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Beneficial Bancorp, Inc. Announces Second Quarter Results

PHILADELPHIA, July 23, 2015 (GLOBE NEWSWIRE) -- Beneficial Bancorp, Inc. ("Beneficial") (NASDAQ:BNCL), the parent company of Beneficial Bank (the "Bank"), today announced its financial results for the three and six months ended June 30, 2015. Beneficial recorded net income of $7.1 million and $12.3 million, or $0.09 and $0.16 per diluted share, for the three and six months ended June 30, 2015, respectively, compared to net income of $4.6 million and $7.0 million, or $0.06 and $0.09 per diluted share, for the three and six months ended June 30, 2014.

Highlights for the three and six months ended June 30, 2015 are as follows:

  • Net income increased 54.2% and 74.6% for the three and six months ended June 30, 2015 compared to the same periods in 2014.
  • Our net interest margin improved to 2.83% for the second quarter of 2015 compared to 2.75% for the first quarter of 2015 and 2.81% for the second quarter of 2014. Loan growth, increases in non-interest bearing deposits, and reductions in higher-cost time deposits and borrowings are the primary drivers of the improvement in our net interest margin.
  • Continued asset quality improvement and net loan recoveries resulted in a $1.6 million negative provision for loan losses during the three months ended June 30, 2015. Our allowance for loan losses totaled $47.8 million, or 1.76% of total loans and 124.87% of non-performing loans at June 30, 2015, compared to $49.1 million, or 1.84% of total loans and 128.70% of non-performing loans, at March 31, 2015.
  • On a linked quarter basis, our loan portfolio grew $42.5 million (6.4% annualized growth) as a result of increases in commercial real estate and commercial business loans as well as a $14.4 million purchase of residential mortgage loans.
  • For the six months ended June 30, 2015, our loan portfolio increased $286.8 million, or 11.8%, primarily due to purchases of multi-family and residential loans, as well as organic growth primarily in our commercial loan portfolio.
  • Core deposits remained stable at $2.7 billion at June 30, 2015 and December 31, 2014, excluding the second-step proceeds, despite $70.8 million in planned decreases in higher-cost, non-relationship-based municipal accounts during the period.
  • Following the second-step conversion that was completed on January 12, 2015, our capital levels increased and remained strong with tangible capital to tangible assets totaling 21.14% at June 30, 2015 compared to 20.83% at March 31, 2015 and 10.44% at December 31, 2014.
  • Tangible book value per share totaled $11.77 at June 30, 2015.

"We are pleased with the progress our team made against a number of goals during the second quarter," said Gerard Cuddy, Beneficial's President and CEO. "Improvement in our balance sheet mix, loan growth, net interest income, and net interest margin all contributed to our success. Our focus remains on employee engagement, a superior customer experience, prudent capital management and organic growth to continue to improve the financial performance of our organization."

Balance Sheet

Total assets decreased $15.0 million, or 0.3%, to $4.74 billion at June 30, 2015 compared to $4.75 billion at December 31, 2014. Cash and cash equivalents decreased $247.7 million to $286.3 million at June 30, 2015 from $534.0 million at December 31, 2014. The decrease in cash and cash equivalents was primarily driven by the deployment of a portion of the second-step conversion offering proceeds through the participation in a portfolio of multi-family loans during the first quarter and the purchase of residential real estate loans during the year as well as organic loan growth.

Investments decreased $50.1 million, or 3.4%, to $1.44 billion at June 30, 2015 compared to $1.49 billion at December 31, 2014. We continue to focus on maintaining a high quality investment portfolio that provides a steady stream of cash flows both in the current and in rising interest rate environments. We are also focused on improving our balance sheet mix by reducing the percentage of our assets in cash and investments and growing our loan portfolio.

Loans increased $286.8 million, or 11.8%, to $2.71 billion at June 30, 2015 from $2.42 billion at December 31, 2014. The increase was primarily due to a $200.1 million participation in a portfolio of multi-family loans and the purchase of $35.4 million of residential real estate loans. The remaining increase was due to growth in our commercial real estate and commercial business loans, which include shared national credits.

