WSFS: Efficiency and Profitability Gains Still Expected in 2H19; Reduced NIM Outlook Leads to Lower EPS Estimates; Reducing Target Price; Reiterating Outperform Rating.
WSFS reported 2Q19 net income of $36.2 million, up $23.2 million or 178.0% compared to the $13.0 million posted in 1Q19. This translates to EPS $0.68 compared to the $0.33 recorded in the preceding quarter. Included in 2Q19 results are $15.8 million of corporate development and restructuring charges related to the Beneficial acquisition, $0.6 million in unrealized gains related to the company’s investment in digital home equity lender Spring EQ, and a $0.4 million unrealized gain on the valuation of the company’s remaining Visa, Inc. Class B stock. Included in 1Q19 results are $31.0 million of corporate development and restructuring charges related to the Beneficial acquisition, and a $3.8 million unrealized gain on the valuation of the company’s remaining Visa, Inc. Class B stock. These items amounted to a reduction of roughly $(0.20) per share in 2Q19 and a reduction of $(0.58) per share in 1Q19. Excluding these items “core” EPS was $0.88 in 2Q19 compared to $0.91 in 1Q19. The core results for 2Q19 exceeded our $0.84 “core” estimate and the $0.74 median Street estimate. The main driver of the positive variance versus our estimate was a lower-than-projected effective tax rate. Greater net interest income than we projected was largely offset by a higher-than-expected loan loss provision.