advances (109,588,547) (90,166,500)
Receipts from federal funds purchased and securities sold under agreement to repurchase 17,610,000
 21,676,620
Repayments of federal funds purchased and securities sold under agreement to repurchase (17,670,000) (21,723,820)
Dividends paid (6,600) (5,437)
Issuance of common stock and exercise of common stock options 2,317
 1,918
Redemption of senior debt (55,000) —
Issuance of senior debt —
 97,849
Purchase of treasury stock (9,211) (12,890)
Net cash provided by financing activities $34,531
 $333,389
(Decrease) increase in cash and cash equivalents (88,558) 252,226
Cash and cash equivalents at beginning of period 821,923
 561,179
Cash and cash equivalents at end of period $733,365
 $813,405
Supplemental Disclosure of Cash Flow Information:    
Cash paid during the year for:    
     Interest $21,893
 $13,238
     Income taxes 20,861
 18,640
Non-cash information:    
Loans transferred to other real estate owned 4,925
 1,455
Loans transferred to portfolio from held-for-sale at fair value 12,782
 6,337
Net change in accumulated other comprehensive income 4,494
 13,163
Fair value of assets acquired, net of cash received —
 526,767
Fair value of liabilities assumed —
 583,517
Goodwill adjustments, net (1,532) (1,496)
Nine Months Ended September 30,
 20202019
(Dollars in thousands)(Unaudited)
Financing activities:
Net increase in demand and saving deposits$1,948,026 $55,527 
Decrease in time deposits(132,767)(81,783)
Decrease in brokered deposits(5,002)(161,892)
Receipts from FHLB advances5,037,296 27,146,456 
Repayments of FHLB advances(5,133,220)(27,109,246)
Receipts from federal funds purchased8,030,475 21,475,000 
Repayments of federal funds purchased(8,225,475)(21,632,975)
Cash dividend(18,319)(16,208)
Issuance of common stock including proceeds from exercise of common stock options1,359 7,340 
Repurchases of common shares(39,488)(57,740)
Net cash provided by (used in) financing activities$1,462,885 $(375,521)
Increase (decrease) in cash, cash equivalents, and restricted cash501,168 (40,458)
Cash, cash equivalents, and restricted cash at beginning of period571,752 620,757 
Cash, cash equivalents, and restricted cash at end of period$1,072,920 $580,299 
Supplemental disclosure of cash flow information:
Cash paid during the period for:
     Interest$34,735 $48,782 
     Income taxes60,494 24,579 
Non-cash information:
Loans transferred to other real estate owned2,503 2,344 
Loans transferred to portfolio from held-for-sale at fair value24,180 19,278 
Fair value of assets acquired, net of cash received0 5,032,299 
Fair value of liabilities assumed0 5,108,371 
Impact of ASC 842 Adoption:
     Right of use asset0 121,288 
     Lease liability0 (132,346)
Impact of ASC 326 Adoption (Note 2):
Allowance for credit losses on held-to-maturity debt securities(8)— 
Allowance for credit losses on loans and leases(35,855)— 
Deferred tax assets8,461 — 
Allowance for credit losses on unfunded lending commitments(2,966)— 
Retained earnings30,368 — 
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

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WSFS FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 20172020
(UNAUDITED)
1. BASIS OF PRESENTATION
General
OurThese 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) and, Christiana Trust Company of Delaware (Christiana Trust DE). We and WSFS SPE Services, LLC. The Company also have onehas 1 unconsolidated subsidiary, WSFS Capital Trust III. WSFS Bank has three wholly-owned3 wholly owned subsidiaries: Beneficial Equipment Finance Corporation (BEFC), WSFS Investment Group, Inc. (WSFS Wealth Investments,Investments), and 1832 Holdings, Inc., and Monarch Entity Services LLC.1 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.). We provideThe Company provides residential and commercial real estate, commercial and consumer lending services, as well as retail deposit and cash management services. Lending activities areThe core banking business is commercial lending funded primarily with customer deposits and borrowings.by customer-generated deposits. In addition, we offerthe Company offers a variety of wealth management and trust services to personal and corporate customers. The Federal Deposit Insurance Corporation (FDIC) insures ourthe customers’ deposits to their legal maximums. We serve ourThe Company serves its customers primarily from our 77115 offices located in Pennsylvania (54), Delaware (46)(43), Pennsylvania (29)New Jersey (16), Virginia (1) and Nevada (1) and through our, its ATM network, website at www.wsfsbank.com. and mobile app. Information on ourthe website is not incorporated by reference into this quarterly report.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.
Basis of Presentation
In preparing the unaudited Consolidated Financial Statements, we arethe 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 loancredit losses (including loans and reservesleases held for lending relatedinvestment, 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, other-than-temporary impairment (OTTI), and the income tax valuation allowance.taxes. Among other effects, changes to these estimates could result in future impairments of investment securities, goodwill and intangible assets, andthe establishment of theadditional allowance and lending related commitmentslending-related commitment reserves as well as increased post-retirement benefits expense.
OurThe Company's accounting and reporting policies conform to Generally Accepted Accounting Principles (GAAP) 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, 2017.2020. These unaudited, interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in ourthe Annual Report on Form 10-K for the year ended December 31, 20162019 (the "20162019 Annual Report on Form 10-K")10-K) that was filed with the SEC on March 1, 20172, 2020 and is available at www.sec.gov or on ourthe website at http://investors.wsfsbank.com/financials.cfm.www.wsfsbank.com. All significant intercompany accounts and transactions were eliminated in consolidation.


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES:
The significant accounting policies used in preparation of ourthe Consolidated Financial Statements are disclosed in our 2016the Company's 2019 Annual Report on Form 10-K. There have not been any material changes in ourThose significant accounting policies from those disclosed in our 2016 Annual Report on Form 10-K.
Senior Debt
On September 1, 2017, we redeemed $55.0 million in aggregate principal amount of our 6.25% senior notes due 2019 which were issued in 2012 (the 2012 senior notes). The 2012 senior notes were repaid using a portion of the proceeds from our 2016 issuance of senior unsecured fixed-to-floating rate notes (the 2016 senior notes) described below. We recorded noninterest expense of $0.7 million due to the write-off of unamortized debt issuance costs in connection with this redemption.
On June 13, 2016, the Company issued $100.0 million of the 2016 senior notes. The 2016 senior notes mature on June 15, 2026 and have a fixed coupon rate of 4.50% from issuance until June 15, 2021 and a variable coupon rate of three month LIBOR plus 3.30% from June 15, 2021 until maturity. The 2016 senior notes may be redeemed beginning on June 15, 2021 at 100% of principal plus accrued and unpaid interest. The net proceeds from the issuance of the 2016 senior notes are being used for general corporate purposes.

Acquisitions in 2016
On August 12, 2016, we completed the acquisition of Penn Liberty Financial Corp. (Penn Liberty), a community bank headquartered in Wayne, Pennsylvania in order to build our market share, deepen our presence in the southeastern Pennsylvania market, and enhance our customer base. The results of Penn Liberty’s operations are included in our Consolidated Financial Statements since the date of the acquisition. See Note 2 – Business Combinations for further information.
During the third and fourth quarters of 2016, respectively, we acquired the assets of Powdermill Financial Solutions LLC, a multi-family office serving an affluent clientele in the local community and throughout the U.S., and West Capital Management, Inc., an independent, fee-only wealth management firm providing fully customized solutions tailored to the unique needs of institutions and high-net-worth individuals which operates under a multi-family office philosophy. These acquisitions align with our strategic plan to expand our wealth management offerings and to diversify our fee-income generating businesses.
Correction of Prior Period Balances
Consolidated Statements of Income: The Consolidated Statements of Income for the three and nine months ended September 30, 2016 have been revised to correct an immaterial error in Noninterest income - Other income and Noninterest expense - Other operating expense related to revenue earned for cash servicing fees. As a result, the Consolidated Statements of Income have been revised to reflect these changes, as follows:
  Three months ended September 30, 2016 Nine months ended September 30, 2016
(Dollars in thousands) As originally reported Adjustments As revised As originally reported Adjustments As revised
Noninterest income - Other income $4,125
 $737
 $4,862
 $12,017
 $1,994
 $14,011
Noninterest expense - Other operating expense 8,074
 737
 8,811
 22,558
 1,994
 24,552
The above revisions had no effect on earnings per share or retained earnings. Periods not presented herein will be revised, as applicable, as they are included in future filings.

RECENT ACCOUNTING PRONOUNCEMENTS
Accounting Guidance Adopted in 2017
In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-05: Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships, which amends Accounting Standards Codification (ASC) Topic 815: Derivatives and Hedging. This new guidance clarifies that the novation of a derivative contract (i.e., a change in the counterparty) in a hedge accounting relationship does not, in and of itself, cause a hedge accounting relationship to be discontinued because it does not represent a termination of the original derivative instrument or a change in the critical terms of the hedge relationship. This new guidance is effective for annual reporting periods beginning after December 15, 2016 and may be adopted prospectively or retroactively. Early adoption is permitted, including adoption in an interim period. The Company adopted this accounting guidance during the quarter ended March 31, 2017 on a prospective basis with no impact to our Consolidated Financial Statements.
In March 2016, the FASB issued ASU No. 2016-06, Contingent Put and Call Options in Debt Instruments, Derivatives and Hedging (Topic 815). ASU 2016-06 clarifies that determining whether the economic characteristics of a put or call are clearly and closely related to its debt host requires only an assessment of the four-step decision sequence outlined in FASB ASC paragraph 815-15-25-24. Additionally, entities are not required to separately assess whether the contingency itself is clearly and closely related. The standard is effective for public business entities in interim and annual periods in fiscal years beginning after December 15, 2016. Early adoption is permitted in any interim period for which the entity’s financial statements have not been issued, but would be retroactively applied to the beginning of the year that includes the interim period. The standard requires a modified retrospective transition approach, with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. For instruments that are eligible for the fair value option, an entity has a one-time option to irrevocably elect to measure the debt instrument affected by the standard in its entirety at fair value with changes in fair value recognized in earnings. The Company adopted this accounting guidance during the quarter ended March 31, 2017 with no impact on our Consolidated Statements of Income or Consolidated Statements of Financial Condition.

In March 2016, the FASB issued ASU No. 2016-07, Simplifying the Transition to the Equity Method of Accounting, Investments - Equity Method and Joint Ventures (Topic 323). ASU 2016-07 eliminates the requirement for an investor to retroactively apply the equity method when its increase in ownership interest (or degree of influence) in an investee triggers equity method accounting. The standard is effective for all entities in annual and interim periods in fiscal years beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied prospectively to changes in ownership (or influence) after the adoption date. The Company adopted this accounting guidance during the quarter ended March 31, 2017 on a prospective basis with no impact to our Consolidated Financial Statements.
Accounting Guidance Pending Adoptionremain unchanged at September 30, 20172020, except as described below:

Loans
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. ASU No. 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers using a five-step model that requires entities to exercise judgment when considering the terms of the contracts. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. This amendment defers the effective date of ASU 2014-09 by one year. In March 2016, the FASB issued ASU 2016-08, Principal versus Agent Considerations (Reporting Gross versus Net), which amends the principal versus agent guidance and clarifies that the analysis must focus on whether the entity has control of the goods or services before theyLoans held for investment are transferred to the customer. In addition, the FASB issued ASU Nos. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers and 2016-12, Narrow-Scope Improvements and Practical Expedients, both of which provide additional clarification of certain provisions in Topic 606. These ASC updates are effective for public business entities in annual and interim reporting periods in fiscal years beginning after December 15, 2017. Early application is permitted for all entities, but not before annual reporting periods beginning after December 15, 2016. The standard permits the use of either the retrospective or retrospectively with the cumulative effect transition method. The Company will adopt the standard on January 1, 2018 using the retrospective with the cumulative effect transition method. For revenue streams determined to be within the scope of the standard, we have substantially completed our impact analysis, the results of which has shown an immaterial effect on our Consolidated Financial Statements. The Company is in the process of updating our accounting policies, processes and related internal controls to incorporate the changes from the standard. Topic 606 also includes expanded disclosure requirements which we are currently in the process of drafting. Although the impact of this adoption is expected to be immaterial on our financial statements, we do anticipate adding additional detail to our revenue disclosures.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities. This amendment requires that equity investments be measured at fair value with changes in fair value recognized in net income. When fair value is not readily determinable an entity may elect to measure the equity investment at cost, minus impairment, plus or minus any change in the investment’s observable price. For financial liabilities that are measured at fair value, the amendment requires an entity to present separately, in other comprehensive income, any change in fair value resulting from a change in instrument specific credit risk. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Entities may apply this guidance on a prospective or retrospective basis. The Company will adopt the standard on a prospective basis and does not expect the prospective application of this guidance to have a material impact on its Consolidated Financial Statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU revises the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. ASU 2016-02 is effective for the first interim period within annual periods beginning after December 15, 2018, with early adoption permitted. Adoption using the modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company does not plan to early adopt this guidance and is currently in the process of identifying our complete lease population as defined by this guidance. The Company is also evaluating our internal systems, accounting policies, processes and related internal controls for potential impacts. Our preliminary review of this guidance suggests that adoption will result in additional assets and liabilities on our Consolidated Balance Sheet. The Company will adopt this guidance on January 1, 2019.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with an expected credit loss methodology and requires consideration of a broader range of information to determine credit loss estimates. Financial assets measuredrecorded at amortized cost, will be presented at the net amount expected to be collected by using anof allowance for credit losses. Purchased credit impaired loans will receive an allowance account at the acquisition date that represents a component of the purchase price allocation. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses, with such allowance limited toAmortized cost is the amount byat which fair value is below amortized cost. This guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company does not plan to early adopt this guidance and is in the early stages of evaluating the impact of this guidance on its Consolidated Financial Statements, internal systems, accounting policies, processes and related internal controls. Our preliminary review of this guidance suggests that adoption may materially increase the allowance for loan losses and decrease capital levels; however, the extent of these impacts will depend on the asset quality of the portfolio and significant estimates and judgments made by management at the time of adoption. The Company will adopt this guidance on January 1, 2020.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 represents the Emerging Issues Task Force’s final consensus on eight issues related to the classification of cash payments and receipts in the statement of cash flows for a number of common transactions. The consensus also clarifies when identifiable cash flows should be separated versus classified based on their predominant source or use. This guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not expect the application of this guidance to have any impact on its Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 provides a new, two-step framework for determining whether a transaction is accounted for as an acquisition (or disposal) of assets or a business. The first step is evaluating whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the transaction is not considered a business. Also, in order to be considered a business, the transaction would need to include an input and a substantive process that together significantly contribute to the ability to create outputs. The guidance is effective for public entities in annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted for transactions that have not been reported in financial statements that have been issued or been made available for issuance. The Company does not expect the application of this guidance to have any impact on its Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the measurement of goodwill impairment by removing the hypothetical purchase price allocation. The new guidance requires an impairment of goodwill be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, up to the amount of goodwill recorded. The guidance is effective for public entities in annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted for goodwill impairment tests with measurement dates after January 1, 2017. The Company does not expect the application of this guidance to have a material impact on its Consolidated Financial Statements.

In February 2017, the FASB issued ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. ASU 2017-05 provides clarification of the scope of ASC 610-20. Specifically, the new guidance clarifies that ASC 610-20 applies to nonfinancial assets which do not meet the definition of a business or not-for-profit activity. Further, the new guidance clarifies that a financial asset is withinoriginated or acquired, adjusted for the scopeamortization of ASC 610-20 if it meetspremium and discount, net deferred fees or costs, collection of cash, and write-offs. Interest income on loans is recognized using the definition of an in-substance nonfinancial asset which is defined as a financial asset promised to a counterparty in a contract where substantially alllevel yield method. Loan origination fees, commitment fees and direct loan origination costs are deferred and recognized over the life of the assets promised are nonfinancial. Finally, the new guidance clarifies that each distinct nonfinancial asset and in-substance nonfinancial asset should be derecognized when the counterparty obtains control of it. The guidance is effective for public entities in annual and interim reporting periods in fiscal years beginning after December 15, 2017. Early application is permitted for all entities, but not before annual reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact of adopting ASU 2017-05 on its Consolidated Financial Statements.

In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The new guidance requires that the service cost component of net periodic pension cost be disclosed with other compensation costs in the income statement. For all other cost components, an entity must either separately disclose the other cost components in separate line item(s) outsiderelated loans using a subtotal of income from operations in the income statement or disclose the line item(s) used to present the other cost components in the income statement. The guidance is effective for public entities in annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted. The Company does not expect the application of this guidance to have a material impact on its Consolidated Financial Statements.

In March 2017, the FASB issued ASU No. 2017-08, Premium Amortization on Purchased Callable Debt Securities. The new guidance requires the amortization period for certain non-contingent callable debt securities held at a premium to end at the earliest call date of the debt security. If the call option is not exercised at the earliest call date, the guidance requires the debt security's effectivelevel yield to be reset based on the contractual payment terms of the debt security. The guidance is effective for public entities in annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted. Use of the modified retrospective method with a cumulative-effect adjustment to retained earnings, is required. Inover the period of adoption, a change in accounting principle disclosure is required. The Company does not expect the application of this guidance to have a material impact on its Consolidated Financial Statements.
In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting. The new guidance clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. If the award’s fair value, vesting conditions and classification remain the same immediately before and after the change, modification accounting is not applied. Additionally, the guidance does not require valuation before or after the change if the change does not affect any of the inputs to the model used to value the award. The guidance is effective for all entities in annual and interim periods beginning after December 15, 2017. Early adoption is permitted. The new guidance will be applied on a prospective basis to awards modified on or after the adoption date. The Company does not expect the application of this guidance to have a material impact on its Consolidated Financial Statements.
In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities. The new guidance changes both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. Specifically, the guidance eliminates the requirement to separately measure and report hedge ineffectiveness and also aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. Additionally, the new guidance provides entities the ability to apply hedge accounting to additional hedging strategies. The guidance is effective for all entities in annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The Company does not expect the application of this guidance to have a material impact on its Consolidated Financial Statements.


2. BUSINESS COMBINATIONS
Penn Liberty Financial Corporation
On August 12, 2016, we completed the acquisition of Penn Liberty. The acquisition of Penn Liberty was accounted for as a business combination using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration transferred were recorded at their estimated fair values as of the acquisition date. The fair values of assets acquired and liabilities assumed are now considered final.
In connection with the acquisition of Penn Liberty, the consideration transferred and the fair value of identifiable assets acquired and liabilities assumed, including remeasurement adjustments subsequent to the date of acquisition, are summarized in the following table:
(Dollars in thousands) Fair Value
Consideration Transferred:  
Common shares issued (1,806,748) $68,352
Cash paid to Penn Liberty stock and option holders 40,549
Value of consideration 108,901
Assets acquired:  
Cash and due from banks 102,301
Investment securities 627
Loans 483,203
Premises and equipment 6,817
Deferred income taxes 6,542
Bank owned life insurance 8,666
Core deposit intangible 2,882
Other real estate owned 996
Other assets 12,085
Total assets 624,119
Liabilities assumed:  
Deposits 568,706
Other borrowings 10,000
Other liabilities 3,738
Total liabilities 582,444
Net assets acquired: 41,675
Goodwill resulting from acquisition of Penn Liberty $67,226
The following table details the change to goodwill recorded subsequent to acquisition:
(Dollars in thousands) Fair Value
Goodwill resulting from the acquisition of Penn Liberty reported as of December 31, 2016 $68,814
Effects of adjustments to:  
Deferred income taxes 880
Loans 279
Other assets (1,440)
Other liabilities (1,307)
Adjusted goodwill resulting from the acquisition of Penn Liberty as of September 30, 2017 $67,226
In many cases, the fair values of assets acquired and liabilities assumed were determined by estimating the cash flows expected to result from those assets and liabilities and discounting them at appropriate market rates. During the three months ended September 30, 2017, no adjustments were made to goodwill resulting from the acquisition of Penn Liberty.

3. EARNINGS PER SHARE
The following table shows the computation of basic and diluted earnings per share:
 Three Months Ended September 30, Nine Months Ended September 30,
(Dollars and Shares in thousands, except per share data)2017 2016 2017 2016
Numerator:       
Net income$20,569
 $12,722
 $60,076
 $45,970
Denominator:       
Weighted average basic shares31,420
 30,520
 31,424
 29,914
Dilutive potential common shares848
 797
 856
 747
Weighted average fully diluted shares32,268
 31,317
 32,280
 30,661
Earnings per share:       
Basic$0.65
 $0.42
 $1.91
 $1.54
Diluted$0.64
 $0.41
 $1.86
 $1.50
Outstanding common stock equivalents having no dilutive effect—
 1
 5
 10


4. INVESTMENT SECURITIES
The following tables detail the amortized cost and the estimated fair value of our available-for-sale and held-to-maturity investment securities. None of our investment securities are classified as trading.
(Dollars in thousands) Amortized Cost 
Gross
Unrealized
 Gain
 
Gross
Unrealized
 Loss
 
Fair
Value
Available-for-Sale Securities:        
September 30, 2017        
CMO $269,267
 $895
 $2,354
 $267,808
FNMA MBS 434,920
 1,545
 5,223
 431,242
FHLMC MBS 85,564
 277
 779
 85,062
GNMA MBS 25,723
 289
 315
 25,697
Other investments 640
 —
 16
 624
  $816,114
 $3,006
 $8,687
 $810,433
December 31, 2016        
GSE $35,061
 $9
 $60
 $35,010
CMO 264,607
 566
 3,957
 261,216
FNMA MBS 414,218
 950
 9,404
 405,764
FHLMC MBS 64,709
 135
 1,330
 63,514
GNMA MBS 28,540
 303
 427
 28,416
Other investments 626
 —
 3
 623
  $807,761
 $1,963
 $15,181
 $794,543
(Dollars in thousands) Amortized Cost 
Gross
Unrealized
 Gain
 
Gross
Unrealized
 Loss
 
Fair
Value
Held-to-Maturity Securities(1)
        
September 30, 2017        
State and political subdivisions $161,721
 $1,796
 $120
 $163,397
December 31, 2016        
State and political subdivisions $164,346
 $271
 $1,385
 $163,232
(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 held-to-maturity securities included net unrealized gains of $1.8 million and $2.2 million at September 30, 2017 and December 31, 2016, respectively, related to securities transferred, which are offset in Accumulated Other Comprehensive Income, net of tax.


The scheduled maturities of investment securities available for sale and held to maturity at September 30, 2017 and December 31, 2016 are presented in the table below:
  
Available for Sale (1)
  Amortized Fair
(Dollars in thousands) Cost Value
September 30, 2017    
Within one year $—
 $—
After one year but within five years 4,007
 4,002
After five years but within ten years 201,919
 198,334
After ten years 609,548
 607,473
  $815,474
 $809,809
December 31, 2016    
Within one year $16,009
 $16,017
After one year but within five years 19,052
 18,992
After five years but within ten years 276,635
 270,300
After ten years 495,439
 488,611
  $807,135
 $793,920
     
  Held to Maturity
  Amortized Fair
(Dollars in thousands) Cost Value
September 30, 2017    
Within one year $328
 $326
After one year but within five years 5,437
 5,491
After five years but within ten years 15,672
 15,838
After ten years 140,284
 141,742
  $161,721
 $163,397
December 31, 2016    
Within one year $—
 $—
After one year but within five years 6,168
 6,162
After five years but within ten years 8,882
 8,870
After ten years 149,296
 148,200
  $164,346
 $163,232
(1)
Included in the investment portfolio, but not in the table above, is a mutual fund with an amortized cost and fair value of $0.6 million and $0.6 million as of September 30, 2017 and December 31, 2016 which has no stated maturity.
Mortgage-backed securities (MBS) may have expected maturities that differ from their contractual maturities. These differences arise because borrowers have the right to call or prepay obligations with or without prepayment penalty.
Investment securities with fair market values aggregating $737.3 million and $562.5 million were pledged as collateral for retail customer repurchase agreements, municipal deposits, and other obligations as of September 30, 2017 and December 31, 2016, respectively.
During the nine months ended September 30, 2017, we sold $415.5 million of investment securities categorized as available for sale, resulting in realized gains of $1.9 million and realized losses of less than $0.1 million. During the nine months ended September 30, 2016, we sold $155.8 million of investment securities categorized as available for sale, resulting in realized gains of $1.9 million and no realized losses. The cost basis of all investment securities sales is based on the specific identification method.
As of September 30, 2017 and December 31, 2016, our investment securities portfolio had remaining unamortized premiums of $14.9 million and $18.0 million, respectively, and unaccreted discounts of $1.1 million and $0.4 million, respectively.


For investment securities with unrealized losses, the table below shows our gross unrealized losses and fair value by investment category and length of time that individual securities were in a continuous unrealized loss position at September 30, 2017.
  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 securities:            
CMO $114,939
 $1,188
 $43,775
 $1,166
 $158,714
 $2,354
FNMA MBS 188,153
 2,299
 74,801
 2,924
 262,954
 5,223
FHLMC MBS 45,317
 497
 7,892
 282
 53,209
 779
GNMA MBS 4,856
 83
 10,687
 232
 15,543
 315
Other investments —
 —
 624
 16
 624
 16
Total temporarily impaired investments $353,265
 $4,067
 $137,779
 $4,620
 $491,044
 $8,687
             
  Less than 12 months 12 months or longer Total
  Fair Unrealized Fair Unrealized Fair Unrealized
(Dollars in thousands) Value Loss Value Loss Value Loss
Held-to-maturity securities:            
State and political subdivisions $13,571
 $48
 $6,700
 $72
 $20,271
 $120
Total temporarily impaired investments $13,571
 $48
 $6,700
 $72
 $20,271
 $120
For investment securities with unrealized losses, the table below shows our gross unrealized losses and fair value by investment category and length of time that individual securities were in a continuous unrealized loss position at December 31, 2016.
  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 securities:            
GSE $21,996
 $60
 $—
 $—
 $21,996
 $60
CMO 160,572
 3,867
 4,654
 90
 165,226
 3,957
FNMA MBS 50,878
 1,330
 —
 —
 50,878
 1,330
FHLMC MBS 300,403
 9,404
 —
 —
 300,403
 9,404
GNMA MBS 16,480
 427
 —
 —
 16,480
 427
Other investments 623
 3
 —
 —
 623
 3
Total temporarily impaired investments $550,952
 $15,091
 $4,654
 $90
 $555,606
 $15,181
             
  Less than 12 months 12 months or longer Total
  Fair Unrealized Fair Unrealized Fair Unrealized
(Dollars in thousands) Value Loss Value Loss Value Loss
Held-to-maturity securities:            
State and political subdivisions $112,642
 $1,374
 $695
 $11
 $113,337
 $1,385
Total temporarily impaired investments $112,642
 $1,374
 $695
 $11
 $113,337
 $1,385

At September 30, 2017, we owned investment securities totaling $511.3 million for which the amortized cost basis exceeded fair value. Total unrealized losses on these securities were $8.8 million at September 30, 2017. The temporary impairment is the result of changes in market interest rates subsequent to the purchase of the securities. Our investment portfolio is reviewed each quarter for indications of OTTI. This review includes analyzing the length of time and the extent to which the fair value has been lower than the amortized cost, the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer and our intent and ability to hold the investment for a period of time sufficient to allow for full recovery of the unrealized loss. We evaluate our intent and ability to hold securities based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy and interest rate risk position. We do not have the intent to sell, nor is it more likely-than-not we will be required to sell these securities before we are able to recover the amortized cost basis.
All securities, with the exception of one having a fair value of $0.8 million at September 30, 2017, were AA-rated or better at the time of purchase and remained investment grade at September 30, 2017. All securities were evaluated for OTTI at September 30, 2017 and December 31, 2016. The result of this evaluation showed no OTTI as of September 30, 2017 or December 31, 2016. The estimated weighted average duration of MBS was 5.10 years at September 30, 2017.


