Deposits decreased $504.6 million, or 13.0%, to $3.38 billion at June 30, 2015 from $3.88 billion at December 31, 2014. Deposits at December 31, 2014 included $482.1 million of subscription funds held in deposit accounts in connection with the second-step conversion offering that were reclassified into stockholders' equity in the first quarter of 2015. Excluding the $482.1 million of subscription funds, deposits decreased $22.5 million during the six months ended June 30, 2015. The $22.5 million decrease in deposits during the six months ended June 30, 2015 was primarily due to a $70.8 million decrease in municipal deposits and a $28.6 million decrease in time deposits, which resulted from our planned run-off of higher-cost, non-relationship-based accounts. The decrease in deposits was partially offset by increases in savings deposits, as well as interest and non-interest bearing checking deposits.

Stockholders' equity increased $490.9 million, or 80.4%, to $1.10 billion at June 30, 2015 from $610.9 million at December 31, 2014. The increase in stockholders' equity was primarily due to net proceeds received in connection with the second-step conversion that was completed during the first quarter of 2015.

Net Interest Income

For the three months ended June 30, 2015, net interest income was $31.2 million, an increase of $2.0 million, or 6.9%, from the three months ended June 30, 2014. The increase in net interest income was primarily due to higher interest earning assets as a result of the second-step conversion proceeds. During 2015, these proceeds were partially utilized to increase the loan portfolio, which resulted in an increase in the average balance of loans. Net interest income was also positively impacted by a reduction in the average cost of liabilities primarily due to reductions in higher-cost time deposits and borrowings, which offset the decline in yields on loans and investments. The net interest margin totaled 2.83% for the three months ended June 30, 2015 as compared to 2.81% for the same period in 2014. We expect that the continued low interest rate environment will put pressure on the net interest margin in future periods but we are focused on growing our loan portfolio and improving our balance sheet mix to help stabilize our net interest margin.

For the six months ended June 30, 2015, Beneficial reported net interest income of $61.4 million, an increase of $2.6 million, or 4.4%, from the six months ended June 30, 2014. The increase in net interest income was primarily due to higher interest earning assets as a result of the second-step conversion proceeds. During 2015, these proceeds were utilized to increase the loan portfolio, which resulted in an increase in the average balance of loans. Net interest income was also positively impacted by a reduction in the average cost of liabilities and a $169.8 million decrease in the average balance of municipal deposits, partially offset by a decline in yields on loans and investments. Our net interest margin decreased to 2.79% for the six months ended June 30, 2015 from 2.81% for the same period in 2014.

Non-interest Income

For the three months ended June 30, 2015, non-interest income totaled $7.2 million, an increase of $853 thousand, or 13.5%, from the three months ended June 30, 2014. Service charges and other income increased $922 thousand during the three months ended June 30, 2015 compared to the same period a year ago primarily due to increases of $754 thousand in limited partnership income and $223 thousand in foreign ATM fees.

For the six months ended June 30, 2015, non-interest income totaled $12.8 million, an increase of $857 thousand, or 7.2%, from the six months ended June 30, 2014. Service charges and other income increased $1.2 million during the six months ended June 30, 2015 compared to the same period a year ago as a result of increases of $958 thousand in limited partnership income and $448 thousand in foreign ATM fees. These increases were partially offset by a $306 thousand decrease in the net gain on the sale of investment securities.

Non-interest Expense

For the three months ended June 30, 2015, non-interest expense totaled $30.0 million, an increase of $785 thousand, or 2.7% from the three months ended June 30, 2014. The increase in non-interest expense was primarily driven by a $1.1 million increase in salaries and employee benefits due to merit increases and other retirement benefits, a $412 thousand increase in marketing expenses due to current year initiatives to continue rebranding and drive future growth and a $263 thousand increase in professional fees. These increases were partially offset by a $225 thousand decrease in occupancy expense, a $293 thousand decrease in Federal Deposit Insurance Corporation ("FDIC") insurance expense due to lower assessments, and a $420 thousand decrease in debit card rewards expense due to changes in the program parameters.

