UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934
For the quarterly period ended		June 30, 2009
OR
o	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 0-16668
WSFS FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware					22-2866913
(State or other jurisdiction of					(I.R.S. Employer
Incorporation or organization)					Identification Number)
500 Delaware Avenue, Wilmington, Delaware					19801
(Address of principal executive offices)					(Zip Code)
(302) 792-6000
Registrant’s telephone number, including area code:
Indicate by check markwhether 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 o
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            _____ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o                 Accelerated filer x Non-accelerated filer o                 Smaller reporting company [ ] (Do not check if smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of August 3, 2009:
Common Stock, par value $.01 per share				6,193,635
(Title of Class)				(Shares Outstanding)

1

WSFS FINANCIAL CORPORATION

FORM 10-Q

INDEX

PART I. Financial Information

		Page
Item 1.	Financial Statements (Unaudited)
	Consolidated Statement of Operations for the Three and Six Months
	Ended June 30, 2009 and 2008	3
	Consolidated Statement of Condition as of June 30, 2009
	and December 31, 2008	4
	Consolidated Statement of Cash Flows for the Six Months Ended
	June 30, 2009 and 2008	5
	Notes to the Consolidated Financial Statements for the Three and Six
	Months Ended June 30, 2009 and 2008	6
Item 2.	Management’s Discussion and Analysis of Financial Condition
	and Results of Operations	21
Item 3.	Quantitative and QualitativeDisclosures About Market Risk	34
Item 4.	Controls and Procedures	34
PART II. Other Information
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults upon Senior Securities	34
Item 4.	Submission of Matters to a Vote of Security Holders	34
Item 5.	Other Information	35
Item 6.	Exhibits	35
Signatures		36
Exhibit 31.1	Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2	Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

2

WSFS FINANCIAL CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

	Three months ended					Six months ended
	June 30,					June 30,
	2009			2008		2009			2008
	(Unaudited)
	(In Thousands, Except Per Share Data)
Interest income:
Interest and fees on loans	$	32,356		$	34,464	$	63,730		$	72,146
Interest on mortgage-backed securities		6,948			5,715		14,284			11,703
Interest and dividends on investment securities		535			202		632			540
Other interest income		—			414		—			966
		39,839			40,795		78,646			85,355
Interest expense:
Interest on deposits		7,523			9,223		15,852			21,352
Interest on Federal Home Loan Bank advances		4,804			7,356		10,145			16,324
Interest on trust preferred borrowings		465			783		1,060			1,801
Interest on other borrowings		667			1,066		1,318			2,542
		13,459			18,428		28,375			42,019
Net interest income		26,380			22,367		50,271			43,336
Provision for loan losses		11,997			2,433		19,650			4,823
Net interest income after provision for loan losses		14,383			19,934		30,621			38,513
Noninterest income:
Deposit service charges		4,276			4,174		8,093			7,972
Credit/debit card and ATM income		4,049			4,314		7,751			8,845
Loan fee income		1,354			1,004		2,604			1,647
Security gains		887			53		1,310			1,120
Investment advisory income		516			591		1,047			1,246
Mortgage banking activities, net		406			93		608			198
Bank owned life insurance income		229			456		439			1,030
Other income		950			986		1,916			2,119
		12,667			11,671		23,768			24,177
Noninterest expenses:
Salaries, benefits and other compensation		12,051			11,297		24,382			22,784
Occupancy expense		2,355			2,063		4,791			4,170
Professional fees		2,311			723		3,273			1,572
Equipment expense		1,725			1,533		3,304			2,996
FDIC special assessment		1,650			—		1,650			—
Data processing and operations expenses		1,157			1,082		2,278			2,120
Marketing expense		831			1,161		1,558			2,068
Other operating expense		8,875			3,311		14,983			6,397
		30,955			21,170		55,329			42,107
(Loss) income before taxes		(3,905	)		10,435		(940	)		20,583
Income tax (benefit) provision		(1,589	)		3,735		(1,564	)		6,637
Net (loss) income		(2,316	)		6,700		624			13,946
Dividends on preferred stock and accretion of discount		751			—		1,264			—
Net (loss) income available to common shareholders	$	(3,067	)	$	6,700	$	(640	)	$	13,946
(Loss) earnings per share:
Basic	$	(0.50	)	$	1.09	$	(0.10	)	$	2.27
Diluted	$	(0.50	)	$	1.07	$	(0.10	)	$	2.22

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

3

WSFS FINANCIAL CORPORATION

CONSOLIDATED STATEMENT OF CONDITION

	June 30,			December 31,
	2009			2008
	(Unaudited)
	(In Thousands, Except Per Share Data)
Assets
Cash and due from banks	$	75,042		$	58,377
Cash in non-owned ATMs		201,844			189,965
Interest-bearing deposits in other banks		242			216
Total cash and cash equivalents		277,128			248,558
Investment securities held-to-maturity		1,177			1,181
Investment securities available-for-sale including reverse mortgages		46,448			48,507
Mortgage-backed securities available-for-sale		538,564			487,389
Mortgage-backed securities trading		11,313			10,816
Loans held-for-sale		13,562			2,275
Loans, net of allowance for loan losses of $41,415      at June 30, 2009 and $31,189 at December 31, 2008		2,502,923			2,441,560
Bank owned life insurance		59,776			59,337
Stock in Federal Home Loan Bank of Pittsburgh, at cost		39,305			39,305
Assets acquired through foreclosure		8,073			4,471
Premises and equipment		35,626			34,966
Accrued interest receivable and other assets		54,021			54,195
Total assets	$	3,587,916		$	3,432,560
Liabilities and Stockholders’ Equity
Liabilities:
Deposits:
Noninterest-bearing demand	$	424,382		$	311,322
Interest-bearing demand		245,556			214,749
Money market		413,764			326,792
Savings		223,829			208,368
Time		458,542			450,056
Jumbo certificates of deposit – customer		215,061			195,846
Total customer deposits		1,981,134			1,707,133
Other jumbo certificates of deposit		58,694			103,825
Brokered deposits		333,123			311,394
Total deposits		2,372,951			2,122,352
Federal funds purchased and securities sold under agreements to repurchase		100,000			75,000
Federal Home Loan Bank advances		636,773			815,957
Trust preferred borrowings		67,011			67,011
Other borrowed funds		103,420			108,777
Accrued interest payable and other liabilities		35,851			26,828
Total liabilities		3,316,006			3,215,925
Stockholders’ Equity:
Serial preferred stock $.01 par value, 7,500,000 shares authorized; issued 52,625 at June 30, 2009 and -0- at December 31, 2008		1			—
Common stock $.01 par value, 20,000,000 shares authorized; issued 15,771,556 at June 30, 2009 and 15,739,768 at December 31, 2008		157			157
Capital in excess of par value		140,653			87,033
Accumulated other comprehensive loss		(8,869	)		(12,613	)
Retained earnings		388,248			390,338
Treasury stock at cost, 9,580,569 shares at June 30, 2009 and December 31, 2008		(248,280	)		(248,280	)
Total stockholders’ equity		271,910			216,635
Total liabilities and stockholders’ equity	$	3,587,916		$	3,432,560

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

4

WSFS FINANCIAL CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

	Six months ended June 30,
	2009			2008
	(Unaudited)
	(In Thousands)
Operating activities:
Net income	$	624		$	13,946
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		19,650			4,823
Depreciation, accretion and amortization		3,393			3,221
(Increase) decrease in accrued interest receivable and other assets		(4,538	)		3,533
Origination of loans held-for-sale		(53,740	)		(13,631	)
Proceeds from sales of loans held-for-sale		43,104			14,619
Gain on mortgage banking activity		(608	)		(198	)
(Income) loss on mark to market adjustment on trading securities		(497	)		250
Securities gain from the sale of MasterCard, Inc. and Visa, Inc. common stock		(119	)		(1,370	)
Gain on sale of investments		(694	)		—
Stock-based compensation expense, net of tax benefit recognized		484			377
Excess tax benefits from share-based payment arrangements		—			(37	)
Increase in accrued interest payable and other liabilities		8,995			15,116
Loss on wind-down of 1st Reverse Financial Services, LLC		1,589			—
Loss on sale of assets acquired through foreclosure and valuation adjustments		1,993			37
Increase in value of bank-owned life insurance		(439	)		(1,030	)
Increase in capitalized interest, net		106			18
Net cash provided by operating activities		19,303			39,674
Investing activities:
Maturities of investment securities		18,025			6,070
Purchases of investment securities available-for-sale		(16,049	)		(12,015	)
Sales of mortgage backed securities available-for-sale		38,646			—
Repayments of mortgage-backed securities available-for-sale		75,605			40,231
Purchases of mortgage-backed securities available-for-sale		(158,473	)		(9,849	)
Repayments of reverse mortgages		50			1,247
Disbursements for reverse mortgages		(104	)		(116	)
Purchase of 1st Reverse Financial Services, LLC		—			(2,307	)
Purchases of loans		—			(2,620	)
Net increase in loans		(88,002	)		(62,173	)
Net decrease in stock of Federal Home Loan Bank of Pittsburgh		—			5,365
Sales of assets acquired through foreclosure, net		1,523			1,010
Proceeds from the sale of MasterCard, Inc. and Visa, Inc. common stock		119			1,370
Investment in premises and equipment, net		(3,526	)		(2,880	)
Net cash used for investing activities		(132,186	)		(36,667	)
Financing activities:
Net increase in demand and savings deposits		210,943			13,603
Net increase in time deposits		3,917			28,434
Receipts from federal funds purchased & securities sold under agreement to repurchase		9,247,995			6,350,000
Repayments of federal funds purchased & securities sold under agreement to repurchase		(9,222,995	)		(6,350,000	)
Receipts from FHLB advances		17,615,421			47,732,887
Repayments of FHLB advances		(17,794,606	)		(47,798,037	)
Proceeds from issuance of unsecured bank debt		30,000			—
Dividends paid		(2,301	)		(1,355	)
Proceeds from issuance of preferred stock		52,625			—
Issuance of common stock and exercise of common stock options		454			774
Excess tax benefits from share-based payment arrangements		—			37
Purchase of treasury stock, net of reissuance		—			(2,426	)
Net cash provided by (used in) financing activities		141,453			(26,083	)
Increase (decrease) in cash and cash equivalents		28,570			(23,076	)
Cash and cash equivalents at beginning of period		248,558			267,537
Cash and cash equivalents at end of period	$	277,128		$	244,461
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest during the period	$	22,919		$	41,465
Cash paid for income taxes, net		971			1,789
Loans transferred to assets acquired through foreclosure		6,683			1,592
Net change in other comprehensive income		3,744			(5,772	)
Net transfer of loans to loans held-for-sale		—			247

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

5

WSFS FINANCIAL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008

(UNAUDITED)

1. BASIS OF PRESENTATION

Our consolidated Financial Statements include the accounts of WSFS Financial Corporation (“the Company”, “our Company”, “we”, “our” or “us”), Wilmington Savings Fund Society, FSB (“WSFS Bank” or the “Bank”) and Montchanin Capital Management, Inc. (“Montchanin”) and its wholly owned subsidiary, Cypress Capital Management, LLC (“Cypress”). We also have one unconsolidated affiliate, WSFS Capital Trust III (“the Trust”). WSFS Bank has a fully-owned subsidiary, WSFS Investment Group, Inc., which markets various third-party insurance products and securities products to Bank customers through WSFS’ retail banking system. WSFS Bank also owns a majority interest in 1^st Reverse Financial Services, LLC (1^st Reverse ), specializing in reverse mortgage lending. Founded in 1832, the Bank is one of the ten oldest banks continuously operating under the same name in the United States. We provide residential and commercial real estate, commercial and consumer lending services, as well as retail deposit and cash management services. In addition, we offer a variety of wealth management and personal trust services. Lending activities are funded primarily with retail deposits and borrowings. The Federal Deposit Insurance Corporation (“FDIC”) insures our customers’ deposits to their legal maximums. We serve customers from our main office, 37 retail banking offices, loan production offices and operations centers located in Delaware and southeastern Pennsylvania and Virginia and through our website at www.wsfsbank.com. The Wealth Management Services Division provides wealth management and personal trust services to customers in the Company’s primary market area.