5. LOANS
The following table shows our loan portfolio by category:
(Dollars in thousands) September 30, 2017 December 31, 2016
Commercial and industrial $1,388,094
 $1,287,731
Owner-occupied commercial 1,096,753
 1,078,162
Commercial mortgages 1,157,074
 1,163,554
Construction 293,317
 222,712
Residential (1)
 262,147
 289,611
Consumer 520,276
 450,029
  4,717,661
 4,491,799
Less:    
Deferred fees, net 7,244
 7,673
Allowance for loan losses 40,201
 39,751
Net loans $4,670,216
 $4,444,375
(1) Includes reverse mortgages, at fair value of $21.4 million at September 30, 2017 and $22.6 million at December 31, 2016.
The following table shows the outstanding principal balance and carrying amounts for acquired credit impaired loans for which the Company applies ASC 310-30 as of the dates indicated:
(Dollars in thousands) September 30, 2017 December 31, 2016
Outstanding principal balance $30,465
 $41,574
Carrying amount 24,039
 33,104
Allowance for loan losses 542
 510

The following table presents the changes in accretable yield on the acquired credit impaired loans for the nine months ended September 30, 2017:
(Dollars in thousands) Nine months ended September 30, 2017
Balance at beginning of period $5,150
Accretion (2,158)
Reclassification from nonaccretable difference 1,246
Additions/adjustments (1,089)
Disposals (345)
Balance at end of period $2,804

6. ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY INFORMATION
Allowance for LoanCredit Losses - Loans and Leases
We maintain an allowance for loan losses which represents our best estimate of probable losses within our loan portfolio. As losses are realized, they are charged to this allowance. We established ourThe Company establishes its allowance in accordance with guidance provided in ASC 326, Financial Instruments - Credit Losses. The allowance for credit losses includes quantitative and qualitative factors that comprise management's current estimate of expected credit losses, including the SEC’s Staff Accounting Bulletin 102 (SAB 102)Company's portfolio mix and segmentation, modeling methodology, historical loss experience, relevant available information from internal and external sources relating to qualitative adjustment factors, prepayment speeds and reasonable and supportable forecasts about future economic conditions.
The Company's portfolio segments, established based on similar risk characteristics and loss behaviors, are:
•Commercial and industrial, owner-occupied commercial, commercial mortgages, construction and commercial small business leases (collectively, commercial loans), Selected Loan Loss Allowance Methodologyand
•Residential, equity secured lines and Documentation Issues, ASC 450, Contingencies loans, installment loans, unsecured lines of credit and ASC 310, Receivableseducation loans (collectively, retail loans). When we have reason
Expected credit losses are net of expected recoveries and estimated over the contractual term, adjusted for expected prepayments. The contractual term excludes any extensions, renewals and modifications unless the Company has reasonable expectations at the reporting date that it will result in a troubled debt restructuring (TDR) or they are not unconditionally cancellable. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to believe it is probablebe charged-off.
The allowance includes two primary components: (i) an allowance established on loans which share similar risk characteristics collectively evaluated for credit losses (collective basis) and (ii) an allowance established on loans which do not share similar risk characteristics with any loan segment and are individually evaluated for credit losses (individual basis).
Loans that we will not be able to collect all contractually due amounts of principalshare similar risk characteristics are collectively reviewed for credit loss and interest, loans are evaluated for impairment on an individual basis and a specific allocation of the allowance is assigned in accordance with ASC 310-10. We also maintain an allowance for loan losses on acquired loans when: (i) for loans accounted for under ASC 310-30, there is deterioration in credit quality subsequent to acquisition and (ii) for loans accounted for under ASC 310-20, the inherent losses in the loans exceed the remaining credit discount recorded at the time of acquisition. The determination of the allowance for loan losses requires significant judgment reflecting our best estimate of impairment related to specifically identified impaired loans as well as probable loan losses in the remaining loan portfolio. Our evaluation is based on a continuing review of these portfolios. The following are included in our allowance for loan losses:
Specific reserves for impaired loans
An allowance for each pool of homogenous loans based on historical loss experience,
Adjustments adjusted for qualitativecurrent economic conditions and environmental factors allocated to pools of homogenous loans
When it is probable that the Bank will be unable to collect all amounts due (interest and principal) in accordance with the contractual terms of the loan agreement, it assigns a specific reserve to that loan, if necessary. Unless loans are well-secured and collection is imminent, loans greater than 90 days past due are deemed impaired and their respective reserves are generally charged-off once the loss has been confirmed.future economic forecasts. Estimated specific reserves are based on collateral values, estimates of future cash flows or market valuations. We charge loans off when they are deemed to be uncollectible. During the nine months ended September 30, 2017 and 2016, net charge-offs totaled $6.5 million or 0.19% of average loans annualized, and $5.9 million, or 0.20% of average loans annualized, respectively.
Allowances for pooled homogeneous loans, that are not deemed impaired, are based on historical net loss experience. Estimated losses for pooled portfolios are determined differently for commercial loan pools and retail loan pools. Commercial loans, are pooled as follows: commercial, owner-occupied commercial, commercial mortgages and construction. Each pooleach portfolio segment is further segmented by internally assessed risk ratings. Loan losses
The Company uses a third-party economic forecast to adjust the calculated historical loss rates of the portfolio segments. The Company's economic forecast considers the general health of the economy, the interest rate environment, real estate pricing and market risk. Our forecast extends out 6 quarters (the forecast period) and reverts to the historical loss rates on a straight-line basis over 4 quarters (the reversion period) as it believes this to be reasonable and supportable in the current environment. The economic forecast and reversion periods will be evaluated periodically by the Company and updated as appropriate.
The historical loss rates for commercial loans are estimated by determining the probability of default (PD) and expected loss severity upon default.given default (LGD). The probability of default is calculated based on the historical rate of migration to impaired statusan event of credit loss during the last 27 quarters. During the nine months ended September 30, 2017, we increased the look-back period to 27 quarters from the 24 quarters used at December 31, 2016. This increase in the look-back period allows us to continue to anchor to the fourth quarter of 2010 to ensure that the core reserves calculated by the ALLL model are adequately considering the losses within a full credit cycle.
Loss severity upon default is calculated as the actual loan losses (net of recoveries) on impaired loans in their respective pool during the same time frame. Retail loans are pooled into the following segments: residential mortgage, consumer secured and consumer unsecured loans. Pooled reservesperiod. The historical loss rates for retail loans areis calculated based solely on average net loss rates over the same 27 quarter look-back period. The current look-back period is 39 quarters which ensures historical loss rates are adequately considering losses within a full credit cycle.
Loans that do not share similar risk characteristics with any loan segments are evaluated on an individual basis. These loans, which may include TDRs, are not included in the collective basis evaluation. When it is probable the Company will not collect all principal and interest due according to their contractual terms, which is assessed based on the credit characteristics of the loan and/or payment status, these loans are individually reviewed and measured for potential credit loss.
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The amount of the potential credit loss is measured using one of three methods: (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the fair value of collateral, if the loan is collateral dependent; or (iii) the loan’s observable market price. If the measured fair value of the loan is less than the amortized cost basis of the loan, an allowance for credit loss is recorded.
For collateral dependent loans, the expected credit losses at the individual asset level is the difference between the collateral's fair value (less cost to sell) and the amortized cost.
Qualitative adjustment factors consider various current internal and external conditions which are allocated among loan typessegments and take into consideration:
•Current underwriting policies, staff and portfolio mix,concentrations,
•Risk rating accuracy, credit and administration,
•Internal risk emergence (including internal trends of delinquency, nonaccrual and criticized loans by segment,segment),
Risk rating accuracy, control•Economic forecasts and regulatory assessments/environment,
General economic conditions - locally and nationally
Market (including market trends impacting collateral values,values), and
The competitive•Competitive environment, as it could impact loan structure and underwriting.
The aboveThese factors are based on their relative standing compared to the period in which historichistorical losses are used in corequantitative reserve estimates and current directional trends.trends, and reasonable and supportable forecasts. Qualitative factors in ourthe model can add to or subtract from corequantitative reserves.
The allowance methodology uses a loss emergence period (LEP), which is the period of time between an event that triggers the probability of a loss and the confirmation of the loss. We estimate the commercial LEP to be approximately 9 quarters as of September 30, 2017. Our residential mortgage and consumer LEP remained at 4 quarters as of September 30, 2017. We evaluate LEP quarterly for reasonableness and complete a detailed historical analysis of our LEP annually for our commercial portfolio and review the current 4 quarter LEP for the retail portfolio to determine the continued reasonableness of this assumption.

In prior periods, we had a component of the allowance for model estimation and complexity risk reserve. During the second quarter of 2016 as a result of continued refinement of the model and normal review of the factors, we removed the model estimation and complexity risk reserve from our calculation of the allowance for loan losses.
OurCompany's loan officers and risk managers meet at least quarterly to discuss and review the conditions and risks associated with individual problem loans. In addition, various regulatory agencies periodically review ourthe Company's loan ratings and allowance for loancredit losses and the Bank’sBank's internal loan review department performs loan reviews.
The following tables provideAccrued interest receivable on loans is excluded from the activityestimate of our allowance for loancredit losses and loan balances foris included in Accrued interest receivable on the three and nine months ended September 30, 2017:Consolidated Statements of Financial Condition.
(Dollars in thousands) Commercial 
Owner-occupied
Commercial
 
Commercial
Mortgages
 Construction 
Residential(1)
 Consumer Total
Three months ended September 30, 2017
Allowance for loan losses              
Beginning balance $14,224
 $5,816
 $7,335
 $3,432
 $2,050
 $7,148
 $40,005
Charge-offs (1,603) (104) (1,196) (215) (59) (575) (3,752)
Recoveries 417
 12
 16
 301
 11
 295
 1,052
Provision (credit) 2,128
 (96) (231) 427
 (49) 644
 2,823
Provision for acquired loans (7) 104
 (5) (28) 9
 —
 73
Ending balance $15,159
 $5,732
 $5,919
 $3,917
 $1,962
 $7,512
 $40,201
Nine months ended September 30, 2017
Allowance for loan losses              
Beginning balance $13,339
 $6,588
 $8,915
 $2,838
 $2,059
 $6,012
 $39,751
Charge-offs (3,787) (296) (1,702) (346) (112) (2,606) (8,849)
Recoveries 820
 120
 69
 305
 141
 943
 2,398
Provision (credit) 4,597
 (802) (1,602) 1,056
 (146) 3,177
 6,280
Provision for acquired loans 190
 122
 239
 64
 20
 (14) 621
Ending balance $15,159
 $5,732
 $5,919
 $3,917
 $1,962
 $7,512
 $40,201
Period-end allowance allocated to:
Loans individually evaluated for impairment $1,220
 $—
 $131
 $—
 $858
 $198
 $2,407
Loans collectively evaluated for impairment 13,646
 5,699
 5,638
 3,881
 1,078
 7,310
 37,252
Acquired loans evaluated for impairment 293
 33
 150
 36
 26
 4
 542
Ending balance $15,159
 $5,732
 $5,919
 $3,917
 $1,962
 $7,512
 $40,201
Period-end loan balances evaluated for:
Loans individually evaluated for impairment (2)
 $12,845
 $3,346
 $9,012
 $1,839
 $14,060
 $7,409
 $48,511
Loans collectively evaluated for impairment 1,249,027
 941,296
 943,699
 271,447
 148,715
 472,488
 4,026,672
Acquired nonimpaired loans 120,987
 144,710
 194,394
 19,085
 77,154
 40,136
 596,466
Acquired impaired loans 5,235
 7,401
 9,969
 946
 788
 243
 24,582
Ending balance (3)
 $1,388,094
 $1,096,753
 $1,157,074
 $293,317
 $240,717
 $520,276
 $4,696,231
(1)
Period-end loan balance excludes reverse mortgages, at fair value of $21.4 million.
(2)
The difference between this amount and nonaccruing loans represents accruing troubled debt restructured loans of $14.9 million for the period ending September 30, 2017. Accruing troubled debt restructured loans are considered impaired loans.
(3)
Ending loan balances do not include net deferred fees.





The following table provides the activity ofFor additional detail regarding the allowance for loancredit losses and loan balancesthe provision for the three and nine months ended September 30, 2016:credit losses, see Note 7.
(Dollars in thousands) Commercial 
Owner -
occupied
Commercial
 
Commercial
Mortgages
 Construction 
Residential(1)
 Consumer 
Complexity Risk(2)
 Total
Three months ended September 30, 2016
Allowance for loan losses                
Beginning balance $11,402
 $6,723
 $8,135
 $3,308
 $2,352
 $5,826
 $—
 $37,746
Charge-offs (3,737) (1,415) (1) (30) (43) (518) —
 (5,744)
Recoveries 223
 15
 197
 440
 33
 290
 —
 1,198
Provision (credit) 3,714
 1,437
 1,089
 (824) (179) 401
 —
 5,638
Provision for acquired loans 117
 185
 (48) (76) 12
 —
 —
 190
Ending balance $11,719
 $6,945
 $9,372
 $2,818
 $2,175
 $5,999
 $—
 $39,028
Nine months ended September 30, 2016
Allowance for loan losses                
Beginning balance $11,156
 $6,670
 $6,487
 $3,521
 $2,281
 $5,964
 $1,010
 $37,089
Charge-offs (4,643) (1,556) (79) (59) (72) (1,967) —
 (8,376)
Recoveries 557
 66
 310
 486
 112
 922
 —
 2,453
Provision (credit) 4,551
 1,564
 2,650
 (1,104) (177) 1,118
 (1,010) 7,592
Provision for acquired loans 98
 201
 4
 (26) 31
 (38) —
 270
Ending balance $11,719
 $6,945
 $9,372
 $2,818
 $2,175
 $5,999
 $—
 $39,028
Period-end allowance allocated to:
Loans individually evaluated for impairment $692
 $—
 $1,264
 $215
 $989
 $201
 $—
 $3,361
Loans collectively evaluated for impairment 10,974
 6,923
 7,982
 2,549
 1,167
 5,798
 —
 35,393
Acquired loans evaluated for impairment 53
 22
 126
 54
 19
 —
 —
 274
Ending balance $11,719
 $6,945
 $9,372
 $2,818
 $2,175
 $5,999
 $—
 $39,028
Period-end loan balances:
Loans individually evaluated for impairment (3)
 $4,198
 $2,510
 $7,165
 $1,419
 $13,957
 $8,105
 $—
 $37,354
Loans collectively evaluated for impairment 1,077,258
 869,051
 904,328
 182,338
 150,318
 368,428
 —
 3,551,721
Acquired nonimpaired loans 175,570
 175,411
 229,530
 21,627
 103,537
 61,257
 —
 766,932
Acquired impaired loans 9,691
 10,673
 12,880
 3,592
 899
 368
 —
 38,103
Ending balance (4)
 $1,266,717
 $1,057,645
 $1,153,903
 $208,976
 $268,711
 $438,158
 $—
 $4,394,110
(1)
Period-end loan balance excludes reverse mortgages, at fair value of $23.1 million.
(2)
Represents the portion of the allowance for loan losses established to capture factors not already included in other components in our allowance for loan losses methodology.
(3)
The difference between this amount and nonaccruing loans represents accruing troubled debt restructured loans of $14.2 million for the period ending September 30, 2016. Accruing troubled debt restructured loans are considered impaired loans.
(4)
Ending loan balances do not include net deferred fees.













Nonaccrual and Past Due and Nonaccrual Loans

Past due loans are defined as loans contractually past due 30 days or more as to principal or interest payments. Past due loans 90 days or more that remain in accrual status are considered well secured and in the process of collection.
Nonaccruing loans are those on which the accrual of interest has ceased. Typically, we discontinue accrualLoans are placed on nonaccrual status immediately if, in the opinion of interest on originated loans after payments become more than 90 days past duemanagement, collection is doubtful, or earlier if we do not expect the full collection ofwhen principal or interest in accordance with the terms ofis past due 90 days or more and the loan agreement.is not well secured and in the process of collection. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed and charged against interest income. In addition, the accretionamortization of net deferred loan fees and amortization of net deferred loan costs is suspended when a loan is placed on nonaccrual status. Subsequent cash receipts are applied either to the outstanding principal balance or recorded as interest income, depending on ourthe Company’s assessment of the ultimate collectability of principal and interest. Loans are returned to accrual status when the Company assesses that the borrower has the ability to make all principal and interest payments in accordance with the terms of the loan (i.e. a consistent repayment record, generally six consecutive payments, has been demonstrated).
Unless loans are well-secured and collection is imminent, for loans greater than 90 days past due their respective reserves are generally charged off once the loss has been confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged off and still accruingexpected to be charged off.
A loan, for which the terms have been modified resulting in a concession to the borrower experiencing financial difficulty, is considered a TDR. Principal balances are definedgenerally 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 demonstrated, as noted above, and repayment is reasonably assured.
On March 27, 2020, the CARES Act was signed into law, which allows financial institutions to exclude eligible loan modifications from TDR reporting under its loan forbearance program. Eligible modifications must be related to the COVID-19 pandemic, executed on a loan that was not more than 30 days past due as of December 31, 2019 and executed between March 1, 2020 and the earlier of 60 days after the date of the termination of the national emergency or December 31, 2020. Management has elected to account and report eligible modifications under the provisions of the CARES Act.
For additional detail regarding past due and nonaccrual loans, see Note 7.

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Debt Securities
Investments in debt securities are classified into one of the following three categories and accounted for as follows:
•Securities purchased with the intent of selling them in the near future are classified as “trading” and reported at fair value, with unrealized gains and losses included in earnings.
•Securities purchased with the positive intent and ability to hold to maturity are classified as “held-to-maturity” and reported at amortized cost.
•Securities not classified as either trading or held-to-maturity are classified as “available-for-sale” and reported at fair value, with unrealized gains and losses excluded from earnings and reported, net of tax, as a separate component of stockholders’ equity in accumulated other comprehensive income (loss). Realized gains and losses on sales of investment and mortgage-backed securities (MBS) are determined using the specific identification method. All sales are made without recourse.
Debt securities mostly include MBS, municipal bonds, and U.S. government and agency securities. Premiums and discounts on MBS collateralized by residential 1-4 family loans are recognized in interest income using a level yield method over the period to expected maturity. Premiums and discounts on all other securities are recognized on a straight line basis over the period to expected maturity, with the exception of premiums on callable debt securities, which are recognized over the period to the earliest call date.
The fair value of debt securities is primarily obtained from third-party pricing services. Implicit in the valuation of MBS are estimated prepayments based on historical and current market conditions.
A debt security is placed on nonaccrual status at the time any principal or interest payments are contractually past due 90 days or more asmore. Interest accrued but not received for a security placed on nonaccrual status is reversed against interest income.
The Company's investment portfolio is reviewed each quarter for indications of potential credit losses. Refer to principal or interest payments, but which remain in accrual status because theythe respective held-to-maturity and available-for-sale debt securities sections for management's discussion of the allowance for credit loss for each portfolio.
Allowance for Credit Losses - Held-to-Maturity Debt Securities
The Company follows Accounting Standards Codification (ASC) 326-20, Financial Instruments - Credit Loss - Measured at Amortized Cost, to measure expected credit losses on held-to-maturity debt securities on a collective basis by security investment grade. The estimate of expected credit losses considers historical credit loss information adjusted by a security's credit rating.
The Company classifies the held-to-maturity debt securities into the following major security types: state and political subdivisions, and foreign bonds. These securities are considered well securedhighly rated with a history of no credit losses, and are in the process of collection.
The following tables show our nonaccrual and past due loans at the dates indicated:

  September 30, 2017
(Dollars in thousands) 
30–59 Days
Past Due 
and
Still 
Accruing
 
60–89 Days
Past Due and
Still 
Accruing
 
Greater 
Than
90 Days
Past Due and
Still Accruing
 
Total Past
Due
And Still
Accruing
 
Accruing
Current
Balances
 
Acquired
Impaired
Loans
 
Nonaccrual
Loans
 
Total
Loans
Commercial $673
 $136
 $685
 $1,494
 $1,368,660
 $5,235
 $12,705
 $1,388,094
Owner-occupied commercial 998
 —
 —
 998
 1,085,008
 7,401
 3,346
 1,096,753
Commercial mortgages 1,320
 —
 —
 1,320
 1,136,982
 9,969
 8,803
 1,157,074
Construction 1,033
 —
 —
 1,033
 289,499
 946
 1,839
 293,317
Residential(1)
 1,708
 364
 557
 2,629
 232,567
 788
 4,733
 240,717
Consumer 593
 771
 96
 1,460
 516,463
 243
 2,110
 520,276
Total (2)
 $6,325
 $1,271
 $1,338
 $8,934
 $4,629,179
 $24,582
 $33,536
 $4,696,231
% of Total Loans 0.13% 0.03% 0.03% 0.19% 98.58% 0.52% 0.71% 100%
(1)
Residential accruing current balances excludes reverse mortgages at fair value of $21.4 million.
(2)
The balances above include a total of $596.5 million of acquired nonimpaired loans.
  December 31, 2016
(Dollars in thousands) 
30–59 Days
Past Due 
and
Still 
Accruing
 
60–89 Days
Past Due 
and
Still 
Accruing
 
Greater 
Than
90 Days Past
Due and Still
Accruing
 
Total Past
Due And
Still
Accruing
 
Accruing
Current
Balances
 
Acquired
Impaired
Loans
 
Nonaccrual
Loans
 
Total
Loans
Commercial $1,507
 $278
 $—
 $1,785
 $1,277,748
 $6,183
 $2,015
 $1,287,731
Owner-occupied commercial 116
 540
 —
 656
 1,063,306
 12,122
 2,078
 1,078,162
Commercial mortgages 167
 —
 —
 167
 1,143,180
 10,386
 9,821
 1,163,554
Construction 132
 —
 —
 132
 218,886
 3,694
 —
 222,712
Residential(1)
 3,176
 638
 153
 3,967
 257,234
 860
 4,967
 267,028
Consumer 392
 346
 285
 1,023
 444,642
 369
 3,995
 450,029
Total(2)
 $5,490
 $1,802
 $438
 $7,730
 $4,404,996
 $33,614
 $22,876
 $4,469,216
% of Total Loans 0.12% 0.04% 0.01% 0.17% 98.57% 0.75% 0.51% 100%
(1)
Residential accruing current balances excludes reverse mortgages, at fair value of $22.6 million.
(2)
The balances above include a total of $724.1 million of acquired nonimpaired loans.










Impaired Loans

Loans for which it is probable we will not collect all principal and interest due according to their contractual terms, which is assessedassigned ratings based on the most recent data from ratings agencies depending on the availability of data for the security. Credit ratings of held-to-maturity debt securities, which are a significant input in calculating the expected credit characteristicsloss, are reviewed on a quarterly basis.
Accrued interest receivable on held-to-maturity debt securities is excluded from the estimate of credit losses and is included in Accrued interest receivable on the loan and/Consolidated Statements of Financial Condition.
Allowance for Credit Losses - Available-for-Sale Debt Securities
The Company follows ASC 326-30, Financial Instruments - Credit Loss - Available-for-Sale Debt Securities, which provides guidance related to the recognition of and expanded disclosure requirements for expected credit losses on available-for-sale debt securities. For available-for-sale debt securities in an unrealized loss position, the Company first evaluates whether it intends to sell, or payment status, are measured for impairmentit is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either criteria is met, the security's amortized cost basis is reduced to fair value and recognized as a reduction to Noninterest income in accordance with the provisionsConsolidated Statements of SAB 102 and FASB ASC 310, Receivables (ASC 310). The amount of impairmentIncome.
For debt securities available-for-sale which the Company does not intend to sell, or it is not likely the security would be required to be sold before recovery, it evaluates whether a decline in fair value has resulted from credit losses or other adverse factors, such as a change in the security's credit rating. In assessing whether a credit loss exists, the Company compares the present value of cash flows expected to be collected from the security with the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance is recorded, limited to the fair value of the security.

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The Company performs this analysis on a quarterly basis to review the conditions and risks associated with the individual securities. Credit losses on an impaired security shall continue to be measured using one of three methods: (1) the present value of expected future cash flows discountedflows. Any impairment not recorded through an allowance for credit loss is included in other comprehensive income (loss), net of the tax effect. The Company is required to use its judgment in determining impairment in certain circumstances.
For additional detail regarding debt securities, see Note 5.
Unfunded Lending Commitments
For unfunded lending commitments, the Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the probability of default and utilization rate at default to calculate expected credit losses on commitments expected to be funded based on historical losses.
The allowance for credit losses for off-balance sheet exposures is included in Other liabilities on the loan’s effective interest rate; (2)Consolidated Statements of Financial Condition and the provision for credit losses for off-balance sheet exposure is included in Loan workout and other credit costs on the Consolidated Statements of Income.
For additional detail regarding unfunded lending commitments, see Note 16.

RECENT ACCOUNTING PRONOUNCEMENTS
Accounting Guidance Adopted in 2020
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). ASU 2016-13 replaces the incurred loss impairment methodology with the current expected credit losses (CECL) methodology which requires management consideration and judgment of a broader range of information to determine credit loss estimates.
In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, clarifying that operating lease receivables are not within the scope of Topic 326. In December 2018, federal regulators issued a final rule related to regulatory capital and CECL (Regulatory Capital Rule: Implementation and Transition of the Current Expected Credit Losses Methodology for Allowances and Related Adjustments to the Regulatory Capital Rule and Conforming Amendments to Other Regulations), intended to provide regulatory capital relief for entities transitioning to CECL. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, providing entities the option to irrevocably elect the fair value option on eligible financial instruments, which excluded held-to-maturity debt securities. In November 2019, the FASB issued ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, clarifying guidance on expected recoveries for purchased credit deteriorated financial assets, accrued interest receivable and collateral maintenance provisions and providing transition relief for troubled debt restructurings. In March 2020, the FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments, clarifying the contractual term of collateral, ifa net investment in a lease and the loan is collateral dependent or (3)requirement to establish an allowance for credit loss when an entity regains control of sold financial assets.
While the loan’s observable market price. If the measureCARES Act provided an option to defer implementation of the CECL methodology, the Company adopted this guidance on January 1, 2020, using the modified retrospective approach for financial assets recorded at amortized cost with the exception of purchase credit deteriorated (PCD) assets, which were previously classified as purchase credit impaired loan(PCI) accounted for under ASC 310-30, adopted using the prospective approach. The cumulative effect of the adoption resulted in a $30.4 million decrease to the beginning balance of retained earnings as of January 1, 2020. Results and disclosures for reporting periods beginning after January 1, 2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. For further details on the impact of the adoption, accounting policies, elections, and practical expedients applied, see updated Significant Accounting Policies and CECL disclosures throughout the Notes to the Consolidated Financial Statements.
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Table of Contents
The following table illustrates the impact of ASC 326 on loans, leases, purchased financial assets, debt securities, other assets and unfunded lending commitments compared to the incurred loss approach, as disclosed prior to adoption on January 1, 2020.
January 1, 2020
As reported under ASC 326Pre-ASC 326 AdoptionImpact of ASC 326 Adoption
(Dollars in thousands)
Assets:
Investment securities, held-to-maturity
State and political subdivisions$(8)$0 $(8)
Allowance for credit losses on held-to-maturity debt securities$(8)$0 $(8)
Loans and leases
Commercial and industrial(1)
(42,596)(22,849)(19,747)
Owner-occupied commercial(3,144)(4,616)1,472 
Commercial mortgages(9,114)(7,452)(1,662)
Construction(4,572)(3,891)(681)
Residential(8,903)(1,381)(7,522)
Consumer(15,102)(7,387)(7,715)
Allowance for credit losses on loans and leases$(83,431)$(47,576)$(35,855)
Other assets
Deferred tax assets18,452 9,991 8,461 
Liabilities:
Other liabilities
Allowance for credit losses on unfunded lending commitments(4,513)(1,547)(2,966)
Total ASC 326 impact to retained earnings$30,368 
(1)Includes commercial small business leases.
ASU No. 2018-13, Fair Value Measurement Disclosure Framework: In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement Disclosure Framework, which amended ASC 820 - Fair Value Measurement. The new guidance modifies, adds and removes certain disclosures aimed to improve the overall usefulness of the disclosure requirements for fair value measurements. The guidance is less thaneffective in annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted. Adoption is required on either a prospective or retrospective basis, depending on the recorded investmentamendment. The Company adopted this standard on January 1, 2020. See Note 13 for changes to financial statement disclosures resulting from the adoption of this standard.
ASU No. 2018-14, Compensation-Retirement Benefits - Defined Benefit Plans-General (Topic 715): In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits - Defined Benefit Plans-General (Topic 715) which applies to all employers that provide defined benefit pension or other postretirement benefit plans for their employees. The new guidance modifies, adds and removes certain disclosures aimed to improve the overall usefulness of the disclosure requirements to financial statement users. The guidance is effective for annual periods beginning after December 15, 2020. Early adoption is permitted. Use of the retrospective method is required. The Company early adopted this standard on January 1, 2020. See Note 11 for changes to financial statement disclosures resulting from the adoption of this standard.
ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Topic 350):In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Topic 350). The new guidance provided clarity on capitalizing and expensing implementation costs for cloud computing arrangements in a service contract. If an implementation cost is capitalized, the cost should be recognized over the noncancellable term and periodically assessed for impairment. The guidance is effective in annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted. Adoption can be applied retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted this standard on January 1, 2020, on a prospective basis with no impact to the Consolidated Financial Statements at the time of adoption.
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ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments: In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The new guidance amended ASU 2016-13 to address topics related to accrued interest receivables, recoveries, disclosures, and provides certain other clarifications. The new guidance also amended ASU 2017-12 to provide clarification on certain hedge accounting topics and transition requirements. Lastly, the new guidance amended ASU 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities, to add clarifying guidance when using the measurement alternative under ASC 820, among certain other clarifications. The guidance is effective for annual periods beginning after December 15, 2019. Early adoption is permitted. Adoption is required on a prospective, modified-retrospective or retrospective basis, depending on the amendment. The Company included the amendments related to ASU 2016-13 as part of its CECL guidance implementation and adoption at January 1, 2020. The Company adopted other amendments within this guidance on January 1, 2020 with no impact to the Consolidated Financial Statements at the time of adoption.

Accounting Guidance Pending Adoption at September 30, 2020

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 does not expect the application of this guidance to have a material impact on the Consolidated Financial Statements.

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 does not expect the application of this guidance to have a material impact on the Consolidated Financial Statements.

ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting: In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments provide optional guidance to entities for a limited period of time to ease the transition in accounting for and recognizing the effects of reference rate reform on financial reporting. Under the guidance, modifications of contracts due to reference rate reform will not require contract remeasurement or reassessment of a previous accounting determination. For hedge accounting, modification of critical terms of the hedge due to changes in reference rate reform will not affect hedge accounting or dedesignate the hedging relationship. The guidance also provides specific expedients for fair value hedges, cash flow hedges, and excluded components. Further, the guidance provides a one-time election to sell or transfer held to maturity debt securities that are affected by the reference rate change. The guidance is effective upon issuance through December 31, 2022. The Company will apply the guidance to any contracts modifications made due to reference rate reform.
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3. NONINTEREST INCOME
Credit/debit card and ATM income
The following table presents the components of credit/debit card and ATM income:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2020201920202019
Bailment fees$3,311 $6,580 $11,472 $20,387 
Interchange fees3,267 6,234 14,514 17,073 
Other card and ATM fees673 301 1,930 847 
Total credit/debit card and ATM income$7,251 $13,115 $27,916 $38,307 
Credit/debit card and ATM income is composed of bailment fees, interchange fees, and other card and ATM 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 loan, a related allowance is allocatedbailee's assets. The bailee pays an agreed-upon fee for the impairment.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 quarter-to-date and year-to-date compared to 2019 as a result of the Durbin amendment (effective on July 1, 2020).
Investment management and fiduciary income
The following table presents the components of investment management and fiduciary income:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2020201920202019
Trust fees$9,303 $6,632 $23,565 $19,884 
Wealth management and advisory fees3,963 3,827 11,592 11,104 
Total investment management and fiduciary income$13,266 $10,459 $35,157 $30,988 
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 West Capital, Cypress, Powdermill and WSFS Wealth Investments. Wealth management and advisory fees are based on revenue earned from services including asset management, financial planning, family office, and brokerage. The fees are based on the market value of assets, are assessed as a flat fee, or are brokerage commissions. This revenue stream primarily generates fee income through quarterly and annual billing for the services.

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Deposit service charges
The following table presents the components of deposit service charges:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2020201920202019
Service fees$3,116 $3,188 $9,246 $9,083 
Return and overdraft fees1,532 2,797 4,998 7,341 
Other deposit service fees124 154 350 564 
Total deposit service charges$4,772 $6,139 $14,594 $16,988 
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 September 30,Nine Months Ended September 30,
(Dollars in thousands)2020201920202019
Managed service fees$3,794 $3,628 $11,549 $10,195 
Currency preparation1,083 823 2,842 2,413 
ATM loss protection597 644 1,815 1,923 
Miscellaneous products and services1,719 1,942 3,920 7,947 
Total other income$7,193 $7,037 $20,126 $22,478 
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. Miscellaneous products and services include gains from the sale of SBA loans, which were higher during the nine months ended September 30, 2019, and a non-recurring transfer of client accounts to a departing Wealth investment advisor in accordance with the buy-out provisions of the advisor's contract, which occurred during the nine months ended September 30, 2019.
Arrangements with multiple performance obligations
The Company's contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. The Company generally determines standalone selling prices based on the prices charged to customers.
Practical expedients and exemptions
The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed.

See Note 15 for further information about the disaggregation of noninterest income by segment.
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4. EARNINGS PER SHARE
The following table shows the computation of basic and diluted earnings per share:
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars and shares in thousands, except per share data)2020201920202019
Numerator:
Net income attributable to WSFS$51,145 $53,882 $54,961 $103,105 
Denominator:
Weighted average basic shares50,665 52,863 50,802 48,381 
Dilutive potential common shares19 191 30 287 
Weighted average fully diluted shares$50,684 $53,054 $50,832 $48,668 
Earnings per share:
Basic$1.01 $1.02 $1.08 $2.13 
Diluted$1.01 $1.02 $1.08 $2.12 
Outstanding common stock equivalents having no dilutive effect29 1 18 1 

5. INVESTMENTS
Debt Securities
The following tables providedetail 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. NaN of the Company's investments in debt securities are classified as trading.
September 30, 2020
(Dollars in thousands)Amortized CostGross
Unrealized
Gain		Gross
Unrealized
Loss		Allowance for Credit LossesFair
Value
Available-for-Sale Debt Securities
CMO$417,162 $11,455 $84 $0 $428,533 
FNMA MBS1,393,291 61,809 192 0 1,454,908 
FHLMC MBS232,056 14,277 109 0 246,224 
GNMA MBS25,637 993 0 0 26,630 
GSE agency notes176,395 2,329 97 0 178,627 
$2,244,541 $90,863 $482 $0 $2,334,922 
Held-to-Maturity Debt Securities(1)
State and political subdivisions$113,115 $4,504 $0 $7 $117,612 
Foreign bonds501 0 0 0 501 
$113,616 $4,504 $0 $7 $118,113 
(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 $0.4 million at September 30, 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. See Note 2 for updated Significant Accounting Policies on held-to-maturity debt securities.

