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 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 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 through WSFS Wealth Strategies, which was formed in 2005. Lending activities are funded primarily with retail deposits and borrowings. The Federal Deposit Insurance Corporation ("FDIC") insures our customers' deposits to their legal maximum. We serve our customers primarily from our main office, 35 retail banking offices, loan production offices and operations centers located in Delaware, southeastern Pennsylvania and Virginia and through our website at www.wsfsbank.com.

Montchanin has one consolidated subsidiary, Cypress Capital Management, LLC ("Cypress"). Cypress is a Wilmington-based investment advisory firm serving high net-worth individuals and institutions. Cypress had approximately $386 million in assets under management at March 31, 2009.

FORWARD-LOOKING STATEMENTS

Within this report and financial statements, management has included certain "forward-looking statements" concerning our future operations. Statements contained in this report which are not historical facts, are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. It is management's desire to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. This statement is for the express purpose of availing the Company of the protections of such safe harbor with respect to all "forward-looking statements". Management has used "forward-looking statements" to describe the future plans and strategies including expectations of our future financial results. Management's ability to predict results or the effect of future plans and strategy is inherently uncertain. Factors that could affect results include interest rate trends, competition, the general economic climate in Delaware, the mid-Atlantic region and the country as a whole, asset quality, loan growth, loan delinquency rates, liquidity, operating risk, uncertainty of estimates in general and changes in federal and state regulations, among other factors. These factors should be considered in evaluating the "forward-looking statements," and undue reliance should not be placed on such statements. Actual results may differ materially from management expectations. We do not undertake, and specifically disclaim any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

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, 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.

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 8, Fair Value of Financial Instruments.

FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY

Financial Condition

Our total assets increased $110.7 million or 3% during the three months ended March 31, 2009. Total loans increased $60.1 million, or 2%, attributable to a $69.7 million, or 4%, increase in commercial and commercial real estate loans offset by a decrease in residential loans of $8.0 million, or 2%.
Mortgage-backed securities increased $98.3 million, or 20%. These increases were partially offset by decreases of $46.7 million, or 19%, in cash and cash equivalents. This included decreases of $45.2 million, or 24%, in cash in non-owned ATMs. The decrease is attributable to the higher cash balances required for ATMs during the fourth quarter of 2008 due to seasonal demand.

Total liabilities increased $51.9 million, or 2%, between December 31, 2008 and March 31, 2009, to $3.3 billion. This increase was mainly due to an increase in deposits of $135.8 million, or 6%. This included increases of $139.1 million, or 8%, in customer deposits and $22.9 million, or 7%, in brokered certificates of deposit. These increases were partially offset by a decrease in other jumbo certificates of deposit of $26.2 million, or 25%. There were also increases in Federal funds purchased and securities sold under agreements to repurchase of $25.0 million, or 33%, and other borrowed funds of $7.0 million, or 6%. These increases were more than offset by a decrease in Federal Home Loan Bank ("FHLB") advances of $119.7 million, or 15%.

Capital Resources

Stockholders' equity increased $58.8 million between December 31, 2008 and March 31, 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 income
(loss) improved $3.7 million during the first three months of 2009 mainly due to an increase of the fair value of securities available for sale. Also contributing to the increase was net income of $2.9 million as well as an increase of $583,000 from the issuance of common stock and employee stock option activity. Partially offsetting these increases was the declaration of cash dividends totaling $740,000 during the three months ended March 31, 2009.

Below is a table comparing the Bank's consolidated capital position to the minimum regulatory requirements as of March 31, 2009 (dollars in thousands):

                                                                              To be Well-Capitalized
                             Consolidated             For Capital             Under Prompt Corrective
                             Bank Capital          Adequacy Purposes             Action Provisions
                                        % of                     % of                            % of
                            Amount     Assets       Amount      Assets         Amount           Assets
Total Capital
(to Risk-Weighted
Assets)                   $  323,462    11.34 %   $   228,137     8.00 %   $      285,171           10.0 %
Core Capital (to
Adjusted
Total Assets)                290,483     8.21         141,544     4.00            176,930           5.00
Tangible Capital (to
Tangible
Assets)                      290,483     8.21          53,079     1.50                N/A            N/A
Tier 1 Capital (to
Risk-Weighted
Assets)                      290,483    10.19         114,068     4.00            171,103           6.00

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 three months ended March 31, 2009, cash and cash equivalents decreased $46.7 million to $201.8 million. Net loan growth resulted in the use of $69.9 million in cash, and was primarily the result of the successful implementation of specific strategies designed to increase corporate and small business lending. Also, during the three months ended March 31, 2009, net borrowings from the FHLB decreased $119.7 million, resulting in a decrease in cash. Further, our mortgage-backed securities portfolio growth decreased cash by $143.3 million. Partially offsetting these decreases was $142.6 million in cash provided through the net increase in demand, savings and time deposits. In addition, we sold 52,625 shares of senior preferred stock, resulting in an increase in cash of $52.6 million. Finally, $13.6 million in cash was provided by operating activities.