Although our current estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that in 2009, actual conditions could be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Amounts subject to significant estimates are items such as the allowance for loan losses and lending related commitments, goodwill and intangible assets, post-retirement obligations, the fair value of financial instruments and other-than-temporary impairments. Among other effects, such changes could result in future impairments of investment securities, goodwill and intangible assets and establishment of allowances for loan losses and lending related commitments as well as increased post-retirement expense.

Our accounting and reporting policies conform with U.S. generally accepted accounting principles and prevailing practices within the banking industry for interim financial information and Rule 10-01 of Regulation S-X. Per Rule 10-01 of Regulation S-X, we are not required to include all information and notes for complete financial statements and prevailing practices within the banking industry. Operating results for the three and six months period ended June 30, 2009 are not necessarily indicative of the results that may be expected for any future quarters or for the year ending December 31, 2009. For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K/A for the year ended December 31, 2008 as filed with the Securities and Exchange Commission.

Accounting for Stock-Based Compensation

Stock-based compensation is accounted for in accordance with SFAS 123R. We have stock options outstanding under two plans (collectively, “Stock Incentive Plans”) for officers, directors and Associates of the Company and its subsidiaries. After shareholder approval in 2005, the 1997 Stock Option Plan (“1997 Plan”) was replaced by the 2005 Incentive Plan (“2005 Plan”). No future awards may be granted under the 1997 Plan. The 2005 Plan will terminate on the tenth anniversary of its effective date, after which no awards may be granted. The number of shares reserved for issuance under the 2005 Plan is 862,000. At June 30, 2009, there were 82,846 shares available for future grants under the 2005 Plan.

The Stock Incentive Plans provide for the granting of incentive stock options as defined in Section 422 of the Internal Revenue Code as well as nonincentive stock options (collectively, “Stock Options”). Additionally, the 2005 Plan provides for the granting of stock appreciation rights, performance awards, restricted stock and restricted stock unit awards, deferred stock units, dividend equivalents, other stock-based awards and cash awards. All Stock Options are to be granted at not less than the market price of our common stock on the date of the grant. All Stock Options granted during 2009 vest in 25% per annum increments, start to become exercisable one year from the grant date and expire five years from the grant date. Generally, all awards become immediately exercisable in the event of a change in control, as defined within the Stock Incentive Plans.

6

              A summary of the status of our Stock Incentive Plans and changes during the quarter then ended is presented below:

	June 2009		June 2008
	Shares	Weighted- Average Exercise Price	Shares		Weighted- Average Exercise Price
Stock Options:
Outstanding at beginning of period	755,388	$42.56	712,386		$43.29
Granted	1,500	26.23	—		—
Exercised	—	—	(2,460	)	14.16
Forfeited	—	—	(4,929	)	60.41
Outstanding at end of period	756,888	42.52	704,997		43.27
Exercisable at end of period	476,469	39.95	431,451		33.87
Weighted-average fair value of stock options granted	$ 7.69		$     —

On April 1, 2009, 475,617 stock options were exercisable with an intrinsic value of $1.0 million. In addition, at April 1, 2009, there were 279,771 nonvested options with a grant date fair value of $10.10. During the second quarter of 2009, 852 options vested with no intrinsic value, and a grant date fair value of $12.44 per option. Also during the quarter, there were no options exercised. There were 476,469 exercisable options remaining at June 30, 2009, with an intrinsic value of $2.0 million and a remaining contractual term of 2.9 years. At June 30, 2009 there were 756,888 stock options outstanding with an intrinsic value of $2.4 million and a remaining contractual term of 3.2 years. During the second quarter of 2008, 2,460 options were exercised with an intrinsic value of $93,000 and 852 options vested with a grant date fair value of $12.44 per option.

A summary of the status of our Stock Incentive Plans and changes during the six months then ended is presented below:

	June 2009			June 2008
	Shares		Weighted- Average Exercise Price	Shares		Weighted- Average Exercise Price
Stock Options:
Outstanding at beginning of period	675,887		$44.98	722,582		$43.14
Granted	83,921		23.33	3,150		48.95
Exercised	—		—	(13,750	)	29.10
Forfeited	(2,920	)	59.26	(6,985	)	59.92
Outstanding at end of period	756,888		42.52	704,997		43.27
Exercisable at end of period	476,469		39.95	431,451		33.87
Weighted-average fair value of stock options granted	$ 5.42			$ 9.58

Beginning January 1, 2009, 473,445 stock options were exercisable. During the six months ended June 30, 2009, 4,476 options vested with no intrinsic value, and a grant date fair value of $13.61 per option. Also during the first six months of 2009, there were no options exercised. During the first six months of 2008, 13,750 options were exercised with an intrinsic value of $275,000 and 4,485 options vested with a grant date fair value of $13.10 per option.

The total amount of compensation cost related to nonvested stock options as of June 30, 2009 was $1.5 million. The weighted-average period over which it is expected to be recognized is 2.4 years. We issue new shares upon the exercise of options.

During the second quarter of 2009, we granted 1,500 options with a five-year life and a four-year vesting period. The Black-Scholes option-pricing model was used to determine the grant date fair value of options. Significant assumptions used in the model included a weighted-average risk-free rate of return of 2.1% in 2009; an expected option life of three and three-quarter years; and an expected stock price volatility of 41.3% in 2009. For the purposes of this option-pricing model, a dividend yield of 1.8% was assumed. During the first six months of 2009, we granted 83,921 options with a five-year life and a four-year vesting period. The Black-Scholes option-pricing model was used to determine the grant date fair value of options. Significant assumptions used in the model included a weighted-average risk-free rate of return of 1.7% in 2009; an expected option life of three and three-quarter years; and an expected stock price volatility of 34.5% in 2009. For the purposes of this option-pricing model, a dividend yield of 2.1% was assumed.

7

During the second quarter of 2009 and 2008 we issued 78 and 48 shares, respectively, of restricted stock units. During the first two quarters of 2009 and 2008 we issued 174 and 92 shares, respectively, of restricted stock units. These awards vest over five years: 0% during the first two years, 25% at the end of each of the third and fourth years and 50% at the end of the fifth year. In addition, during the second quarter of 2009 we issued 37 shares of restricted stock units and during the first six months of 2009 we issued 8,309 shares of restricted stock units, which awards vest over four years, 25% on each anniversary date.

Additionally, we issued 25,248 shares of restricted stock during the first six months of 2009. These awards vest on the later of four years (25% per year on the first four anniversaries of the awards), or the first date on which the Company has no remaining outstanding obligation under the Emergency Economic Stabilization Act of 2008 (“EESA”) or such other date as may be provided by the U.S. Department of the Treasury regulations under EESA applicable to the Company; provided, however, that if the date specified has not occurred by the tenth anniversary of the grant date, the grantee shall forfeit all of the final 25% of the restricted shares. Finally, we issued 640 shares of restricted stock during the first six months of 2009 that vest over four years, 25% on each anniversary date.

During the first six months of 2009 we awarded 5,900 shares of Common Stock from this plan to our Board of Directors as part of their semi-annual retainer. These shares are not subject to a vesting period.

During 2008 we created a new performance-based incentive program under the terms of the 2005 Plan. Under this program shares of WSFS stock may be awarded to certain members of management.

The Long-Term Performance-Based Restricted Stock Unit Program (“Long-Term Program”) will award up to an aggregate of 109,200 shares of WSFS stock to seventeen participants, only after the achievement of targeted levels of return on assets (“ROA”). Under the terms of the plan, if an annual ROA performance level of 1.20% is achieved, up to 54,900 shares will be awarded. If an annual ROA performance level of 1.35% is achieved, an additional 21,200 shares, or up to 76,100 shares will be awarded. If an annual ROA performance level of 1.50% or greater is achieved, an additional 33,100 shares, or up to 109,200 shares will be awarded. If these targets are achieved in any year up until 2011, the awarded stock will vest in 25% increments over four years.

We did not recognize any compensation expense related to this program in the first six months of 2009. Compensation expense for the Long-Term Program was based on the closing stock price as of May 28, 2008 and will begin to be recognized once the achievement of target performance is considered probable.

At June 30, 2009 we had 82,846 shares available for issuance under the 2005 Plan. Full share awards, such as restricted stock, have the equivalence of four option grants for the purpose of calculating shares available for issuance. Under the provisions of the Long -Term Program, if a performance level is achieved and there are insufficient shares available for grant, then we would have the option of granting the available shares with the remainder being paid in cash.

The impact of stock-based compensation (stock options, restricted stock units and restricted stock) for the three months ended June 30, 2009 was $356,000 pre-tax ($273,000 after tax) or $0.04 per share, to salaries, benefits and other compensation. This compares to $286,000 pre-tax ($229,000 after tax) or $0.04 per share for the three months ended June 30, 2008. The impact of stock-based compensation for the six months ended June 30, 2009 was $801,000 pre-tax ($639,000 after tax) or $0.10 per share, to salaries, benefits and other compensation. This compares to $585,000 pre-tax ($472,000 after tax) or $0.07 per share for the six months ended June 30, 2008. The increase in the first six months of 2009 over 2008 includes $170,000 of expense related to restricted stock and restricted stock units. In prior years, stock options have been granted to Associates during the fourth quarter. The stock options that would have been awarded in the fourth quarter of 2008 were delayed until the first quarter of 2009. This delay and the effect of immediately expensing stock-based compensation to retirement eligible Associates accounted for the increase in compensation expense related to stock options.

8

2. EARNINGS PER SHARE

The following table shows the computation of basic and diluted earnings per share:

		For the three months					For the six months
		ended June 30,					ended June 30,
		2009			2008		2009			2008
		(Unaudited)
		(In Thousands, Except per Share Data)
Numerator:
Net income (loss) available to common stockholders	$	(3,067	)	$	6,700	$	(640	)	$	13,946
Denominator:
Denominator for basic earnings per share — weighted average shares		6,191			6,140		6,182			6,155
Effect of dilutive employee stock options		—			139		—			140
Denominator for diluted earnings per share — adjusted
weighted average shares and assumed exercise		6,191			6,279		6,182			6,295
Basic (loss) earnings per share	$	(0.50	)	$	1.09	$	(0.10	)	$	2.27
Diluted (loss) earnings per share	$	(0.50	)	$	1.07	$	(0.10	)	$	2.22
Outstanding common stock equivalents having no dilutive effect		763			381		761			379

For the three and six months ended June 30, 2009, 68,000 and 67,000 employee stock options were excluded from the computation of diluted net loss per common share because the effect would have been antidilutive due to the net loss reported in these periods.