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December 31, 2019
(Dollars in thousands)Amortized CostGross
Unrealized
Gain		Gross
Unrealized
Loss		Fair
Value
Available-for-Sale Debt Securities
CMO$336,194 $4,578 $542 $340,230 
FNMA MBS1,219,522 25,717 2,786 1,242,453 
FHLMC MBS320,896 8,641 591 328,946 
GNMA MBS32,871 477 63 33,285 
$1,909,483 $39,413 $3,982 $1,944,914 
Held-to-Maturity Debt Securities(1)
State and political subdivisions$131,600 $3,023 $0 $134,623 
Foreign bonds2,001 1 0 2,002 
$133,601 $3,024 $0 $136,625 
(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 $0.6 million at December 31, 2019, which are offset in Accumulated other comprehensive income.
The scheduled maturities of available-for-sale debt securities at September 30, 2020 and December 31, 2019 are presented in the table below:
 Available-for-Sale
 AmortizedFair
(Dollars in thousands)CostValue
September 30, 2020 (1)
Within one year$0 $0 
After one year but within five years32,729 34,393 
After five years but within ten years219,962 233,169 
After ten years1,991,850 2,067,360 
$2,244,541 $2,334,922 
December 31, 2019 (1)
Within one year$0 $0 
After one year but within five years22,136 22,207 
After five years but within ten years194,197 194,376 
After ten years1,693,150 1,728,331 
$1,909,483 $1,944,914 
(1)Actual maturities could differ from contractual maturities.










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The scheduled maturities of held-to-maturity debt securities at September 30, 2020 and December 31, 2019 are presented in the table below:
 Held-to-Maturity
 AmortizedFair
(Dollars in thousands)CostValue
September 30, 2020 (1)
Within one year$1,152 $1,168 
After one year but within five years1,549 1,567 
After five years but within ten years32,533 33,763 
After ten years78,382 81,615 
$113,616 $118,113 
December 31, 2019 (1)
Within one year$2,649 $2,653 
After one year but within five years4,239 4,270 
After five years but within ten years35,288 35,967 
After ten years91,425 93,735 
$133,601 $136,625 
(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 2.1 years at September 30, 2020.
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 $1.6 billion and $1.1 billion were pledged as collateral for retail customer repurchase agreements, municipal deposits, and other obligations as of September 30, 2020 and December 31, 2019, respectively.
During the nine months ended September 30, 2020, the Company sold $198.9 million of debt securities categorized as available-for-sale, resulting in $5.9 million of realized gains and 0 realized losses. During the nine months ended September 30, 2019, the Company sold $602.5 million of debt securities categorized as available-for-sale, of which $578.8 million was related to the acquisition of Beneficial. The remaining $23.7 million resulted in realized gains of less than $0.1 million and 0 realized losses.
As of September 30, 2020 and December 31, 2019, the Company's debt securities portfolio had remaining unamortized premiums of $47.1 million and $15.1 million, respectively, and unaccreted discounts of $3.0 million and $4.1 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 September 30, 2020.
 Duration of Unrealized Loss Position  
 Less than 12 months12 months or longerTotal
 FairUnrealizedFairUnrealizedFairUnrealized
(Dollars in thousands)ValueLossValueLossValueLoss
Available-for-sale debt securities:
CMO$52,291 $84 $0 $0 $52,291 $84 
FNMA MBS74,281 189 4,380 3 78,661 192 
FHLMC MBS5,196 109 0 0 5,196 109 
GSE agency notes25,751 97 0 0 25,751 97 
Total$157,519 $479 $4,380 $3 $161,899 $482 

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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, 2019.
 Duration of Unrealized Loss Position  
 Less than 12 months12 months or longerTotal
 FairUnrealizedFairUnrealizedFairUnrealized
(Dollars in thousands)ValueLossValueLossValueLoss
Available-for-sale debt securities:
CMO$47,376 $481 $7,999 $61 $55,375 $542 
FNMA MBS310,312 2,681 6,522 105 316,834 2,786 
FHLMC MBS35,354 541 2,836 50 38,190 591 
GNMA MBS1,847 4 5,742 59 7,589 63 
Total temporarily impaired investments$394,889 $3,707 $23,099 $275 $417,988 $3,982 
Held-to-maturity debt securities:
State and political subdivisions (1)
$523 $— $0 $0 $523 $0 
(1)State and political subdivisions with an unrealized loss position of less than twelve months had an unrealized loss of less than $1 thousand at December 31, 2019.
At September 30, 2020, available-for-sale debt securities for which the amortized cost basis exceeded fair value totaled $161.9 million. Total unrealized losses on these securities were $0.5 million at September 30, 2020. 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 September 30, 2020.
At September 30, 2020, held-to-maturity debt securities had an amortized cost basis of $113.6 million. 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 September 30, 2020, aggregated by credit quality indicator:
(Dollars in thousands)State and political subdivisionsForeign bonds
A+ rated or higher$112,826 $501 
Not rated289 0 
Ending balance$113,115 $501 
As a result of the adoption of ASC 326 on January 1, 2020, the Company reviewed its held-to-maturity debt securities for potential credit losses. The following table presents the activity in the allowance for credit losses for debt securities held-to-maturity by major security type for the nine months ended September 30, 2020:
(Dollars in thousands)State and political subdivisionsForeign bonds
Allowance for credit losses:
Beginning balance$0 $0 
Impact of adoption ASC 3268 0 
Provision for credit losses(1)0 
Charge-offs, net0 0 
Ending balance$7 $0 
Accrued interest receivable of $1.0 million as of September 30, 2020 for held-to-maturity debt securities was excluded from the evaluation of allowance for credit losses. There were no nonaccrual or past due held-to-maturity debt securities as of September 30, 2020.


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Equity Investments
The following tables detail the amortized cost, and the estimated fair value of the Company's equity investments, which are included in Other investments in the unaudited Consolidated Statements of Financial Condition.
September 30, 2020
(Dollars in thousands)Amortized CostGross Unrealized GainGross Unrealized LossFair Value
Equity Investments
Visa Class B shares(1)
$618 $185 $0 $803 
Other equity investments(2)
11,279 0 1,646 9,633 
$11,897 $185 $1,646 $10,436 

December 31, 2019
(Dollars in thousands)Amortized CostGross Unrealized GainGross Unrealized LossFair Value
Equity Investments
Visa Class B shares(1)
$15,716 $45,565 $0 $61,281 
Other equity investments(2)
8,140 625 0 8,765 
$23,856 $46,190 $0 $70,046 
(1)The Company recorded a net realized gain on sale of Visa Class B shares of $22.1 million during the nine months ended September 30, 2020, which is recorded in Realized gain on sale of equity investment in the Consolidated Statements of Income. The Company recorded unrealized gains on its remaining investment in Visa Class B shares of $0.2 million and $25.6 million during the nine months ended September 30, 2020 and 2019, respectively which is recorded in Unrealized gain on equity investment, net in the Consolidated Statements of Income.
(2)The Company recorded an impairment loss of $2.3 million in the investment of Spring EQ during the first quarter of 2020, which is recorded in Unrealized gain on equity investment, net in the Consolidated Statements of Income. There were 0 impairment losses recorded on the Company's equity investments during the nine months ended September 30, 2019. During the second quarter of 2020, the Company amended its agreement with Spring EQ in an exchange for additional equity interest. The additional equity interest in Spring EQ was valued at $2.4 million.
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6. LOANS
The following table shows the Company's loan and lease portfolio by category:
(Dollars in thousands)September 30, 2020December 31, 2019
Commercial and industrial(1)
$2,902,815 $2,046,798 
Owner-occupied commercial1,344,494 1,296,466 
Commercial mortgages2,167,508 2,222,976 
Construction666,317 581,082 
Commercial small business leases227,539 188,630 
Residential(2)
857,494 1,016,500 
Consumer(3)
1,168,891 1,128,731 
9,335,058 8,481,183 
Less:
Deferred fees, net(4)
0 9,143 
Allowance for credit losses232,726 47,576 
Net loans and leases$9,102,332 $8,424,464 
(1) Includes PPP loans of $954.2 million at September 30, 2020.
(2) Includes reverse mortgages at fair value of $12.5 million at September 30, 2020 and $16.6 million at December 31, 2019.
(3) Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
(4) At September 30, 2020, deferred fees, net are included in portfolio segment totals to present the amortized cost basis in accordance with the adoption of CECL. At December 31, 2019, deferred fees, net are excluded from portfolio segment totals to present the unpaid principal balance under the incurred loss methodology.
Accrued interest receivable on loans and leases was $36.4 million and $31.5 million at September 30, 2020 and December 31, 2019, respectively. Accrued interest receivable on loans and leases was excluded from the evaluation of allowance for credit losses.
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7. ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY INFORMATION
The following table provides the activity of allowance for credit losses and loan balances for the three and nine months ended September 30, 2020 under the CECL model in accordance with ASC 326 (as adopted on January 1, 2020):
(Dollars in thousands)
Commercial and Industrial(1)
Owner-occupied
Commercial		Commercial
Mortgages		Construction
Residential(2)
Consumer(3)
Total
Three months ended September 30, 2020
Allowance for credit losses
Beginning balance$144,225 $8,956 $38,397 $10,126 $9,171 $21,317 $232,192 
Charge-offs(2,254)0 (4)0 0 (374)(2,632)
Recoveries223 8 6 0 26 187 450 
Provision (credit)6,335 1,420 (4,140)104 (743)(260)2,716 
Ending balance$148,529 $10,384 $34,259 $10,230 $8,454 $20,870 $232,726 
Nine months ended September 30, 2020
Allowance for credit losses
Beginning balance, prior to adoption of ASC 326$22,849 $4,616 $7,452 $3,891 $1,381 $7,387 $47,576 
Impact of adopting ASC 326(4)
19,747 (1,472)1,662 681 7,522 7,715 35,855 
Charge-offs(7,390)(336)(55)0 (175)(1,955)(9,911)
Recoveries4,038 133 38 5 141 735 5,090 
Provision (credit)109,285 7,443 25,162 5,653 (415)6,988 154,116 
Ending balance$148,529 $10,384 $34,259 $10,230 $8,454 $20,870 $232,726 
Period-end allowance allocated to:
Loans evaluated on an individual basis$16 $0 $0 $0 $0 $0 $16 
Loans evaluated on a collective basis148,513 10,384 34,259 10,230 8,454 20,870 232,710 
Ending balance$148,529 $10,384 $34,259 $10,230 $8,454 $20,870 $232,726 
Period-end loan balances:
Loans evaluated on an individual basis$14,946 $5,132 $4,878 $83 $5,307 $2,503 $32,849 
Loans evaluated on a collective basis3,115,408 1,339,362 2,162,630 666,234 839,688 1,166,388 9,289,710 
Ending balance$3,130,354 $1,344,494 $2,167,508 $666,317 $844,995 $1,168,891 $9,322,559 
(1)Includes commercial small business leases and PPP loans.
(2)Period-end loan balance excludes reverse mortgages at fair value of $12.5 million.
(3)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.
(4)The impact of adopting ASC 326 includes $0.1 million for the initial allowance on loans purchased with credit deterioration.


27
Table of Contents
The following table provides the activity of the allowance for loan and lease losses and loan balances for the three and nine months ended September 30, 2019 under the incurred loss model:
(Dollars in thousands)
Commercial and Industrial(1)
Owner -
occupied
Commercial		Commercial
Mortgages		Construction
Residential(2)
ConsumerTotal
Three months ended September 30, 2019
Allowance for loan and lease losses
Beginning balance$22,004 $4,480 $6,544 $2,984 $1,358 $7,994 $45,364 
Charge-offs(1,441)(12)2 0 (3)(1,042)(2,496)
Recoveries297 4 120 2 (60)319 682 
Provision (credit)3,595 23 97 (105)43 327 3,980 
Provision (credit) for acquired loans49 9 (26)0 (8)117 141 
Ending balance$24,504 $4,504 $6,737 $2,881 $1,330 $7,715 $47,671 
Nine months ended September 30, 2019
Allowance for loan losses
Beginning balance$14,211 $5,057 $6,806 $3,712 $1,428 $8,325 $39,539 
Charge-offs(15,185)(20)(153)(42)(288)(2,686)(18,374)
Recoveries858 85 547 4 (76)1,118 2,536 
Provision (credit)24,286 (614)(533)(787)118 656 23,126 
Provision (credit) for acquired loans334 (4)70 (6)148 302 844 
Ending balance$24,504 $4,504 $6,737 $2,881 $1,330 $7,715 $47,671 
Period-end allowance allocated to:
Individually evaluated for impairment$3,534 $156 $0 $0 $478 $180 $4,348 
Collectively evaluated for impairment20,969 4,269 6,690 2,873 813 7,534 43,148 
Acquired loans individually evaluated for impairment1 79 47 8 39 1 175 
Ending balance$24,504 $4,504 $6,737 $2,881 $1,330 $7,715 $47,671 
Period-end loan balances:
Individually evaluated for impairment(3)
$21,135 $9,263 $2,325 $0 $12,031 $7,502 $52,256 
Collectively evaluated for impairment1,657,748 935,306 1,019,723 375,664 138,121 887,193 5,013,755 
Acquired nonimpaired loans605,804 322,030 1,237,282 138,251 876,089 241,633 3,421,089 
Acquired impaired loans1,664 6,809 12,655 487 7,655 2,545 31,815 
Ending balance(4)
$2,286,351 $1,273,408 $2,271,985 $514,402 $1,033,896 $1,138,873 $8,518,915 
(1)Includes commercial small business leases.
(2)Period-end loan balance excludes reverse mortgages at fair value of $17.7 million.
(3)The difference between this amount and nonaccruing loans represents accruing troubled debt restructured loans of $14.1 million for the period ending September 30, 2019. Accruing troubled debt restructured loans are considered impaired loans.
(4)Ending loan balances do not include net deferred fees.

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Table of Contents
The following table shows nonaccrual and past due loans presented at amortized cost at the date indicated under the CECL model:
September 30, 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)
$17,314 $1,040 $18,354 $3,097,310 $14,690 $3,130,354 
Owner-occupied commercial3,073 3,171 6,244 1,334,228 4,022 1,344,494 
Commercial mortgages15,290 1,399 16,689 2,149,167 1,652 2,167,508 
Construction2,799 0 2,799 663,518 0 666,317 
Residential(3)
2,673 0 2,673 839,240 3,082 844,995 
Consumer(4)
10,282 6,276 16,558 1,149,944 2,389 1,168,891 
Total$51,431 $11,886 $63,317 $9,233,407 $25,835 $9,322,559 
% of Total Loans0.55 %0.13 %0.68 %99.04 %0.28 %100 %
(1)Nonaccrual loans with an allowance totaled $15 thousand.
(2)Includes commercial small business leases and PPP loans.
(3)Residential accruing current balances excludes reverse mortgages at fair value of $12.5 million.
(4)Includes $15.0 million of delinquent, but still accruing, U.S. government-guaranteed student loans that carry little risk of credit loss.

The following table shows nonaccrual and past due loans presented at unpaid principal balance at the date indicated under the incurred loss model:
December 31, 2019
(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		Acquired
Impaired
Loans		Nonaccrual
Loans		Total
Loans
Commercial and industrial(1)
$6,289 $2,038 $8,327 $2,214,506 $1,564 $11,031 $2,235,428 
Owner-occupied commercial1,498 831 2,329 1,283,320 6,757 4,060 1,296,466 
Commercial mortgages4,999 99 5,098 2,207,582 8,670 1,626 2,222,976 
Construction0 0 0 580,591 491 0 581,082 
Residential(2)
6,733 437 7,170 980,893 7,326 4,490 999,879 
Consumer(3)
13,164 12,745 25,909 1,098,980 2,127 1,715 1,128,731 
Total(4)
$32,683 $16,150 $48,833 $8,365,872 $26,935 $22,922 $8,464,562 
% of Total Loans0.39 %0.19 %0.58 %98.83 %0.32 %0.27 %100 %
(1)Includes commercial small business leases.
(2)Residential accruing current balances excludes reverse mortgages, at fair value of $16.6 million.
(3)Includes $22.3 million of delinquent, but still accruing, U.S. government-guaranteed student loans that carry little risk of credit loss.
(4)Balances in the table above include a total of $3.2 billion acquired non-impaired loans.
The following table presents the amortized cost basis of nonaccruing collateral-dependent loans by class at September 30, 2020 under the CECL model:
September 30, 2020
(Dollars in thousands)PropertyEquipment and other
Commercial and industrial(1)
$10,824 $3,866 
Owner-occupied commercial4,022 0 
Commercial mortgages1,652 0 
Construction0 0 
Residential(2)
3,082 0 
Consumer(3)
2,389 0 
Total$21,969 $3,866 
(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.
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Table of Contents
The following table provides an analysis of ourthe Company's impaired loans at September 30, 2017 and December 31, 2016:2019 under the incurred loss model:
December 31, 2019
(Dollars in thousands)Ending
Loan
Balances
Loans with
No Related
Reserve(1)
Loans with
Related
Reserve(2)
Related
Reserve
Contractual
Principal
Balances(2)
Average
Loan
Balances
Commercial and industrial$11,900 $9,979 $1,921 $1,185 $14,653 $17,033 
Owner-occupied commercial5,596 3,919 1,677 233 6,083 7,869 
Commercial mortgages4,888 1,753 3,135 65 5,215 4,607 
Construction435 0 435 24 488 1,686 
Residential14,119 8,858 5,261 557 16,721 12,031 
Consumer7,584 5,876 1,708 178 8,444 7,729 
Total$44,522 $30,385 $14,137 $2,242 $51,604 $50,955 
(1)Reflects loan balances at or written down to their remaining book balance.
  September 30, 2017
(Dollars in thousands) 
Ending
Loan
Balances
 
Loans with
No Related
Reserve (1)
 
Loans with
Related
Reserve
 Related Reserve 
Contractual
Principal Balances
 Average Loan Balances
Commercial $14,814
 $3,129
 $11,685
 $1,513
 $16,967
 $11,981
Owner-occupied commercial 4,669
 3,346
 1,323
 33
 4,984
 5,583
Commercial mortgages 12,190
 7,267
 4,923
 281
 18,385
 12,941
Construction 2,111
 1,839
 272
 36
 2,377
 3,769
Residential 14,621
 8,343
 6,278
 884
 17,517
 14,652
Consumer 7,447
 5,914
 1,533
 202
 9,283
 8,216
Total (2) $55,852
 $29,838
 $26,014
 $2,949
 $69,513
 $57,142
(2)The above includes acquired impaired loans totaling $7.9 million in the ending loan balance and $9.0 million in the contractual principal balance.
(1)
Reflects loan balances at or written down to their remaining book balance.
(2)
The above includes acquired impaired loans totaling $7.3 million in the ending loan balance and $8.3 million in the contractual principal balance of the total acquired impaired loan portfolio of $24.6 million
  December 31, 2016
(Dollars in thousands) 
Ending
Loan
Balances
 
Loans with
No Related
Reserve (1)
 
Loans with
Related
Reserve
 
Related
Reserve
 
Contractual
Principal
Balances
 
Average
Loan
Balances
Commercial $4,250
 $1,395
 $2,855
 $505
 $5,572
 $5,053
Owner-occupied commercial 4,650
 2,078
 2,572
 15
 5,129
 3,339
Commercial mortgages 15,065
 4,348
 10,717
 1,433
 20,716
 7,323
Construction 3,662
 —
 3,662
 303
 3,972
 2,376
Residential 14,256
 7,122
 7,134
 934
 17,298
 15,083
Consumer 8,021
 6,561
 1,460
 215
 11,978
 7,910
Total (2)
 $49,904
 $21,504
 $28,400
 $3,405
 $64,665
 $41,084
(1)
Reflects loan balances at or written down to their remaining book balance.
(2)
The above includes acquired impaired loans totaling $12.8 million in the ending loan balance and $15.0 million in the contractual principal balance of the total acquired impaired loan portfolio of $33.6 million.
Interest income of $0.3$0.5 million and $1.0$0.8 million was recognized on individually reviewed loans during the three and nine months ended September 30, 2020. Interest income of $0.2 million and $0.6 million was recognized on impaired loans during the three and nine months ended September 30, 2017, respectively. Interest income of $0.5 million and $0.8 million was recognized on impaired loans during the three and nine months ended September 30, 2016, respectively.2019.
As of September 30, 2017,2020, there were 3224 residential loans and 324 commercial loans in the process of foreclosure. The total outstanding balance on thethese loans was $3.3$1.7 million and $0.2$13.1 million, respectively. As of December 31, 2016,2019, there were 2933 residential loans and 729 commercial loans in the process of foreclosure. The total outstanding balance on thethese loans was $3.7$3.2 million and $3.6$9.5 million, respectively.

Reserves on Acquired Nonimpaired Loans
In accordance with FASB ASC 310, loans acquired by Loan workout and OREO expenses were $0.6 million and $2.4 million during the Bank through its mergers with First National Bank of Wyoming, Alliance Bankcorp, Inc. (Alliance)three and Penn Libertynine months ended September 30, 2020, respectively, and $0.6 million and $1.8 million during three and nine months ended September 30, 2019, respectively. Loan workout and OREO expenses are required to be reflectedincluded in Loan workout and other credit costs on the balance sheet at their fair values on the dateConsolidated Statement of acquisition as opposed to their contractual values. Therefore, on the dateIncome.
30
Table of acquisition establishing an allowance for acquired loans is prohibited. After the acquisition date the Bank performs a separate allowance analysis on a quarterly basis to determine if an allowance for loan loss is necessary. Should the credit risk calculated exceed the purchased loan portfolio’s remaining credit mark, additional reserves will be added to the Bank’s allowance. When a purchased loan becomes impaired after its acquisition, it is evaluated as part of the Bank’s reserve analysis and a specific reserve is established to be included in the Bank’s allowance.Contents
Credit Quality Indicators
Below is a description of each of ourthe 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
collectible.
•Special Mention. Borrowers have potential weaknesses that deserve management’s close attention. Borrowers in this category may be experiencing adverse operating trends, for example, declining revenues or margins, high leverage, tight liquidity, or increasing inventory without increasing sales. These adverse trends can have a potential negative effect on the borrower’s repayment capacity. These assets are not adversely classified and do not expose the Bank to significant risk that would warrant a more severe rating. Borrowers in this category may also be experiencing significant management problems, pending litigation, or other structural credit weaknesses.
•Substandard or Lower. Borrowers have well-defined weaknesses that require extensive oversight by management. Borrowers in this category may exhibit one or more of the following: inadequate debt service coverage, unprofitable operations, insufficient liquidity, high leverage, and weak or inadequate capitalization. Relationships in this category are not adequately protected by the sound financial worth and paying capacity of the obligor or the collateral pledged on the loan, if any. A distinct possibility exists that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful. Borrowers In addition, some borrowers in this category could have well-defined weaknesses inherent in the Substandard category with 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. A doubtful asset has some pending event that may strengthen the asset that defers the loss classification. Such impending events include: perfecting liens on additional collateral, obtaining collateral valuations, an acquisition or liquidation preceding, proposed merger, or refinancing plan.
Loss. Borrowers are uncollectible or of such negligible value that continuance as a bankable asset is not supportable. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical to defer writing off this asset even though partial recovery may be recognized sometime in the future.
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.


31
Table of Contents
The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the Allowanceallowance for Loan Loss.credit losses, as of September 30, 2020 under the CECL model.

Term Loans Amortized Cost Basis by Origination Year
20202019201820172016PriorRevolving loans amortized cost basisRevolving loans converted to termTotal
(Dollars in thousands)
Commercial and industrial(1):
Risk Rating
Pass(2)
$1,360,120 $460,904 $275,565 $182,326 $105,960 $148,327 $5,893 $139,851 $2,678,946 
Special mention3,514 42,224 29,414 10,445 8,145 29,059 0 24,220 147,021 
Substandard or Lower75,455 70,069 62,398 53,471 11,080 23,318 65 8,531 304,387 
$1,439,089 $573,197 $367,377 $246,242 $125,185 $200,704 $5,958 $172,602 $3,130,354 
Owner-occupied commercial:
Risk Rating
Pass$162,465 $236,745 $96,951 $151,118 $135,794 $298,133 $0 $134,165 $1,215,371 
Special mention83 7,974 653 17,670 3,599 3,328 0 3,451 36,758 
Substandard or Lower4,556 20,219 15,077 14,076 9,127 22,304 0 7,006 92,365 
$167,104 $264,938 $112,681 $182,864 $148,520 $323,765 $0 $144,622 $1,344,494 
Commercial mortgages:
Risk Rating
Pass$277,281 $299,727 $247,892 $306,437 $301,239 $462,444 $0 $122,592 $2,017,612 
Special mention8,479 7,211 22,309 21,450 1,906 6,519 0 1,861 69,735 
Substandard or Lower26,260 19,239 1,911 1,833 2,636 26,211 0 2,071 80,161 
$312,020 $326,177 $272,112 $329,720 $305,781 $495,174 $0 $126,524 $2,167,508 
Construction:
Risk Rating
Pass$123,965 $209,675 $214,989 $24,828 $7,711 $3,864 $0 $66,591 $651,623 
Special mention0 0 0 3,503 0 0 0 616 4,119 
Substandard or Lower0 8,743 0 0 0 83 0 1,749 10,575 
$123,965 $218,418 $214,989 $28,331 $7,711 $3,947 $0 $68,956 $666,317 
Residential(3):
Risk Rating
Performing$21,380 $32,628 $89,647 $103,019 $163,476 $429,538 $0 $0 $839,688 
Nonperforming(4)
112 0 0 0 92 5,103 0 0 5,307 
$21,492 $32,628 $89,647 $103,019 $163,568 $434,641 $0 $0 $844,995 
Consumer(5):
Risk Rating
Performing$171,357 $152,211 $275,702 $71,871 $50,878 $62,148 $374,550 $7,439 $1,166,156 
Nonperforming(6)
0 0 642 236 0 0 1,478 379 2,735 
$171,357 $152,211 $276,344 $72,107 $50,878 $62,148 $376,028 $7,818 $1,168,891 

(1)Includes commercial small business leases.

(2)Includes $954.2 million of PPP loans.

(3)Excludes reverse mortgages at fair value.

(4)Includes troubled debt restructured mortgages performing in accordance with the loans' modified terms and are accruing interest.

(5)Includes home equity lines of credit, installment loans, unsecured lines of credit and education loans.

(6)Includes troubled debt restructured home equity installment loans performing in accordance with the loans' modified terms and are accruing interest.

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Table of Contents

The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for loan and lease loss, as of December 31, 2019 under the incurred loss model.







Commercial Credit Exposure

  September 30, 2017
(Dollars in thousands) Commercial 
Owner-occupied
Commercial
 
Commercial
Mortgages
 Construction 
Total
Commercial(1)
          Amount %
Risk Rating:            
Special mention $12,474
 $2,858
 $—
 $3,644
 $18,976
  
Substandard:            
Accrual 52,237
 25,083
 64
 754
 78,138
  
Nonaccrual 11,485
 3,346
 8,672
 1,839
 25,342
  
Doubtful 1,220
 —
 131
 —
 1,351
  
Total Special Mention and Substandard 77,416
 31,287
 8,867
 6,237
 123,807
 3%
Acquired impaired 5,235
 7,401
 9,969
 946
 23,551
 1%
Pass 1,305,443
 1,058,065
 1,138,238
 286,134
 3,787,880
 96%
Total $1,388,094
 $1,096,753
 $1,157,074
 $293,317
 $3,935,238
 100%
(1)
Table includes $479.2 million of acquired nonimpaired loans as of September 30, 2017.

December 31, 2019
Commercial
 and Industrial(1)
Owner-occupied
Commercial		Commercial
Mortgages		Construction
Total
Commercial(2)
(Dollars in thousands)Amount%
Risk Rating:
Special mention$12,287 $0 $40,478 $0 $52,765 
Substandard:
Accrual78,809 32,679 23,017 0 134,505 
Nonaccrual9,852 4,037 1,626 0 15,515 
Doubtful1,179 23 0 0 1,202 
Total Special Mention and Substandard102,127 36,739 65,121 0 203,987 3 %
Acquired impaired1,564 6,757 8,670 491 17,482 0 %
Pass2,131,737 1,252,970 2,149,185 580,591 6,114,483 97 %
Total$2,235,428 $1,296,466 $2,222,976 $581,082 $6,335,952 100 %
(1)Includes commercial small business leases.
  December 31, 2016
(Dollars in thousands) Commercial 
Owner-occupied
Commercial
 
Commercial
Mortgages
 Construction 
Total
Commercial(1)
          Amount %
Risk Rating:            
Special mention $17,630
 $11,419
 $34,198
 $—
 $63,247
  
Substandard:            
Accrual 45,067
 19,871
 239
 2,193
 67,370
  
Nonaccrual 1,693
 2,078
 8,574
 —
 12,345
  
Doubtful 322
 —
 1,247
 —
 1,569
  
Total Special Mention and Substandard 64,712
 33,368
 44,258
 2,193
 144,531
 4%
Acquired impaired 6,183
 12,122
 10,386
 3,694
 32,385
 1%
Pass 1,216,836
 1,032,672
 1,108,910
 216,825
 3,575,243
 95%
Total $1,287,731
 $1,078,162
 $1,163,554
 $222,712
 $3,752,159
 100%
(2)Includes $2.2 billion of acquired non-impaired loans as of December 31, 2019.
(1)
Table includes $573.5 million of acquired nonimpaired loans as of December 31, 2016.
Residential and ConsumerRetail Credit Exposure
 
Residential(2)
Consumer
Total Retail(3)
 December 31, 2019December 31, 2019December 31, 2019
(Dollars in thousands)AmountPercent
Nonperforming(1)
$12,858 $7,374 $20,232 1 %
Acquired impaired loans7,326 2,127 9,453 0 %
Performing979,695 1,119,230 2,098,925 99 %
Total$999,879 $1,128,731 $2,128,610 100 %
(1)Includes $14.0 million as of December 31, 2019 of troubled debt restructured mortgages and home equity installment loans that are performing in accordance with the loans’ modified terms and are accruing interest.
(2)Residential performing loans excludes $16.6 million of reverse mortgages at fair value as of December 31, 2019.
(3)Total includes $1.1 billion in acquired non-impaired loans as of December 31, 2019.
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Table of Contents
(Dollars in thousands) 
Residential(2)
 Consumer 
Total Residential and Consumer(3)
  September 30, December 31, September 30, December 31, September 30, 2017 December 31, 2016
  2017 2016 2017 2016 Amount Percent Amount Percent
Nonperforming(1)
 $14,060
 $13,547
 $7,409
 $7,863
 $21,469
 3% $21,410
 3%
Acquired impaired loans 788
 860
 243
 369
 1,031
 —% 1,229
 —%
Performing 225,869
 252,621
 512,624
 441,797
 738,493
 97% 694,418
 97%
Total $240,717
 $267,028
 $520,276
 $450,029
 $760,993
 100% $717,057
 100%
(1)
Includes $14.6 million as of September 30, 2017 and $12.4 million as of December 31, 2016 of troubled debt restructured mortgages and home equity installment loans that are performing in accordance with the loans’ modified terms and are accruing interest.
(2)
Residential performing loans excludes $21.4 million and $22.6 million of reverse mortgages at fair value as of September 30, 2017 and December 31, 2016, respectively.
(3)
Total includes $117.3 million and $150.5 million in acquired nonimpaired loans as of September 30, 2017 and December 31, 2016, respectively.
Troubled Debt Restructurings (TDRs)
TDRs are recorded in accordance with FASB ASC 310-40, Troubled Debt Restructuring by Creditors (ASC 310-40). 