For the six months ended June 30, 2015, non-interest expense remained relatively consistent at $60.5 million, an increase of $41 thousand, or 0.1%, from the six months ended June 30, 2014. The slight increase in non-interest expense was primarily driven by a $1.5 million increase in salaries and employee benefits due to merit increases and other retirement benefits, an $843 thousand increase in marketing expenses due to current year initiatives to continue rebranding and drive future growth and a $463 thousand increase in professional fees. These increases were partially offset by a $1.3 million decrease in operating expenses related to the headquarters move in the first quarter of 2014, a $528 thousand decrease in FDIC insurance expense due to lower assessments, and a $642 thousand decrease in debit card rewards expense due to changes in the program parameters.

Income Taxes

For the three months ended June 30, 2015, we recorded a provision for income taxes of $2.9 million, reflecting an effective tax rate of 29.5% compared to a provision for income taxes of $1.5 million, reflecting an effective tax benefit of 24.7% for the three months ended June 30, 2014. For the six months ended June 30, 2015, we recorded a provision for income taxes of $5.0 million, reflecting an effective tax rate of 28.7%, compared to a provision for income taxes of $1.4 million, reflecting an effective tax rate of 16.9% for the six months ended June 30, 2014. The increase in income tax expense and the effective tax rate during these periods is due to higher profitability levels and ratio of taxable income compared to tax exempt income for the three and six months ended June 30, 2015 as compared to the same periods in 2014. The effective tax rates differ from the statutory rate of 35% principally because of tax-exempt investments, non-taxable income related to bank-owned life insurance and tax credits received on affordable housing partnerships. These tax credits relate to investments maintained by the Bank as a limited partner in partnerships that sponsor affordable housing projects utilizing low-income housing credits pursuant to Section 42 of the Internal Revenue Code.

Asset Quality

Asset quality metrics continued to improve as non-performing loans, excluding government guaranteed student loans, decreased to $12.8 million at June 30, 2015, compared to $14.6 million at December 31, 2014, and $27.8 million at June 30, 2014. The $15.0 million, or 54.0%, decrease from June 30, 2014 in non-performing loans, was the result of our continued work out of non-performing assets as well as $12.3 million of non-performing commercial loan sales during the third and fourth quarter of 2014.

As a result of the improvement in our asset quality metrics and net recoveries received during the quarter ended June 30, 2015, we recorded a $1.6 million negative provision for loan losses for the three months ended June 30, 2015 compared to recording a $250 thousand provision for loan losses for the three months ended June 30, 2014. Net recoveries totaled $248 thousand during the three months ended June 30, 2015 compared to net charge-offs of $1.7 million during the three months ended June 30, 2014.

At June 30, 2015, the Bank's allowance for loan losses totaled $47.8 million, or 1.76% of total loans, compared to $50.7 million, or 2.09% of total loans, at December 31, 2014, and $52.6 million, or 2.22% of total loans at June 30, 2014.

Capital

The Bank's capital position remains strong relative to current regulatory requirements. The Bank continues to have substantial liquidity that has been retained in cash or invested in high quality government-backed securities. In addition, at June 30, 2015, we had the ability to borrow up to $1.4 billion combined from the Federal Home Loan Bank of Pittsburgh and the Federal Reserve Bank of Philadelphia. Our capital ratios are considered to be well capitalized and are as follows:

Minimum Well Excess Capital
6/30/2015 12/31/2014 6/30/2014 Capitalized Ratio 6/30/2015
Tangible Capital 21.14% 10.44% 11.26% N/A N/A
Tier 1 Leverage (to average assets) 16.71% 11.05% 10.76% 5.0% $539,641
Common Equity Tier 1 Capital (to risk weighted assets) 29.62% N/A N/A 6.5% $601,023
Tier 1 Capital (to risk weighted assets) 29.62% 21.17% 20.97% 8.0% $562,037
Total Capital Ratio (to risk weighted assets) 30.88% 22.43% 22.24% 10.0% $542,735

Maintaining strong capital levels remains one of our top priorities. Our capital levels are in excess of well capitalized levels under Basel III regulatory requirements.

About Beneficial Bancorp, Inc.