3. INVESTMENT SECURITIES

The following tables detail the amortized cost and the estimated fair value of the Company’s investment securities:

				Gross		Gross
	Amortized			Unrealized		Unrealized		Fair
	Cost			Gains		Losses		Value
	(In Thousands)
Available-for-sale securities:
June 30, 2009:
Reverse mortgages	$	(113	)	$	—	$	—	$	(113	)
U.S. Government and agencies		41,756			755		5		42,506
State and political subdivisions		4,005			50		—		4,055
	$	45,648		$	805	$	5	$	46,448
December 31, 2008
Reverse mortgages	$	(61	)	$	—	$	—	$	(61	)
U.S. Government and agencies		43,778			857		1		44,634
State and political subdivisions		4,020			—		86		3,934
	$	47,737		$	857	$	87	$	48,507
Held-to-maturity:
June 30, 2009:
State and political subdivisions	$	1,177		$	—	$	66	$	1,111
	$	1,177		$	—	$	66	$	1,111
December 31, 2008:
State and political subdivisions	$	1,181		$	—	$	110	$	1,071
	$	1,181		$	—	$	110	$	1,071

9

Securities with book values aggregating $41.5 million at June 30, 2009 were specifically pledged as collateral for WSFS’ Treasury Tax and Loan account with the Federal Reserve Bank; Federal Reserve Credit Discount; securities sold under agreement to repurchase; and certain letters of credit and municipal deposits which require collateral. Accrued interest receivable relating to investment securities was $368,000 and $409,000 at June 30, 2009 and December 31, 2008, respectively.

The scheduled maturities of investment securities held-to-maturity and securities available-for-sale at June 30, 2009 were as follows:

	Held-to-Maturity				Available-for Sale
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(In Thousands)
Within one year (1)	$	—	$	—	$	6,161	$	6,257
After one year but within five years		630		630		38,452		39,144
After five years but within ten years		—		—		1,035		1,047
After ten years		547		481		—		—
	$	1,177	$	1,111	$	45,648	$	46,448

(1) Reverse mortgages do not have contractual maturities. We have included reverse mortgages in maturities within one year.

There were no sales of investment securities classified as available-for-sale or held-to-maturity for the quarters ended June 30, 2009 or June 30, 2008. The cost basis for all investment security sales was based on the specific identification method. Investment securities totaling $18.0 million were called by the issuers during the first six months of 2009.

At June 30, 2009, we owned investment securities totaling $2.5 million where the amortized cost basis exceeded fair value. Total unrealized losses on those securities were $71,000 at June 30, 2009. This temporary impairment is the result of changes in market interest rates since the purchase of the securities. Securities amounting to $299,000 have been impaired for 12 months or longer. We have determined that these securities are not other than temporarily impaired. The following table includes unrealized losses aggregated by category:

	Less than 12 months				12 months or longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
	(In Thousands)
Held-to-maturity
State and political subdivisions	$	—	$	—	$	299	$	66	$	299	$	66
Available-for-sale
State and political subdivisions		182		—		—		—		182		—
U.S Government and agencies		2,016		5		—		—		2,016		5
Total temporarily impaired investments	$	2,198	$	5	$	299	$	66	$	2,497	$	71

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4. MORTGAGE-BACKED SECURITIES

The following tables detail the amortized cost and the estimated fair value of the Company’s mortgage-backed securities:

				Gross		Gross
	Amortized			Unrealized		Unrealized		Fair
	Cost			Gains		Losses		Value
	(In Thousands)
Available-for-sale securities:
June 30, 2009:
Collateralized mortgage obligations	$	394,673		$	3,161	$	19,866	$	377,968
FNMA		89,550			1,136		470		90,216
FHLMC		36,225			648		9		36,864
GNMA		32,485			1,052		21		33,516
	$	552,933		$	5,997	$	20,366	$	538,564
Weighted average yield		4.86%
December 31, 2008:
Collateralized mortgage obligations	$	419,177		$	2,595	$	25,728	$	396,044
FNMA		35,578			932		—		36,510
FHLMC		30,477			830		—		31,307
GNMA		22,536			992		—		23,528
	$	507,768		$	5,349	$	25,728	$	487,389
Weighted average yield		5.30%
Trading securities:
June 30, 2009:
Collateralized mortgage obligations	$	11,313		$	—	$	—	$	11,313
	$	11,313		$	—	$	—	$	11,313
Weighted average yield		3.31	%
December 31, 2008:
Collateralized mortgage obligations	$	10,816		$	—	$	—	$	10,816
	$	10,816		$	—	$	—	$	10,816
Weighted average yield		3.47%

The portfolio of available-for-sale mortgage-backed securities consists primarily of AAA-rated, currently cash flowing securities, backed by conventional 10 to 30-year mortgages. The weighted average duration of the mortgage-backed securities was 2.5 years at June 30, 2009.

At June 30, 2009, mortgage-backed securities with par values aggregating $259.4 million were pledged as collateral for retail customer repurchase agreements and municipal deposits. Accrued interest receivable relating to mortgage-backed securities was $2.2 million and $2.1 million at June 30, 2009 and December 31, 2008, respectively. From time to time, mortgage-backed securities are pledged as collateral for Federal Home Loan Bank (FHLB) borrowings. The fair value of these pledged mortgage-backed securities at June 30, 2009 and December 31, 2008 was $2.1 million and $16.0 million, respectively.

During the first six months of 2009, proceeds from the sale of mortgage-backed securities available-for-sale were $38.6 million, resulting in a gain of $688,000. The cost basis of all mortgage-backed sales is based on the specific identification method. There were no sales of mortgage-backed securities available-for-sale during the first six months of 2008.

We own $12.4 million par value of SASCO RM-1 2002 securities which are classified as trading. $10.0 million was originally received as partial consideration for the sale of a previously owned reverse mortgage portfolio, an additional $1.0 million was purchased

11

at par at the time of the securitization of these assets by a third party, and $1.4 million of accrued interest was paid in kind. We expect to recover all principal and interest, because of seasoning and the fact that these securities are well over-collateralized.

Based on SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities (“SFAS 115”), when these securities were acquired they were classified as trading. It was our intention to sell them in the near term. An active market for these securities has not developed since the issuance. Since there is no active market for these securities, we have used the guidance under SFAS 157 to provide a reasonable estimate of fair value in 2009. We estimated the value of these securities as of June 30, 2009 based on the pricing of BBB+ securities that have an active market through a technique which estimates the fair value of this asset using the income approach.

At June 30, 2009, we owned mortgage-backed securities totaling $315.1 million where the amortized cost basis exceeded fair value. Total unrealized losses on those securities were $20.4 million at June 30, 2009. This temporary impairment is the result of changes in market interest rates since the purchase of the securities and a lack of liquidity in the mortgage-backed securities market, depressing prices. Most of these securities have been impaired for twelve months or longer. We have determined that these securities are not other than temporarily impaired. We evaluate the current characteristics of each of our mortgage-backed securities such as delinquency and foreclosure levels, credit enhancement, projected losses and coverage, on a quarterly basis. In addition, 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. The following table lists the unrealized losses aggregated by category:

	Less than 12 months				12 months or longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Loss		Value		Loss		Value		Loss
	(In Thousands)
Available-for-sale
CMO	$	46,767	$	1,727	$	222,808	$	18,139	$	269,575	$	19,866
FNMA		42,061		470		—		—		42,061		470
FHLMC		2,273		9		—		—		2,273		9
GNMA		1,224		21		—		—		1,224		21
Total temporarily impaired MBS	$	92,325	$	2,227	$	222,808	$	18,139	$	315,133	$	20,366

5. IMPAIRED LOANS

Loans for which it is probable that we will not collect all principal and interest due according to contractual terms are measured for impairment in accordance with the provisions of SFAS No. 114 Accounting by Creditors for Impairment of a Loan (“SFAS 114”). 

We had impaired loans of approximately $65.2 million at June 30, 2009 compared to $23.8 million at December 31, 2008. The average recorded balance of impaired loans was $41.3 million for the six months ended June 30, 2009 and $29.5 million for the year-ended December 31, 2008. The allowance for losses on these impaired loans was $5.5 million at June 30, 2009 compared to $395,000 at December 31, 2008.

When there is little prospect of collecting either principal or interest, loans, or portions of loans, may be charged-off to the allowance for loan losses. Losses are recognized in the period an obligation becomes uncollectible. Any charge-offs recognized during the period are not included in the allowance for losses on impaired loans as of June 30, 2009 or December 31, 2008.

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6. COMPREHENSIVE INCOME

The following schedule reconciles net income to total comprehensive income:

	For the three months						For the six months
	Ended June 30,						Ended June 30,
	2009			2008			2009			2008
	(In Thousands)
Net (loss) income	$	(2,316	)	$	6,700		$	624		$	13,946
Other Comprehensive Income:
Unrealized holding gains (losses) on securities
available-for-sale arising during the period		158			(8,479	)		6,727			(9,310	)
Tax (expense) benefit		(60	)		3,222			(2,556	)		3,538
Net of tax amount		98			(5,257	)		4,171			(5,772	)
Reclassification adjustment for gains included in net income		(141	)		—			(688	)		—
Tax expense		54			—			261			—
Net of tax amount		(87	)		—			(427	)		—
Total comprehensive (loss) income	$	(2,305	)	$	1,443		$	4,368		$	8,174

7. TAXES ON INCOME

We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes (“SFAS 109”) and Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement 109 (“FIN 48”). SFAS 109 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 have assessed valuation allowances on the deferred income taxes due to, among other things, limitations imposed by Internal Revenue Code and uncertainties, including the timing of settlement and realization of these differences. 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 upon 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. FIN 48 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 FIN 48 requires careful consideration of the technical merits of a position based on our analysis of tax regulations and interpretations. Significant judgment may be involved in applying the requirements of FIN 48.

The total amount of unrecognized tax benefits as of June 30, 2009 and December 31, 2008 were $1.8 million and $2.6 million, respectively, of which $1.3 million would affect our effective tax rate if recognized. As of June 30, 2009 and December 31, 2008, the total amount of accrued interest included in such unrecognized tax benefits was $312,000 and $572,000, respectively. No penalties are included in such unrecognized tax benefits. We record interest and penalties on potential income tax deficiencies as income tax expense. The decrease in the unrecognized tax benefits was primarily due to the expiration of a statute of limitations.

While our Federal and State tax years 2005 through 2008 remain subject to examination as of June 30, 2009, the Internal Revenue Service (“IRS”) completed its examination of our 2004 through 2006 Federal tax returns during the quarter ended June 30, 2008. During 2008 we successfully completed the IRS appeal process and during the quarter ended March 31, 2009 we recovered $863,000 of taxes plus $275,000 of interest that were previously assessed during the audit phase. The financial statement impact of the recovery was recorded during 2008, however we received $130,000 more interest than originally expected. This amount, net of federal tax expense, was recorded as a reduction of income tax expense during the quarter ended March 31, 2009.

During the fourth quarter of 2007, we donated a N.C. Wyeth mural which was previously displayed in our former headquarters. The estimated fair value of the mural was $6.0 million, which was recorded as a charitable contribution expense. We recognized a related offsetting gain on the transfer of the asset during 2007. The expense and offsetting gain was shown net in our Consolidated Financial Statements in 2007. As the gain on the transfer of the asset is permanently excludible from taxation, the charitable contribution transaction results in a permanent deduction for income tax purposes. The amount of the deduction represents

13

an income tax uncertainty because it is subject to evaluation by the IRS. The IRS is still in the process of evaluating this tax deduction and we anticipate this evaluation to be completed during 2009.

8. SEGMENT INFORMATION

Under the definition of SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information (“SFAS 131”), we discuss our business in three segments. There is one segment for WSFS Bank and one for Cash Connect, the ATM division of WSFS. The third segment, “All Others”, represents the combined contributions of Montchanin, WSFS Investment Group, Inc., our Wealth Management Services Division, and 1^st Reverse. Montchanin, WSFS Investment Group, Inc., Wealth Management Services Division, and 1^st Reverse each offer different products, to a separate customer base, through distinct distribution methods. Therefore, we have combined these entities to form the operating segment “All Others”.