The following table presents the balance of TDRs as of the indicated dates:
(Dollars in thousands)September 30, 2020December 31, 2019
Performing TDRs$15,670 $14,281 
Nonperforming TDRs4,136 5,896 
Total TDRs$19,806 $20,177 
(Dollars in thousands) September 30, 2017 December 31, 2016
Performing TDRs $14,905
 $14,336
Nonperforming TDRs 11,114
 8,451
Total TDRs $26,019
 $22,787

Approximately $1.1$0.2 million and $1.3$0.6 million in related reserves have been established for these loans at September 30, 20172020 and December 31, 2016,2019, respectively.
The following table presentstables present information regarding the types of loan modifications made for the three and nine months ended September 30, 2017:2020 and 2019:
Three months ended September 30, 2020Nine months ended September 30, 2020
Contractual payment reduction and term extensionMaturity Date ExtensionDischarged in bankruptcy
Other(1)
TotalContractual payment reduction and term extensionMaturity Date ExtensionDischarged in bankruptcy
Other(1)
Total
Commercial and industrial0 0 0 0 0 1 0 0 0 1 
Owner-occupied commercial0 0 0 0 0 3 0 0 0 3 
Commercial mortgages0 0 0 0 0 0 1 0 0 1 
Construction0 0 0 0 0 0 0 0 0 0 
Residential0 0 1 1 2 0 0 5 3 8 
Consumer0 0 1 2 3 0 0 8 5 13 
Total0 0 2 3 5 4 1 13 8 26 
  Contractual payment reduction and term extension Maturity Date Extension Discharged in bankruptcy 
Other (1)
 Total
Commercial 1
 1
 —
 —
 2
Owner-occupied commercial —
 1
 —
 —
 1
Construction —
 2
 —
 1
 3
Residential 2
 —
 3
 —
 5
Consumer 1
 —
 11
 6
 18
Total 4
 4
 14
 7
 29

(1)
Three months ended September 30, 2019Nine months ended September 30, 2019
Contractual payment reduction and term extensionMaturity Date ExtensionDischarged in bankruptcy
Other(1)
TotalContractual payment reduction and term extensionMaturity Date ExtensionDischarged in bankruptcy
Other(1)
Total
Commercial and industrial0 0 0 0 0 0 1 0 2 3 
Owner-occupied commercial0 0 0 0 0 0 0 0 2 2 
Commercial mortgages0 0 0 0 0 1 0 0 1 2 
Construction0 0 0 0 0 0 0 0 0 0 
Residential0 0 1 0 1 4 0 2 0 6 
Consumer0 2 1 2 5 5 3 2 2 12 
Total0 2 2 2 6 10 4 4 7 25 
(1)Other includes underwriting exceptions.
Other includes underwriting exceptions.
Principal balances are generally not forgiven when a loan is modified as a TDR. Nonaccruing restructured loans remain in nonaccrual status until there has been a period of sustained repayment performance, which is typically six months, and paymentrepayment is reasonably assured.
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The following table presents loans identifiedmodified as TDRs during the three and nine months ended September 30, 20172020 and 2016.2019.
 Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
 2017 2016 2017 20162020201920202019
(Dollars in thousands) Pre Modification Post Modification Pre Modification Post Modification Pre Modification Post Modification Pre Modification Post Modification(Dollars in thousands)Pre ModificationPost ModificationPre ModificationPost ModificationPre ModificationPost ModificationPre ModificationPost Modification
Commercial $—
 $—
 $—
 $—
 $781
 $781
 $1,125
 $1,125
Commercial$0 $0 $0 $0 $16 $16 $1,335 $1,335 
Owner-occupied commercial —
 —
 —
 —
 3,071
 3,071
 —
 —
Owner-occupied commercial0 0 0 0 1,206 1,206 1,413 1,413 
Commercial mortgages —
 —
 —
 —
 —
 —
 —
 —
Commercial mortgages0 0 0 0 99 99 504 504 
Construction —
 —
 —
 —
 1,836
 1,836
 —
 —
Construction0 0 0 0 0 0 0 0 
Residential 1,058
 1,058
 797
 797
 1,300
 1,300
 1,523
 1,523
Residential404 404 253 253 1,522 1,522 670 670 
Consumer 609
 609
 278
 278
 1,867
 1,867
 733
 733
Consumer928 928 500 500 1,321 1,321 1,807 1,807 
Total $1,667
 $1,667
 $1,075
 $1,075
 $8,855
 $8,855
 $3,381
 $3,381
Total$1,332 $1,332 $753 $753 $4,164 $4,164 $5,729 $5,729 
During the three and nine months ended September 30, 2017,2020, the TDRs set forth in the table above resulted in noa less than $0.1 million and $0.1 million increase in ourthe allowance for loancredit losses, respectively, and also resulted0 additional charge-offs in no additional charge-offs.either period. For the same period of 2016,three and nine months ended September 30, 2019 the TDRs set forth in the table above increased our allowance for loan losses byresulted in a $0.1 million and resulted$0.2 million decrease in the allowance for credit losses, respectively, and 0 additional charge-offs of $0.1 million. Atfor either period.
During the three months ended September 30, 2017, four2020, 0 TDRs defaulted that had received troubled debt modification during the past twelve months, compared to 2 TDRs with a total loan amount of $3.7 million.$0.2 million during the three months ended September 30, 2019. During the nine months ended September 30, 2020, 0 TDRs defaulted that had received troubled debt modification during the past twelve months, compared with 6 TDRs with a total loan amount of $1.5 million during the nine months ended September 30, 2019.

During the nine months ended September 30, 2020, the Company provided a number of customer relief programs in its commercial and retail portfolios, such as payment deferrals or interest only payments on loans and leases. The TDRs set forth in the table above did not occur as a result of the loan forbearance program under the CARES Act.
7.

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

Lessee

The Company's ongoing leases have remaining lease terms of less than 1 year to 42 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 endedNine months ended
(Dollars in thousands)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Operating lease cost (1)
$4,723 $5,596 $14,224 $14,610 
Sublease income(93)(105)(279)(381)
Net lease cost$4,630 $5,491 $13,945 $14,229 
(1)Includes variable lease cost and short-term lease cost.

Supplemental balance sheet information related to operating leases was as follows:
(Dollars in thousands)September 30, 2020December 31, 2019
Assets
Right of use assets$154,007 $166,221 
Total assets$154,007 $166,221 
Liabilities
Lease liabilities$169,058 $181,814 
Total liabilities$169,058 $181,814 
Lease term and discount rate
Weighted average remaining lease term (in years)19.3719.06
Weighted average discount rate4.25 %4.17 %

Maturities of operating lease liabilities were as follows:
(Dollars in thousands)September 30, 2020
Remaining in 2020$4,359 
202117,110 
202217,074 
202317,192 
202416,017 
After 2024195,793 
Total lease payments267,545 
Less: Interest(98,487)
Present value of lease liabilities$169,058 

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(Dollars in thousands)December 31, 2019
2020$18,591 
202118,314 
202218,315 
202318,525 
202417,390 
After 2024197,203 
Total lease payments288,338 
Less: Interest(106,524)
Present value of lease liabilities$181,814 

Supplemental cash flow information related to operating leases was as follows:
Nine months ended
(Dollars in thousands)September 30, 2020September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$13,915 $12,564 
Right of use assets obtained in exchange for new operating lease liabilities (non-cash)0 61,693 

Lessor Equipment Leasing

The Company provides equipment and small business lease financing through its leasing subsidiary, NewLane Finance, acquired in the Beneficial acquisition. 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 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 endedNine months ended
(Dollars in thousands)September 30, 2020September 30, 2019September 30, 2020September 30, 2019
Direct financing leases:
Interest income on lease receivable$3,965 $2,048 $11,344 $5,826 
Interest income on deferred fees and costs117 63 304 326 
Total direct financing lease income$4,082 $2,111 $11,648 $6,152 

Equipment leasing receivables relate to direct financing leases. The composition of the net investment in direct financing leases was as follows:
(Dollars in thousands)September 30, 2020December 31, 2019
Lease receivables$257,519 $217,076 
Unearned income(33,430)(28,446)
Deferred fees and costs3,450 1,962 
Net investment in direct financing leases$227,539 $190,592 

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

(Dollars in thousands)September 30, 2020
Remaining in 2020$21,770 
202180,291 
202264,172 
202347,661 
202430,874 
After 202412,751 
Total lease payments$257,519 

(Dollars in thousands)December 31, 2019
2020$71,067 
202158,337 
202242,274 
202328,628 
202414,450 
After 20242,320 
Total lease payments$217,076 

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

WSFS performs its annual 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 nine months ended September 30, 2017, we2020, management included considerations of the current economic environment caused by COVID-19 in its evaluation, and determined there were no events or other indicatorsbased on the totality of its qualitative assessment that it is not more likely than not that the carrying value of goodwill is impaired. NaN goodwill impairment as it relates to goodwill or other intangibles.exists during the nine months ended September 30, 2020.

The following table shows the changes in our goodwill during nine months ended September 30, 2017 as well as the allocation of goodwill to ourthe reportable operating segments for purposes of goodwill impairment testing:
  WSFS Cash Wealth Consolidated
(Dollars in thousands) Bank Connect Management Company
December 31, 2016 $147,396
 $—
 $20,143
 $167,539
Remeasurement adjustments (1,588) —
 56
 (1,532)
September 30, 2017 $145,808
 $—
 $20,199
 $166,007
(Dollars in thousands)WSFS
Bank		Cash
Connect		Wealth
Management		Consolidated
Company
December 31, 2019$452,629 $0 $20,199 $472,828 
Goodwill adjustments0 0 0 0 
September 30, 2020$452,629 $0 $20,199 $472,828 
ASC 350 also 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 tables summarize othertable summarizes the Company's intangible assets:
(Dollars in thousands)Gross
Intangible
Assets		Accumulated
Amortization		Net
Intangible
Assets		Amortization Period
September 30, 2020
Core deposits$95,711 $(20,384)$75,327 10 years
Customer relationships15,281 (6,281)9,000 7-15 years
Non-compete agreements221 (179)42 5 years
Loan servicing rights(1)
4,819 (2,210)2,609 10-25 years
Total intangible assets$116,032 $(29,054)$86,978 
December 31, 2019
Core deposits$95,711 $(13,326)$82,385 10 years
Customer relationships17,561 (7,416)10,145 7-15 years
Non-compete agreements221 (146)75 5 years
Loan servicing rights(2)
4,880 (1,568)3,312 10-25 years
Total intangible assets$118,373 $(22,456)$95,917 
  September 30, 2017
(Dollars in thousands) Gross Intangible Assets Accumulated Amortization Net Intangible Assets Amortization Period
Core deposits $10,658
 $(3,997) $6,661
 10 years
Customer relationships 17,560
 (3,813) 13,747
 7-15 years
Non-compete agreements 221
 (46) 175
 5 years
Loan servicing rights 2,056
 (1,161) 895
 10-30 years
Favorable lease asset 1,932
 (301) 1,631
 10 months-18 years
Total intangible assets $32,427
 $(9,318) $23,109
  
  December 31, 2016
(Dollars in thousands) Gross Intangible Assets Accumulated Amortization Net Intangible Assets Amortization Period
Core deposits $13,128
 $(5,630) $7,498
 10 years
Customer relationships 17,561
 (2,612) 14,949
 7-15 years
Non-compete agreements 1,006
 (728) 278
 6 months-5 years
Loan servicing rights 1,708
 (1,067) 641
 10-30 years
Favorable lease asset 458
 (116) 342
 10 months-15 years
Total intangible assets $33,861
 $(10,153) $23,708
  
Core deposits are amortized over their expected lives using(1)Includes reversal of impairment losses of $0.1 million and impairment losses of $0.3 million for the present value of the benefit of the core depositsthree and either accelerated or straight-line methods of amortization. During the nine months ended September 30, 2017, we2020, respectively.
(2)Includes impairment losses of $0.5 million for the year ended December 31, 2019
The Company recognized amortization expense on other intangible assets of $2.3 million.$2.7 million and $8.2 million for the three and nine months ended September 30, 2020, respectively, compared to $2.8 million and $6.9 million for the three and nine months ended September 30, 2019, respectively.

The following table presents the estimated future amortization expense on intangible assets:
(Dollars in thousands)September 30, 2020
Remaining in 2020$2,875 
202111,289 
202211,073 
202310,914 
202410,739 
Thereafter40,088 
Total$86,978 
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10. DEPOSITS

The following table shows the estimated future amortization expense related to our intangible assets:deposits by category:
(Dollars in thousands)September 30, 2020December 31, 2019
Noninterest-bearing:
Noninterest demand$3,196,967 $2,189,573 
Total noninterest-bearing$3,196,967 $2,189,573 
Interest-bearing:
Interest-bearing demand$2,521,030 $2,129,725 
Savings1,717,952 1,563,000 
Money market2,488,794 2,100,188 
Customer time deposits1,223,843 1,356,610 
Brokered deposits242,759 247,761 
Total interest-bearing8,194,378 7,397,284 
Total deposits$11,391,345 $9,586,857 

40
(Dollars in thousands) 
Amortization
of Intangibles
Remaining in 2017 $757
2018 2,986
2019 2,918
2020 2,722
2021 2,396
Thereafter 11,330
Total $23,109
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8.11. ASSOCIATE BENEFIT PLANS
Postretirement Medical Benefits
We shareThe 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 us.the Company. Effective March 31, 2014, wethe Company changed the eligibility of this plan to include only those Associates who have achieved ten years of service with us as of March 31, 2014. As of December 31, 2014, we began to useThe Company uses the mortality table issued by the Office of the Actuary of the U.S. Bureau of Census in October 2014 in ourits calculation.
We accountThe Company accounts for ourits obligations under the provisions of FASB ASC 715, Compensation - Retirement Benefits (ASC 715). ASC 715 requires that we recognizethe 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 following are disclosuresCompany recognizes its service cost in Salaries, benefits and other compensation and the other components of the 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 measured at January 1, 2017 and 2016.plan.
Three months ended September 30,Nine months ended September 30,
(Dollars in thousands)2020201920202019
Service cost$15 $13 $45 $40 
Interest cost17 20 51 58 
Prior service cost amortization(19)(19)(57)(57)
Net gain recognition(9)(16)(27)(47)
Net periodic cost (benefit)$4 $(2)$12 $(6)
  Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2017 2016 2017 2016
Service cost $11
 $14
 $40
 $43
Interest cost 16
 19
 54
 57
Prior service cost amortization (19) (18) (57) (44)
Net gain recognition (18) (16) (52) (47)
Net periodic benefit cost $(10) $(1) $(15) $9


Alliance Associate Pension Plan


During the fourth quarter of 2015, wethe Company completed the acquisition of Alliance and its wholly owned subsidiary, Alliance Bank, headquartered in Broomall, Pennsylvania.Alliance. At the time of the acquisition, wethe Company assumed the Alliance pension plan offered to its current associates.

Associates.
The following table showspresents the components of net periodic benefit cost components forrelated to the Alliance Associate Pension PlanPlan.
Three months ended September 30,Nine months ended September 30,
(Dollars in thousands)2020201920202019
Service cost$0 $10 $17 $30 
Interest cost0 70 105 208 
Expected return on plan assets0 (150)(196)(445)
Prior service cost amortization0 0 0 0 
Net gain recognition0 0 0 0 
Plan settlement loss0 0 1,431 $0 
Net periodic cost (benefit)$0 $(70)$1,357 $(207)

During the fourth quarter of 2018, the Company notified the Alliance pension plan participants, the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) of its intention to terminate the plan, and received IRS and PBGC approval in the first quarter of 2020. The Company completed the termination and contributed $0.5 million to the plan to settle the obligation during the three months ended June 30, 2020.

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Beneficial Associate Pension and other postretirement benefits measured at Januaryplans
On March 1, 2017.2019, the Company closed its acquisition of 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 September 30, 2020Nine months ended September 30, 2020
(Dollars in thousands)Pension BenefitsOther Postretirement BenefitsPension BenefitsOther Postretirement Benefits
Service cost$0 $2 $0 $59 
Interest cost728 108 2,183 381 
Expected return on plan assets(1,590)0 (4,773)0 
Prior service cost amortization0 (76)0 (76)
Net loss (gain) recognition1 (6)3 (15)
Net periodic (benefit) cost$(861)$28 $(2,587)$349 

Three months ended September 30, 2019Nine months ended September 30, 2019
(Dollars in thousands)Pension BenefitsOther Postretirement BenefitsPension BenefitsOther Postretirement Benefits
Service cost$0 $23 $0 $53 
Interest cost857 177 1,999 413 
Expected return on plan assets(1,442)0 (3,365)0 
Prior service cost amortization0 0 0 0 
Net loss (gain) recognition0 0 0 0 
Net periodic (benefit) cost$(585)$200 $(1,366)$466 





42
(Dollars in thousands) Three months ended September 30, 2017 Nine months ended September 30, 2017
Service cost $10
 $30
Interest cost 75
 225
Expected Return on Plan Assets (135) (405)
Prior service cost amortization —
 —
Net gain recognition —
 —
Net periodic benefit cost $(50) $(150)
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9.12. INCOME TAXES
We account for income taxes in accordance with FASB ASC 740, Income Taxes (ASC 740). ASC 740 requires the recording of deferred income taxes that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We exercise significant judgment in the evaluation of the amount and timing of the recognition of the resulting tax assets and liabilities. The judgments and estimates required for the evaluation are updated based on changes in business factors and the tax laws. If actual results differ from the assumptions and other considerations used in estimating the amount and timing of tax recognized, there can be no assurance that additional expenses will not be required in future periods.
ASC 740 prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. We recognize, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the financial statements. Assessment of uncertain tax positions under ASC 740 requires careful consideration of the technical merits of a position based on our analysis of tax regulations and interpretations.
There were no0 unrecognized tax benefits as of September 30, 2017. We record2020. The Company records interest and penalties on potential income tax deficiencies as income tax expense. OurThe Company's federal and state tax returns for the 20142017 through 20162019 tax years are subject to examination as of September 30, 2017. We do2020. The Company does not expect to record or realize any material unrecognized tax benefits during 2017.2020.
As a result of the adoption of ASU No. 2014-01, “Investments-Equity MethodASC 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 Joint Ventures: Accountingdeferred tax asset on the Company's Consolidated Statements of Financial Condition.

On March 27, 2020, the CARES Act was enacted, and Section 2303(b) of this 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 InvestmentsNOL carryback claims to be calculated based on a rate of 35%, which was the federal corporate tax rate in Qualified Affordable Housing Projects,”effect for the carryback years. Consequently, effective September 30, 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 ourthe low-income housing credit investments has been reflected as income tax expense. Accordingly, $0.4expense of $0.8 million of such amortization has been reflected as income tax expenseand $0.9 million for the three months ended September 30, 20172020 and September 30, 2016,2019, respectively, and $1.2$2.4 million and $2.1 million of such amortization has been reflected as income tax expense for the nine months ended September 30, 20172020 and September 30, 2016.2019, respectively.
The amount of affordable housing tax credits, amortization and tax benefits recorded as income tax expense for the nine months ended September 30, 20172020 were $1.2$2.2 million, $1.2$2.4 million and $0.3$0.7 million, respectively. The carrying value of the investment in affordable housing credits is $14.2$27.4 million at September 30, 2017,2020, compared to $15.4$25.8 million at December 31, 2016.2019.

10.
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13. FAIR VALUE DISCLOSURES OF FINANCIAL ASSETS AND LIABILITIES
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
ASC 820-10,Fair Value Measurement - Overall (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.
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The following tables present financial instruments carried at fair value as of September 30, 20172020 and December 31, 20162019 by level in the valuation hierarchy (as described above):
September 30, 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$0 $428,533 $0 $428,533 
FNMA MBS0 1,454,908 0 1,454,908 
FHLMC MBS0 246,224 0 246,224 
GNMA MBS0 26,630 0 26,630 
GSE agency notes0 178,627 0 178,627 
Other assets0 18,448 0 18,448 
Total assets measured at fair value on a recurring basis$0 $2,353,370 $0 $2,353,370 
Liabilities measured at fair value on a recurring basis:
Other liabilities$0 $8,350 $25,205 $33,555 
Assets measured at fair value on a nonrecurring basis:
Other investments$0 $0 $10,436 $10,436 
Other real estate owned0 0 3,000 3,000 
Loans held for sale0 152,453 0 152,453 
Total assets measured at fair value on a nonrecurring basis$0 $152,453 $13,436 $165,889 
  September 30, 2017
(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 $—
 $267,808
 $—
 $267,808
FNMA MBS —
 431,242
 —
 431,242
FHLMC MBS —
 85,062
 —
 85,062
GNMA MBS —
 25,697
 —
 25,697
Other investments 624
 —
 —
 624
Other assets —
 1,338
 —
 1,338
Total assets measured at fair value on a recurring basis $624
 $811,147
 $—
 $811,771
         
Liabilities measured at fair value on a recurring basis:        
Other liabilities $—
 $2,736
 $—
 $2,736
         
Assets measured at fair value on a nonrecurring basis:        
Other real estate owned $—
 $—
 $3,924
 $3,924
Loans held for sale —
 19,313
 —
 19,313
Impaired loans, net —
 —
 52,903
 52,903
Total assets measured at fair value on a nonrecurring basis $—
 $19,313
 $56,827
 $76,140


December 31, 2019
(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$0 $340,230 $0 $340,230 
FNMA MBS0 1,242,453 0 1,242,453 
FHLMC MBS0 328,946 0 328,946 
GNMA MBS0 33,285 0 33,285 
Other assets0 4,884 0 4,884 
Total assets measured at fair value on a recurring basis$0 $1,949,798 $0 $1,949,798 
Liabilities measured at fair value on a recurring basis:
Other liabilities$0 $3,918 $0 $3,918 
Assets measured at fair value on a nonrecurring basis
Other investments$0 $0 $70,046 $70,046 
Other real estate owned0 0 2,605 2,605 
Loans held for sale0 83,872 0 83,872 
Total assets measured at fair value on a nonrecurring basis$0 $83,872 $72,651 $156,523 

45
  December 31, 2016
(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 $—
 $261,215
 $—
 $261,215
FNMA MBS —
 405,764
 —
 405,764
FHLMC MBS —
 63,515
 —
 63,515
GNMA MBS —
 28,416
 —
 28,416
GSE —
 35,010
 —
 35,010
Other investments 623
 —
 —
 623
Other assets —
 1,508
 —
 1,508
Total assets measured at fair value on a recurring basis $623
 $795,428
 $—
 $796,051
         
Liabilities measured at fair value on a recurring basis:        
Other liabilities $—
 $3,380
 $—
 $3,380
         
Assets measured at fair value on a nonrecurring basis        
Other real estate owned $—
 $—
 $3,591
 $3,591
Loans held for sale —
 54,782
 —
 54,782
Impaired loans, net —
 —
 46,499
 46,499
Total assets measured at fair value on a nonrecurring basis $—
 $54,782
 $50,090
 $104,872
There were no transfers between Level 1 and Level 2Table of the fair value hierarchy during the nine months ended September 30, 2017.Contents
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. OurThe 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 we believe ourthe 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
As of September 30, 2017, securitiesSecurities classified as available-for-sale are reported at fair value using Level 2 inputs, except for one mutual fund asset acquired as part of the Penn Liberty acquisition, which is categorized as Level 1. Included in the Level 2 total are $809.8 million in Federal Agency MBS. We believeinputs. The Company believes that this Level 2 designation is appropriate for these securities under ASC 820-10, as these securities are government sponsored enterprises (GSEs) and Ginnie Mae securities with almost all fixed income securities, none are exchange traded, and all are priced by correlation to observed market data. For these securities we obtainthe Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors.
Other investments
Other investments includes equity investments without readily determinable fair values and are categorized as Level 3. The Company's equity investments without readily determinable fair values are held at cost, and are adjusted for any observable transactions during the reporting period.
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 lower of the loan balance or 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 ourother real estate owned was estimated using Level 3 inputs based on appraisals obtained from third parties.

Loans held for sale
The fair value of our 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.
Impaired loansOther assets
We evaluate and value impaired loans at the time the loan is identified as impaired, and the fair values of such loans are estimated using Level 3 inputs in the fair value hierarchy. Each loan’s collateral has a unique appraisal and management’s discount of the value is based on the factors unique to each impaired loan. The significant unobservable input in determining the fair value is management’s subjective discount on appraisals of the collateral securing the loan, which range from 10% - 50%. Collateral may consist of real estate and/or businessOther assets including equipment, inventory and/or accounts receivable and the value of these assets is determined based on the appraisals by qualified licensed appraisers hired by us. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, estimated costs to sell, and/or management’s expertise and knowledge of the client and the client’s business.
The gross amount of impaired loans, which are measured for impairment by either calculating the expected future cash flows discounted at the loan’s effective interest rate or determininginclude the fair value of interest rate products and derivatives on the collateralresidential mortgage held for collateral dependentsale 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 was $55.9 millionheld for sale portfolio as described above in Loans held for sale.
Other liabilities
Other liabilities include the fair value of interest rate products, risk participation agreement, derivatives on the residential mortgage held for sale loan pipeline and $51.6 million at September 30, 2017derivative related to the sale of certain Visa Class B common share. Valuation of interest rate products and December 31, 2016, respectively. Therisk participation agreements is obtained from an independent pricing service and also from the derivative counterparty. 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. Valuation of the derivative related to the residential mortgage held for sale loan pipeline is based on valuation allowance on impairedof the loans was $2.9 millionheld for sale portfolio as described above in Loans held for sale.

46
Table of September 30, 2017 and $3.4 million as of December 31, 2016.Contents
FAIR VALUE OF FINANCIAL INSTRUMENTS
The reported fair values of financial instruments are based on a variety of factors. In certain cases, fair values represent quoted market prices for identical or comparable instruments. In other cases, fair values have been estimated based on assumptions regarding the amount and timing of estimated future cash flows that are discounted to reflect current market rates and varying degrees of risk. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of period-end or that will be realized in the future.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and cash equivalents
For cash and short-term investment securities, including due from banks, federal funds sold or purchased under agreements to resell and interest-bearing deposits with other banks, the carrying amount is a reasonable estimate of fair value.
Investment securities
Investment securities include debt securities classified as held-to-maturity or available-for-sale. Fair value is estimated using quoted prices for similar securities, which we obtainthe Company obtains from a third party vendor. We utilizeThe 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 usthe Company to validate the vendor’s methodology as described above in available-for-sale securities.
Other investments
Other investments includes equity investments without readily determinable fair values (see discussion in “Fair Value of Financial Assets and Liabilities” section above).
Loans held for sale
Loans held for sale are carried at their fair value (see discussion in “Fair Value of Financial Assets and Liabilities” section above).
Loans and leases
Fair values are estimated for portfolios of loans with similar financial characteristics. Loans and leases are segregated by type: commercial, commercial mortgages, owner-occupied commercial, construction, residential mortgages and consumer.portfolio segments (see Note 2). 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.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 utilizedused if appraisals are not available. This technique does not 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 includes, among others, other real estate ownedinclude the fair value of interest rate products and derivatives on the residential mortgage held for sale loan pipeline (see discussion earlier in this note)“Fair Value of Financial Assets and our investment in Visa Class B stock. Our ownership includes shares acquired at no cost from our prior participation in Visa’s network, while Visa operated as a cooperative. During 2016 and 2017 we purchased additional shares which are accounted for as non-marketable equity securities and carried at cost. We evaluate the shares carried at cost for OTTI periodically. AsLiabilities” section above).

47
Table of September 30, 2017, our evaluation indicated that there was no OTTI of these shares. Following resolution of Visa’s covered litigation, shares of Visa’s Class B stock will be converted to Visa Class A shares.Contents

Only current owners of Class B shares are allowed to purchase other Class B shares.  We estimate the value of our Visa Class B shares to be $44.1 million as of September 30, 2017.

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 usthe Company for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.
Other Liabilities
Other liabilities includes, among others, cash flow derivatives and derivative on the residential mortgage held for sale pipeline. Valuation of our cash flow derivative is obtained from an independent pricing service and also from the derivative counterparty. Valuation for the residential mortgage held for sale pipeline is based on valuation of the loans held for sale portfolio as described above in Loans held for sale.
Off-balance sheet instruments
The fair value of off-balance sheet instruments, including commitments to extend creditswap guarantees of $12.2 million and $8.8 million at September 30, 2020 and December 31, 2019, respectively, and standby letters of credit, approximates the recorded net deferred fee amounts, which are not significant.amounts. Because commitments to extend credit and letters of credit are generally not assignable by either usthe Company or the borrower, they only have value to usthe Company and the borrower.

Accrued interest payable
The carrying amounts of interest payable approximate fair value.
Other liabilities
Other liabilities include the fair value of interest rate products, risk participation agreements, 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:
September 30, 2020
Financial InstrumentFair ValueValuation Technique(s)Unobservable InputRange (Weighted Average)
Other investments$10,436 Observed market comparable transactionsPeriod of observed transactionsJuly 2020
Other real estate owned$3,000 Fair market value of collateralCosts to sell5.0% - 10.0% (10.0%)
Other liabilities$25,205 Discounted cash flowTiming of the resolution of the Visa litigation3 - 8 years (5.75 years or 4Q 2025)





48
Table of Contents
The book value and estimated fair value of our financial instruments are as follows:
 
September 30, 2020December 31, 2019
(Dollars in thousands)Fair Value
Measurement		Book ValueFair ValueBook ValueFair Value
Financial assets:
Cash, cash equivalents, and restricted cashLevel 1$1,072,920 $1,072,920 $571,752 $571,752 
Investment securities available-for-saleLevel 22,334,922 2,334,922 1,944,914 1,944,914 
Investment securities held-to-maturity, netLevel 2113,609 118,113 133,601 136,625 
Other investmentsLevel 310,436 10,436 70,046 70,046 
Loans, held for saleLevel 2152,453 152,453 83,872 83,872 
Loans and leases, net(1)
Level 39,102,332 9,455,051 8,424,464 8,580,015 
Stock in FHLB of PittsburghLevel 26,497 6,497 21,097 21,097 
Accrued interest receivableLevel 242,801 42,801 38,094 38,094 
Other assetsLevel 218,448 18,448 4,884 4,884 
Financial liabilities:
DepositsLevel 211,391,345 11,353,731 9,586,857 9,575,394 
Borrowed fundsLevel 2204,294 206,804 489,288 489,561 
Standby letters of creditLevel 3496 496 623 623 
Accrued interest payableLevel 28,522 8,522 3,103 3,103 
Other liabilitiesLevels 2, 333,555 33,555 3,918 3,918 
(Dollars in thousands)   September 30, 2017 December 31, 2016
  
Fair Value
Measurement
 Book Value Fair Value Book Value Fair Value
Financial assets:          
Cash and cash equivalents Level 1 $733,365
 $733,365
 $821,923
 $821,923
Investment securities available for sale See previous table 810,433
 810,433
 794,543
 794,543
Investment securities held to maturity Level 2 161,721
 163,397
 164,346
 163,232
Loans, held for sale Level 2 19,313
 19,313
 54,782
 54,782
Loans, net(1)(2)
 Level 2,3 4,617,313
 4,596,437
 4,397,876
 4,300,963
Impaired loans, net Level 3 52,903
 52,903
 46,499
 46,499
Stock in FHLB of Pittsburgh Level 2 33,277
 33,277
 38,248
 38,248
Accrued interest receivable Level 2 17,789
 17,789
 17,027
 17,027
Other assets Level 3 19,618
 49,697
 9,189
 15,787
Financial liabilities:          
Deposits Level 2 5,051,719
 4,681,111
 4,738,438
 4,423,921
Borrowed funds Level 2 1,003,308
 999,551
 1,267,447
 1,264,170
Standby letters of credit Level 3 463
 463
 468
 468
Accrued interest payable Level 2 3,882
 3,882
 1,151
 1,151
Other liabilities Level 2 2,736
 2,736
 3,380
 3,380
 (1) Excludes impaired loans, net.
 (2) Includes reverse mortgage loans, which are categorized as Level 3.loans.
At September 30, 20172020 and December 31, 2016 we2019 the Company had no0 commitments to extend credit measured at fair value.
49
11.
Table of Contents
14. DERIVATIVE FINANCIAL INSTRUMENTS
Risk Management Objective of Using Derivatives
We areThe Company is exposed to certain risks arising from both economic conditions and ourits business operations. WeThe Company principally manage ourmanages its exposures to a wide variety of business and operational risks through management of ourits core business activities. We manageThe Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of ourits assets and liabilities. We manageThe Company manages a matched book with respect to ourits derivative instruments in order to minimize ourits net risk exposure resulting from such transactions. Our cash flow hedging program began in the third quarter of 2016.
Fair Values of Derivative Instruments
The table below presents the fair value of ourderivative financial instruments as well as their location on the unaudited Consolidated Statements of Financial Condition as of September 30, 2020.
Fair Values of Derivative Instruments
(Dollars in thousands)NotionalBalance Sheet LocationDerivatives
(Fair Value)
Derivatives not designated as hedging instruments:
Interest rate products$65,068 Other assets$6,339 
Interest rate products65,068 Other liabilities(7,067)
Risk participation agreements4,410 Other liabilities(12)
Interest rate lock commitments with customers308,807 Other assets11,606 
Interest rate lock commitments with customers22,134 Other liabilities(174)
Forward sale commitments56,290 Other assets503 
Forward sale commitments245,224 Other liabilities(1,097)
Financial derivatives related to
sales of certain Visa Class B shares		113,177 Other liabilities(25,205)
Total derivatives$880,178 $(15,107)
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 September 30, 2017.December 31, 2019.
Fair Values of Derivative Instruments
(Dollars in thousands)CountNotionalBalance Sheet LocationDerivatives
(Fair Value)
Derivatives designated as hedging instruments:
Interest rate products3$75,000 Other liabilities$(759)
Total$75,000 $(759)
Derivatives not designated as hedging instruments:
Interest rate products$71,804 Other assets$2,520 
Interest rate products71,804 Other liabilities(2,688)
Risk participation agreements4,524 Other liabilities(4)
Interest rate lock commitments with customers99,057 Other assets1,768 
Interest rate lock commitments with customers28,505 Other liabilities(191)
Forward sale commitments61,301 Other assets596 
Forward sale commitments90,177 Other liabilities(276)
Total$427,172 $1,725 
Total derivatives$502,172 $966 

50
 Fair Values of Derivative Instruments
(Dollars in thousands) Count Notional Balance Sheet Location Liability Derivatives (Fair Value)
Derivatives designated as hedging instruments:        
Interest rate products 3
 $75,000
 Other Liabilities $2,556
Total derivatives designated as hedging instruments       $2,556
Table of Contents

Cash Flow Hedges of Interest Rate Risk
OurThe Company's objectives in using interest rate derivatives are to add stability to interest income and to manage ourits exposure to interest rate movements. To accomplish this objective, wethe Company primarily useuses interest rate swaps as part of ourits 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 usthe Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount.