Beneficial is a community-based, diversified financial services company providing consumer and commercial banking services. Its principal subsidiary, Beneficial Bank, has served individuals and businesses in the Delaware Valley area since 1853. The Bank is the oldest and largest bank headquartered in Philadelphia, Pennsylvania, with 56 offices in the greater Philadelphia and South New Jersey regions. Insurance services are offered through the Beneficial Insurance Services, LLC and wealth management services are offered through the Beneficial Advisors, LLC, both wholly owned subsidiaries of the Bank. For more information about the Bank and Beneficial, please visit www.thebeneficial.com.

Forward Looking Statements

This news release may contain forward-looking statements, which can be identified by the use of words such as "believes," "expects," "anticipates," "estimates" or similar expressions. Such forward-looking statements and all other statements that are not historic facts are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors. These factors include, but are not limited to, general economic conditions, changes in the interest rate environment, legislative or regulatory changes that may adversely affect our business, changes in accounting policies and practices, changes in competition and demand for financial services, adverse changes in the securities markets, changes in deposit flows and changes in the quality or composition of Beneficial's loan or investment portfolios. Additionally, other risks and uncertainties may be described in Beneficial's Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q or its other reports as filed with the Securities and Exchange Commission, which are available through the SEC's website at www.sec.gov. Should one or more of these risks materialize, actual results may vary from those anticipated, estimated or projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as may be required by applicable law or regulation, Beneficial assumes no obligation to update any forward-looking statements.