The WSFS Bank segment provides financial products to commercial and retail customers through its main office, 37 retail banking and loan production offices and operations center. Retail and Commercial Banking, Commercial Real Estate Lending, Private Banking and other banking business units are operating departments of WSFS. 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 Company. Because of these and other reasons, these departments are not considered discrete segments and are appropriately aggregated within the WSFS Bank segment of the Company in accordance with SFAS 131.

Cash Connect provides turnkey ATM services through strategic partnerships with several of the largest networks, manufacturers and service providers in the ATM industry. 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 “All Others” column, for the three and six months ended June 30, 2009, includes a $1.6 million pre-tax charge related to 1^st Reverse, which includes the write-off of all related goodwill and intangibles, uncollectable receivables and our remaining investment in this subsidiary.

An operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the enterprise’s chief operating decision makers to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. We evaluate performance based on pretax ordinary 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 Consolidated Financial Statements. Segment information for the three and six months ended June 30, 2009 and 2008 follows:

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	For the Three Months Ended June 30,
	2009												2008
	WSFS			Cash Connect		All Others				Total			WSFS		Cash Connect		All Others			Total
	(in Thousands)
External customer revenues:
Interest income	$	39,839		$	—	$	—		$		39,839		$	40,795	$	—	$	—		$	40,795
Noninterest income		8,298			2,855		1,514				12,667			7,087		3,382		1,202			11,671
Total external customer revenues		48,137			2,855		1,514				52,506			47,882		3,382		1,202			52,466
Inter-segment revenues:
Interest income		162			—		—				162			879		—		—			879
Noninterest income		1,071			98		—				1,169			948		170		—			1,118
Total inter-segment revenues		1,233			98		—				1,331			1,827		170		—			1,997
Total revenue		49,370			2,953		1,514				53,837			49,709		3,552		1,202			54,463
External expenses:
Interest expense		13,459			—		—				13,459			18,428		—		—			18,428
Noninterest expenses		26,235			1,272		3,448				30,955			18,366		1,354		1,450			21,170
Provision for loan loss		11,997			—		—				11,997			2,433		—		—			2,433
Total external expenses		51,691			1,272		3,448				56,411			39,277		1,354		1,450			42,031
Inter-segment expenses
Interest expense		—			162		—				162			—		879		—			879
Noninterest expenses		98			253		818				1,169			170		242		706			1,118
Total inter-segment expenses		98			415		818				1,331			170		1,121		706			1,997
Total expenses		51,789			1,687		4,266				57,742			39,397		2,475		2,156			44,028
(Loss) Income before minority interest and taxes	$	(2,419	)	$	1,266	$	(2,752	)	$		(3,905	)	$	10,312	$	1,077	$	(954	)	$	10,435
Income tax (benefit) provision											(1,589	)									3,735
Consolidated net (loss) income									$		(2,316	)								$	6,700
Cash and cash equivalents	$	72,148		$	201,844	$	3,136		$		277,128		$	74,389	$	167,693	$	2,379		$	244,461
Other segment assets		3,292,427			15,967		2,394				3,310,788			2,936,222		14,713		2,647			2,953,582
Total segment assets	$	3,364,575		$	217,811	$	5,530		$		3,587,916		$	3,010,611	$	182,406	$	5,026		$	3,198,043
Capital expenditures	$	2,524		$	138	$	2		$		2,664		$	936	$	26	$	136		$	1,098

15

	For the Six Months Ended June 30,
	2009										2008
	WSFS		Cash Connect		All Others			Total			WSFS		Cash Connect		All Others			Total
	(in Thousands)
External customer revenues:
Interest income	$	78,646	$	—	$	—		$	78,646		$	85,355	$	—	$	—		$	85,355
Noninterest income		15,195		5,632		2,941			23,768			14,724		7,168		2,285			24,177
Total external customer revenues		93,841		5,632		2,941			102,414			100,079		7,168		2,285			109,532
Inter-segment revenues:
Interest income		327		—		—			327			2,314		—		—			2,314
Noninterest income		1,796		169		—			1,965			1,744		336		—			2,080
Total inter-segment revenues		2,123		169		—			2,292			4,058		336		—			4,394
Total revenue		95,964		5,801		2,941			104,706			104,137		7,504		2,285			113,926
External expenses:
Interest expense		28,375		—		—			28,375			42,019		—		—			42,019
Noninterest expenses		47,366		2,346		5,617			55,329			36,658		2,720		2,729			42,107
Provision for loan loss		19,650		—		—			19,650			4,823		—		—			4,823
Total external expenses		95,391		2,346		5,617			103,354			83,500		2,720		2,729			88,949
Inter-segment expenses
Interest expense		—		318		9			327			—		2,314		—			2,314
Noninterest expenses		169		440		1,356			1,965			336		461		1,283			2,080
Total inter-segment expenses		169		758		1,365			2,292			336		2,775		1,283			4,394
Total expenses		95,560		3,104		6,982			105,646			83,836		5,495		4,012			93,343
(Loss) Income before minority interest and taxes	$	404	$	2,697	$	(4,041	)	$	(940	)	$	20,301	$	2,009	$	(1,727	)	$	20,583
Income tax (benefits) provision									(1,564	)									6,637
Consolidated net income								$	624									$	13,946
Cash and cash equivalents	$	72,148	$	201,844	$	3,136		$	277,128		$	74,389	$	167,693	$	2,379		$	244,461
Other segment assets		3,292,427		15,967		2,394			3,310,788			2,936,222		14,713		2,647			2,953,582
Total segment assets	$	3,364,575	$	217,811	$	5,530		$	3,587,916		$	3,010,611	$	182,406	$	5,026		$	3,198,043
Capital expenditures	$	4,401	$	138	$	13		$	4,552		$	2,591	$	59	$	137		$	2,787

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9. 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 quarter-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 Short-Term Investments: For cash and short-term investments, including due from banks, federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with other banks, the carrying amount is a reasonable estimate of fair value.

Investments and Mortgage-Backed Securities: Fair value of investment and mortgage-backed securities is based on quoted market prices, where available. If a quoted market price is not available, fair value is estimated using quoted prices for similar securities. The fair value of our investment in reverse mortgages is based on the net present value of estimated cash flows, which have been updated to reflect recent external appraisals of the underlying collateral. For additional discussion of our mortgage-backed securities-trading, see Note 11, Fair Value of Financial Assets, to the Consolidated Financial Statements.

Loans: Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type: commercial, commercial mortgages, construction, residential mortgages and consumer. For loans that reprice frequently, the book value approximates fair value. The fair values of other types of loans 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 value of nonperforming loans is based on recent external appraisals of the underlying collateral. Estimated cash flows, discounted using a rate commensurate with current rates and the risk associated with the estimated cash flows, are utilized if appraisals are not available.

Bank-Owned Life Insurance: The estimated fair value approximates the book value for this investment.

Stock in the Federal Home Loan Bank of Pittsburgh: The fair value of FHLB stock is assumed to be essentially equal to its cost basis, since the stock is non-marketable but redeemable at its par value.

Deposit Liabilities: The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, money market and interest-bearing demand deposits and savings deposits, is assumed to be equal to the amount payable on demand. The carrying value of variable rate time deposits and time deposits that reprice frequently also approximates fair value. The fair value of the remaining time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits with comparable remaining maturities.

Borrowed Funds: Rates currently available to us for debt with similar terms and remaining maturities are used to estimate fair value of existing debt.

Off-Balance Sheet Instruments: The fair value of off-balance sheet instruments, including commitments to extend credit and standby letters of credit, is estimated using the fees currently charged to enter into similar agreements with comparable remaining terms and reflects the present creditworthiness of the counterparties.

17

The book value and estimated fair value of our financial instruments are as follows:

	June 30, 2009				December 31, 2008
	Book Value		Fair Value		Book Value		Fair Value
(In Thousands)
Financial assets:
Cash and cash equivalents	$	277,128	$	277,128	$	248,558	$	248,558
Investment securities		47,625		47,559		49,688		49,578
Mortgage-backed securities		549,877		549,877		498,205		498,205
Loans, net		2,516,485		2,518,850		2,443,835		2,435,135
Bank-owned life insurance		59,776		59,776		59,337		59,337
Stock in Federal Home Loan Bank of Pittsburgh		39,305		39,290		39,305		39,290
Accrued interest receivable		11,284		11,284		11,609		11,609
Financial liabilities:
Deposits		2,372,951		2,384,223		2,122,352		2,101,881
Borrowed funds		907,204		895,747		1,066,745		1,035,401
Accrued interest payable		12,249		12,249		6,794		6,794

The estimated fair value of our off-balance sheet financial instruments is as follows:

	June 30, 2009		Dec. 31, 2008
(In Thousands)
Off-balance sheet instruments:
Commitments to extend credit	$	5,325	$	5,926
Standby letters of credit		611		597

10. FAIR VALUE OF FINANCIAL ASSETS

Effective January 1, 2008, we adopted the provisions of SFAS No. 157, Fair Value Measurements (“SFAS 157”), for financial assets and financial liabilities. In addition we adopted Financial Accounting Standards Board Staff Position (FSP) No. 157-2, Effective Date of FASB Statement No. 157, on January 1, 2009. This adoption did not have a material impact on our financial statements.

SFAS 157 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. SFAS 157 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.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of our financial assets carried at fair value effective January 1, 2008. The table below presents the balances of assets measured at fair value as of June 30, 2009 (there are no material liabilities measured at fair value):

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	Quoted Prices in Active Markets for Identical Asset		Significant Other Observable Inputs		Significant Unobservable Inputs	Total
Description	(Level 1)		(Level 2)		(Level 3)	Fair Value
	(in Thousands)
Assets Measured at Fair Value on a Recurring Basis
Available for sale securities	$	-	$	585,012	$                    -	$	585,012
Trading Securities		-		-	11,313	$	11,313
Total assets measured at fair value on a recurring basis	$	-	$	585,012	$          11,313	$	596,325
Assets Measured at Fair Value on a Nonrecurring Basis
Impaired Loans	$	-	$	52,461	$                    -	$	52,461
Total assets measured at fair value on a nonrecurring basis	$	-	$	52,461	$                    -	$	52,461

Fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon 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. Our 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 our valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

Available for sale securities. Securities classified as available for sale are reported at fair value using Level 2 inputs. Included in the Level 2 total are approximately $42.5 million in Federal Agency debentures, $259.8 million in Federal Agency mortgage-backed securities, $278.8 million of Private Label mortgage-backed securities, and $4.1 million in municipal bonds. Agency and mortgage-backed securities were predominately AAA-rated. We believe that this Level 2 designation is appropriate for these securities under SFAS 157 as, with almost all fixed income securities, none are exchange traded, and are priced by correlation to observed market data.  For these securities we obtain 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.

Trading securities. The amount included in the trading securities category represents the fair value of a BBB-rated traunche of a reverse mortgage security. There has never been an active market for these securities. As such, we classify these trading securities as Level 3 under FAS 157. As prescribed by FAS 157 management used various observable and unobservable inputs to develop a range of likely fair value prices where this security would be exchanged in an orderly transaction between market participants at the measurement date. The unobservable inputs reflect management’s assumptions about the assumptions that market participants would use in pricing this asset. Included in these inputs were the median of a selection of other BBB-rated securities as well as quoted market prices from higher rated traunches of this asset class. As a result, the value assigned to this security is determined primarily through a discounted cash flow analysis. All of these assumptions require a significant degree of management judgment.