The effective portion of changes inChanges to the fair value of derivatives designated and that qualify as cash flow hedges isare 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 nine months ended September 30, 2017,first half of 2020, such derivatives were used to hedge the variable cash flows associated with a variable rate loan pool. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the nine months ended September 30, 2017, we did not record any hedge ineffectiveness.
Amounts reported in accumulated other comprehensive income related to derivatives are reclassified to interest income as interest payments are received on our variable-rate pooled loans. During the next twelve months, we estimate that $0.3 million will be reclassified as an increase to interest income. During the nine months ended September 30, 2017, $0.1 million was reclassified into interest income.
We are hedging our exposure to the variability in future cash flows for forecasted transactions over a maximum period of 1 month (excluding forecasted transactions related to the payment of variable interest on existing financial instruments).
As of September 30, 2017, we had three outstanding interest rate derivatives with a notional of $75 million that were designated as cash flow hedges of interest rate risk.
Effect of Derivative Instruments on the Income Statement
The table below presents the effect of the derivative financial instruments on the Consolidated Statements of Income for the three and nine months ended September 30, 2017 and September 30, 2016.
(Dollars in thousands) Amount of Gain Recognized in OCI on Derivative (Effective Portion) Location of Gain or (Loss)Reclassified from Accumulated OCI into Income (Effective Portion)
  Three months ended September 30,  
Derivatives in Cash Flow Hedging Relationships 2017 2016  
Interest Rate Products $42
 $—
 Interest income
Total $42
 $—
  
(Dollars in thousands) Amount of Gain Recognized in OCI on Derivative (Effective Portion) Location of Gain or (Loss)Reclassified from Accumulated OCI into Income (Effective Portion)
  Nine months ended September 30,  
Derivatives in Cash Flow Hedging Relationships 2017 2016  
Interest Rate Products $192
 $—
 Interest income
Total $192
 $—
  

Credit risk-related Contingent Features
We haveCompany has agreements with certain of our derivative counterparties that contain a provision whereunder which, if we defaultit defaults on any of ourits indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then wethe Company could also be declared in default on ourits derivative obligations.
We The Company also havehas agreements with certain of our derivative counterparties that contain a provision where if we failit fails to maintain ourits status as a well/well-capitalized or adequately capitalized institution, then the counterparty could terminate the derivative positions and wethe Company would be required to settle ourits obligations under the agreements.
As of September 30, 2017,In April 2020, the termination value ofCompany terminated its 3 interest rate derivatives inthat were designated as cash flow hedges for a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreementsgain of $1.3 million. At this point, hedge accounting was $2.6 million. We have minimum collateral posting thresholds with certain of our derivative counterparties,discontinued, and have posted collateral of $3.4 million against our obligations under these agreements. If we had breached any of these provisions at September 30, 2017, we could have been required to settle our obligations under the agreements atnet gain was recognized in accumulated other comprehensive income (loss). Once a cash flow hedge is discontinued, the termination value.

12. SEGMENT INFORMATION
net gain or loss that remains in accumulated comprehensive income (loss) is reclassified into earnings when the transaction affects earnings. As defined in FASB 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 resourcesunderlying hedged transaction continues to be allocatedprobable, 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 $0.6 million will be reclassified as an increase to the segment and assess its performance, and for which discrete financial information is available. We evaluate performance based on pretax net income relative to resources used, and allocate resources based on these results. The accounting policies applicable to our segments are those that apply to our preparation of the accompanying unaudited Consolidated Financial Statements. Based on these criteria, we have 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 within the WSFS Bank segment in accordance with ASC 280.
Cash Connect® provides ATM vault cash and smart safe and 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 fiduciary, investment management, credit and deposit products to clients through six business lines. WSFS Wealth Investments provides insurance and brokerage products primarily to our retail banking clients. Cypress, a registered investment adviser whose primary market segment is high-net-worth individuals, offers a "balanced" investment style focused on preservation of capital and providing currentinterest income. West Capital, a registered investment adviser, is a fee-only wealth management firm which operates under a multi-family office philosophy and provides fully-customized solutions tailored to the unique needs of institutions and high-net-worth individuals. Christiana Trust provides fiduciary and investment services to personal trust clients, and trustee, agency, bankruptcy administration, custodial and commercial domicile services to corporate and institutional clients. Powdermill is a multi-family office that specializes in providing unique, independent solutions to high-net-worth individuals, families and corporate executives through a coordinated, centralized approach. WSFS Private Banking serves high-net-worth clients by delivering credit and deposit products and partnering with other business units to deliver investment management and fiduciary products and services.

The following table shows segment results forDuring the three months ended September 30, 2017 and 2016:

  Three months ended September 30, 2017 Three months ended September 30, 2016
(Dollars in thousands) WSFS Bank 
Cash
Connect®
 
Wealth
Management
 Total WSFS Bank 
Cash
Connect®
 Wealth
Management		 Total
Statement of Income                
External customer revenues:                
Interest income $62,748
 $—
 $2,262
 $65,010
 53,332
 —
 2,005
 55,337
Noninterest income 12,102
 11,212
 9,127
 32,441
 11,957
 9,369
(r) 
6,260
 27,586
Total external customer revenues 74,850
 11,212
 11,389
 97,451
 65,289
 9,369
 8,265
 82,923
Inter-segment revenues:                
Interest income 2,537
 —
 2,235
 4,772
 1,302
 —
 1,698
 3,000
Noninterest income 1,721
 213
 37
 1,971
 2,140
 229
 27
 2,396
Total inter-segment revenues 4,258
 213
 2,272
 6,743
 3,442
 229
 1,725
 5,396
Total revenue 79,108
 11,425
 13,661
 104,194
 68,731
 9,598
 9,990
 88,319
External customer expenses:                
Interest expense 8,542
 —
 339
 8,881
 6,113
 —
 203
 6,316
Noninterest expenses 39,546
 7,048
 7,569
 54,163
 40,991
 5,743
(r) 
4,500
 51,234
Provision for loan losses 3,065
 —
 (169) 2,896
 5,669
 —
 159
 5,828
Total external customer expenses 51,153
 7,048
 7,739
 65,940
 52,773
 5,743
 4,862
 63,378
Inter-segment expenses:                
Interest expense 2,235
 1,856
 681
 4,772
 1,698
 790
 512
 3,000
Noninterest expenses 250
 556
 1,165
 1,971
 256
 744
 1,396
 2,396
Total inter-segment expenses 2,485
 2,412
 1,846
 6,743
 1,954
 1,534
 1,908
 5,396
Total expenses 53,638
 9,460
 9,585
 72,683
 54,727
 7,277
 6,770
 68,774
Income before taxes $25,470
 $1,965
 $4,076
 $31,511
 $14,004
 $2,321
 $3,220
 $19,545
Income tax provision       10,942
       6,823
Consolidated net income       $20,569
       $12,722
                 
Capital expenditures $2,688
 $35
 $117
 $2,840
 $10,900
 $248
 $11
 $11,159

(r) Noninterest income and noninterest expense for the period ended September 30, 2016 have been restated to correct an immaterial error related to revenue earned for cash servicing fees. See Note 1 - Basis of Presentation for further information.






The following table shows segment results for the nine months ended September 30, 20172020, $0.1 million and 2016:

  Nine months ended September 30, 2017 Nine months ended September 30, 2016
(Dollars in thousands) WSFS Bank 
Cash
Connect®
 Wealth
Management		 Total WSFS Bank 
Cash
Connect®
 Wealth
Management		 Total
Statement of Income                
External customer revenues:                
Interest income $181,670
 $—
 $6,500
 $188,170
 $150,862
 $—
 $6,024
 $156,886
Noninterest income 34,318
 31,403
 26,488
 92,209
 31,982
 26,437
(r) 
18,343
 76,762
Total external customer revenues 215,988
 31,403
 32,988
 280,379
 182,844
 26,437
 24,367
 233,648
Inter-segment revenues:                
Interest income 6,780
 —
 6,735
 13,515
 3,498
 —
 5,245
 8,743
Noninterest income 5,791
 611
 113
 6,515
 6,211
 632
 76
 6,919
Total inter-segment revenues 12,571
 611
 6,848
 20,030
 9,709
 632
 5,321
 15,662
Total revenue 228,559
 32,014
 39,836
 300,409
 192,553
 27,069
 29,688
 249,310
External customer expenses:                
Interest expense 23,744
 —
 880
 24,624
 15,506
 —
 589
 16,095
Noninterest expenses 117,288
 19,774
 21,334
 158,396
 109,265
 16,681
(r) 
13,771
 139,717
Provision for loan losses 6,097
 —
 804
 6,901
 7,675
 —
 187
 7,862
Total external customer expenses 147,129
 19,774
 23,018
 189,921
 132,446
 16,681
 14,547
 163,674
Inter-segment expenses:                
Interest expense 6,735
 4,843
 1,937
 13,515
 5,245
 1,973
 1,525
 8,743
Noninterest expenses 724
 1,944
 3,847
 6,515
 708
 2,186
 4,025
 6,919
Total inter-segment expenses 7,459
 6,787
 5,784
 20,030
 5,953
 4,159
 5,550
 15,662
Total expenses 154,588
 26,561
 28,802
 209,951
 138,399
 20,840
 20,097
 179,336
Income before taxes $73,971
 $5,453
 $11,034
 $90,458
 $54,154
 $6,229
 $9,591
 $69,974
Income tax provision       30,382
       24,004
Consolidated net income       $60,076
       $45,970
                 
Capital expenditures $6,611
 $103
 $480
 $7,194
 $14,346
 $672
 $19
 $15,037

(r) Noninterest$0.3 million was reclassified into interest income, and noninterest expense for the period ended September 30, 2016 have been restated to correct an immaterial error related to revenue earned for cash servicing fees. See Note 1 - Basis of Presentation for further information.respectively.


The following table shows significant components of segment net assets as of September 30, 2017 and December 31, 2016:

  September 30, 2017 December 31, 2016
(Dollars in thousands) WSFS Bank 
Cash
Connect®
 Wealth
Management		 Total WSFS Bank 
Cash
Connect®
 
Wealth
Management
 Total
Statement of Financial Condition                
Cash and cash equivalents $94,169
 $631,883
 $7,313
 $733,365
 $100,893
 $717,643
 $3,387
 $821,923
Goodwill 145,808
 —
 20,199
 166,007
 147,396
 —
 20,143
 167,539
Other segment assets 5,757,941
 2,983
 215,048
 5,975,972
 5,545,611
 3,533
 226,664
 5,775,808
Total segment assets $5,997,918
 $634,866
 $242,560
 $6,875,344
 $5,793,900
 $721,176
 $250,194
 $6,765,270








13. INDEMNIFICATIONS AND GUARANTEES
Secondary Market Loan Sales
Given the current interest rate environment and our overall asset and liability management approach, we typically sell newly originated residential mortgage loans in the secondary market to mortgage loan aggregators and on a more limited basis, to government sponsored entities (GSEs) such as FHLMC, FNMA, and the FHLB. Loans held for sale are reflected on our unaudited Consolidated Statements of Financial Condition at fair value with changes in the value reflected in our unaudited Consolidated Statements of Income. Gains and losses are recognized at the time of sale. We periodically retain the servicing rights on residential mortgage loans sold which results in monthly service fee income. The mortgage servicing rights are included in our intangible assets in our unaudited Consolidated Statements of Financial Condition. Otherwise, we sell loans with servicing released on a nonrecourse basis. Rate-locked loan commitments that we intend to sell in the secondary market are accounted for as derivatives under ASC Topic 815, Derivatives and Hedging (ASC:815).
We do 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 such repurchases for the nine months ended September 30, 2017.
Swap Guarantees
WeThe Company entered into agreements with three4 unrelated financial institutions whereby those financial institutions entered into interest rate derivative contracts (interest rate swap transactions) directly with customers referred to them by us.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. derivatives.
At both September 30, 20172020 and December 31, 2016,2019, there were 134226 and 172 variable-rate to fixed-rate swap transactions between the third partythird-party financial institutions and our customers.the Company's customers, respectively. The initial notional aggregate amount was approximately $557.1 million$1.1 billion at September 30, 20172020 compared to $518.8$941.0 million at December 31, 2016.2019. At September 30, 20172020, the swap transactions remaining maturities ranged from under one1 year to ten15 years. The aggregate marketAt September 30, 2020, 223 of these customer swaps were in a paying position to third parties for $93.9 million, with our swap guarantees having a fair value of $12.2 million. At December 31, 2019, 156 of these customer swaps were in a paying position to third parties for $27.4 million, with our swap guarantees having a fair value of $8.8 million. However, for both periods, none of the Company's customers was a liabilitywere in default of $8.6the swap agreements.

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The table below presents the effect of the derivative financial instruments on the unaudited Consolidated Statements of Income for the three and nine months ended September 30, 2020 and September 30, 2019.
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 September 30,Nine Months Ended September 30,
Derivatives in Cash Flow Hedging Relationships2020201920202019
Interest Rate Products$0 $368 $1,560 $2,005 Interest income
Total$0 $368 $1,560 $2,005 
Amount of Gain or (Loss) Recognized in IncomeAmount of Gain or (Loss) Recognized in IncomeLocation of Gain or (Loss) Recognized in Income
(Dollars in thousands)Three Months Ended September 30,Nine Months Ended September 30,
Derivatives Not Designated as a Hedging Instrument2020201920202019
Interest Rate Lock Commitments$3,261 $322 $9,488 $1,496 Mortgage banking activities, net
Forward Sale Commitments(3,110)(481)(9,594)$(1,203)Mortgage banking activities, net
Total$151 $(159)$(106)$293 

The Company has minimum collateral posting thresholds with certain of its derivative counterparties, and has posted collateral of $8.4 million in securities and $11.1 million in cash against its obligations under these agreements. If the Company had breached any of these provisions at September 30, 20172020, it could have been required to settle its obligations under the agreements at the termination value.
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15. SEGMENT INFORMATION
As defined in ASC 280, Segment Reporting (ASC 280), an operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and $10.9 million at December 31, 2016. We had no reservesincur 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 3 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 in accordance with ASC 280.
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 institutional trust division of WSFS, WSFS Institutional Services®, provides trustee, agency, bankruptcy administration, custodial and commercial domicile services to institutional and corporate clients. Christiana Trust DE, a subsidiary of WSFS, provides personal trust and fiduciary services to families and individuals across the U.S. Powdermill is a multi-family office specializing in providing independent solutions to high-net-worth individuals, families and corporate executives through a coordinated, centralized approach. WSFS Wealth Client Management serves high-net-worth clients by delivering credit and deposit products and partnering with other Wealth Management units to provide comprehensive solutions to clients.

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The following tables show segment results for the swap guaranteesthree and nine months ended September 30, 2020 and 2019:
 Three Months Ended September 30, 2020Three Months Ended September 30, 2019
(Dollars in thousands)WSFS Bank
Cash
Connect®
Wealth
Management		TotalWSFS Bank
Cash
Connect®
Wealth
Management		Total
Statements of Income
External customer revenues:
Interest income$121,179 $0 $2,191 $123,370 $138,585 $0 $2,677 $141,262 
Noninterest income25,601 10,157 13,413 49,171 38,563 13,067 10,716 62,346 
Total external customer revenues146,780 10,157 15,604 172,541 177,148 13,067 13,393 203,608 
Inter-segment revenues:
Interest income965 244 2,477 3,686 2,855 0 5,592 8,447 
Noninterest income3,359 199 497 4,055 2,483 257 320 3,060 
Total inter-segment revenues4,324 443 2,974 7,741 5,338 257 5,912 11,507 
Total revenue151,104 10,600 18,578 180,282 182,486 13,324 19,305 215,115 
External customer expenses:
Interest expense9,994 0 328 10,322 19,056 0 1,373 20,429 
Noninterest expenses79,469 6,537 7,534 93,540 93,146 9,132 7,283 109,561 
Provision for credit losses1,324 0 1,392 2,716 3,954 0 167 4,121 
Total external customer expenses90,787 6,537 9,254 106,578 116,156 9,132 8,823 134,111 
Inter-segment expenses:
Interest expense2,721 172 793 3,686 5,592 1,730 1,125 8,447 
Noninterest expenses696 798 2,561 4,055 577 680 1,803 3,060 
Total inter-segment expenses3,417 970 3,354 7,741 6,169 2,410 2,928 11,507 
Total expenses94,204 7,507 12,608 114,319 122,325 11,542 11,751 145,618 
Income before taxes$56,900 $3,093 $5,970 $65,963 $60,161 $1,782 $7,554 $69,497 
Income tax provision15,140 15,902 
Consolidated net income50,823 53,595 
Net loss attributable to noncontrolling interest(322)(287)
Net income attributable to WSFS51,145 53,882 
Supplemental Information
Capital expenditures for the period ended$640 $0 $10 $650 $3,920 $1,340 $0 $5,260 


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Nine Months Ended September 30, 2020Nine Months Ended September 30, 2019
(Dollars in thousands)WSFS Bank
Cash
Connect®
Wealth
Management		TotalWSFS Bank
Cash
Connect®
Wealth
Management		Total
Statements of Income
External customer revenues:
Interest income$376,198 $0 $6,910 $383,108 $375,762 $0 $7,980 $383,742 
Noninterest income87,977 30,844 35,572 154,393 74,697 38,824 32,818 146,339 
Total external customer revenues464,175 30,844 42,482 537,501 450,459 38,824 40,798 530,081 
Inter-segment revenues:
Interest income3,845 481 7,768 12,094 9,992 0 13,649 23,641 
Noninterest income9,808 616 1,017 11,441 6,522 626 717 7,865 
Total inter-segment revenues13,653 1,097 8,785 23,535 16,514 626 14,366 31,506 
Total revenue477,828 31,941 51,267 561,036 466,973 39,450 55,164 561,587 
External customer expenses:
Interest expense38,400 0 1,754 40,154 52,474 0 3,889 56,363 
Noninterest expenses232,343 21,173 21,955 275,471 267,138 26,055 21,808 315,001 
Provision for credit losses150,177 0 3,939 154,116 23,479 0 491 23,970 
Total external customer expenses420,920 21,173 27,648 469,741 343,091 26,055 26,188 395,334 
Inter-segment expenses:
Interest expense8,249 1,257 2,588 12,094 13,649 6,491 3,501 23,641 
Noninterest expenses1,633 2,438 7,370 11,441 1,343 1,923 4,599 7,865 
Total inter-segment expenses9,882 3,695 9,958 23,535 14,992 8,414 8,100 31,506 
Total expenses430,802 24,868 37,606 493,276 358,083 34,469 34,288 426,840 
Income before taxes$47,026 $7,073 $13,661 $67,760 $108,890 $4,981 $20,876 $134,747 
Income tax provision14,181 32,253 
Consolidated net income53,579 102,494 
Net loss attributable to noncontrolling interest(1,382)(611)
Net income attributable to WSFS54,961 103,105 
Supplemental Information
Capital expenditures for the period ended$3,077 $256 $147 $3,480 $9,160 $1,411 $130 $10,701 

The following table shows significant components of segment net assets as of September 30, 2017.2020 and December 31, 2019:
 September 30, 2020December 31, 2019
(Dollars in thousands)WSFS Bank
Cash
Connect®
Wealth
Management		TotalWSFS Bank
Cash
Connect®
Wealth
Management		Total
Statements of Financial Condition
Cash and cash equivalents$720,456 $342,951 $9,513 $1,072,920 $202,792 $357,494 $11,466 $571,752 
Goodwill452,629 0 20,199 472,828 452,629 0 20,199 472,828 
Other segment assets12,045,866 6,757 231,737 12,284,360 10,982,681 6,555 222,486 11,211,722 
Total segment assets$13,218,951 $349,708 $261,449 $13,830,108 $11,638,102 $364,049 $254,151 $12,256,302 





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16. COMMITMENTS AND CONTINGENCIES

Secondary Market Loan Sales

Given the current interest rate environment and the Company's overall asset and liability management approach, the Company typically sells newly originated residential mortgage loans in the secondary market to mortgage loan aggregators and on a more limited basis, to government sponsored enterprise (GSEs) such as FHLMC, FNMA, and the FHLB. Loans held for sale are reflected on the unaudited Consolidated Statements of Financial Condition at fair value with changes in the value reflected in the unaudited Consolidated Statements of Income. Gains and losses are recognized at the time of sale. The Company periodically retains the servicing rights on residential mortgage loans sold which results in monthly service fee income. The mortgage servicing rights are included in Intangible assets in the unaudited Consolidated Statements of Financial Condition. Otherwise, the Company sells loans with servicing released on a nonrecourse basis. Rate-locked loan commitments that the Company intends to sell in the secondary market are accounted for as derivatives under ASC 815, Derivatives and Hedging (ASC 815).

The Company does not sell loans with recourse, except for standard loan sale contract provisions covering violations of representations and warranties and, under certain circumstances, early payment default by the borrower. These are customary repurchase provisions in the secondary market for residential mortgage loan sales. These provisions may include either an indemnification from loss or the repurchase of the loans. Repurchases and losses have been rare and 0 provision is made for losses at the time of sale. There were 0 repurchases during the nine months ended September 30, 2020 as compared to 1 repurchase for $0.2 million during the nine months ended September 30, 2019.

Unfunded Lending Commitments

At September 30, 2020 and December 31, 2019, the allowance for credit losses of unfunded lending commitments were $8.6 million and $1.5 million, respectively. The balance at September 30, 2020 was determined using the CECL methodology, which included a $3.0 million adjustment to retained earnings at the time of adoption. A provision for unfunded lending commitments of $0.9 million and $4.1 million was recognized during the three and nine months ended September 30, 2020, respectively, and a provision for unfunded lending commitments of $0.2 million and $0.7 million was recognized during the three and nine months ended September 30, 2019, respectively.

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17. CHANGE IN ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Accumulated other comprehensive (loss) income includes unrealized gains and losses on available-for-sale investments, unrealized gains and losses on cash flow hedges, as well as unrecognized prior service costs, transition costs, and actuarial gains and losses on defined benefit pension plans. Changes to accumulated other comprehensive (loss) income are presented, net of tax, as a component of stockholders'stockholders’ equity. Amounts that are reclassified out of accumulated other comprehensive (loss) income are recorded on the unaudited Consolidated Statement of Income either as a gain or loss.
Changes to accumulated other comprehensive (loss) income by component are shown, net of taxes, in the following tables for the period indicated:
(Dollars in thousands)Net change in
investment
securities
available-for-sale		Net change
in investment securities
held-to-maturity		Net
change in
defined
benefit
plan
Net change in
fair value of
derivatives
used for cash
flow hedges (1)
Net change in equity method investmentsTotal
Balance, June 30, 2020$74,689 $346 $(3,127)$872 $0 $72,780 
Other comprehensive (loss) income before reclassifications(3,474)0 58 0 (9)(3,425)
Less: Amounts reclassified from accumulated other comprehensive (loss) income(2,525)(39)(83)(113)0 (2,760)
Net current-period other comprehensive loss(5,999)(39)(25)(113)(9)(6,185)
Balance, September 30, 2020$68,690 $307 $(3,152)$759 $(9)$66,595 
Balance, June 30, 2019$22,244 $602 $659 $(817)$0 $22,688 
Other comprehensive income (loss) before reclassifications9,268 (1)(8)368 0 9,627 
Less: Amounts reclassified from accumulated other comprehensive loss0 (69)(27)0 0 (96)
Net current-period other comprehensive income (loss)9,268 (70)(35)368 0 9,531 
Balance, September 30, 2019$31,512 $532 $624 $(449)$0 $32,219 
(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 investmentsTotal
Balance, December 31, 2019$26,927 $468 $(3,317)$(577)$0 $23,501 
Other comprehensive income (loss) before reclassifications46,264 0 84 1,560 (9)47,899 
Less: Amounts reclassified from accumulated other comprehensive (loss) income(4,501)(161)81 (224)0 (4,805)
Net current-period other comprehensive income (loss)41,763 (161)165 1,336 (9)43,094 
Balance, September 30, 2020$68,690 $307 $(3,152)$759 $(9)$66,595 
Balance, December 31, 2018$(14,553)$779 $834 $(2,454)$0 $(15,394)
Other comprehensive income (loss) before reclassifications46,124 (2)(131)2,005 0 47,996 
Less: Amounts reclassified from accumulated other comprehensive (loss) income(59)(245)(79)0 0 (383)
Net current-period other comprehensive income (loss)46,065 (247)(210)2,005 0 47,613 
Balance, September 30, 2019$31,512 $532 $624 $(449)$0 $32,219 
(1)Cash flow hedges were terminated as of April 1, 2020
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(Dollars in thousands) 
Net change in
investment
securities
available for sale
 
Net change
in securities
held to
maturity
 
Net
change in
defined
benefit
plan
 
Net change in
fair value of
derivative
used for cash
flow hedge
 Total
Balance, June 30, 2017 $(4,342) $1,194
 $912
 $(1,622) $(3,858)
Other comprehensive income before reclassifications 1,289
 —
 —
 42
 1,331
Less: Amounts reclassified from accumulated other comprehensive (loss) income (475) (99) (22) —
 (596)
Net current-period other comprehensive income (loss) 814
 (99) (22) 42
 735
Balance, September 30, 2017 $(3,528) $1,095
 $890
 $(1,580) $(3,123)
Balance, June 30, 2016 $12,841
 $1,592
 $1,244
 $—
 $15,677
Other comprehensive (loss) income before reclassifications (1,112) —
 —
 61
 (1,051)
Less: Amounts reclassified from accumulated other comprehensive income (645) (102) (20) —
 (767)
Net current-period other comprehensive (loss) income (1,757) (102) (20) 61
 (1,818)
Balance, September 30, 2016 $11,084
 $1,490
 $1,224
 $61
 $13,859
           
Balance, December 31, 2016 $(8,194) $1,392
 $957
 $(1,772) $(7,617)
Other comprehensive income before reclassifications 5,802
 —
 —
 192
 5,994
Less: Amounts reclassified from accumulated other comprehensive (loss) income (1,136) (297) (67) —
 (1,500)
Net current-period other comprehensive income (loss) 4,666
 (297) (67) 192
 4,494
Balance, September 30, 2017 $(3,528) $1,095
 $890
 $(1,580) $(3,123)
Balance, December 31, 2015 $(1,887) $1,795
 $788
 $—
 $696
Other comprehensive income before reclassifications 14,143
 —
 —
 61
 14,204
Less: Amounts reclassified from accumulated other comprehensive (loss) income (1,172) (305) 436
 —
 (1,041)
Net current-period other comprehensive income (loss) 12,971
 (305) 436
 61
 13,163
Balance, September 30, 2016 $11,084
 $1,490
 $1,224
 $61
 $13,859


The unaudited Consolidated Statements of Income were impacted by components of other comprehensive income (loss) as shown in the tabletables below:
Three Months Ended September 30,Affected line item in unaudited Consolidated Statements of Income
(Dollars in thousands)20202019
Securities available for sale:
Realized gains on securities transactions$(3,322)$0 Securities gains, net
Income taxes797 0 Income tax provision
Net of tax$(2,525)$0 
Net unrealized holding gains on securities transferred between available-for-sale and held-to-maturity:
Amortization of net unrealized gains to income during the period$(51)$(91)Interest and dividends on investment securities
Income taxes12 22 Income tax provision
Net of tax$(39)$(69)
Amortization of defined benefit pension plan-related items:
Prior service credits$(95)$(19)
Actuarial gains(14)(16)
Total before tax$(109)$(35)Salaries, benefits and other compensation
Income taxes26 8 Income tax provision
Net of tax$(83)$(27)
Net unrealized gains on terminated cash flow hedges:
Amortization of net unrealized gains to income during the period$(149)$0 Interest and fees on loans and leases
Income taxes36 0 Income tax provision
Net of tax$(113)$0 
Total reclassifications$(2,760)$(96)
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Nine Months EndedAffected line item in unaudited Consolidated
Statements of Operations
(Dollars in thousands) Three Months Ended September 30, Affected line item in Consolidated Statements of Income
 2017 2016  September 30,Affected line item in unaudited Consolidated
Statements of Operations
Securities available for sale:     
20202019 
Securities available-for-sale:Securities available-for-sale:
Realized gains on securities transactions $(736) $(1,040) Security gains, netRealized gains on securities transactions$(5,923)$(78)Securities gains, net
Income taxes 261
 395
 Income tax provisionIncome taxes1,422 19 Income tax provision
Net of tax $(475) $(645) Net of tax$(4,501)$(59)
Net unrealized holding gains on securities transferred between available-for-sale and held-to-maturity:     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 $(159) $(162) Interest income on investment securitiesAmortization of net unrealized gains to income during the period$(211)$(322)Interest and dividends on investment securities
Income taxes 60
 60
 Income tax provisionIncome taxes50 77 Income tax provision
Net of tax $(99) $(102) Net of tax$(161)$(245)
Amortization of Defined Benefit Pension items:     
Prior service (credits) costs $(19) $(18) 
Actuarial (gains) losses (18) (16) 
Amortization of defined benefit pension plan-related items:Amortization of defined benefit pension plan-related items:
Prior service creditsPrior service credits$(133)$(57)
Actuarial gainsActuarial gains(39)(47)
Total before tax $(37) $(34) Salaries, benefits and other compensationTotal before tax$(172)$(104)Salaries, benefits and other compensation
Income taxes 15
 14
 Income tax provisionIncome taxes41 25 Income tax provision
Net of tax (22) (20) Net of tax$(131)$(79)
Defined benefit pension plan settlement:Defined benefit pension plan settlement:
Realized losses on plan settlementRealized losses on plan settlement$279 $0 Other operating expense
Income taxesIncome taxes(67)0 Income tax provision
Net of taxNet of tax$212 $0 
Net unrealized gains on terminated cash flow hedges:Net unrealized gains on terminated cash flow hedges:
Amortization of net unrealized gains to income during the periodAmortization of net unrealized gains to income during the period$(295)$0 Interest and fees on loans and leases
Income taxesIncome taxes71 0 Income tax provision
Net of taxNet of tax$(224)$0 
Total reclassifications $(596) $(767) Total reclassifications$(4,805)$(383)

59
(Dollars in thousands) Nine Months Ended September 30, Affected line item in Consolidated Statements of Income
  2017 2016 
Securities available for sale:      
Realized gains on securities transactions $(1,764) $(1,890) Security gains, net
Income taxes 628
 718
 Income tax provision
Net of tax $(1,136) $(1,172)  
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 $(478) $(492) Interest income on investment securities
Income taxes 181
 187
 Income tax provision
Net of tax $(297) $(305)  
Amortization of Defined Benefit Pension items:      
Prior service (credits) costs $(57) $(44)  
Actuarial (gains) losses (52) 746
  
Total before tax $(109) $702
 Salaries, benefits and other compensation
Income taxes 42
 (266) Income tax provision
Net of tax (67) 436
  
Total reclassifications $(1,500) $(1,041)  
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15.18. RELATED PARTY TRANSACTIONS
In the ordinary course of business, from time to time we enterthe Company enters into transactions with related parties, including, but not limited to, ourits 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 features.to the Company. Any related party loans exceeding $0.5 million require review and approval by the Board of Directors. During the three months ended September 30, 2020, there were 0 loans originated to related parties exceeding $0.5 million. During the nine months ended September 30, 2020, there were 2 loans originated to related parties exceeding $0.5 million, both of which were sold during the second quarter. During the three and nine months ended September 30, 2019, there were 1 and 2 loans, respectively, originated to related parties exceeding $0.5 million.
The outstanding balances of loans to related parties at September 30, 20172020 and December 31, 20162019 were $1.1$0.2 million and $1.3$1.0 million, respectively. Total deposits from related parties at September 30, 20172020 and December 31, 20162019 were $6.6$9.2 million and $3.6$4.9 million, respectively. During the third quarter of 2017,2020, there was 1 new loansloan and credit line advancesadvance to related parties and repayments were each less than $0.1 million. For the nine months ended September 30, 2017, new loans and credit line advances to related parties were $0.4 million and repayments were $0.6$0.2 million.