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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                                                March 31,     December 31,
                                                  2009            2008
                                                      (In Thousands)
Nonaccruing loans:
Commercial                                     $     1,455   $          986
Consumer                                               531              352
Commercial mortgage                                  5,626            5,748
Residential mortgage                                 4,010            4,753
Construction                                        27,761           16,595

Total nonaccruing loans                             39,383           28,434
Assets acquired through foreclosure                  8,023            4,471
Restructured loans                                   8,385            2,855

Total nonperforming assets                     $    55,791   $       35,760

Past due loans:(1)
Residential mortgages                                1,796            1,313
Commercial and commercial mortgages                     43               --
Consumer                                               346               26

Total past due loans                           $     2,185   $        1,339

Ratios:
Nonaccruing loans to total loans (2)                  1.55 %           1.15 %
Allowance for loan losses to total loans (2)          1.41 %           1.26 %
Nonperforming assets to total assets                  1.57 %           1.04 %
Loan loss allowance to nonaccruing loans (3)         86.87 %         108.30 %
Loan and foreclosed asset allowance to total
nonperforming assets (3)                             61.32 %          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) The applicable allowance represents general valuation allowances only.

.

Nonerforming assets increased $20.0 million between December 31, 2008 and March 31, 2009. This increase was mainly due to a $10.9 million net increase in nonaccruing loans and a $5.5 million increase in restructured mortgage and home equity consumer debt comprised of 24 loans with an average size of approximately $230,000. The increase in nonaccruing loans was largely due to four nonaccruing residential construction loans (net of $2 million in writedowns on these loans). In addition there was a $3.6 million increase in assets acquired through foreclosure due to one large residential construction and land development ("CLD") property.

The analysis of the change in nonperforming assets is presented on the following table:

                                                    For the
                                For the Three      Year Ended
                                Months Ended      December 31,
                                March 31 2009         2008
                                        (In Thousands)
Beginning balance              $        35,760   $       31,809
Additions                               33,673           48,152
Collections                             (7,316 )        (26,574 )
Transfers to accrua                     (2,845 )         (1,345 )
Charge-offs / write-downs, net          (3,481 )        (16,282 )
Ending balance                 $        55,791   $       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 and includes periodic reviews by loan review consultants. However, there can be

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 March 31, 2009, interest-earning assets exceeded interest-bearing liabilities that mature or reprice within one year (interest-sensitive gap) by $129.2 million. Our interest-sensitive assets as a percentage of interest-sensitive liabilities within the one-year window increased from 101% at December 31, 2008 to 107% at March 31, 2009. Likewise, the one-year interest-sensitive gap as a percentage of total assets changed to 3.65% at March 31, 2009 from 0.33% at December 31, 2008. The change in sensitivity since December 31, 2008 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 March 31, 2009 and 2008, calculated in compliance with Thrift Bulletin No. 13a:

                                                       At March 31,
                                       2009                                 2008
                            % Change in                      % Change in
      Change in                 Net             Net              Net
    Interest Rate            Interest        Portfolio        Interest       Net Portfolio
   (Basis Points)           Margin (1)       Value (2)       Margin (1)        Value (2)

          +300                  1%             8.65%             2%             10.17%
          +200                  -1%            8.79%             1%             10.23%
          +100                  -4%            8.90%             1%             10.37%
             0                  0%             8.93%             0%             10.61%
          -100                  -1%            9.17%             -1%            10.99%
          -200   (3)            NMF             NMF              -3%            11.13%
          -300   (3)            NMF             NMF              -4%            11.60%

(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 of the Company in a stable interest rate environment and the net portfolio value as projected under the various rate change environments.

(3) Sensitivity indicated by a decrease of 200 and 300 basis points is not deemed meaningful at March 31, 2009 given the low absolute levels of interest rates at that time.

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008

Results of Operations

We recorded net income of $2.9 million ($3.0 million pre-tax) or $.39 per diluted share for the first quarter of 2009. This compares to $7.2 million ($10.0 million pre-tax) or $1.15 per diluted share for the same quarter last year. Earnings per share were reduced by preferred stock dividends and discount accretion of $513,000 resulting from the sale of the senior preferred stock to the U.S. Treasury under CPP. Earnings for the first quarter of 2009 were impacted by an increase in the provision for loan loss to $7.7 million compared to $2.4 million in the first quarter of 2008. This increase was the result of a risk grade migration in the commercial loan portfolio, charge-offs taken during the quarter, continuing declines in value of collateral and loan growth. In addition, noninterest expenses increased $3.4 million due in large part to an increase in FDIC insurance premiums as a result of higher rates and deposits as well as the recording of certain immaterial items in 2009 that pertain to a billing methodology change from a prior period. Net interest income for the first quarter of 2009 was $23.9 million, a $2.9 million increase, compared to $21.0 million for the first quarter of 2008.

Net Interest Income



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



                                                                        Three Months Ended March 31,
                                                             2009                                         2008
                                             Average        Interest &      Yield         Average        Interest &       Yield/
                                             Balance         Dividends     Rate (1)       Balance         Dividends      Rate (1)

Assets:
Interest-earning assets:
Loans: (2) (3)
Commercial real estate loans               $    810,238    $       9,463       4.67 %   $    747,433    $      13,236        7.08 %
Residential real estate loans                   425,165            6,052       5.69          445,681            6,497        5.83
Commercial loans                                973,088           12,081       5.08          795,136           13,247        6.73
Consumer loans                                  298,306            3,778       5.14          277,402            4,702        6.82
Total loans                                   2,506,797           31,374       5.05        2,265,652           37,682        6.70
Mortgage-backed securities (4)                  577,054            7,336       5.09          495,538            5,988        4.83
Investment securities (4)(5)                     48,971               97       0.79           29,707              338        4.55
Other interest-earning assets                    39,782                -       0.00           45,296              552        4.90
Total interest-earning assets                 3,172,604           38,807       4.93        2,836,193           44,560        6.32
Allowance for loan losses                       (32,687 )                                    (25,496 )
. . .