The changes in Level 3 assets measured at fair value are summarized as follows:

		Trading
		Securities
		(In Thousands)
Balance at January 1, 2009	$	10,816
Total net gains for the period included in net income		497
Purchases, sales, issuances, and settlements, net		—
Balance at June 30, 2009	$	11,313

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Impaired loans. Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $57.3 million at June 30, 2009. The valuation allowance on impaired loans was $4.8 million as of June 30, 2009.

11. INDEMNIFICATIONS AND GUARANTEES

Secondary Market Loan Sales. We generally do not sell loans with recourse except to the extent arising from standard loan sale contract provisions covering violations of representations and warranties and, under certain circumstances, first payment defaults by borrowers. These are customary repurchase provisions in the secondary market for conforming mortgage loan sales. We typically sell fixed-rate, conforming first mortgage loans (including reverse mortgages) in the secondary market as part of our ongoing asset/liability management program. Loans held-for-sale are carried at the lower of cost or market of the aggregate or in some cases individual loans. Gains and losses on sales of loans are recognized at the time of the sale.

As is customary in such sales, we provide indemnifications to the buyers under certain circumstances. These indemnifications may include the repurchase of loans by us. Repurchases and losses are rare, and no provision is made for losses at the time of sale. During 2008 through the second quarter of 2009, we had no repurchases under these indemnifications.

Swap Guarantees. We entered into agreements with three unrelated financial institutions whereby those financial institutions entered into interest rate derivative contracts (interest rate swap transactions) with customers referred to them by us. By the terms of the agreements, those financial institutions have recourse to us for any exposure created under each swap transaction in the event 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 smaller financial institutions like us to provide access to interest rate swap transactions for our customers without creating the swap ourselves.

At June 30, 2009 there were forty-two variable-rate to fixed-rate swap transactions between the third party financial institutions and our customers, compared to thirty-nine at December 31, 2008. The initial notional amount aggregated approximately $202.2 million at June 30, 2009 compared with $176.6 million at December 31, 2008. At June 30, 2009 maturities ranged from approximately three months to thirteen years. The aggregate market value of these swaps to the customers was a liability of $13.6 million at June 30, 2009 and $20.9 million at December 31, 2008. At June 30, 2009 almost all of the swap transactions were in a paying position to third-party financial institutions.

12. ASSOCIATE (EMPLOYEE) BENEFIT PLANS

Postretirement Benefits

               We share certain costs of providing health and life insurance benefits to retired Associates (and their eligible dependents). Substantially all Associates may become eligible for these benefits if they reach normal retirement age while working for us.

                We account for our obligations under the provisions of SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions (“SFAS 106”). SFAS 106 requires that the costs of these benefits be recognized over an Associate’s active working career. Disclosures are in accordance with SFAS No. 158, Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans (“SFAS 158”).

The following disclosures of the net periodic benefit cost components of post-retirement benefits were measured at January 1, 2009 and 2008:

	Three months ended June 30,				Six months ended June 30,
(In Thousands)	2009		2008		2009		2008
Service cost	$	40	$	35	$	80	$	71
Interest cost		35		35		70		69
Amortization of transition obligation		15		15		30		30
Net loss recognition		5		4		9		8
Net periodic benefit cost	$	95	$	89	$	189	$	178

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13. NONINTEREST EXPENSES

During the three months ended June 30, 2009, we incurred $5.7 million of charges we consider to be non-routine. These charges are included in Noninterest expenses in the Consolidated Statement of Operations and include the following:

• A $1.6 million charge resulting from management’s decision to conduct an orderly wind-down of 1^st Reverse. The charge represents the write-off of all related goodwill and intangibles, uncollectible receivables and our remaining investment in that subsidiary (reflected in Other operating expenses).

• A $1.7 million insurance premium charged by the FDIC representing our share of the special assessment levied on the banking industry at June 30, 2009 (reflected in FDIC special assessment).

• A $1.5 million charge related to the previously disclosed fraudulent wire transfer activity affecting the accounts of two customers ($1.3 million reflected in Other operating expense and $0.2 million reflected in Professional fees).

• A $953,000 expense related to due diligence on an acquisition prospect in which discussions have terminated (reflected in Professional fees).

There were no material non-routine charges recorded during the three month period ended March 31, 2009, or the three and six month periods ended June 30, 2008.

14. PREFERRED STOCK AND COMMON STOCK WARRANTS

The Company entered into a purchase agreement with the U.S. Treasury on January 23, 2009, pursuant to which the Company issued and sold 52,625 shares of the Company’s fixed-rate cumulative perpetual preferred stock for a total purchase price of $52.6 million, and a 10-year warrant to purchase 175,105 shares of the Company’s common stock at an exercise price of $45.08 per share. The Company will pay the Treasury Department a five percent dividend annually for each of the first five years of the investment and a nine percent dividend thereafter until the shares are redeemed. The cumulative dividend for the preferred stock is accrued for and payable on February 15, May 15, August 15 and November 15 of each year. The Company has declared and paid $819,000 in preferred stock dividends during the first six months of 2009.

The Company allocated total proceeds of $52.6 million, based on the relative fair value of preferred stock and common stock warrants, to preferred stock for $51.9 million and common stock warrants for $693,000, respectively, on January 23, 2009. The preferred stock discount will be accreted, on an effective yield method, to preferred stock over 5 years. The Company has accreted a total of $58,000 during the first six months of 2009 relating to the discount on preferred stock.

15. SUBSEQUENT EVENT

The Company has evaluated all subsequent events through August 7, 2009, the last business day before the filing date of this Form 10-Q with the Securities and Exchange Commission, and identified one non-recognized subsequent event.

In July 2009, the Company entered into a Stock Purchase Agreement to sell 862,069 shares of common stock and to issue a warrant to purchase 129,310 shares to Peninsula Investment Partners, L.P. (Peninsula) for $25 million in cash ($29.00 per share excluding the value of the warrant). The warrant has an exercise price of $29 per share and a term of 10 years. Peninsula currently owns 610,000 shares or 9.85% of WSFS’ outstanding common stock. After the sale, Peninsula will own 1,472,069 shares or 20.87% of WSFS’ outstanding common stock (not including the warrant shares). Following the completion of the stock sale, WSFS will appoint Mr. R. Ted Weschler, managing partner of Peninsula, to the Board of Directors of WSFS. The stock sale is contingent on, among other things, regulatory approval by the Office of Thrift Supervision.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

WSFS Financial Corporation (“the Company”, “our Company”, “we”, “our” or “us”) is a thrift 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”). Founded in 1832, we are one of the ten oldest banks in the United States continuously-operating under the same name. As a federal savings bank, which was formerly chartered as a state mutual savings bank, we enjoy broader investment powers than

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most other financial institutions. We have served the residents of the Delaware Valley for over 175 years. We are the largest thrift institution headquartered in Delaware and the third largest financial institution in the state on the basis of total deposits traditionally garnered in-market. Our primary market area is the mid-Atlantic region of the United States, which is characterized by a diversified manufacturing and service economy. Our long-term strategy is to serve small and mid-size businesses through loans, deposits, investments, and related financial services, and to gather retail core deposits. Our strategic focus is to exceed customer expectations, deliver stellar service and build customer advocacy through highly trained, relationship oriented, friendly, knowledgeable, and empowered Associates.

We have two consolidated subsidiaries, WSFS Bank and Montchanin Capital management, Inc. (“Montchanin”). We also have one unconsolidated affiliate, WSFS Capital Trust III (“the Trust”). WSFS Bank has a fully-owned subsidiary, WSFS Investment Group, Inc., and also owns a majority interest in 1^st Reverse Financial Services, LLC (“1^st Reverse") Montchanin has one consolidated subsidiary, Cypress Capital Management, LLC (“Cypress”). For additional information on the Company or any of our subsidiaries, see Note 1, Basis of presentation, to the Consolidated Financial Statements.

FORWARD-LOOKING STATEMENTS

The following discussion may contain statements which are not historical facts and are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, which are based on various assumptions, some of which may be beyond the company’s control, are subject to risks and uncertainties 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 the economic environment, particularly in the market areas in which the company operates, the volatility of the financial securities markets, including changes with respect to the market value of our financial assets, changes in government regulations affecting financial institutions, and potential expenses associated therewith, changes resulting from our participation in the CPP, including additional conditions that may be imposed in the future on participating companies, and the costs associated with resolving any problem loans and other risks and uncertainties discussed in documents filed by WSFS Financial Corporation with the Securities and Exchange Commission from time to time. The Corporation does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Corporation.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of the financial condition and results of operations are based on the Consolidated Financial Statements, which are prepared in conformity with U.S. generally accepted accounting principles. The preparation of these Consolidated Financial Statements requires management to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenue and expenses. We regularly evaluate these estimates and assumptions including those related to the allowance for loan losses, contingencies (including indemnifications), and deferred taxes. 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. Actual results may differ from these estimates under different assumptions or conditions.

The following are critical accounting policies that involve more significant judgments and estimates:

Allowance for Loan Losses

We maintain allowances for credit losses and charge losses to these allowances when realized. The determination of the allowance for loan losses requires significant judgment reflecting our best estimate of probable loan losses related to specifically identified loans as well as those in the remaining loan portfolio. Our evaluation is based upon a continuing review of these portfolios, with consideration given to evaluations resulting from examinations performed by regulatory authorities.

Contingencies (Including Indemnifications)

In the ordinary course of business we are subject to legal actions, which involve claims for monetary relief. Based upon information presently available to us and our counsel, it is our opinion that any legal and financial responsibility arising from such claims will not have a material adverse effect on our results of operations.

We maintain a loss contingency for standby letters of credit and charge losses to this reserve when such losses are realized. The determination of the loss contingency for standby letters of credit requires significant judgment reflecting management’s best estimate of probable losses.

The Bank, as successor to originators of reverse mortgages is, from time to time, involved in arbitration or litigation with various parties including borrowers or the heirs of borrowers. Because reverse mortgages are a relatively new and uncommon product,

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there can be no assurances about how the courts or arbitrators may apply existing legal principles to the interpretation and enforcement of the terms and conditions of the Bank’s reverse mortgage obligations.

Deferred Taxes

We account for income taxes in accordance with Statement of Financial Account Standards (“SFAS”) No. 109, Accounting for Income Taxes (“SFAS 109”), which 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 continually assess the need for valuation allowances on deferred income tax assets that may result from, among other things, limitations imposed by Internal Revenue Code and uncertainties, including the timing of settlement and realization of these differences.

Fair Value Measurements

On January 1, 2008, we adopted SFAS No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. See Note 9, Fair Value of Financial Assets.

FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY

Financial Condition

Our total assets increased $155.4 million, or 5%, during the six months ended June 30, 2009. Total loans increased $72.7 million, or 3%, primarily attributable to a $97.1 million, or 6%, increase in commercial and commercial real estate loans offset by a decrease in residential loans of $19.4 million, or 5%. The decrease in residential mortgages is mainly due to pay-downs in the portfolio and our decision to sell more of our new originated loans and record a gain on sale. Mortgage-backed securities increased $51.7 million, or 10%. Finally, cash and cash equivalents increased $28.6 million, or 11%. This included a $16.7 million, or 29%, increase in cash and due from banks, and an $11.9 million, or 6%, increase in cash in non-owned ATMs.