16.19. LEGAL AND OTHER PROCEEDINGS
In accordance with the current accounting standards for loss contingencies, we establishthe Company establishes reserves for litigation-related matters that arise in the ordinary course of ourits 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, ourthe Company's defense of litigation claims may result in legal fees, which we expenseit 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 current accounting standards for loss contingencies, we establish reserves for litigation-related matterslitigation 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 ariseprovided 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 ordinary course2010 purchase agreement by which WSFS acquired CB&T.
In March 2017, Nature’s Healing Trust (NHT) filed a complaint against WSFS Bank in the Delaware Court of our business activities when it is probableChancery. NHT asserts that a loss associated with a claim or proceeding has been incurred andWSFS 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 loss can be reasonably estimated. Litigationtrust. NHT asserts claims and proceedings of all types are subject to many uncertain factors that generally cannot be predicted with assurance. In addition, our defense of litigation claims may result in legal fees, which we expense as incurred.
On April 7, 2015,against WSFS Bank received a noticefor breach of arbitrationcontract, breach of fiduciary duty, and statement of claim (the Claim) from Universitas Education, LLC (Universitas) relating to Christiana Trust acting as “insurance trustee”negligence, and seeks the face value of the Charter Oak Trust Welfare Benefit Plan (the Trust). The actions underlyingpolicies. WSFS Bank disputes the Claim occurred duringfactual allegations and denies liability. WSFS Bank has, in accordance with its normal procedures, notified its insurance carriers of a period prior to WSFS’ acquisition of Christiana Trust. According to the allegations contained in the Claim, certain life insurance policy benefits paid to an individual claiming/purporting to be a trustee of the Trust were misappropriated by individuals associated with the plan sponsor. None of those individuals, however, were employed by or agents of Christiana Trust orpossible claim. WSFS Bank. It is alleged that Christiana Trust, as insurance trustee, owed a fiduciary duty to the beneficiaries of the Trust and that it breached its fiduciary duty, was negligent, and aided and abetted fraud and theft in connection with the misappropriation of funds. It is further alleged that Universitas was the rightful beneficiary under the Trust of the misappropriated funds, and thus was harmed because it did not receive the death benefits that had been paid over to the purported trustee of the Trust. While the face amounts of the two insurance policies in question total $30 million, Universitas revised its total Claim to assert an alleged loss of approximately $27 million plus costs and interest to date of $27 million. WSFSBank is vigorously defending itself against the Claimin this matter and believes that it has valid factual and legal defenses to the Claim. The evidentiary hearing concluded late in the third quarter of 2017 and post-trial briefing will conclude in late November 2017. It is anticipated that a decision in the arbitration will be rendered during the fourth quarter of 2017 or the first quarter of 2018. WSFS does not believe that the ultimate resolution of the Claim will have a material adverse effect on the Company, but there can be no assurance as to the ultimate outcome.defenses.
There were no0 material changes or additions to other significant pending legal or other proceedings involving usthe Company other than those arising out of routine operations.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
WSFS Financial Corporation (the Company or WSFS) is a savings and loan holding company headquartered in Wilmington, Delaware. Substantially all of our assets are held by our subsidiary, Wilmington Savings Fund Society, FSB (WSFS Bank or the Bank), one of the ten oldest bank and trust companies continuously operating under the same name in the United States (U.S.). At $6.88$13.8 billion in assets and $18.07$23.1 billion in assets under management (AUM) and assets under administration (AUA), WSFS Bank is also the largest bank and trust company headquartered in the Delaware Valley. As a federal savings bank, which was formerly chartered as a state mutual savings bank, the Bank enjoys a broader fiduciary powersscope of permissible activities than most other types of financial institutions. A fixture in the community, we have been in operation for more than 185188 years. In addition to our focus on stellar customer service, we have continued to fuel growth and remain a leader in our community. We are a relationship-focused, locally-managed, community banking institution. We state ourOur mission simply:is simple: “We Stand for Service.” Our strategy of “Engaged Associates, delivering Stellar Experiences growing Customer Advocates and valueliving our culture, making a better life for our Owners”all we serve” focuses on exceeding customer expectations, delivering stellar experiences and building customer advocacy through highly-trained, relationship-oriented, friendly, knowledgeable and empowered Associates.
We have fivesix consolidated subsidiaries: WSFS Bank, WSFS Wealth Management, LLC (Powdermill), WSFS Capital Management, LLC (West Capital), Cypress Capital Management, LLC (Cypress) and, Christiana Trust Company of Delaware (Christiana Trust DE). and WSFS SPE Services, LLC. We also have one unconsolidated subsidiary, WSFS Capital Trust III. WSFS Bank has three wholly-ownedwholly owned subsidiaries: Beneficial Equipment Finance Corporation (BEFC), WSFS Investment Group, Inc. (WSFS Wealth Investments,Investments), and 1832 Holdings, Inc., and Monarch Entity Services LLC.one majority-owned subsidiary, NewLane Finance Company (NewLane Finance).
Our core banking business ishad a total loan portfolio of $9.3 billion as of September 30, 2020, which was funded primarily through commercial lending funded by customer-generatedrelationships and retail and customer generated deposits. We have built a $3.92$7.3 billion commercial loan and lease portfolio by recruiting the best seasoned commercial lenders in our markets, and offering the high level of service and flexibility typically associated with a community bank. We fund this business primarily with deposits generated through commercial relationships and retail deposits. As of September 30, 2017, we service our customers primarily from our 77 offices located in Delaware (46), Pennsylvania (29), Virginia (1) and Nevada (1)bank, and through our website at www.wsfsbank.com.acquisitions. We also offer a broad variety of consumer loan products, retail securities and insurance brokerage through our retail branches, and mortgage and title services through our branches and Pennsylvania-based WSFS Mortgage. WSFS Mortgage is a mortgage banking company specializing in a variety of residential mortgage and refinancing solutions. Our leasing business is conducted by NewLane Finance. NewLane Finance originates small business leases and provides commercial financing to businesses nationwide, targeting various equipment categories including technology, software, office, medical, veterinary and other areas.
TheOur Cash Connect® segment business is a premier provider of ATM vault cash, smart safe (safes that automatically accept, validate, record and hold cash in a secure environment) and other cash logistics services in the U.S. Cash Connect® manages $890.3 millionover $1.4 billion in total cash and services over 22,000approximately 28,000 non-bank ATMs and over 1,200approximately 4,300 smart safes nationwide. Cash Connect® provides related services such as online reporting and ATM cash management, predictive cash ordering and reconcilement services, armored carrier management, loss protection, ATM processing equipment sales and deposit safe cash logistics. Cash Connect® also operates over 440supports 635 branded ATMs for theWSFS Bank Customers, which has one of the largest branded ATM networknetworks in Delaware.our market.
As a provider of ATM vault cash to the U.S. ATM industry, Cash Connect® is exposed to substantial operational risk, including theft of cash from ATMs, armored vehicles, or armored carrier terminals, as well as general risk of accounting errors or fraud. This risk is managed through a series of financial controls, automated tracking and settlement systems, contracts, and other risk mitigation strategies, including both loss prevention and loss recovery strategies. Throughout its 17 year history, Cash Connect® periodically has been exposed to losses through theft from armored courier companies and consistently has been able to recover losses through its risk management strategies.
TheOur Wealth Management segmentbusiness provides a broad array of fiduciary,planning and advisory services, investment management, trust services, and credit and deposit products to individual, corporate, and institutional clients through sixmultiple integrated businesses. Combined, these businesses had $23.1 billion of AUM and AUA at September 30, 2020. WSFS Wealth Investments provides financial advisory services along with $177.2 million in AUM, provides insurance and brokerage products primarily to our retail banking clients.products. Cypress, a registered investment adviser, with approximately $860.2 million in AUM (includes $122.9 million of Christiana Trust assets for which Cypress serves as sub-adviser), is a fee-only wealth management firm offeringmanaging a “balanced” investment style portfolio focused on preservation of capital and providinggenerating current income whose primary market segment is high-net-worth individuals.income. West Capital, a registered investment adviser, with approximately $839.6 million in AUM, is a fee-only wealth management firm which operatesoperating under a multi-family office philosophy and provides fullyto provide customized solutions tailored to the unique needs of institutions and high-net-worth individuals. Christiana Trust, with $16.31 billion in AUM and assets under administration (includes $122.9 millionThe institutional trust division of Christiana Trust assets for which Cypress serves as sub-adviser)WSFS, WSFS Institutional Services®, provides fiduciary and investment services to personal trust clients; and trustee, agency, bankruptcy administration, custodial and commercial domicile services to institutional and corporate clients. Christiana Trust DE, a subsidiary of WSFS, provides personal trust and institutional clients.fiduciary services to families and individuals across the U.S. Powdermill is a multi-family office that specializesspecializing in providing unique, independent solutions to high-net-worth individuals, families and corporate executives through a coordinated, centralized approach. WSFS Private BankingWealth Client Management serves high-net-worth clients by delivering credit and deposit products and partnering with other businessWealth Management units to deliver investment managementprovide comprehensive solutions to clients.
As of September 30, 2020, we service our customers primarily from 115 offices located in Pennsylvania (54), Delaware (43), New Jersey, (16), Virginia (1) and fiduciary productsNevada (1), our ATM network, our website at www.wsfsbank.com and services.our mobile app.


As
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Recent Developments and Business Outlook
Our results through the third quarter of 2020 continue to be impacted by the COVID-19 pandemic and its impact on the economic forecasts that drive the estimates we use to determine the provision for credit losses. Contributing to the magnitude of the pandemic's effect is our adoption, as of January 1, 2020, of, the Current Expected Credit Loss (CECL) method of accounting, which considers forward-looking information when establishing reserves for credit losses. Results through the third quarter of 2020 and other notable items include the following:
•The COVID-19 pandemic resulted in acute deterioration in the economic forecast used in our CECL modeling, resulting in additional provision for credit losses of $154.1 million for the nine months ended September 30, 2020. Including the impact of our adoption of CECL, the allowance for credit losses increased to $185.2 million during the nine months ended September 30, 2020. During the three months ended September 30, 2020 our economic forecasts were relatively consistent with previous estimates and resulted in a provider of trust servicesmodest increase to our clients,provision for credit losses. We continue to incur other COVID-19 costs as we are exposednavigate through the COVID-19 pandemic. During the three and nine months ended September 30, 2020, we recorded $1.6 million and $3.5 million, respectively, of such other COVID-19 related costs. The COVID-19 pandemic also resulted in a lower interest rate environment, impacting our asset/liability management strategies. See "Interest Rate Sensitivity" and "Results of Operations" for further details.
•We participated in some of the regulatory relief programs offered as a result of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, including the Paycheck Protection Program (PPP). We have provided nearly $1.0 billion in PPP loans to operational, reputation-relatedmore than 5,400 new and legal risksexisting WSFS Customers. During the three and nine months ended September 30, 2020, we recorded $0.4 million and $2.4 million, respectively, of PPP related costs. We experienced an increase in deposits and liquidity due to these PPP loans and the inherent complexitycurrent economic environment. See "Financial Condition" and "Recent Regulatory Developments" for further details.
•During 2020, WSFS made a $3.0 million grant to the WSFS Community Foundation to address the impacts of COVID-19 on the communities we serve and provide long-term support for education, health and human services, and economic development in our communities. In addition, the WSFS Community Foundation provided $335,500 in grants to 25 local nonprofit organizations and schools engaged in the fight against COVID-19, and WSFS Bank provided a $200,000 donation to four community development financial institutions (CDFIs) to utilize for relief grants to help accelerate recovery efforts of local small businesses within the Bank’s footprint.
•During March 2020, we began a phased approach to our retail office closures and our retail branch offices only accepted drive-thru services. By the second quarter of 2020, nearly two-thirds of our retail offices were servicing our Customers. During this time, the retail office closures did not significantly impact our financial condition and results of operations, as our Customer deposits remained intact and the fees and costs associated with our Customer deposits remained under normal business operations. During the third quarter of 2020, we reopened all previously closed banking locations that service our Customers and continued with a carefully planned and phased approach to opening our remaining office locations that aligns with Federal, State and local guidance. Our non-retail office Associates continue to work from home; however, our ability to operate and execute on our strategy continues without disruption.
•In the nine months ended September 30, 2020, WSFS recorded net realized gains on our equity investments of $22.1 million from the sale of 360,000 Visa Class B shares. Since our adoption of ASU 2016-01 in 1Q 2018, cumulative realized and unrealized gains and dividends on Visa Class B shares total $78.1 million.
•Cash Connect® expanded its ATM network by adding over 150 ATMs during 2020 to serve Delaware and the greater Philadelphia region. The number of owned and branded ATMs increased to 635 as of September 30, 2020.
•During 2020, we announced the addition of two executive officers of WSFS. Michael P. Reed has joined as Executive Vice President, Chief Risk Officer and Michael L. Conklin has joined as Executive Vice President, Chief Human Resources Officer. We also announced that Peggy H. Eddens transitioned to Executive Vice President, Chief Customer Officer, and will be retiring at the end of 2021.
For a discussion of additional risk factors relating to COVID-19, see "Item 1A. Risk Factors."
Looking ahead, the continuation of the trust business. To mitigateeconomic effects of COVID-19 and actions taken in response to it, including the impacts of loan forbearances and forgiveness and other provisions of the CARES Act and other federal and state measures, may adversely impact our business and results of operations and the operations of our borrowers, customers and business partners.The uncertainty regarding the duration of the pandemic and the resulting economic disruption has caused increased market volatility and has led to an economic recession and a significant decrease in consumer confidence and business generally.The continuation of these conditions (including whether due to a resurgence of COVID-19 infections, particularly as the geographic areas in which we operate begin to re-open) and their ultimate impact of these factors is highly uncertain at this time and we do not yet know the full extent of the impacts on our business, our operations or the global economy as a whole. However, the decline in economic conditions generally and a prolonged negative impact on small to medium sized businesses, in particular, due to COVID-19 may result in an adverse effect to our business, financial condition and results of operations.For more information about these risks we rely on the hiring, development and retentionuncertainties, see “Item 1A. Risk Factors.”
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Table of experienced Associates, financial controls, managerial oversight, and other risk management practices. Also, from time to time our trust business may give rise to disputes with clients and we may be exposed to litigation which could result in significant costs. The ultimate outcome of any litigation is uncertain.Contents


FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
Financial Condition
Our totalTotal assets increased $110.1 million, or 2%,$1.6 billion to $6.88$13.8 billion at September 30, 20172020 compared to December 31, 2016. 2019. This increase is primarily comprised of the following (in descending order of magnitude):
•Net loans, excluding loans held for sale, increased $225.8$677.9 million or 5%,which included:
◦An increase of $954.2 million from PPP loans, in addition to growth in construction, owner-occupied commercial, and commercial small business leases, as well as an increase in home equity installment loans originated through our partnership with Spring EQ;
◦A decline during the year of $316.4 million from residential and commercial real estate, primarily due to growthnon-relationship run-off portfolios primarily acquired from the Beneficial Bancorp, Inc. (Beneficial) acquisition; and
◦An increase in the commercialallowance for credit losses, primarily from $154.1 million of provision for credit losses during the nine months ended September 30, 2020 due to the impact of the COVID-19 pandemic, significant deterioration in economic forecasts and industrial (C&I), construction and consumer loan portions of our loan portfolio. Available-for-sale investment securities increased $15.9 million, or 2% as part of our balance sheet management strategy. Partially offsetting these increases, cashportfolio credit migration.
•Cash and cash equivalents decreasedincreased $501.2 million, primarily reflecting excess cash held due to increased deposits related to PPP loans and CARES Act payments, partially offset by $88.6a decline of $60.1 million or 11%, due primarily to the redemption of $55.0 million of our 6.25% senior notes due 2019, which were issued in 2012 (the 2012 senior notes) as well asfrom improved cash optimization at Cash Connect® resulting due to an increased use of external funding sources to support the bailment, cash management and smart safe lines of business offset by changes in lower cash balancesseasonality.
•Investment securities, available-for-sale increased $390.0 million during the nine months ended September 30, 2020 primarily due to $943.7 million in non-owned ATMs. purchases and favorable market-value changes on available-for-sale securities of $41.8 million, partially offset by repayments of $409.0 million and sales of $198.9 million.
•Loans held for sale increased $68.6 million during the nine months ended September 30, 2020 driven by an increase in residential mortgage loan originations.
•Other investments decreased $35.5$59.6 million or 65%, consistent with our strategy to sell most newly originated residential mortgages induring the secondary market.nine months ended September 30, 2020 as we sold 360,000 Visa Class B shares during the second quarter of 2020.
Total liabilities increased $56.5 million, or less than 1%,$1.6 billion to $6.13$12.0 billion during the nine months ended September 30, 2017. Deposits2020 compared to December 31, 2019. These increases are primarily comprised of the following (in descending order of magnitude):
•Total deposits increased $313.3 million, or 7%, includingby $1.8 billion, primarily due to an increase of $278.2 million in customer funding and an increase of $35.1 million in brokered deposits. The increase in customer funding, reflecting elevated deposits from Customers who received PPP loans, the impact of government stimulus checks and less customer spending during the COVID-19 pandemic. The ratio of loans to customer deposits was mainly83% at September 30, 2020 reflecting significant liquidity capacity;
•Federal funds purchased decreased $195.0 million due to an increase of $314.2 million in core deposits. This increase includes a seasonal increase in public funding balance core deposit balances of $155.7 million as well as other organic core deposit growth of $158.5 million, partially offset a decline in CDs of $36.1 million. Growth in deposits was partially offset by FHLB advances, which decreased $156.4 million, or 18%, and lower federal funds purchased and securities sold under agreement to repurchase, which decreased $60.0 million or 46%, both a result of the increase in deposits. Senior debtcustomer funding, as described above; and
•FHLB advances decreased $53.9$95.9 million or 35%, primarily due to the redemptiontermination of the 2012 senior notes, net of the associated write-off of unamortized debt issuance costs,fixed rate FHLB term advances as part of our continued net interest margin management strategy.routine balance sheet and liquidity management.
For further information, see "Notes to the unaudited Consolidated Financial Statements."

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Capital Resources
Senior Debt: On September 1, 2017, WSFS redeemed $55.0 million in aggregate principal amount of the 2012 senior notes. We recorded noninterest expense of $0.7 million due to the write-off of unamortized debt issuance costs in connection with this redemption.
Share Repurchases:During the secondfirst quarter of 2016, WSFS issued $100.02020, we repurchased $38.7 million, in aggregate principal amount of 4.50% fixed-to-floating rate senior notes due June 15, 2026 (the 2016 senior notes). The Company is using the net proceeds from the offering for general corporate purposes. See Note 1 to the Consolidated Financial Statements for further information.
Share Repurchases: During the third quarter of 2017, WSFS repurchased 71,000or 1,004,348 shares of common stock at an average price of $44.78 as part of$38.53 per share, completing our 5% share buybackrepurchase program approved by the Board of Directors duringin the fourth quarter of 2015. WSFS has 750,194 shares, or more than 2%2018. Also in the first quarter of 2020, the Board of Directors approved a new share purchase authorization of 15% of outstanding shares, remainingshares. However, we temporarily suspended all share repurchases through the third quarter of 2020 due to repurchase under this authorization.the impact of COVID-19 on the economy and our performance. Based on our current balance sheet, capital position and earnings, as well as additional clarity on the economic and credit environment, our Board of Directors approved the resumption of share repurchases in the fourth quarter of 2020.
Stockholders’ equity of WSFS increased $53.5$13.2 million between December 31, 20162019 and September 30, 2017.2020. This increase was primarily due to net$55.0 million of income attributable to WSFS for the nine months ended September 30, 20172020 and $41.8 million from the effect of $60.1 million, improvement in the fair value of ourmarket-value changes on available-for-sale securities, portfolio of $5.8 million (after-tax) and an increase of $4.8 million related to the issuance of stock based compensation and stock option expense. These were partially offset by year-to-date$38.7 million for repurchases of common stock buybacksunder the previously announced stock repurchase plan, a $30.4 million impact to retained earnings due to the adoption of $9.2 millionCECL, and the payment of dividends on our common stock dividends of $6.6$18.3 million.

The table below compares the Bank's and the Company’s consolidated capital positionOur Board of Directors approved a quarterly cash dividend of $0.12 per share of common stock. This dividend will be paid on November 19, 2020 to the minimum regulatory requirementsstockholders of record as of September 30, 2017:November 5, 2020.
  
Consolidated
Capital
 
For Capital
Adequacy Purposes
 
To be Well-Capitalized
Under Prompt Corrective
Action Provisions
(Dollars in thousands) Amount Percent Amount Percent Amount Percent
Total Capital (to Risk-Weighted Assets)            
Wilmington Savings Fund Society, FSB $716,943
 12.22% $469,233
 8.00% $586,542
 10.00%
WSFS Financial Corporation 672,476
 11.43% 470,701
 8.00% 588,376
 10.00%
Tier 1 Capital (to Risk-Weighted Assets)            
Wilmington Savings Fund Society, FSB 675,623
 11.52% 351,925
 6.00% 469,233
 8.00%
WSFS Financial Corporation 631,157
 10.73% 353,026
 6.00% 470,701
 8.00%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)            
Wilmington Savings Fund Society, FSB 675,623
 11.52% 263,944
 4.50% 381,252
 6.50%
WSFS Financial Corporation 566,220
 9.62% 264,769
 4.50% 382,444
 6.50%
Tier 1 Leverage Capital            
Wilmington Savings Fund Society, FSB 675,623
 10.24% 263,794
 4.00% 329,742
 5.00%
WSFS Financial Corporation 631,157
 9.54% 264,796
 4.00% 330,996
 5.00%
Book value per share of common stock was $23.59$36.77 at September 30, 2017,2020, an increase of $1.69, or 8%$0.89 from $21.90$35.88 at December 31, 2016.2019. Tangible book value per share of common stock (a non-GAAP financial measure) was $17.57$25.73 at September 30, 2017,2020, an increase of $1.77, or 11%,$0.88 from $15.80$24.85 at December 31, 2016.2019. We believe tangible common book value per common share helps management and investors better understand and assess changes from period to period in stockholders’ equity exclusive of changes in intangible assets. This non-GAAP data should be considered in addition to results prepared in accordance with GAAP,Generally Accepted Accounting Principles in the U.S. (GAAP), and is not a substitute for, or superior to, GAAP results. For a reconciliation of tangible common book value per common share to book value per share in accordance with GAAP, see "Reconciliation"Reconciliation of Non-GAAP Measure to GAAP Measure".Measure."
RegulatorsThe table below compares the Bank's and the Company’s consolidated capital position to the minimum regulatory requirements as of September 30, 2020:
 Consolidated
Capital		For Capital
Adequacy Purposes		To be Well-Capitalized
Under Prompt Corrective
Action Provisions
(Dollars in thousands)AmountPercentAmountPercentAmountPercent
Total Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB$1,473,337 14.50 %$812,713 8.00 %$1,015,891 10.00 %
WSFS Financial Corporation1,473,652 14.47 %814,844 8.00 %1,018,555 10.00 %
Tier 1 Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB1,345,296 13.24 %609,535 6.00 %812,713 8.00 %
WSFS Financial Corporation1,345,282 13.21 %611,133 6.00 %814,844 8.00 %
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB1,345,296 13.24 %457,151 4.50 %660,329 6.50 %
WSFS Financial Corporation1,280,282 12.57 %458,350 4.50 %662,061 6.50 %
Tier 1 Leverage Capital
Wilmington Savings Fund Society, FSB1,345,296 10.31 %521,967 4.00 %652,458 5.00 %
WSFS Financial Corporation1,345,282 10.30 %522,328 4.00 %652,910 5.00 %
Under the prompt corrective action regime, regulators have established five capital tiers: well-capitalized, adequately-capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized. A depository institution’s capital tier depends on its capital levels in relation to various relevant capital measures, which include leveraged and risk-based capital measures and certain other factors. Depository institutions that are not classified as well-capitalized are subject to various restrictions regarding capital distributions, payment of management fees, acceptance of brokered deposits and other operating activities.
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Regulatory capital requirements for the Bank and the Company include a minimum common equity Tier 1 capital ratio of 4.50% of risk-weighted assets, a Tier 1 capital ratio of 6.00% of risk-weighted assets, a minimum Total capital ratio of 8.00% of risk-weighted assets and a minimum Tier 1 leverage capital ratio of 4.00% of average assets. PPP loans receive a zero percent risk weighting under the regulators' capital rules. In order to avoid limits on capital distributions and discretionary bonus payments, the Bank and the Company must maintain a capital conservation buffer of 2.5% of common equity Tier 1 capital over each of the risk-based capital requirements.
Not includedAs part of our adoption of CECL, we elected the Implementation and Transition of the Current Expected Credit Losses Methodology for Allowances and Related Adjustments to the Regulatory Capital Rule and Conforming Amendments to Other Regulations, which permits the Company to phase in the Bank’sday-one adverse effects on regulatory capital that may result from the Company separately held $32.5 million in cashadoption of CECL over a three-year period. In addition, the final rule revises the agencies' regulatory capital rule, stress testing rules, and regulatory disclosure requirements to support share repurchases, potential dividends, acquisitions, strategic growth plansreflect CECL, and makes conforming amendments to other general corporate purposes.regulations that reference allowance for credit losses.
As shown in the table above, as of September 30, 2017,2020, the Bank and the Company were in compliance with regulatory capital requirements and exceeded the amounts required to be considered “well capitalized”“well-capitalized” as defined in the regulations.

Not included in the Bank’s capital, the Company separately held $90.7 million in cash to support share repurchases, potential dividends, acquisitions, strategic growth plans and other general corporate purposes.

As a result of the three-year period phase-in related to our CECL adoption, the impact (by bps) to our capital ratios were as follows:
September 30, 2020
(Dollars in thousands)As Reported
Proforma(1)
CECL Impact
Total Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB14.50 %14.59 %(0.09)%
WSFS Financial Corporation14.47 %14.55 %(0.08)%
Tier 1 Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB13.24 %13.32 %(0.08)%
WSFS Financial Corporation13.21 %13.29 %(0.08)%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)
Wilmington Savings Fund Society, FSB13.24 %13.32 %(0.08)%
WSFS Financial Corporation12.57 %12.65 %(0.08)%
Tier 1 Leverage Capital
Wilmington Savings Fund Society, FSB10.31 %10.36 %(0.05)%
WSFS Financial Corporation10.30 %10.35 %(0.05)%
(1) Excludes the phase-in impact of CECL.



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Liquidity
We manage our liquidity and funding needs through our Treasury function and our Asset/Liability Committee. We have a policy that separately addresses liquidity, and management monitors our adherence to policy limits. Also, liquidity risk management is a primary area of examination by the banking regulators.
We have ready access to several fundingFunding sources to fundsupport growth and meet our liquidity needs.  Among these areneeds include cash from operations, retail deposit programs, loan repayments, FHLB borrowings, repurchase agreements, access to the Federal Reserve Discount Window, and access to the brokered deposit market as well as other wholesale funding avenues. In addition, we have a large portfolio of high-quality, liquid investments, primarily short-duration mortgage-backed securities, that provide a near-continuous source of cash flow to meet current cash needs, or can be sold to meet larger discrete needs for cash. We believe these sources are sufficient to meet our funding needs as well as maintain required and prudent levels of liquidity over the next twelve months.
During the nine months ended September 30, 2017,2020, cash, and cash equivalents decreased $88.6and restricted cash increased $501.2 million to $733.4 million$1.1 billion from $821.9$571.8 million as of December 31, 2016.2019. Cash provided by operating activities was $107.8$48.9 million, primarily reflecting the cash impact of earnings and gains of $22.8 million from the sale of debt and equity securities (including Visa Class B shares), offset by a $73.4 million increase in net activity for loans held for sale during the nine months ended September 30, 2017.2020. Cash used byin investing activities was $230.9 million,$1.0 billion primarily due to $792.9 million from increased lending activity related to PPP loans and net purchases of $232.0debt securities of $534.7 million, $5.7 million of net investment in premises and equipment, and $4.1 million of net cash paid for available-for-sale securities, partially offset by $5.0proceeds of $198.9 million received from net redemptions of FHLB stock and $4.4 million received from sales of other real estate owned (OREO) properties.debt securities and net proceeds of $85.9 million from the sale of Visa Class B shares. Cash provided by financing activities was $34.5 million,$1.5 billion, primarily due to a $319.8 million$1.8 billion net increase in deposits, as a result of the increase in customer funding discussed above, partially offset by $156.4$195.0 million used to repay FHLB advances, $60.0 million from repayments onfor repayment of federal funds purchased, and securities sold under agreement to repurchase, $55.0 million from the redemption of our 2012 senior debt, $9.2$95.9 million for repurchaserepayment of FHLB advances, $38.7 million for repurchases of common stock under the previously announced stock repurchase plan and cash paid forcommon stock dividends of $6.6$18.3 million.