BENEFICIAL BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Financial Condition
(Dollars in thousands, except share amounts)
June 30, March 31, December 31, June 30,
2015 2015 2014 2014
ASSETS:
Cash and Cash Equivalents:
Cash and due from banks $48,114 $42,594 $40,684 $57,853
Interest-bearing deposits 238,189 264,121 493,331 196,115
Total cash and cash equivalents 286,303 306,715 534,015 253,968
Investment Securities:
Available-for-sale 689,775 733,210 757,834 840,551
Held-to-maturity 745,730 757,730 727,755 644,061
Federal Home Loan Bank stock, at cost 8,786 8,830 8,830 15,606
Total investment securities 1,444,291 1,499,770 1,494,419 1,500,218
Loans: 2,708,508 2,665,961 2,421,745 2,369,335
Allowance for loan losses (47,792) (49,144) (50,654) (52,624)
Net loans 2,660,716 2,616,817 2,371,091 2,316,711
Accrued interest receivable 13,657 13,736 13,383 13,396
Bank premises and equipment, net 79,159 79,616 78,957 79,089
Other assets:
Goodwill 121,973 121,973 121,973 121,973
Bank owned life insurance 64,647 63,724 63,349 62,528
Other intangibles 5,203 5,670 6,136 7,073
Other assets 60,550 62,432 68,199 70,778
Total other assets 252,373 253,799 259,657 262,352
Total assets $4,736,499 $4,770,453 $4,751,522 $4,425,734
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits:
Non-interest bearing deposits $381,667 $394,653 $369,683 $319,082
Interest bearing deposits 2,993,464 3,020,674 3,510,026 3,186,383
Total deposits 3,375,131 3,415,327 3,879,709 3,505,465
Borrowed funds 190,396 190,392 190,388 250,379
Other liabilities 69,162 70,008 70,531 57,231
Total liabilities 3,634,689 3,675,727 4,140,628 3,813,075
Commitments and contingencies Stockholders' equity:
Preferred stock -- $.01 par value -- -- -- --
Common stock – $.01 par value 829 827 826 825
Additional paid-in capital 784,587 782,423 362,685 360,521
Unearned common stock held by employee stock ownership plan (33,248) (33,820) (14,306) (15,204)
Retained earnings 372,364 365,309 360,058 349,073
Accumulated other comprehensive loss, net (22,382) (19,747) (22,663) (12,867)
Treasury stock, at cost (340) (266) (75,706) (69,689)
Total stockholders' equity 1,101,810 1,094,726 610,894 612,659
Total liabilities and stockholders' equity $4,736,499 $4,770,453 $4,751,522 $4,425,734
BENEFICIAL BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
For the Three Months Ended For the Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2015 2015 2014 2015 2014
INTEREST INCOME:
Interest and fees on loans $28,196 $26,266 $26,202 $54,461 $52,660
Interest on overnight investments 157 269 190 426 379
Interest and dividends on investment securities:
Taxable 7,215 7,910 7,736 15,126 15,530
Tax-exempt 394 498 658 892 1,321
Total interest income 35,962 34,943 34,786 70,905 69,890
INTEREST EXPENSE:
Interest on deposits:
Interest bearing checking accounts 381 423 422 805 865
Money market and savings deposits 1,334 1,307 1,349 2,641 2,678
Time deposits 1,762 1,833 1,988 3,595 3,989
Total 3,477 3,563 3,759 7,041 7,532
Interest on borrowed funds 1,261 1,247 1,810 2,508 3,611
Total interest expense 4,738 4,810 5,569 9,549 11,143
Net interest income 31,224 30,133 29,217 61,356 58,747
Provision for loan losses (1,600) (2,000) 250 (3,600) 1,750
Net interest income after provision for loan losses 32,824 32,133 28,967 64,956 56,997
NON-INTEREST INCOME:
Insurance and advisory commission and fee income 1,486 1,986 1,609 3,472 3,690
Service charges and other income 5,425 3,507 4,503 8,932 7,705
Mortgage banking income 267 127 115 394 240
Net (loss) gain on sale of investment securities (4) (5) 94 (9) 297
Total non-interest income 7,174 5,615 6,321 12,789 11,932
NON-INTEREST EXPENSE:
Salaries and employee benefits 15,845 15,492 14,783 31,337 29,793
Occupancy expense 2,211 2,797 2,436 5,008 6,054
Depreciation, amortization and maintenance 2,174 2,301 2,117 4,475 4,594
Marketing expense 1,148 1,316 736 2,464 1,621
Intangible amortization expense 467 466 467 933 934
FDIC insurance 512 548 805 1,060 1,588
Professional fees 1,297 1,555 1,034 2,852 2,389
Classified loan and other real estate owned related expense 799 292 627 1,091 969
Other 5,542 5,724 6,205 11,265 12,502
Total non-interest expense 29,995 30,491 29,210 60,485 60,444
Income before income taxes 10,003 7,257 6,078 17,260 8,485
Income tax expense 2,948 2,006 1,502 4,954 1,437