Total liabilities increased $100.1 million, or 3%, between December 31, 2008 and June 30, 2009 to $3.3 billion. This increase was mainly due to an increase in deposits of $250.6 million, or 12%. This included increases of $274.0 million, or 16%, in customer deposits and $21.7 million, or 7%, in brokered certificates of deposit. These increases in customer deposits improved our funding mix as deposit growth reduced more-costly wholesale funding needs. As a result, both Federal Home Loan Bank (FHLB) advances and other jumbo certificates of deposit decreased $179.2 million, or 22%, and $45.1 million, or 43%, respectively.

Capital Resources

Stockholders’ equity increased $55.3 million between December 31, 2008 and June 30, 2009. This increase was mainly due to the sale of senior preferred stock to the U.S. Department of the Treasury under its Capital Purchase Program (CPP) totaling $52.6 million. In addition, accumulated other comprehensive loss decreased $3.7 million during the first six months of 2009 mainly due to an increase of the fair value of securities available for sale. Also contributing to the increase was $939,000 from the issuance of common stock and employee stock option activity and net income of $624,000. Partially offsetting these increases was the declaration of common and preferred dividends totaling $1.5 million and $819,000, respectively, during the six months ended June 30, 2009.

Below is a table comparing the Bank’s consolidated capital position to the minimum regulatory requirements as of June 30, 2009 (dollars in thousands):

	Consolidated Bank Capital				For Capital Adequacy Purposes				To be Well-Capitalized Under Prompt Corrective Action Provisions
	Amount		% of Assets		Amount		% of Assets		Amount		% of Assets
Total Capital (to Risk-Weighted Assets)	$	324,412	11.15	%	$	232,689	8.00	%	$	290,861	10.00	%
Core Capital (to Adjusted Total Assets)		289,514	8.08			143,296	4.00			179,120	5.00
Tangible Capital (to Tangible Assets)		289,514	8.08			53,736	1.50			N/A	N/A
Tier 1 Capital (to Risk-Weighted Assets)		289,514	9.95			116,344	4.00			174,516	6.00

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Under Office of Thrift Supervision (“OTS”) capital regulations, savings institutions such as the Bank must maintain “tangible” capital equal to 1.5% of adjusted total assets, “core” capital equal to 4.0% of adjusted total assets, “Tier 1” capital equal to 4.0% of risk weighted assets and “total” or “risk-based” capital (a combination of core and “supplementary” capital) equal to 8.0% of risk-weighted assets. Failure to meet minimum capital requirements can initiate certain mandatory actions and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our bank’s financial statements. At June 30, 2009 the Bank was in compliance with regulatory capital requirements and is considered a “well-capitalized” institution.

Liquidity

We manage our liquidity risk 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 OTS. We comply with guidance promulgated under Thrift Bulletin 77 that requires thrift institutions to maintain adequate liquidity to assure safe and sound operations.

As a financial institution, the Bank has ready access to several sources to fund growth and meet its liquidity needs. Among these are: net income, deposit programs, loan repayments, borrowing from the FHLB, repurchase agreements and the brokered deposit market. The Bank’s branch expansion is intended to enter us into new, but contiguous, markets, attract new customers and provide funding for its business loan growth. In addition, we have a large portfolio of high-quality, liquid investments, primarily short-duration, AAA-rated, mortgage-backed securities and Agency notes that are positioned to provide a near-continuous source of cash flow to meet current cash needs, or can be sold to meet larger discrete needs for cash. Management believes these sources are sufficient to maintain the required and prudent levels of liquidity.

During the six months ended June 30, 2009, cash and cash equivalents increased $28.6 million to $277.1 million. There was a $214.9 million increase in cash provided through increases in demand, savings and time deposits. In addition, we sold 52,625 shares of senior preferred stock to the U.S Treasury, resulting in an increase in cash of $52.6 million. Further, we had an increase in cash of $19.3 million provided by operating activities. Partially offsetting these increases was net borrowings from the FHLB, which decreased $179.2 million during the six months ended June 30, 2009, resulting in a decrease in cash. Also, our mortgage-backed security portfolio decreased cash by $44.2 million as a result of purchases in order to minimize earnings dilution related to the additional capital raised offset in part by repayments and sales. Finally, net loan growth resulted in the use of $88.0 million in cash, which was primarily the result of the successful implementation of specific strategies designed to increase corporate and small business lending.

NONPERFORMING ASSETS

The following table shows our nonperforming assets and past due loans at the dates indicated. Nonperforming assets include nonaccruing loans, nonperforming real estate investments, assets acquired through foreclosure and restructured mortgage and home equity consumer debt. Nonaccruing loans are those on which the accrual of interest has ceased. 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 loans contractually past due 90 days or more as to principal or interest payments but which remain on accrual status because they are considered well secured and in the process of collection.

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	June 30,			December 31,
	2009			2008
	(In Thousands)
Nonaccruing loans:
Commercial	$	5,430		$	986
Consumer		1,023			352
Commercial mortgage		2,033			5,748
Residential mortgage		6,202			4,753
Construction		49,822			16,595
Total nonaccruing loans		64,510			28,434
Assets acquired through foreclosure		8,073			4,471
Troubled debt restructuring		7,312			2,855
Total nonperforming assets	$	79,895		$	35,760
Past due loans:(1)
Residential mortgages		727			1,313
Commercial and commercial mortgages		238			—
Consumer		111			26
Total past due loans	$	1,076		$	1,339
Ratios:
Nonaccruing loans to total loans (2)		2.54	%		1.15	%
Allowance for loan losses to total loans (2)		1.63	%		1.26	%
Nonperforming assets to total assets		2.23	%		1.04	%
Loan loss allowance to nonaccruing loans (3)		55.65	%		108.30	%
Loan and foreclosed asset allowance to total
nonperforming assets (3)		44.93	%		86.11	%

 

(1)	Past due loans are accruing loans which are contractually past due 90 days or more as to principal or interest. These loans are well secured and in the process of collection.
(2)	Total loans exclude loans held for sale.
(3)	Total applicable allowance represents general valuation allowances only.

 

Nonperforming assets increased $44.1 million between December 31, 2008 and June 30, 2009. As a result, nonperforming assets as a percentage of total assets increased from 1.04% at December 31, 2008 to 2.23% at June 30, 2009. The increase was attributed to six construction projects totaling $35.1 million and three commercial construction projects totaling $3.6 million. Also the $4.4 million increase in troubled debt restructuring (TDR) reflects our continued efforts to work with homeowners with a goal to both keep them in their homes an optimize the bank’s returns. The entire TDR balance is made up of restructured mortgage and consumer debt.

	For the six months ended June 30 2009			For the year ended December 31, 2008
	(In Thousands)
Beginning balance of nonperforming assets	$	35,760		$	31,809
Additions		64,207			42,000
Collections		(3,805	)		(20,422	)
Transfers to accrual		(4,912	)		(1,345	)
Charge-offs / write-downs, net		(11,305	)	$	(16,282	)
Ending balance of nonperforming assets	$	79,945		$	35,760

The timely identification of problem loans is a key element in our strategy to manage our loan portfolio. 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 utilizes guidelines established by federal regulation. However, there can be no assurance that the levels or the categories of problem loans and assets established by the Bank are the same as those which would result from a regulatory examination.

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INTEREST SENSITIVITY

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. Management regularly reviews our interest-rate sensitivity and adjusts the sensitivity within acceptable tolerance ranges established by management. At June 30, 2009, interest-earning liabilities exceeded interest-bearing assets that mature or reprice within one year (interest-sensitive gap) by $8.6 million. Our interest-sensitive assets as a percentage of interest-sensitive liabilities within the one-year window decreased from 107.1% at March 31, 2009 to 99.6% at June 30, 2009. Likewise, the one-year interest-sensitive gap as a percentage of total assets changed to (0.24)% at June 30, 2009 from 3.65% at March 31, 2009. The change in sensitivity since March 31, 2009 is the result of the current interest rate environment and our continuing effort to effectively manage interest rate risk.

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 its lending, investing, and funding activities. To that end, management actively monitors and manages its interest rate risk exposure. One measure, required to be performed by OTS-regulated institutions, is the test specified by OTS Thrift Bulletin No. 13a “Management of Interest Rate Risk, Investment Securities and Derivative Activities.” This test measures the impact of an immediate change in interest rates in 100 basis point increments on the net portfolio value ratio. The net portfolio value ratio is defined as the net present value of the estimated cash flows from assets and liabilities as a percentage of net present value of cash flows from total assets (or the net present value of equity). The table below shows the estimated impact of immediate changes in interest rates on our net interest margin and net portfolio value ratio at the specified levels at June 30, 2009 and 2008, calculated in compliance with Thrift Bulletin No. 13a:

		At June 30,
		2009		2008
Change in Interest Rate (Basis Points)		% Change in Net Interest Margin (1)	Net Portfolio Value Ratio (2)	% Change in Net Interest Margin (1)	Net Portfolio Value Ratio (2)
+300		0%	8.66%	2%	10.03%
+200		-2%	9.23%	1%	10.11%
+100		-4%	9.51%	0%	10.26%
0		0%	9.73%	0%	10.41%
-100		-6%	9.75%	-2%	10.94%
-200	(3)	NMF	NMF	-3%	11.02%
-300	(3)	NMF	NMF	-4%	11.35%

(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 net portfolio value ratio of the Company in a stable interest rate environment and the net portfolio value 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 at June 30, 2009 given the low absolute level of interest rates at that time.

COMPARISON OF THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008

Results of Operations

             We recorded a net loss of $2.3 million ($3.9 million pre-tax) or a loss of $.50 per common share for the second quarter of 2009. This compares to net income of $6.7 million ($10.4 million pre-tax) or $1.07 per diluted common share for the same quarter last year. Earnings for the second quarter of 2009 were impacted by an increase in the provision for loan loss to $12.0 million compared to $2.4 million in the second quarter of 2009. This increase was the result of several factors, including risk grade migration and collateral depreciation in the commercial loan portfolio as well as continuing economic weakness, particularly in the residential construction and land development portfolio. In addition, noninterest expenses increased $9.8 million mainly due to a number of non-routine items in the second quarter of 2009 (discussed further in the noninterest expense section) combined with franchise growth as we added seven new branches and relocated an eighth. Net interest income for the second quarter of 2009 was $26.4 million, a $4.0 million increase, compared to $22.4 million for the second quarter of 2009.

Net income for the first six months of 2009 was $624,000 or a loss of $.10 per common share due to the effects of preferred stock dividends. This compares to net income of $13.9 million ($20.6 million pre-tax) or $2.22 per diluted common share for the same six months of 2008. Consistent with the quarterly results, earnings for the first six months of 2009 were impacted by a $19.7 million provision for loan loss, an increase of $14.8 million over the first six months of 2008. In addition, noninterest expenses increased $13.2 million over the first six months of 2008 mainly due to the previously mentioned non-routine items (discussed further in the noninterest expense section) and franchise growth. Net interest income for the first six months of 2009 improved by $6.9 million in comparison to the first six months of 2008.

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Net Interest Income

The following tables provide information concerning the balances, yields and rates on interest-earning assets and interest-bearing liabilities during the periods indicated.