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NONPERFORMING ASSETS
Nonperforming assets include nonaccruing loans, OREO and restructured loans. Nonaccruing loans are those on which we no longer accrue interest. Loans are placed on nonaccrual status immediately if, in the opinion of management, collection is doubtful, or when principal or interest is past due 90 days or more and the value of the collateral is insufficient to cover principal and interest. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed and charged against interest income. In addition, the amortization of net deferred loan fees is suspended when a loan is placed on nonaccrual status. Subsequent cash receipts are applied either to the outstanding principal balance or recorded as interest income, depending on management’s assessment of the ultimate collectability of principal and interest. Past due loans are defined as loans contractually past due 90 days or more as to principal or interest payments but which remain in accrual status because they are considered well secured and in the process of collection.

The following table shows our nonperforming assets and past due loans at the dates indicated:
indicated, which presents the portfolio segment totals at the amortized cost in accordance with our adoption of CECL at September 30, 2020, and at the unpaid principal balance under the incurred loss methodology at December 31, 2019:
(Dollars in thousands) September 30, 2017 December 31, 2016(Dollars in thousands)September 30, 2020December 31, 2019
Nonaccruing loans:    Nonaccruing loans:
Commercial $12,705
 $2,015
Commercial and industrialCommercial and industrial$14,690 $11,031 
Owner-occupied commercial 3,346
 2,078
Owner-occupied commercial4,022 4,060 
Commercial mortgages 8,803
 9,821
Commercial mortgages1,652 1,626 
Construction 1,839
 —
Residential mortgages 4,733
 4,967
ResidentialResidential3,082 4,490 
Consumer 2,110
 3,995
Consumer2,389 1,715 
Total nonaccruing loans 33,536
 22,876
Total nonaccruing loans25,835 22,922 
Other real estate owned 3,924
 3,591
Other real estate owned3,000 2,605 
Restructured loans (1)
 14,905
 14,336
Restructured loans(1)(6)
Restructured loans(1)(6)
15,670 14,281 
Total nonperforming assets $52,365
 $40,803
Total nonperforming assets$44,505 $39,808 
Past due loans: (1)
    
Past due loans:Past due loans:
Commercial $685
 $—
Commercial$5,610 $2,968 
Residential mortgages $557
 $153
Consumer 96
 285
ResidentialResidential— 437 
Consumer (2)
Consumer (2)
6,276 12,745 
Total past due loans $1,338
 $438
Total past due loans$11,886 $16,150 
Ratio of allowance for loan losses to total gross loans (2)
 0.86% 0.89%
Ratio of nonaccruing loans to total gross loans (2)
 0.71
 0.51
Ratio of allowance for credit losses to total loans and leases(3)
Ratio of allowance for credit losses to total loans and leases(3)
2.47 %0.56 %
Ratio of nonaccruing loans to total gross loans and leases(4)
Ratio of nonaccruing loans to total gross loans and leases(4)
0.28 0.27 
Ratio of nonperforming assets to total assets 0.76
 0.60
Ratio of nonperforming assets to total assets0.32 0.32 
Ratio of loan loss allowance to nonaccruing loans 119.87
 173.77
Ratio of loan loss allowance to total nonperforming assets 0.77
 0.97
Ratio of allowance for credit losses to nonaccruing loansRatio of allowance for credit losses to nonaccruing loans901 208 
Ratio of allowance for credit losses to total nonperforming assets(5)
Ratio of allowance for credit losses to total nonperforming assets(5)
523 120 
(1)
(1)Accruing loans only, which includes acquired nonimpaired loans. Nonaccruing Troubled Debt Restructurings (TDRs) are included in their respective categories of nonaccruing loans.
(2)Includes U.S. government guaranteed student loans with little risk of credit loss.
(3)Represents amortized cost basis for loans, leases and held-to-maturity securities.
(4)Total loans exclude loans held for sale and reverse mortgages.
(5)Excludes acquired impaired loans.
(6)Balance excludes COVID-19 modifications.

Accruing loans only, which includes acquired nonimpaired loans. Nonaccruing Troubled Debt Restructurings (TDRs) are included in their respective categories of nonaccruing loans.
(2)
Total loans exclude loans held for sale and reverse mortgages.
Nonperforming assets increased $11.6$4.7 million between December 31, 20162019 and September 30, 2017. As2020. This increase was primarily the result of the move of one commercial relationship totaling approximately $7.3 million to non-accrual, partially offset by collection efforts, which includes both continued monthly payments and a result, thefew modest payoffs. The ratio of nonperforming assets to total assets increasedwas relatively flat as compared to 0.76% at September 30, 2017 from 0.60% at December 31, 2016. The increase was primarily due to one locally-based, commercial and industrial participation that was downgraded during the first quarter2019.

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Table of 2017 after a targeted energy sector review which has a current balance of $9.0 million. The loan relationship has been, and continues to be, paying current, and positive resolution is expected. A comprehensive impairment analysis was completed and the results are included in the provision for loan losses for the nine months ended September 30, 2017. Owner-occupied commercial and construction nonaccruing loans increased as several smaller relationships migrated to nonaccruing. Commercial mortgage nonaccruing loans declined $1.0 million and consumer nonaccruing loans declined $1.9 million due to the repayment of one long-term problem loan of $1.3 million as well as several loans which returned to accrual status.Contents
The following table summarizes the changes in nonperforming assets during the periods indicated:
 Nine months ended Nine months endedNine Months Ended September 30,
(Dollars in thousands) September 30, 2017 September 30, 2016(Dollars in thousands)20202019
Beginning balance $40,803
 $39,892
Beginning balance$39,808 $47,675 
Additions 37,028
 32,918
Additions23,276 46,879 
Collections (14,890) (23,950)Collections(11,893)(20,491)
Transfers to accrual (2,694) (681)Transfers to accrual(134)(1,240)
Charge-offs (7,882) (7,593)Charge-offs(6,552)(16,587)
Ending balance $52,365
 $40,586
Ending balance$44,505 $56,236 
The timely identification of problem loans is a key element in our strategy to manage our loan portfolio. Problem loans are all criticized, classified and nonperforming loans and other real estate owned. Timely identification enables us to take appropriate action and accordingly, minimize losses. An asset review system established to monitor the asset quality of our loans and investments in real estate portfolios facilitates the identification of problem assets. In general, this system utilizesuses guidelines established by federal regulation.

In response to the COVID-19 pandemic, the CARES Act was enacted to provide certain measures to support individuals and businesses in maintaining solvency through monetary relief, including in the form of financing and automatic forbearance. Our modified loans, most of which were short-term in duration, decreased significantly from the amounts reported for the second quarter of 2020.
The following table summarizes the COVID-19 modifications by portfolio segment as of October 15, 2020, September 30, 2020, and June 30, 2020:
October 15, 2020September 30, 2020June 30, 2020
(Dollars in thousands)Loan Balances% of PortfolioLoan Balances% of PortfolioLoan Balances% of Portfolio
Commercial and industrial(1)
$94,278 4 %$139,856 7 %$675,724 30 %
Owner-occupied commercial9,764 1 %10,643 1 %380,432 28 %
Commercial mortgages53,005 2 %53,122 2 %700,889 32 %
Construction1,744 — %1,748 — %109,861 17 %
Residential34,954 4 %34,985 4 %86,581 9 %
Consumer(2)(3)
38,304 3 %42,406 4 %65,162 7 %
$232,049 3 %$282,760 3 %$2,018,649 24 %
(1)Includes modifications of leases with balances of $0.2 million, $0.2 million and $39.3 million at October 15, 2020, September 30, 2020, and June 30, 2020, respectively.
(2)Includes modifications of education loans with balances of $23.7 million, $27.7 million, $29.3 million at October 15, 2020 September 30, 2020, and June 30, 2020, respectively.
(3)Includes modifications of credit card loans with balances of $0.1 million, $0.1 million, and $0.3 million at October 15, 2020 September 30, 2020, and June 30, 2020, respectively.

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INTEREST RATE SENSITIVITY

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

The matching of maturities or repricing periods of interest rate-sensitive assets and liabilities to promote a favorable interest rate spread and mitigate exposure to fluctuations in interest rates is our primary tool for achieving our asset/liability management strategies. We regularly review our interest rate sensitivity and adjust the sensitivity within acceptable tolerance ranges. At September 30, 2017,2020, interest-earning liabilitiesassets exceeded interest-bearing assetsliabilities that mature or reprice within one year (interest-sensitive gap) by $116.9 million.$1.0 billion. Our interest-sensitive assets as a percentage of interest-sensitive liabilities within the one-year window increased from 91.03%was 118.92% at September 30, 2020 compared with 95.02% at December 31, 2016 to 96.35% at September 30, 2017.2019. Likewise, the one-year interest-sensitive gap as a percentage of total assets increased from (4.41)was 7.58% at September 30, 2020 compared with (2.06)% at December 31, 2016 to (1.70)% at September 30, 2017. The low rate level of sensitivity reflects our continuing efforts to effectively manage interest rate risk.2019.

Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from interest rate risk inherent in our lending, investing, and funding activities. To that end, we actively monitor and manage our interest rate risk exposure. One measure, which we are required to perform by federal regulation, measures the impact of an immediate change in interest rates in 100 basis point increments on the economic value of equity ratio. The economic value of the equity ratio is defined as the economic value of the estimated cash flows from assets and liabilities as a percentage of economic value of cash flows from total assets.
The following table shows the estimated impact of immediate changes in interest rates on our net interest margin and economic value of equity ratio at the specified levels at September 30, 20172020 and December 31, 2016:2019:
 
 September 30, 2017 December 31, 2016September 30, 2020December 31, 2019
% Change in Interest Rate (Basis Points) 
% Change in Net
Interest Margin (1)
 
Economic Value of Equity (2)
 
% Change in Net
Interest Margin (1)
 
Economic Value of Equity (2)
% Change in Interest Rate (Basis Points)
% Change in Net
Interest Margin(1)
Economic Value of Equity(2)
% Change in Net
Interest Margin(1)
Economic Value of Equity(2)
+300 6% 15.95% 3% 14.04%+30013.9%18.16%5.8%18.97%
+200 4% 15.96% 2% 14.09%+2009.2%17.74%4.0%19.18%
+100 2% 15.79% <1% 14.00%+1004.4%17.05%2.0%19.23%
+50+502.1%16.57%1.0%19.14%
+25+251.0%16.30%0.5%19.06%
— —% 15.47% —% 13.80%——%16.02%—%18.97%
-25-25(0.7)%15.68%(0.5)%18.85%
-50-50(1.1)%15.17%(0.9)%18.72%
-100 (3)% 14.53% <1% 13.08%-100(1.3)%14.77%(2.4)%18.30%
-200(3)
 NMF NMF NMF NMF
'-200(3)
'-200(3)
NMFNMFNMFNMF
-300(3)
 NMF NMF NMF NMF
-300(3)
NMFNMFNMFNMF
(1)
(1)The percentage difference between net interest margin in a stable interest rate environment and net interest margin as projected under the various rate change environments.
(2)The economic value of equity ratio in a stable interest rate environment and the economic value of equity ratio as projected under the various rate change environments.
(3)Sensitivity indicated by a decrease of 200 and 300 basis points is not deemed meaningful (NMF) given the low absolute level of interest rates in the periods presented.
The percentage difference between net interest margin in a stable interest rate environment and net interest margin as projected under the various rate change environments.
(2)
The economic value of equity ratio of the Company in a stable interest rate environment and the economic value of equity ratio as projected under the various rate change environments.
(3)
Sensitivity indicated by a decrease of 200 or 300 basis points is not deemed meaningful (NMF) given the low absolute level of interest rates in the periods presented.
We also engage in other business activities that are sensitive to changes in interest rates. For example, mortgage banking revenues and expenses can fluctuate with changing interest rates. These fluctuations are difficult to model and estimate.



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RESULTS OF OPERATIONS
Three months ended September 30, 2017:Net2020: For the three months ended September 30, 2020, there was net income was $20.6of $51.1 million compared to $53.9 million for the three months ended September 30, 20172019.
•Net interest income decreased $7.8 million during the three months ended September 30, 2020 compared with $12.7 millionto the three months ended September 30, 2019, primarily due to a lower interest rate environment and a decrease in purchase accounting accretion, partially offset by the positive impact of PPP income. See “Net Interest Income” for further information.
•Our provision for credit losses for the three months ended September 30, 2016. Net interest2020 slightly decreased compared to the three months ended September 30, 2019. See “Provision/Allowance for Credit Losses” for further information.
•Noninterest income for the three months ended September 30, 2017 was $56.1 million, an increase of $7.12020 decreased $13.2 million compared to the three months ended September 30, 2016,2019, primarily due primarily to loan portfolio growth,the lower combined gains on debt and equity securities in the current period compared to the prior period and lower interchange fees. These decreases were partially offset by higher interestincreases in mortgage banking business and trust services revenue. See “Noninterest Income” for further information.
•Noninterest expense related to deposit growth, our issuance of the 2016 senior notes during the second quarter of 2016, and higher FHLB advances. Noninterest income increased $4.9 million to $32.4decreased $16.0 million during the three months ended September 30, 2017, primarily due2020 compared to increased investment management and fiduciary revenue and growth in credit/debit card and ATM income. See “Noninterest (Fee) Income” for further information. Partially offsetting these increases was a $2.9 million increase in noninterest expense during the three months ended September 30, 2017, primarily reflecting higher employee-related2019 due to a decrease in net corporate development and ongoing operatingrestructuring costs related to support our organic and acquisition growth.of Beneficial, partially offset by the loss on early extinguishment of debt during the third quarter of 2020. See “Noninterest“Noninterest Expense” for further information.
Nine months ended September 30, 2017: Net2020: For the nine months ended September 30, 2020, net income was $60.1$55.0 million compared to $103.1 million for the nine months ended September 30, 20172019.
•Net interest income increased $15.6 million during the nine months ended September 30, 2020 compared with $46.0 millionto the nine months ended September 30, 2019, primarily due to decrease in rates on deposits, the positive impact of PPP loans, and lower interest on borrowings. See “Net Interest Income” for further information.
•Our provision for credit losses for the nine months ended September 30, 2016. Net interest income for the nine months ended September 30, 2017 was $163.5 million, an increase of $22.82020 increased $130.1 million compared to the nine months ended September 30, 2016,2019, primarily due to the COVID-19 pandemic and its continued impact on the economic forecast used in our CECL modeling. See “Provision/Allowance for Credit Losses” for further information.
•Noninterest income for the nine months ended September 30, 2020 increased $8.1 million compared to the nine months ended September 30, 2019, primarily due to loan portfolio growth partially offset by higher interest expense related to deposit growth,across most of our issuancebusiness lines with the full impact of the 2016 senior notes lateBeneficial acquisition during the nine months ended September 30, 2020 as well as an increase in the second quartersale of 2016,MBS compared to the prior period. Partially offsetting these increases were lower interchange fees, the net impact on the sale of our Visa Class B shares and higher FHLB advances. lower deposit service charges. See “Noninterest Income” for further information.
•Noninterest income increased $15.4 million to $92.2expense decreased $39.5 million during the nine months ended September 30, 2017, primarily due2020 compared to increased investment management and fiduciary revenue and growth in credit/debit card and ATM income. See “Noninterest (Fee) Income” for further information. Partially offsetting these increases was a $18.7 million increase in noninterest expenses during the nine months ended September 30, 2017, primarily reflecting2019 due to a decrease in net corporate development and restructuring costs related to our acquisition of Beneficial, partially offset by higher expense related to employee-related costs, professional fees, credit-related costs (including loan workout expenses, OREO expenses and ongoing operating costsother credit costs), contribution to support our organicthe WSFS Community Foundation and acquisition growth.the loss on early extinguishment of debt. See “Noninterest“Noninterest Expense” for further information.
Efficiency Ratio: Our noninterest expenses are driven by our high-touch, high-service model. This, combined with our significant and diverse fee income mix, resulted in a third quarter 2017 efficiency ratio
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Table of 60.6% compared to 66.2% for the third quarter of 2016 and 60.8% for the second quarter of 2017. Management believes its operating costs are at an appropriate level and scale for our size, products and services as our fee-based businesses typically carry a higher efficiency ratio as they derive revenue primarily based on active human capital costs versus passive assets. We continue to optimize and review our operations in order to limit cost increases or reduce costs, and expect continued improvement of our efficiency ratio in the fourth quarter, resulting in a fourth quarter ratio in the high 50%s. We expect to achieve our goal of a relatively flat efficiency ratio for the full year 2017 as compared to full year 2016 through continued reinvestment in our balance sheet and capabilities to support our organic and acquisition-related growth, as well as increased contributions from our fee-based businesses.Contents


Net Interest Income
The following tables provide information concerning the balances, yields and rates on interest-earning assets and interest-bearing liabilities during the periods indicated:
 Three months ended September 30,
 20202019
(Dollars in thousands)Average
Balance		Interest
Yield/
Rate(1)
Average
Balance		Interest
Yield/
Rate(1)
Assets:
Interest-earning assets:
Loans:(2)
Commercial real estate loans$2,848,655 $30,218 4.22 %$2,783,199 $37,492 5.34 %
Residential loans892,634 12,512 5.61 1,069,495 14,580 5.45 
Commercial loans and leases4,472,190 52,753 4.70 3,548,597 55,903 6.26 
Consumer loans1,153,168 13,726 4.74 1,135,575 16,286 5.69 
Loans held for sale110,768 986 3.54 50,465 539 4.24 
Total loans and leases9,477,415 110,195 4.63 8,587,331 124,800 5.77 
Mortgage-backed securities(3)
2,204,573 11,686 2.12 1,833,267 12,989 2.83 
Investment securities(3)
119,556 1,265 4.86 137,497 968 3.35 
Other interest-earning assets530,178 224 0.17 423,470 2,505 2.35 
Total interest-earning assets12,331,722 $123,370 3.99 %10,981,565 $141,262 5.11 %
Allowance for credit losses(233,301)(46,773)
Cash and due from banks135,198 115,506 
Cash in non-owned ATMs370,912 313,456 
Bank-owned life insurance30,956 30,558 
Other noninterest-earning assets1,012,506 1,024,108 
Total assets$13,647,993 $12,418,420 
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand$2,372,547 $790 0.13 %$2,055,497 $2,490 0.48 %
Money market2,404,202 1,805 0.30 1,966,545 5,034 1.02 
Savings1,753,489 621 0.14 1,579,463 2,068 0.52 
Customer time deposits1,234,637 4,402 1.42 1,371,744 5,452 1.58 
Total interest-bearing customer deposits7,764,875 7,618 0.39 6,973,249 15,044 0.86 
Brokered certificates of deposit243,728 728 1.19 294,485 1,807 2.43 
Total interest-bearing deposits8,008,603 8,346 0.41 7,267,734 16,851 0.92 
Federal Home Loan Bank advances68,442 445 2.59 187,721 1,099 2.32 
Trust preferred borrowings67,011 347 2.06 67,011 693 4.10 
Senior debt98,733 1,179 4.78 98,519 1,179 4.79 
Other borrowed funds(4)
20,062 5 0.10 127,850 607 1.88 
Total interest-bearing liabilities8,262,851 $10,322 0.50 %7,748,835 $20,429 1.05 %
Noninterest-bearing demand deposits3,176,647 2,503,816 
Other noninterest-bearing liabilities374,206 323,350 
Stockholders’ equity1,836,256 1,842,759 
Noncontrolling interest(1,967)(340)
Total liabilities and stockholders’ equity$13,647,993 $12,418,420 
Excess of interest-earning assets over interest-bearing liabilities$4,068,871 $3,232,730 
Net interest and dividend income$113,048 $120,833 
Interest rate spread3.49 %4.06 %
Net interest margin3.66 %4.38 %
(1)Weighted average yields for tax-exempt securities and loans have been computed on a tax-equivalent basis.
(2)Average balances are net of unearned income and include nonperforming loans.
(3)Includes securities available-for-sale at fair value.
(4)Includes federal funds purchased.


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  Three months ended September 30,
  2017 2016
(Dollars in thousands) 
Average
Balance
 Interest 
Yield/
Rate (1)
 
Average
Balance
 Interest 
Yield/
Rate (1)
Assets:            
Interest-earning assets:            
Loans: (2)
            
Commercial real estate loans $1,422,306
 $18,186
 5.07% $1,264,882
 $15,470
 4.87%
Residential real estate loans 269,134
 3,747
 5.57
 283,818
 4,490
 6.33
Commercial loans 2,471,382
 30,013
 4.85
 2,187,214
 25,050
 4.59
Consumer loans 509,750
 6,329
 4.93
 414,653
 4,485
 4.30
Loans held for sale 22,734
 229
 4.03
 40,615
 354
 3.49
Total loans 4,695,306
 58,504
 4.96
 4,191,182
 49,849
 4.75
Mortgage-backed securities (3)
 809,655
 4,955
 2.45
 736,100
 3,854
 2.09
Investment securities (3)
 168,526
 1,139
 4.08
 201,264
 1,214
 3.54
Other interest-earning assets 36,992
 412
 4.46
 35,033
 420
 4.80
Total interest-earning assets 5,710,479
 65,010
 4.57% 5,163,579
 55,337
 4.32%
Allowance for loan losses (40,831)     (39,053)    
Cash and due from banks 118,056
     122,561
    
Cash in non-owned ATMs 558,855
     600,821
    
Bank-owned life insurance 102,513
     100,989
    
Other noninterest-earning assets 344,783
     241,370
    
Total assets $6,793,855
     $6,190,267
    
Liabilities and Stockholders’ Equity:            
Interest-bearing liabilities:            
Interest-bearing deposits:            
Interest-bearing demand $939,239
 $606
 0.26% $855,052
 $295
 0.14%
Money market 1,324,946
 1,227
 0.37
 1,162,986
 850
 0.29
Savings 564,275
 264
 0.19
 494,482
 180
 0.14
Customer time deposits 555,668
 1,188
 0.85
 567,600
 874
 0.61
Total interest-bearing customer deposits 3,384,128
 3,285
 0.39
 3,080,120
 2,199
 0.28
Brokered certificates of deposit 195,073
 577
 1.17
 142,133
 213
 0.60
Total interest-bearing deposits 3,579,201
 3,862
 0.43
 3,222,253
 2,412
 0.30
FHLB of Pittsburgh advances 730,390
 2,402
 1.30
 768,305
 1,225
 0.63
Trust preferred borrowings 67,011
 500
 2.96
 67,011
 415
 2.46
Senior debt 134,658
 1,807
 5.37
 151,875
 2,119
 5.58
Other borrowed funds (4)
 132,030
 310
 0.93
 114,312
 145
 0.50
Total interest-bearing liabilities 4,643,290
 8,881
 0.76% 4,323,756
 6,316
 0.58%
Noninterest-bearing demand deposits 1,333,266
     1,151,240
    
Other noninterest-bearing liabilities 79,176
     54,686
    
Stockholders’ equity 738,123
     660,585
    
Total liabilities and stockholders’ equity $6,793,855
     $6,190,267
    
Excess of interest-earning assets over interest-bearing liabilities $1,067,189
     $839,823
    
Net interest and dividend income   $56,129
     $49,021
  
Interest rate spread     3.81%     3.74%
Net interest margin     3.95%     3.84%
(1)
Weighted average yields for tax-exempt securities and loans have been computed on a tax-equivalent basis using a 35% effective tax rate.
(2)
Average balances are net of unearned income and include nonperforming loans.
(3)
Includes securities available for sale at fair value.
(4)
Includes federal funds purchased and securities sold under agreement to repurchase.



 Nine months ended September 30,
 20202019
(Dollars in thousands)Average
Balance		Interest
Yield/
Rate(1)
Average
Balance		Interest
Yield/
Rate(1)
Assets:
Interest-earning assets:
Loans:(2)
Commercial real estate loans$2,832,976 $95,740 4.51 %$2,539,752 $111,470 5.87 %
Residential loans939,460 39,731 5.64 902,162 37,538 5.55 
Commercial loans and leases4,100,401 161,837 5.28 3,327,414 146,935 5.92 
Consumer loans1,136,107 41,726 4.91 1,035,907 43,711 5.64 
Loans held for sale91,040 2,623 3.85 36,335 1,264 4.65 
Total loans and leases9,099,984 341,657 5.02 7,841,570 340,918 5.82 
Mortgage-backed securities(3)
2,071,344 37,454 2.41 1,642,787 35,684 2.90 
Investment securities127,088 3,200 4.00 144,187 3,042 3.38 
Other interest-earning assets276,707 797 0.38 198,471 4,098 2.76 
Total interest-earning assets11,575,123 $383,108 4.43 %9,827,015 $383,742 5.23 %
Allowance for credit losses(158,584)(44,665)
Cash and due from banks127,859 111,979 
Cash in non-owned ATMs341,940 368,160 
Bank-owned life insurance30,360 40,633 
Other noninterest-earning assets1,028,620 922,557 
Total assets$12,945,318 $11,225,679 
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand$2,224,258 $3,569 0.21 %$1,825,112 $6,389 0.47 %
Money market2,273,786 8,205 0.48 1,851,067 13,806 1.00 
Savings1,670,069 3,243 0.26 1,397,124 4,949 0.47 
Customer time deposits1,260,837 15,012 1.59 1,275,118 13,815 1.45 
Total interest-bearing customer deposits7,428,950 30,029 0.54 6,348,421 38,959 0.82 
Brokered certificates of deposit253,566 2,786 1.47 272,187 4,957 2.43 
Total interest-bearing deposits7,682,516 32,815 0.57 6,620,608 43,916 0.89 
Federal Home Loan Bank advances114,895 1,900 2.21 241,152 4,495 2.49 
Trust preferred borrowings67,011 1,417 2.82 67,011 2,136 4.26 
Senior debt98,681 3,538 4.78 98,465 3,538 4.79 
Other borrowed funds(4)
64,470 484 1.00 154,169 2,278 1.98 
Total interest-bearing liabilities8,027,573 $40,154 0.67 %7,181,405 $56,363 1.05 %
Noninterest-bearing demand deposits2,743,638 2,135,702 
Other noninterest-bearing liabilities337,497 300,378 
Stockholders’ equity1,838,087 1,608,375 
Noncontrolling interest(1,477)(181)
Total liabilities and stockholders’ equity$12,945,318 $11,225,679 
Excess of interest-earning assets over interest-bearing liabilities$3,547,550 $2,645,610 
Net interest and dividend income$342,954 $327,379 
Interest rate spread3.76 %4.18 %
Net interest margin3.97 %4.47 %
(1)Weighted average yields for tax-exempt securities and loans have been computed on a tax-equivalent basis.
(2)Average balances are net of unearned income and include nonperforming loans.
(3)Includes securities available-for-sale at fair value.
(4)Includes federal funds purchased.

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  Nine months ended September 30,
  2017 2016
(Dollars in thousands) 
Average
Balance
 Interest 
Yield/
Rate (1)
 
Average
Balance
 Interest 
Yield/
Rate (1)
Assets:            
Interest-earning assets:            
Loans: (2)
            
Commercial real estate loans $1,411,503
 $52,934
 5.01% $1,221,797
 $44,700
 4.89%
Residential real estate loans 275,020
 12,707
 6.16
 279,387
 13,563
 6.47
Commercial loans 2,432,837
 85,366
 4.72
 2,057,839
 69,364
 4.54
Consumer loans 482,008
 17,326
 4.81
 381,276
 12,652
 4.43
Loans held for sale 31,988
 925
 3.86
 34,945
 115
 0.44
Total loans 4,633,356
 169,258
 4.90
 3,975,244
 140,394
 4.74
Mortgage-backed securities (3)
 784,125
 14,132
 2.40
 724,978
 11,658
 2.14
Investment securities (3)
 187,747
 3,524
 3.71
 203,616
 3,660
 3.51
Other interest-earning assets 37,664
 1,256
 4.45
 32,694
 1,174
 4.79
Total interest-earning assets 5,642,892
 188,170
 4.51% 4,936,532
 156,886
 4.31%
Allowance for loan losses (40,646)     (37,987)    
Cash and due from banks 130,537
     144,420
    
Cash in non-owned ATMs 604,892
     481,570
    
Bank-owned life insurance 101,952
     91,208
    
Other noninterest-earning assets 345,514
     224,798
    
Total assets $6,785,141
     $5,840,541
    
Liabilities and Stockholders’ Equity:            
Interest-bearing liabilities:            
Interest-bearing deposits:            
Interest-bearing demand $924,609
 $1,444
 0.31% $802,117
 $794
 0.13%
Money market 1,311,967
 3,314
 0.51
 1,120,831
 2,387
 0.28
Savings 575,676
 753
 0.26
 458,542
 431
 0.13
Customer time deposits 562,435
 3,338
 0.79
 564,240
 2,369
 0.56
Total interest-bearing customer deposits 3,374,687
 8,849
 0.35
 2,945,730
 5,981
 0.27
Brokered certificates of deposit 194,275
 1,429
 0.98
 180,066
 753
 0.56
Total interest-bearing deposits 3,568,962
 10,278
 0.39
 3,125,796
 6,734
 0.29
FHLB of Pittsburgh advances 744,939
 6,057
 1.09
 719,121
 3,397
 0.63
Trust preferred borrowings 67,011
 1,418
 2.83
 67,011
 1,183
 2.36
Senior debt 146,267
 6,049
 5.51
 93,900
 4,236
 6.01
Other borrowed funds (4)
 133,863
 822
 0.82
 135,596
 545
 0.54
Total interest-bearing liabilities 4,661,042
 24,624
 0.71% 4,141,424
 16,095
 0.52%
Noninterest-bearing demand deposits 1,331,417
     1,027,746
    
Other noninterest-bearing liabilities 75,744
     51,605
    
Stockholders’ equity 716,938
     619,766
    
Total liabilities and stockholders’ equity $6,785,141
     $5,840,541
    
Excess of interest-earning assets over interest-bearing liabilities $981,850
     $795,108
    
Net interest and dividend income   $163,546
     $140,791
  
Interest rate spread     3.80%     3.79%
Net interest margin     3.93%     3.87%
(1)
Weighted average yields for tax-exempt securities and loans have been computed on a tax-equivalent basis using a 35% effective tax rate.
(2)
Average balances are net of unearned income and include nonperforming loans.
(3)
Includes securities available for sale at fair value.
(4)
Includes federal funds purchased and securities sold under agreement to repurchase.