NET INCOME $7,055 $5,251 $4,576 $12,306 $7,048
EARNINGS PER SHARE – Basic $0.09 $0.07 $0.06 $0.16 $0.09
EARNINGS PER SHARE – Diluted $0.09 $0.07 $0.06 $0.16 $0.09
Average common shares outstanding – Basic (1) 78,374,704 78,454,187 80,907,413 78,414,226 81,280,507
Average common shares outstanding – Diluted (1) 79,058,474 79,073,032 81,603,832 79,067,396 81,939,284
(1) As a result of the second-step conversion on January 12, 2015, all share and per share information, as appropriate, was adjusted to reflect the 1.0999 exchange ratio for preceding periods.
BENEFICIAL BANCORP, INC. AND SUBSIDIARIES
Selected Consolidated Financial and Other Data (Unaudited)
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, 2015 March 31, 2015 June 30, 2014 June 30, 2015 June 30, 2014
Average Yield / Average Yield / Average Yield / Average Yield / Average Yield /
Balance Rate Balance Rate Balance Rate Balance Rate Balance Rate
Investment securities: $1,722,562 1.80% $1,934,271 1.79% $1,826,663 1.88% $1,827,831 1.80% $1,849,043 1.86%
Overnight investments 248,284 0.25% 430,391 0.25% 301,195 0.25% 338,834 0.25% 302,731 0.25%
Stock 8,793 4.78% 8,833 20.78% 15,902 5.45% 8,813 12.76% 16,653 4.44%
Other investment securities 1,465,485 2.05% 1,495,047 2.13% 1,509,566 2.17% 1,480,184 2.09% 1,529,659 2.15%
Loans: 2,681,433 4.19% 2,449,445 4.31% 2,322,160 4.50% 2,566,080 4.25% 2,320,887 4.54%
Residential 702,994 4.29% 676,032 4.33% 673,668 4.47% 689,588 4.31% 676,014 4.51%
Commercial real estate 848,740 4.19% 650,686 4.59% 584,285 4.96% 750,260 4.36% 566,769 4.88%
Business and small business 506,122 4.09% 494,773 3.99% 423,747 4.12% 500,479 4.04% 433,000 4.36%
Personal loans 623,577 4.17% 627,954 4.23% 640,460 4.37% 625,753 4.20% 645,104 4.39%
Total interest earning assets $4,403,995 3.26% $4,383,716 3.20% $4,148,823 3.35% $4,393,911 3.23% $4,169,930 3.35%
Deposits: $3,005,930 0.46% $3,165,515 0.46% $3,260,534 0.46% $3,085,282 0.46% $3,289,852 0.46%
Savings 1,144,825 0.35% 1,122,098 0.35% 1,155,229 0.35% 1,133,524 0.35% 1,143,677 0.35%
Money market 421,801 0.33% 426,792 0.33% 440,830 0.32% 424,283 0.33% 443,381 0.32%
Demand 652,839 0.21% 796,491 0.20% 677,371 0.20% 724,268 0.20% 676,264 0.20%
Demand - municipals 125,558 0.11% 145,307 0.11% 272,803 0.11% 135,378 0.11% 305,171 0.12%
Total core deposits 2,345,023 0.29% 2,490,688 0.28% 2,546,233 0.28% 2,417,453 0.29% 2,568,493 0.28%
Time deposits 660,907 1.07% 674,827 1.10% 714,301 1.12% 667,829 1.09% 721,359 1.12%
Borrowings 190,395 2.66% 190,456 2.65% 250,376 2.90% 190,425 2.66% 250,408 2.91%
Total interest bearing liabilities $3,196,325 0.59% $3,355,971 0.58% $3,510,910 0.64% $3,275,707 0.59% $3,540,260 0.63%
Non-interest bearing deposits 379,221 366,686 314,569 372,988 309,452
Net interest margin 2.83% 2.75% 2.81% 2.79% 2.81%
ASSET QUALITY INDICATORS
June 30, March 31, December 31, June 30,
(Dollars in thousands) 2015 2015 2014 2014
Non-performing assets:
Non-accruing loans $12,812 $14,112 $14,615 $27,782
Accruing loans past due 90 days or more 25,460 24,072 25,296 16,819
Total non-performing loans 38,272 38,184 39,911 44,601
Real estate owned 1,359 1,406 1,578 2,008
Total non-performing assets $39,631 $39,590 $41,489 $46,609
Non-performing loans to total loans 1.41% 1.43% 1.65% 1.88%
Non-performing assets to total assets 0.84% 0.83% 0.87% 1.05%
Non-performing assets less accruing government guaranteed student loans past due 90 days or more to total assets 0.30% 0.33% 0.34% 0.67%
ALLL to total loans 1.76% 1.84% 2.09% 2.22%
ALLL to non-performing loans 124.87% 128.70% 126.92% 117.99%
ALLL to non-performing loans, excluding government guaranteed student loans 373.03% 348.24% 346.59% 189.42%
Key performance ratios (annualized) are as follows for the three and six months ended (unaudited):
For the Three Months Ended For the Six Months Ended
June 30, March 31, December 31, June 30,
2015 2015 2014 2015 2014
PERFORMANCE RATIOS:
(annualized)
Return on average assets 0.60% 0.45% 0.39% 0.53% 0.32%
Return on average equity 2.59% 2.30% 2.83% 2.45% 2.35%
Net interest margin 2.83% 2.75% 2.79% 2.79% 2.81%
Efficiency ratio 78.11% 85.29% 82.44% 81.58% 85.52%
Tangible common equity 21.14% 20.83% 10.44% 21.14% 11.26%

CONTACT: Thomas D. Cestare Executive Vice President and Chief Financial Officer PHONE: (215) 864-6009Source:Beneficial Bank