	Three Months Ended June 30,
	2009							2008
	Average			Interest &		Yield/		Average			Interest &		Yield/
	Balance			Dividends		Rate (1)		Balance			Dividends		Rate (1)
	(Dollars in Thousands)
Assets:
Interest-earning assets:
Loans (2) (3):
Commercial real estate loans	$	791,884		$	9,161	4.63	%	$	754,051		$	11,407	6.05	%
Residential real estate loans		414,985			5,660	5.46			438,132			6,339	5.79
Commercial loans		1,057,167			13,747	5.25			821,889			12,446	6.12
Consumer loans		301,613			3,788	5.04			276,695			4,272	6.21
Total loans		2,565,649			32,356	5.09			2,290,767			34,464	6.07
Mortgage-backed securities (4)		570,740			6,948	4.87			463,196			5,715	4.94
Investment securities (4) (5)		47,606			535	4.50			31,698			202	2.55
Other interest-earning assets		39,668			-	0.00			42,829			414	3.89
Total interest-earning assets		3,223,663			39,839	4.98			2,828,490			40,795	5.81
Allowance for loan losses		(36,726	)						(26,998	)
Cash and due from banks		59,263							62,679
Cash in non-owned ATMs		182,696							174,223
Bank owned life insurance		59,624							58,283
Other noninterest-earning assets		93,649							68,784
Total assets	$	3,582,169						$	3,165,461
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand	$	233,035		$	153	0.26	%	$	167,939		$	184	0.44	%
Money market		363,952			1,018	1.12			300,181			1,158	1.55
Savings		224,595			122	0.22			195,646			139	0.29
Retail time deposits		655,484			5,194	3.18			525,982			5,046	3.86
Total interest-bearing retail deposits		1,477,066			6,487	1.76			1,189,748			6,527	2.21
Jumbo certificates of deposits		75,467			473	2.51			85,861			635	2.97
Brokered certificates of deposit		338,163			563	0.67			275,041			2,061	3.01
Total interest-bearing deposits		1,890,696			7,523	1.60			1,550,650			9,223	2.39
FHLB of Pittsburgh advances		712,243			4,804	2.67			842,780			7,356	3.45
Trust preferred borrowings		67,011			465	2.75			67,011			783	4.62
Other borrowed funds		209,426			667	1.27			178,556			1,066	2.39
Total interest-bearing liabilities		2,879,376			13,459	1.87			2,638,997			18,428	2.79
Noninterest-bearing demand deposits		390,516							281,908
Other noninterest-bearing liabilities		33,018							26,372
Minority interest		—							—
Stockholders’ equity		279,259							218,184
Total liabilities and stockholders’ equity	$	3,582,169						$	3,165,461
Excess of interest-earning assets over interest-bearing liabilities	$	344,287						$	189,493
Net interest and dividend income				$	26,380						$	22,367
Interest rate spread						3.11	%						3.02	%
Net interest margin						3.31	%						3.20	%

(1) Weighted average yields have been computed on a tax-equivalent basis using a 35% effective tax rate.

(2) Nonperforming loans are included in average balance computations.

(3) Balances are reflected net of unearned income.

(4) Includes securities available-for-sale.

(5) Includes reverse mortgages.

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	Six Months Ended June 30,
	2009							2008
	Average			Interest &		Yield/		Average			Interest &		Yield/
	Balance			Dividends		Rate (1)		Balance			Dividends		Rate (1)
	(Dollars in Thousands)
Assets:
Interest-earning assets:
Loans (2) (3):
Commercial real estate loans	$	801,011		$	18,625	4.65	%	$	750,743		$	24,642	6.56	%
Residential real estate loans		420,046			11,711	5.58			441,906			12,837	5.81
Commercial loans		1,015,360			25,829	5.17			808,512			25,693	6.42
Consumer loans		299,969			7,565	5.09			277,048			8,974	6.51
Total loans		2,536,386			63,730	5.07			2,278,209			72,146	6.38
Mortgage-backed securities (4)		573,879			14,284	4.98			479,367			11,703	4.88
Investment securities (4) (5)		48,285			632	2.62			30,702			540	3.52
Other interest-earning assets		39,724			—	0.00			44,062			966	4.40
Total interest-earning assets		3,198,274			78,646	4.95			2,832,340			85,355	6.07
Allowance for loan losses		(34,718	)						(26,247	)
Cash and due from banks		57,763							66,435
Cash in non-owned ATMs		178,006							174,818
Bank owned life insurance		59,518							58,016
Other noninterest-earning assets		93,651							67,132
Total assets	$	3,552,494						$	3,172,494
Liabilities and Stockholders’ Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
Interest-bearing demand	$	223,686		$	357	0.32	%	$	164,886		$	510	0.62	%
Money market		349,461			2,046	1.18			302,204			3,330	2.22
Savings		220,414			280	0.26			195,043			397	0.41
Retail time deposits		652,043			10,680	3.30			515,068			10,684	4.17
Total interest-bearing retail deposits		1,445,604			13,363	1.86			1,177,201			14,921	2.55
Jumbo certificates of deposits		85,175			978	2.32			91,723			1,644	3.60
Brokered certificates of deposit		334,076			1,511	0.91			265,748			4,787	3.62
Total interest-bearing deposits		1,864,855			15,852	1.71			1,534,672			21,352	2.80
FHLB of Pittsburgh advances		731,096			10,145	2.76			877,213			16,324	3.68
Trust preferred borrowings		67,011			1,060	3.15			67,011			1,801	5.32
Other borrowed funds		218,854			1,318	1.20			174,547			2,542	2.91
Total interest-bearing liabilities		2,881,816			28,375	1.97			2,653,443			42,019	3.17
Noninterest-bearing demand deposits		371,297							275,226
Other noninterest-bearing liabilities		29,995							24,716
Stockholders’ equity		269,386							219,109
Total liabilities and stockholders’ equity	$	3,552,494						$	3,172,494
Excess of interest-earning assets over interest-bearing liabilities	$	316,458						$	178,897
Net interest and dividend income				$	50,271						$	43,336
Interest rate spread						2.98	%						2.90	%
Net interest margin						3.18	%						3.10	%

(1) Weighted average yields have been computed on a tax-equivalent basis using a 35% effective tax rate

(2) Nonperforming loans are included in average balance computations.

(3) Balances are reflected net of unearned income.

(4) Includes securities available-for-sale.

(5) Includes reverse mortgages.

        Net interest income for the second quarter of 2009 improved by $4.0 million, or 18% compared to the second quarter of 2008. Mainly contributing to the increase was the positive effects of improved pricing, including lower rates on deposits and wholesale funding. The net interest margin for the second quarter of 2009 was 3.31% compared to 3.20% for the same quarter of 2008, an increase of 11 basis points (0.11%). Loans, with a yield of 5.09%, increased $274.9 million,

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while mortgage-backed securities, with a yield of 4.87%, increased $107.5 million. In addition our funding mix improved during the quarter as our interest-bearing retail deposits, with a rate of 1.76% increased $287.3 million, while FHLB advances, with a rate of 2.67%, declined $130.5 million.

Net interest income for the six-month period ending June 30, 2009 was $50.3 million compared to $43.3 million for the same period in 2008. Consistent with the quarterly trend discussed above, the increase in net interest income was the result our active management of deposit pricing and improved funding mix. The net interest margin for the first six months of 2009 was 3.18%, up 8 basis points from the same period in 2008.

Allowance for Loan Losses

We maintain allowances for credit losses and charge losses to these allowances when such losses are realized. The determination of the allowance for loan losses requires significant judgment reflecting management’s best estimate of probable loan losses related to specifically identified loans as well as probable loan losses in the remaining loan portfolio. Our evaluation is based upon a continuing review of these portfolios.

We established our loan loss allowance in accordance with guidance provided in the Securities and Exchange Commission’s Staff Accounting Bulletin 102 (“SAB 102”). Its methodology for assessing the appropriateness of the allowance consists of several key elements which include: specific allowances for identified problem loans; formula allowances for commercial and commercial real estate loans; and allowances for pooled homogenous loans.

Specific reserves are established for certain loans in cases where management has identified significant conditions or circumstances related to a specific credit that indicate the probability that a loss has been incurred.

The formula allowances for commercial and commercial real estate loans are calculated by applying estimated loss factors to outstanding loans based on the internal risk grade of loans. For low risk commercial and commercial real estate loans the portfolio is pooled, based on internal risk grade, and estimates are based on a ten-year net charge-off history. Higher risk and criticized loans have loss factors that are derived from an analysis of both the probability of default and the probability of loss should default occur. Loss adjustment factors are applied based on criteria discussed below. As a result, changes in risk grades of both performing and nonperforming loans affect the amount of the formula allowance.

Pooled loans are loans that are usually smaller, not-individually-graded and homogenous in nature, such as consumer installment loans and residential mortgages. Loan loss allowances for pooled loans are based on a ten-year net charge-off history. The average loss allowance per homogenous pool is based on the product of average annual historical loss rate and the estimated duration of the pool multiplied by the pool balances. These separate risk pools are then assigned a reserve for losses based upon this historical loss information and historical loss adjustment factors.

Historical loss adjustment factors are based upon management’s evaluation of various current conditions, including those listed below.

• General economic and business conditions affecting the Bank’s key lending areas,

• Credit quality trends,

• Recent loss experience in particular segments of the portfolio,

• Collateral values and loan-to-value ratios,

• Loan volumes and concentrations, including changes in mix,

• Seasoning of the loan portfolio,

• Specific industry conditions within portfolio segments,

• Bank regulatory examination results, and

• Other factors, including changes in quality of the loan origination, servicing and risk management processes.

Our loan officers and risk managers meet at least quarterly to discuss and review these conditions and risks associated with individual problem loans. In addition, various regulatory agencies and loan review consultants periodically review our allowance for

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such loans. The provision for loan losses for the three months ended June 30, 2009 was $12.0 million compared to $2.4 million for the three months ended June 30, 2008. Similarly, the provision for loan loss for the six months ended June 30, 2009 was $19.7 million compared to $4.8 million for the six months ended June 30, 2008. This level of provisioning during 2009 generally reflects increased risk within the commercial loan portfolio, mainly due to migration to higher risk ratings, continuing collateral depreciation and charge-offs taken during the quarter.

The table below represents a summary of changes in the allowance for loan losses during the periods indicated.

	Six months ended June 30,
	2009			2008
	(Dollars in Thousands)
Beginning balance	$	31,189		$	25,252
Provision for loan losses		19,650			4,823
Charge-offs:
Residential real estate		494			245
Commercial real estate (1)		5,507			—
Commercial		2,486			641
Overdrafts		563			549
Consumer		769			818
Total charge-offs		9,819			2,253
Recoveries:
Residential real estate		26			5
Commercial real estate (1)		34			7
Commercial		72			51
Overdrafts		230			230
Consumer		33			83
Total recoveries		395			376
Net charge-offs		9,424			1,877
Ending balance	$	41,415		$	28,198
Net charge-offs to average gross loans outstanding, net of unearned income (2)		0.75	%		0.16	%

(1) Includes commercial mortgage and construction loans.

(2) Ratio for six months ended June 30, 2009 and June 30, 2008 are annualized.

Noninterest Income

Noninterest income for the quarter ended June 30, 2009 was $12.7 million compared to $11.7 million for the second quarter of 2008. This growth included increases of $834,000 in securities gains mainly due to the BBB+ adjustment (discussed elsewhere within this document) and $350,000 in loan fee income reflecting overall loan growth. In addition there was an increase of $313,000 in mortgage banking activities. These gains were partially offset by a $265,000 decrease in credit/debit card and ATM income as a result of reduced prime rate bailment fees from Cash Connect, the Bank’s ATM division, as well as a reduction in BOLI income of $227,000.

For the six months ended June 30, 2009, noninterest income was $23.8 million, a decrease of $409,000, or less than 2%, over the same period in 2008. Credit/debit card and ATM income decreased by $1.2 million due to Cash Connect bailment fees. BOLI income decreased $591,000 for the six months ended June 30, 2009 compared to the same period in 2008. These decreases were partially offset by a $957,000 increase in loan fee income mainly due to increased revenues from 1^st Reverse. Since 1^st Reverse was not acquired until April 30, 2008 there were only two months of income included in the same period in 2008.