Three months ended September 30, 2020: During the three months ended September 30, 2017,2020, net interest income increased $7.1decreased $7.8 million or 14% from the three months ended September 30, 2016.2019 primarily due to the lower rate environment and a $2.9 million decrease in purchase accounting accretion, partially offset by $6.4 million of net interest income from PPP loans which included $4.1 million of fee accretion. Net interest margin was 3.95%3.66% for the third quarter of 2017, an 112020, a 72 basis point increasedecrease compared to 3.84%4.38% for the third quarter of 2016. The increase in2019 due to a 44 bps net interest margin includes the positive effectsdecline from the overall higher short-termlower interest rate environment our acquisition of Penn Liberty Financial Corp. (Penn Liberty), disciplined pricing of loans and balance sheet mix, 12 bps from lower purchase accounting accretion, 8 bps from the significant short-term liquidity increase in customer deposits and 8 bps from the redemption of $55.0 million of the 2012 senior notes in late third quarter 2017, partially offset by the negative impact of lower purchased loan accretion from previous acquisitions (excluding Penn Liberty).PPP loans.
Nine months ended September 30, 2020: During the nine months ended September 30, 2017,2020, net interest income increased $22.8$15.6 million or 16% from the nine months ended September 30, 2016,2019 primarily due to a full nine month impact of the Beneficial acquisition in the current year and the impact of net interest income from PPP loans described above. Net interest margin was 3.93%, a 6 basis point increase compared to 3.87%3.97% for the nine months ended September 30, 2016. These year-over-year increases reflect2020, a 50 basis point decrease compared to 4.47% for the positive effectsnine months ended September 30, 2019 due to 36 bps net decline from the lower interest rate environment and expected margin compression due to Beneficial's lower-margin balance sheet, 8 bps from the impact of our acquisition of Penn Liberty, disciplined pricing ofPPP loans, and deposits, and impact of purchased loan accretion6 bps from recent acquisitions.the significant short-term liquidity increase in customer deposits.
Provision/Allowance for LoanCredit Losses
On January 1, 2020, we adopted the CECL method of accounting for loans and leases, and our held-to-maturity debt securities portfolio, which considers forward-looking information when establishing reserves for credit losses. We maintain anthe allowance for loancredit losses at an appropriate level based on our assessment of estimable and probableexpected losses in the loan portfolio. Our evaluationallowance for credit losses is based on a review of the portfolio and requires significant, complex and difficult judgments. For the three months ended September 30, 2017 and 2016, we recorded a provision for loan losses of $2.9 million and $5.8 million, respectively, and for the nine months ended September 30, 2017 and 2016, we recorded a provision for loan losses of $6.9 million and $7.9 million, respectively. Provision for the third quarter of 2017 decreased $2.9 million from the third quarter of 2016, as the third quarter of 2016 included $3.0 million of provision expense related to resolution of a large longstanding problem loan.
Our allowance for loan losses is based onour historical loss experience that includes the inherent risk of our loans and various other factors including but not limited to, collateral values, trends in asset quality, level of delinquent loans and concentrations. In addition,Further, regional and national economic conditionsforecasts are taken into consideration. See Note 6 toconsidered in our expected credit losses. Our evaluation is based on a review of the Consolidated Financial Statementsportfolio and requires significant, complex and difficult judgments.
Three months ended September 30, 2020: During the three months ended September 30, 2020, the provision for additional information.
The allowancecredit losses was $2.7 million, a decrease of $1.4 million from the three months ended September 30, 2019. Our provision for loan losses was $40.2 million atrelatively flat as compared to the prior period as economic forecasts in the current period were relatively consistent with our previous quarter estimates.
Nine months ended September 30, 2017 and $39.8 million at December 31, 2016. The allowance for loan losses and provision reflects the addition of reserves related to an increase of $227.0 million in total net loans (excluding reverse mortgages) at September 30, 2017 when compared to December 31, 2016 as well as loan downgrades, offset by payoff activity and improvement in qualitative adjustment factors due to continued improvement of economic conditions and continued favorable credit quality metrics. The ratio of allowance for loan losses to total gross loans was 0.86% at September 30, 2017 and 0.89% at December 31, 2016. This ratio excluding the impact of all purchased loans would have been 0.99% at September 30, 2017 and 1.08% at December 31, 2016.

The table below represents a summary of changes in the allowance for loan losses for2020: During the nine months ended September 30, 2017 and 2016, respectively.
  Nine months ended September 30,
(Dollars in thousands) 2017 2016
Beginning balance $39,751
 $37,089
Provision for loan losses 6,901
 7,862
Charge-offs:    
Commercial 3,787
 4,643
Owner-occupied commercial 296
 1,556
Commercial real estate 1,702
 79
Construction 346
 59
Residential real estate 112
 72
Consumer 2,017
 1,422
Overdrafts 589
 545
Total charge-offs 8,849
 8,376
Recoveries:    
Commercial 820
 557
Owner-occupied commercial 120
 66
Commercial real estate 69
 310
Construction 305
 486
Residential real estate 141
 112
Consumer 731
 709
Overdrafts 212
 213
Total recoveries 2,398
 2,453
Net charge-offs 6,451
 5,923
Ending balance $40,201
 $39,028
Net charge-offs to average gross loans outstanding, net of unearned income (1)
 0.19% 0.20%
(1) Annualized, excludes loans held for sale and reverse mortgages
    
Noninterest (Fee) Income
During2020, the third quarter of 2017, the Company earned fee income of $32.4provision for credit losses was $154.1 million, an increase of $4.9$130.1 million or 18%, compared to $27.6 million infrom the third quarter of 2016. Thisnine months ended September 30, 2019. The increase iswas primarily due to a $2.7acute deterioration in the economic forecast used in our CECL models related to the impact of COVID-19 pandemic, and loan migration that occurred during the year in several specific portfolios, mainly in the accommodation and food service industries.
The allowance for credit losses increased to $232.7 million at September 30, 2020 from $47.6 million at December 31, 2019. Of this increase, in investment management and fiduciary income$35.9 million was due to growthour adoption of CECL as of January 1, 2020 and $154.1 million was due to the additional provision for credit losses during the nine months ended September 30, 2020. The ratio of allowance for credit losses to total loans and leases was 2.47% at September 30, 2020 and 0.56% at December 31, 2019. During the three and nine months ended September 30, 2020, net charge-offs totaled $2.2 million and $4.8 million, respectively, compared to $1.8 million and $15.8 million during the three and nine months ended September 30, 2019, respectively. The ratio of net charge-offs to average gross loans net of unearned income, which excludes loans held for sale and reverse mortgages, was 0.07% (annualized) and 0.22% at September 30, 2020 and December 31, 2019, respectively.
See Note 7 to the unaudited Consolidated Financial Statements and Nonperforming Assets above for further information.

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Noninterest Income
Three months ended September 30, 2020: During the three months ended September 30, 2020, noninterest income was $49.2 million, a decrease of $13.2 million from $62.3 million during the three months ended September 30, 2019. This amount includes a $21.2 million decrease in several business linesunrealized gains on equity investments compared to the prior period, a $5.9 million decrease in our Wealth Management segment, an increase of $1.6 million in credit/Credit/debit card and ATM income primarily due to less interchange fees resulting from the Durbin amendment (effective on July 1, 2020), and the impact of a $0.5lower interest rate environment. Partially offsetting these decreases was an $8.4 million increase in other fee incomemortgage banking activities due to expandedimproved secondary market conditions and increased volume from refinancings resulting from the lower interest rate environment, a $3.3 million in securities gains, net in the current period and an increase of $2.8 million in Investment management and fiduciary revenue sourcesdriven by trust services revenue.
Nine months ended September 30, 2020: During the nine months ended September 30, 2020, noninterest income was $154.4 million, an increase of $8.1 million from $146.3 million during the nine months ended September 30, 2019, and includes an increase of $15.4 million in our Cash Connect® business,mortgage banking activities, as well asdescribed above, a $0.4$5.8 million gain on the sale of Small Business Administration (SBA) loans.increase in securities gains, net, and a $4.2 million increase in Investment management and fiduciary revenue driven by trust services revenue. These increases were partially offset by a decline of $0.8$10.4 million decrease in mortgage banking-related fee income due to reduced mortgage volume in the higher rate environment compared to 2016.
For the nine months ended September 30, 2017, our fee income was $92.2 million, an increase of $15.4 million, or 20%, compared to $76.8 million in the third quarter of 2016. This increase is primarily due to a $8.1 million increase in investment management and fiduciary income due to growth in several business lines in our Wealth Management segment, an increase of $4.5 million in credit/Credit/debit card and ATM income, as described above, a decrease of $3.4 million in the amount of net realized and unrealized gain on equity investments, which includes the combination of higher unrealized gains compared to the prior period partially offset by the gain on sale of 360,000 Visa Class B shares that occurred in the second quarter of 2020, and a $1.4$2.4 million increasedecrease in other fee incomedeposit service charges due to expanded revenue sources and continued growthlower transaction volume in our Cash Connect® business, as wellthe current period as a $1.2 million increase attributableresult of the COVID-19 pandemic.
For further information, see Note 3 to gains on the sale of SBA loans.unaudited Consolidated Financial Statements.

Noninterest Expense
Three months ended September 30, 2020: Noninterest expense for the third quarterthree months ended September 30, 2020 was $93.5 million, a decrease of 2017$16.0 million from $109.6 million for the three months ended September 30, 2019. The decrease was $54.2primarily due to $18.4 million an increase of $2.9lower net corporate development and restructuring costs as compared to the prior period related to our acquisition of Beneficial, partially offset by a $2.3 million or 6%,loss associated with prepayment fees from $51.2 millionthe termination of fixed rate FHLB term advances that occurred in the third quartercurrent period as part of 2016, primarily the result of ongoing operating costs from our late 2016 combinations with Penn Liberty, Powdermill,routine balance sheet and West Capital.liquidity management.

ForNine months ended September 30, 2020: Noninterest expense for the nine months ended September 30, 2017, noninterest expense2020 was $158.4$275.5 million, an increasea decrease of $18.7$39.5 million or 13% from $139.7$315.0 million atfor the nine months ended September 30, 2016.2019. The increasedecrease was primarily due to $10.9$61.1 million of lower net corporate development and restructuring costs, as described above. This decrease was partially offset by increases of $9.2 million in additional year-over-year ongoing operating costs from recent acquisitions. The remaining increase primarily reflects higher compensationsalary-related expenses and related costs due to added staff$5.7 million in professional fees to support overall franchise growth.organic and merger-related growth, and an increase of $3.9 million for credit-related costs, driven by the increase in the unfunded commitment reserve expense in the current period, a $3.0 million contribution to the WSFS Community Foundation during the first quarter of 2020, and the $2.3 million loss on early extinguishment of debt, as described above.

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Income Taxes
We and our subsidiaries file a consolidated federal income tax return and separate state income tax returns. Income taxes are accounted for in accordance with ASC 740, Income Taxes, which requires the recording of deferred income taxes for tax consequences of temporary differences. We recorded an income tax expense of $10.9$15.1 million and $30.4$14.2 million during the three and nine months ended September 30, 2017,2020, respectively, compared to an income tax expense of $6.8$15.9 million and $24.0$32.3 million for the same periods in 2016.2019.
Our effective tax rate was 34.7%23.0% and 33.6%20.9% for the three and nine months ended September 30, 20172020, respectively, compared to 34.9%22.9% and 34.3% during23.9% for the same periods in 2016.2019. The effective tax rate for the nine months ended September 30, 20172020 decreased primarily due to nondeductible expenses associated with the acquisition of Beneficial incurred during the first quarter of 2019. Nondeductible acquisition costs of $8.2 million were recognized during the first quarter of 2019, whereas none were incurred in the comparable period in 2020. In addition, we recognized $1.7 million in tax benefits during the nine months ended September 30, 2020 related to tax law changes contained in the CARES Act (see "Recent Regulatory Developments"), related to the ability to carry back certain acquired net operating losses to prior years where the statutory tax rate was higher than the current statutory tax rate. Finally, the tax benefit related to stock-based compensation activity during the year, duenine months ended September 30, 2020 pursuant to both the adoption of ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, Compensation –- Stock Compensation (Topic 718) during, decreased compared to the second quarter of 2016, as well as higher tax benefits realized on stock-based compensation activity during the nine months ended September 30, 2017, due to greater transaction volume and increases in the Company’s stock price. The tax benefits recognized duringprior year. During the three and nine months ended September 30, 2017 were $0.32020, we recognized less than $0.1 million of tax expense and less than $0.1 million of a tax benefit, respectively, related to stock-based compensation activity, compared to a tax benefit of $0.7 million and $1.9 million respectively, compared to tax benefits of $0.2 million and $1.0 million for the three and nine months ended September 30, 2016.same periods in 2019.
The effective tax rate reflects the recognition of certain tax benefits in the financial statements including those benefits from tax-exempt interest income, federal low-income housing tax credits, and excess tax benefits from recognized stock compensation, and BOLI income.compensation. These tax benefits are offset by the tax effect of stock-based compensation expense related to incentive stock options, nondeductible acquisition costs and a provision for state income tax expense.
We frequently analyze our projections of taxable income and make adjustments to our provision for income taxes accordingly.

Contractual Obligations
Our contractual obligations at September 30, 20172020 did not significantly change from our contractual obligations at December 31, 2016,2019, which are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016, and at March 31, 2017, which are disclosed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017.2019.


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RECONCILIATION OF NON-GAAP MEASURE TO GAAP MEASURE
The following table provides a reconciliation of tangible common book value per share of common stock to book value per share of common stock, the most directly comparable GAAP financial measure. We believe this measure helps management and investors better understand and assess changes from period to period in stockholders’ equity exclusive of changes in intangible assets.This non-GAAP measure should be considered in addition to results prepared in accordance with GAAP, and is not a substitute for, or superior to, GAAP results.
(Dollars and share amounts in thousands, except per share amounts)September 30, 2020December 31, 2019
Stockholders’ equity of WSFS$1,863,499 $1,850,306 
Less: Goodwill and other intangible assets559,806 568,745 
Tangible common equity (numerator)$1,303,693 $1,281,561 
Shares of common stock outstanding (denominator)50,673 51,567 
Book value per share of common stock$36.77 $35.88 
Goodwill and other intangible assets11.04 11.03 
Tangible book value per share of common stock$25.73 $24.85 

(Dollars and share amounts in thousands, except per share amounts) September 30, 2017 December 31, 2016
Stockholders’ equity $740,861
 $687,336
Less: Goodwill and other intangible assets 189,116
 191,247
Tangible common equity (numerator) $551,745
 $496,089
Shares of common stock outstanding (denominator) 31,410
 31,390
Book value per share of common stock $23.59
 $21.90
Goodwill and other intangible assets 6.02
 6.10
Tangible book value per share of common stock $17.57
 $15.80


CRITICAL ACCOUNTING ESTIMATES
The preparation of the unaudited Consolidated Financial Statements in accordance with U.S. GAAP requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenue and expenses. We regularly evaluate these estimates and assumptions including those used to determine the allowance for loancredit losses, deferred taxes, fair value measurements, goodwill and other intangible assets. We base our estimates on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances. These form the basis for making judgments on the carrying value of assets and liabilities that are not readily apparent from other sources. Although our current estimates contemplate current economic conditions and how we expect them to change in the future, for the remainder of 2017,2020, it is possible that actual conditions may be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Actual results may differ from these estimates under different assumptions or conditions.
For further discussion ofCritical accounting estimates at September 30, 2020 did not significantly change from our critical accounting estimates seeat March 31, 2020 and December 31, 2019, which are disclosed in our Quarterly Report on Form 10-Q for the "Management's Discussionperiod ended March 31, 2020, and Analysis - Critical Accounting Estimates" sectionAnnual Report on Form 10-K for the year ended December 31, 2019, respectively.

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RECENT REGULATORY DEVELOPMENTS
Recent regulatory developments at September 30, 2020 did not significantly change from our recent regulatory developments at December 31, 2019, which are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.2019, except as noted below.

Coronavirus Aid, Relief, and Economic Security (CARES) Act
On March 27, 2020, the CARES Act was enacted, providing wide ranging economic relief for individuals and businesses impacted by COVID-19. Among other things, the statute created the Paycheck Protection Program (PPP) and funded it with $349 billion. The PPP is a stimulus response to the potential economic impacts of COVID-19, and its purpose is to provide forgivable loans to smaller businesses that use the proceeds of the loans for payroll and certain other qualifying expenses. The Small Business Administration (SBA) manages and backs the PPP. If a loan is fully forgiven, SBA will repay the lending bank in full. If a loan is partially forgiven or not forgiven at all, a bank must look to the borrower for repayment of unforgiven principal and interest. If the borrower defaults, the loan is guaranteed by SBA.
RECENT LEGISLATION
GeneralOn April 6, 2020, WSFS Bank began participating in the PPP, We processed PPP loan applications until April 16, 2020, when the SBA announced that it had exhausted the $349 billion appropriated in the CARES Act, and stopped accepting PPP applications. On April 24, 2020, the President signed into law the Paycheck Protection Program and Health Care Enhancement Act, which supplemented certain programs established by the CARES Act and provided $310 billion in additional funding for the PPP. To date, we have provided nearly $1.0 billion in PPP loans for more than 5,400 new and existing WSFS Customers and are now processing loan forgiveness applications. The Bank has not accepted any applications since August 8, 2020, the statutory deadline for submissions by prospective borrowers.
As
We are also providing a federally chartered savings institutionnumber of customer relief programs in our commercial and retail portfolios, such as payment deferrals or interest only payments on loans and leases, disaster assistance, and waiving minimum deposit balance and direct deposit requirements as well as early withdrawal penalties for CDs or IRAs. Additionally, we are offering new lines of credit or increases to existing lines of credit and increased remote deposit limits for those individuals and businesses impacted by COVID-19. To date, we have modified approximately $2.1 billion of loans and leases to provide our customers this monetary relief. In general, we are not required to report these modifications as troubled debt restructurings.

The CARES Act also provides us with an opportunity to carry back net operating losses (NOLs) arising from 2018, 2019 and 2020 to the Bank is subjectprior five tax years. We have such NOLs reflected on our balance sheet as a portion of our 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 regulationbe calculated based on a rate of 35%, which was the federal corporate tax rate in effect for the carryback years. Consequently, effective September 30, 2020, we have revalued the benefit from its NOLs to reflect a 35% tax rate.

Transition from London Inter-Bank Offered Rate (LIBOR)

In 2014, a committee of private-market derivative participants and their regulators, the Alternative Reference Rate Committee (ARRC), was convened by the Federal Housing Finance Agency (FHFA)Reserve to identify an alternative reference interest rate to replace LIBOR. In June 2017, the ARRC announced the Secured Overnight Funding Rate (SOFR), an independent agency in the executive brancha broad measure of the U.S. government,cost of borrowing cash overnight collateralized by Treasury securities, as its preferred alternative to LIBOR. In July 2017, the Federal Deposit Insurance Corporation (FDIC),Chief Executive of the BoardUnited Kingdom Financial Conduct Authority, which regulates LIBOR, announced its intention to stop persuading or compelling banks to submit rates for the calculation of GovernorsLIBOR to the administrator of LIBOR after 2021. In April 2018, the Federal Reserve System (Federal Reserve)Bank of New York began to publish SOFR rates on a daily basis, and the Office of the Comptroller of the Currency (OCC), collectively referred to as the Federal banking agencies. The lending activitiesARRC and other investments ofinstitutions continue to take steps to advance SOFR as an alternative benchmark. In July 2020, the Bank must comply with various federal regulatory requirements. The OCC periodically examines the Bank for compliance with regulatory requirements. The FDIC also has the authority to conduct special examinations of the Bank. The Bank is required to file periodic reports with the OCC describing its activities and financial condition. The Bank is also subject to certain reserve requirements promulgated by the FHFA and the Federal Reserve.
Basel III
In 2013, the Federal banking agencies approvedissued guidance for banking organizations on managing the final rules implementingtransition to an alternative reference rate; for the Basel Committee on Banking Supervision capital guidelinesagencies, however, SOFR is not the exclusive alternative. The International Swaps and Derivatives Association, which develops standardized language for the derivatives contracts that we enter into, recently announced that language replacing LIBOR with another benchmark would take effect in January 2021. For derivatives contracts denominated in U.S. banking organizations. Undercurrency, the final rules as of January 2015, minimum requirements increased for bothreplacement benchmark rate is SOFR.

Given LIBOR’s extensive use across financial markets, the quantitytransition away from LIBOR presents various risks and quality of capital maintained bychallenges to financial markets and institutions, including to the CompanyCompany. The Company’s commercial and the Bank. The rules included a new common equity Tier 1 capitalconsumer businesses issue, trade, and hold various products that are indexed to risk-weighted assets minimum ratio of 4.5%, raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0%, required a minimum ratio of total capital to risk-weighted assets of 10.0%, and required a minimum Tier 1 leverage ratio of 4.0%. The final rule also established a new capital conservation buffer, comprised of common equity Tier 1 capital, above the regulatory minimum capital requirements. The phase-in of the capital conservation buffer began on January 1, 2016 at 0.625% of risk-weighted assets and will increase each subsequent year by an additional 0.625% until reaching its final level of 2.50% on January 1, 2019. For 2017, the capital conservation buffer is 1.25%. The final rules also revised the standards for an insured depository institution to be “well-capitalized” under the banking agencies’ prompt corrective action framework, requiring a common equity Tier 1 capital ratio of 6.5%, Tier 1 capital ratio of 8.0% and total capital ratio of 10.0%, while leaving unchanged the existing 5.0% leverage ratio requirement. Strict eligibility criteria for regulatory capital instruments were also implemented under the final rules. Newly issued trust preferred securities and cumulative perpetual preferred stock may no longer be included in Tier 1 capital. However, for depository institution holding companies of less than $15 billion in total consolidated assets, such as the Company, most outstanding trust preferred securities and other non-qualifying securities issued prior to May 19, 2010 are permanently grandfathered to be included in Tier 1 capital (up to a limit of 25% of Tier 1 capital, excluding non-qualifying capital instruments).LIBOR. As of September 30, 2017, we2020, the Company had approximately $67.0$1.7 billion of loans and $1.0 billion of derivatives that are utilized for customer guarantees, indexed to LIBOR, that mature after 2021. In addition, the Company had approximately $167.0 million of trust preferreddebt securities outstanding all of whichthat are countedindexed to LIBOR (either currently or in the future) as Tier 1 capital.
The phase-in period for the final rules began for us on January 1, 2015. Full compliance with all of the final rule’s requirements phased in over a multi-year schedule is required by January 1, 2019. As of September 30, 2017,2020. The Company has one investment security totaling $0.5 million, and no repurchase and resale agreements or FHLB advances indexed to LIBOR as of September 30, 2020.

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Due to the Companyuncertainty surrounding the future of LIBOR, it is expected that the transition will span several reporting periods through, and potentially beyond, the end of 2021. A cross-functional team from Finance, Lending, Risk and IT is leading our efforts to monitor this activity and evaluate the related risks and potential process changes arising from the transition from LIBOR. We have completed our initial assessment efforts, including our internal risk assessment procedures, and the Bank metcross-functional team is working towards the applicable standards,migration of our existing contracts and system implementation. Our variable or floating rate instruments currently use LIBOR and give us discretion to determine a replacement benchmark rate if LIBOR becomes unavailable. We are still considering the Bank was “well-capitalized” under the prompt corrective action rules.appropriate transition for our legacy contracts.
In 2014, the Federal banking agencies adopted a “liquidity coverage ratio” requirement (LCR) for large internationally active banking organizations, and in 2016, the agencies proposed a “net stable funding ratio” standard (NSFR) for the same group of institutions. The LCR measures an organizations’ ability to meet liquidity demands over a 30-day horizon; the NSFR would test the same capacity over a one-year horizon. Neither requirement applies directly to the Company or the Bank, but the policies embedded in them may inform the work of the examiners as they consider our liquidity.


Item 3.     Quantitative and Qualitative Disclosures About Market Risk
IncorporatedThe information required by this Item is incorporated herein by reference fromto the information provided in Item 2 Part I (Interest Rate Sensitivity) of this Quarterly Report on Form 10-Q.


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

(b)
Changes in internal control over financial reporting. During the three months ended September 30, 2017, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

(a)Evaluation of disclosure controls and procedures. Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934), our principal executive officer and principal financial officer have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q such disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.


(b)Changes in internal control over financial reporting. During the three months ended September 30, 2020, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Part II. OTHER INFORMATION

Item 1.    Legal Proceedings
IncorporatedThe information required by this Item is incorporated herein by reference to the information provided in Note 1619 – Legal and Other Proceedings to the unaudited Consolidated Financial StatementsStatements.
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Item 1A.    Risk Factors

There have not been any material changes to the risk factors previously disclosed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016,2019, previously filed with the Securities and Exchange Commission.Commission, except noted as below.
The novel coronavirus (“COVID-19”) pandemic and the impact of actions to mitigate the spread of the virus could adversely affect our business, financial condition and results of operations.
Federal, state and local governments have enacted various restrictions in an attempt to limit the spread of COVID-19. Such measures have disrupted economic activity and contributed to job losses and reductions in consumer and business spending. In response to the economic and financial effects of COVID-19, the Federal Reserve Board has sharply reduced interest rates (which we expect will likely remain low for a considerable period) and instituted quantitative easing measures as well as domestic and global capital market support programs. In addition, the Trump Administration, Congress, various federal agencies and state governments have taken measures to address the economic and social consequences of the pandemic, including the passage of the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act.

The CARES Act, among other things, provides certain measures to support individuals and businesses in maintaining solvency through monetary relief, including in the form of financing, loan forgiveness and automatic forbearance. Beginning April 6, 2020, we began processing loan applications, under the Paycheck Protection Program (PPP) created under the CARES Act. All of the federal banking regulatory agencies have encouraged lenders to extend additional loans, and the federal government is considering additional stimulus and support legislation focused on providing aid to various sectors, including small businesses. We are also making a high level of loan modifications under our deferred payment program. The full impact on our lending and other business activities as a result of new government and regulatory policies, programs and guidelines, as well as regulators’ reaction to such activities, remains uncertain.
The continuation of the economic effects of the COVID-19 pandemic have had a destabilizing effect on financial markets, key market indices and overall economic activity. The uncertainty regarding the duration of the pandemic and the resulting economic disruption has caused increased market volatility and has led to an economic recession and a significant decrease in consumer confidence and business generally. The continuation of these conditions (including whether due to a resurgence or additional waves of COVID-19 infections, particularly as the geographic areas in which we operate continue to re-open), as well as the impacts of the CARES Act and other federal and state measures, specifically with respect to loan forbearances, has adversely affected our results of operations and financial condition, and have and can be expected to further adversely impact our businesses and results of operations and the operations of our borrowers, customers and business partners. In particular, these events have had, and/or can be expected to continue to have, the following effects, among other things:
•impair the ability of borrowers to repay outstanding loans or other obligations, resulting in increases in delinquencies and modifications to loans;
•impair the value of collateral securing loans (particularly with respect to real estate);
•impair the value of our assets, including our securities portfolio, goodwill and intangible assets;
•require an increase in our allowance for credit losses, particularly in light of our adoption of CECL in the first quarter of 2020;
•adversely affect the stability of our deposit base or otherwise impair our liquidity;
•reduce our revenues from fee-based services, including wealth management and the demand for our products and services;
•negatively impact our self-insurance healthcare costs;
•result in increased compliance risk as we become subject to new regulatory and other requirements, including new and changing guidance, associated with the PPP and other new programs in which we participate;
•impair the ability of loan guarantors to honor commitments;
•negatively impact our regulatory capital ratios;
•negatively impact the productivity and availability of key personnel and other Associates necessary to conduct our business, and of third-party service providers who perform critical services for us (including the processing of forgiveness applications associated with our PPP loans), or otherwise cause operational failures due to changes in our normal business practices necessitated by the pandemic and related governmental actions; and
•increase cyber and payment fraud risk and other operational risks, given increased online and remote activity, which may adversely affect the realization of the anticipated benefits of our Delivery Transformation initiative.
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Prolonged measures by health or other governmental authorities encouraging or requiring significant restrictions on travel, assembly or other core business practices could further harm our business and those of our customers, in particular our small to medium sized business customers. Although we have business continuity plans and other safeguards in place, there is no assurance that they will be effective.
Our loan portfolio includes loans that are in forbearance but which are not classified as TDRs because they were current at the time forbearance began. When the forbearance periods end, we may be required to classify a substantial portion of these loans as problem loans.
Our results of operations have been adversely affected by the factors described above. For example, for the nine months ended September 30, 2020 these factors caused a substantial increase in our provision for credit losses and the amount of our problem loans. While the ultimate impact of these factors over the longer term is uncertain and we do not yet know the full extent of the impacts on our business, our operations or the global economy as a whole, nor the pace of economic recovery when the COVID-19 pandemic subsides, the decline in economic conditions generally and a prolonged negative impact on small to medium sized businesses, in particular, due to COVID-19 is likely to result in an adverse effect on our business, financial condition and results of operations in future periods, and may heighten many of our known risks described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
The following table represents information with respectDuring the fourth quarter of 2018, the Board of Directors of the Company approved a share repurchase program that enables us to repurchasesrepurchase up to 3,136,978 shares of common stock made byafter the closing of our acquisition of Beneficial, which occurred on March 1, 2019.

During the first quarter of 2020, the Company duringcompleted this share repurchase program and the Board of Directors approved a new share repurchase program authorizing the repurchase of 7,594,977 shares, or 15% of its outstanding shares as of March 31, 2020; however, all share repurchases were temporarily suspended due to the impact of COVID-19 on the economy and our performance. During the three months ended September 30, 2017.2020, no repurchases of shares of common stock were made under the Company's new share repurchase program.

Our Board of Directors approved the resumption of share repurchases in the fourth quarter of 2020 due to our improved financial performance and additional clarity on the economic and credit environment. Under the program, repurchases may be made from time to time in the open market or through negotiated transactions, subject to market conditions and other factors, and in accordance with applicable securities laws. The program is consistent with our intent to return a minimum of 25% of annual net income to stockholders through dividends and share repurchases while maintaining capital ratios in excess of “well-capitalized” regulatory benchmarks.
2017 Total Number
of Shares Purchased		 
Average Price
Paid Per Share
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)
 
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs (1)
July 20,000
 $45.71
 20,000
 801,194
August 18,000
 44.05
 18,000
 783,194
September 33,000
 44.61
 33,000
 750,194
Total 71,000
 $44.78
 71,000
  
(1)
During the fourth quarter of 2015, the Board of Directors of the Company approved a stock buyback program of up to 5% of then-outstanding shares of common stock. Under the program, purchases may be made from time to time in the open market or through negotiated transactions, subject to market conditions and other factors, and in accordance with applicable securities laws. There is no fixed termination date for the repurchase program, and the repurchase program may be suspended or discontinued at any time.


(1)


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Item 3.    Defaults upon Senior Securities
None.

Item 4.    Mine Safety Disclosures
Not applicable.

Item 5.    Other Information
None.
Item 6.     Exhibits
 
(a)Exhibit
Number		Description of Document
3.1Registrant’s Amended and Restated Certificate of Incorporation, as amended is incorporated herein by reference to Exhibit 3.1 of the Registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2019.
3.2Amended and Restated Bylaws of WSFS Financial Corporation is incorporated herein by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed on November 21, 2014.
31.1
(b)31.2
(c)32
(d)101.INSExhibit 101.INS – XBRL Instance Document
**
(e)101.SCHExhibit 101.SCH – XBRL Schema Document
**
(f)101.CALExhibit 101.CAL – XBRL Calculation Linkbase Document
**
(g)101.LABExhibit 101.LAB – XBRL Labels Linkbase Document
**
(h)101.PREExhibit 101.PRE – XBRL Presentation Linkbase Document
**
(i)101.DEFExhibit 101.DEF – XBRL Definition Linkbase Document **
104The cover page of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC on November 4, 2020, is formatted in Inline XBRL.

** Submitted as Exhibits 101 to this Quarterly Report on Form 10-Q are documents formatted in XBRL (Extensible Business Reporting Language). Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
WSFS FINANCIAL CORPORATION
Date: November 4, 2020WSFS FINANCIAL CORPORATION/s/ Rodger Levenson
Rodger Levenson
Date: November 8, 2017/s/ Mark A. Turner
Mark A. Turner
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Date: November 8, 20174, 2020/s/ Dominic C. Canuso
Dominic C. Canuso
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)


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