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Noninterest Expense

Noninterest expense for the quarter ended June 30, 2009 was $31.0 million, an increase of $9.8 million, or 46%, over the $21.2 million reported for the same period in 2008. This increase is due to several non-routine items including $1.7 of additional FDIC insurance premiums representing our share of the special assessment, expenses of $1.6 million due to the wind-down of 1^st Reverse, $1.5 million in wire fraud expenses as well as REO write-downs totaling $1.3 million. Additionally, we incurred $953,000 in due-diligence fees relating to an acquisition prospect in which discussions have terminated. Finally, salaries, benefits and other compensation increased by $754,000 as a result of our franchise growth as we added seven new branches and relocated an eighth over the past twelve months.

Noninterest expense for the six months ended June 30, 2009 was $55.3 million, an increase of $13.2 million or 31% over the $42.1 million reported for the same period in 2008. Consistent with the quarter, the increase was mainly attributable to the non-routine expenses incurred during the second quarter of 2009. Salaries, benefits and other compensation and occupancy expenses increased by $1.6 million and $621,000, respectively, mainly due to franchise growth.

Income Taxes

The Company and its subsidiaries file a consolidated Federal income tax return and separate state income tax returns. Income taxes are accounted for in accordance with SFAS 109, which requires the recording of deferred income taxes for tax consequences of “temporary differences.” We recorded an income tax benefit of $1.6 million during the three months ended June 30, 2009, and an income tax benefit during the six months ended June 30, 2009 of $1.6 million, compared to an income tax provision of $3.7 million and $6.6 million for the same periods in 2008. The tax benefit recorded in 2009 reflects a reduction in unrecognized tax benefits related to the expiration of statutes of limitations during the first quarter of 2009 combined with the recognition of certain tax benefits in the financial statements including those benefits from tax-exempt interest income, Bank-Owned Life Insurance (“BOLI”) income and fifty-percent interest income exclusion on a loan to an Employee Stock Ownership Plan. In addition, the 2008 income tax provision included a one-time charge to reflect changes in Maryland tax law.

We frequently analyze our projections of taxable income and make adjustments to our provision for income taxes accordingly.

RECENT LEGISLATION

On February 27, 2009, the FDIC adopted a final rule that: (1) modified the risk-based assessment system and sets initial base assessment rates beginning April 1, 2009, at 12 to 45 basis points; (2) extended the period of the Restoration Plan for the Deposit Insurance Fund to seven years; and (3) adopted an interim rule to impose an emergency special insurance assessment on June 30, 2009 to be collected on September 30, 2009, and (4) allows the FDIC to impose possible additional special assessments thereafter to maintain public confidence in the Deposit Insurance Fund (DIF).

The final rule: (1) introduces a new financial ratio into the financial ratios method applicable to most Risk Category I institutions that includes certain brokered deposits above a threshold that are used to fund rapid asset growth; (2) revises a large bank method for a large Risk Category I institution with long-term debt issuer ratings; and (3) broadens the spread between minimum and maximum initial base assessment rates for Risk Category I institutions.

The final rule provides for the following adjustments to an institution’s assessment rate: (1) a decrease for long-term unsecured debt, including most senior and subordinated debt and, for small institutions, a portion of Tier 1 capital; (2) an increase for secured liabilities above a threshold amount; and (3) for non-Risk Category I institutions, an increase for brokered deposits above a threshold amount.

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In May 2009, the FDIC issued a final rule which levied a special assessment applicable to all insured depository institutions totaling 5 basis points of each institution’s total assets less Tier 1 capital as of June 30, 2009, not to exceed 10 basis points of domestic deposits. The special assessment is part of the FDIC’s efforts to rebuild the DIF. The final rule also allows the FDIC to impose additional special assessments of 5 basis points for the third and fourth quarters of 2009, if the FDIC estimates that the DIF reserve ratio will fall to a level that would adversely affect public confidence in federal deposit insurance or to a level that would be close to or below zero. Any additional special assessment would also be capped at 10 basis points of domestic deposits. We cannot provide any assurance as to the ultimate amount or timing of any such additional special assessments, should such additional special assessments occur, as such special assessments depend upon a variety of factors.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141(R)”). This Statement changes the requirements for an acquirer’s recognition and measurement of the assets acquired and the liabilities assumed in a business combination. SFAS 141(R) is effective for annual periods beginning after December 15, 2008 and should be applied prospectively for all business combinations entered into after the date of adoption. The adoption of this statement did not have a material impact on our Consolidated Financial Statements.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No.51 (“SFAS 160”). This Statement requires (i) that noncontrolling (minority) interests be reported as a component of shareholders’ equity, (ii) that net income attributable to the parent and to the noncontrolling interest be separately identified in the consolidated statement of operations, (iii) that changes in a parent’s ownership interest while the parent retains its controlling interest be accounted for as equity transactions, (iv) that any retained noncontrolling equity investment upon the deconsolidation of a subsidiary be initially measured at fair value, and (v) that sufficient disclosures are provided that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for annual periods beginning after December 15, 2008 and should be applied prospectively. However, the presentation and disclosure requirements of the statement shall be applied retrospectively for all periods presented. The adoption of this statement did not have a material impact on our Consolidated Financial Statements.

In March 2008, the FASB issued SFAS No. 161, Disclosure about Derivative Instruments and Hedging Activities (“SFAS 161”). This statement changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedges are accounted for under Statement 133 and its related interpretations and (c) how derivative instruments and related hedged affect an entity’s financial position, financial performance, and cash flows. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The adoption of this statement did not have a material impact on our Consolidated Financial Statements.

In April 2009, the FASB issued three FASB Staff Position (FSPs) to provide guidance and enhanced disclosures regarding fair value measurements of impairment securities. These FSPs are effective for periods ending after June 15, 2009, with an early adoption election permitted. We elected early adoption in the quarter ended March 31, 2009 and have determined the adoption did not have a material impact on our Consolidated Financial Statements:

FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, changes the disclosure requirements of any financial instrument not currently reflected on the balance sheet. Prior to issuing this FSP, fair values for these financial instruments were only disclosed annually.

32

Effective with adoption of this FSP, the fair value of these instruments are required to be disclosed on an interim and annual basis.

FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, amends the guidance on other-than-temporary impairment for debt securities and modifies the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements.

FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, provides additional guidance for estimating fair value under Statement of Financial Accounting Standard No. 157, Fair Value Measurements when there is an inactive market or the market is not orderly.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS 165”). This Statement incorporates guidance into accounting literature that was previously addressed only in auditing standards. The statement refers to subsequent events that provide additional evidence about conditions that existed at the balance-sheet date as “recognized subsequent events”. Subsequent events which provide evidence about conditions that arose after the balance-sheet date but prior to the issuance of the financial statements are referred to as “non-recognized subsequent events”. It also requires companies to disclose the date through which subsequent events have been evaluated and whether this date is the date the financial statements were issued or the date the financial statements were available to be issued. The adoption of this statement did not have a material impact on our Consolidated Financial Statements. See Note 15, Subsequent Events, to the Consolidated Financial Statements.

In June 2009 the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140 (“SFAS 166”). This statement amends the derecognition guidance in Statement 140 and eliminates the concept of qualifying special-purpose entities. SFAS 166 is effective for fiscal years and interim periods beginning after November 15, 2009. Early adoption of SFAS 166 is prohibited. We have not determined whether the adoption of SFAS 166 will have a material impact on our Consolidated Financial Statements.

In June 2009, SFAS No. 167, Amendments to FASB Interpretation No.46(R) (“SFAS 167”) was issued to amend previous guidance to replace the quantitative-based risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (i) the obligation to absorb losses of the entity or (ii) the right to receive benefits from the entity. The pronouncement is effective January 1, 2010 and we have not determined whether the adoption of SFAS 167 will have a material impact on our Consolidated Financial Statements.

In June 2009 the FASB issued SFAS No. 168, The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162 (“SFAS 168”). This statement establishes the FASB Accounting Standards Codification^TM as the source of authoritative U.S. generally accepted accounting principles recognized by the FASB to be applied to nongovernmental entities. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009 at which time the Codification will supersede all than-existing non-SEC accounting and reporting standards. We do not believe the adoption of this statement will have a material impact on our Consolidated Financial Statements.

33

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Incorporated herein by reference from Item 2, 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 (the “Exchange Act”)), our principal executive officer and the 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 and Exchange Commission’s rules and forms and is accumulated and communicated to our management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

(b) Changes in internal control over financial reporting. During the quarter under report, 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

We are not engaged in any legal proceedings of a material nature at June 30, 2009. From time to time, we are party to legal proceedings in the ordinary course of business which enforces its security interest in loans.

Item 1A. Risk Factors

Our management does not believe there have been any material changes to the risk factors previously disclosed under Item 1A. of the Company’s Form 10-K for the year ended December 31, 2008, previously filed with the Securities and Exchange Commission.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no shares repurchased during the quarter ended June 30, 2009.

In September 2007, the Board of Directors approved an authorization to repurchase up to an additional 10% of its outstanding shares of common stock, or 630,000 shares.

There is no expiration date under the plan.

Item 3. Defaults upon Senior Securities

Not applicable

Item 4. Submission of Matters to a Vote of Security Holders

At the Company’s Annual Stockholder’s Meeting (the Meeting) held on April 23, 2009, all the nominees for director proposed by us were elected. The votes cast for each nominee were as follows:

	For	Withheld
Linda C. Drake	5,340,405	38,224
David E. Hollowell	5,329,324	49,006
Jennifer W. Davis	5,333,513	52,197
Donald W. Delson	5,337,897	40,732
Scott E. Reed	5,183,166	195,464
Claibourne D. Smith	5,153,025	225,605

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At the Meeting, the shareholders also ratified the appointment of KPMG LLP as independent auditors for fiscal year ending December 31, 2009. The votes cast were as follows:

For	Against	Abstain
5,105,141	256,853	16,634

At the Meeting, the shareholders were also asked to approve the following resolution:

“Resolved, that the stockholders approve the compensation of the Company’s executives as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission.”

This was an advisory vote only. The votes cast were as follows:

For	Against	Abstain
5,109,698	239,458	29,468

At the Meeting, the shareholders were asked to approve the deletion of a portion of article Fourth, Paragraph A of our Restated Certificate of Incorporation. It is not required by Delaware General Corporation Law and is applicable only to federal savings banks, not to Delaware business Corporations like ours. The votes cast were as follows:

For	Against	Abstain
5,285,032	73,922	19,671

The shareholders were asked at the Meeting to approve the deletion of Article Fourth, Paragraph C and Article Sixth, Paragraph (d) of our Restated Certificate of Incorporation. These paragraphs were only applicable for a period of five years after the conversion of Wilmington Savings Fund Society, FSB from mutual to stock form and have, by their terms, expired and are no longer applicable. The votes cast were as follows:

For	Against	Abstain
5,321,951	42,242	14,432

At the Meeting, the shareholders also ratified the deletion of Article Fifth of our Restated Certificate of Incorporation. This article has, by its terms, expired and is no longer applicable. The votes cast were as follows:

For	Against	Abstain
5,327,037	37,330	14,257

Item 5. Other Information

Not applicable

Item 6. Exhibits

(a) Exhibit 31.1 – Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(b) Exhibit 31.2 – Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(c) Exhibit 32 – Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

35

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:	August 10, 2009	/s/ MARK A. TURNER
		Mark A. Turner
		President and Chief Executive Officer

Date:	August 10, 2009	/s/ STEPHEN A. FOWLE
		Stephen A. Fowle
		Chief Financial  Officer

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