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Beneficial Mutual Bancorp, Inc. Announces First Quarter 2011 Results

PHILADELPHIA--(BUSINESS WIRE)-- Beneficial Mutual Bancorp, Inc. ("Beneficial") (NASDAQGS: BNCL), the parent company of Beneficial Bank (the "Bank" or the "Company"), today announced its financial results for the three months ended March 31, 2011.

For the three months ended March 31, 2011, Beneficial recorded a net loss of $898 thousand, or $0.01 per share, compared to net loss of $356 thousand, or $0.00 per share, for the three months ended December 31, 2010 and net income of $7.5 million, or $0.10 per share, for the three months ended March 31, 2010.

During the quarter, the Bank completed a comprehensive review of its operating cost structure and finalized an expense management reduction program which resulted in a $4.1 million restructuring charge. The Bank reduced its workforce by 4% and announced that it was consolidating five of its branch locations. Financial results for the quarter were also impacted by increased provisions for loan losses due primarily to a large charge-off in our commercial construction portfolio. During the quarter the Company recorded a provision for credit losses of $10.0 million compared to $8.0 million for the three months ended December 31, 2010 and $5.0 million for the three months ended March 31, 2010. In 2011, a significant portion of our commercial real estate and commercial construction portfolios contractually mature (approximately 33%). We expect that market conditions coupled with the large amount of commercial maturities will result in an elevated provision for credit losses in 2011. We continue to charge-off the collateral deficiency on all classified collateral dependent loans across all portfolios once they are 90 days delinquent.

At March 31, 2011, the Company's allowance for loan losses totaled $47.4 million, or 1.7% of total loans, compared to $45.4 million, or 1.6% of total loans, at December 31, 2010.

Gerard Cuddy, Beneficial's President and CEO, stated, "Although a difficult process, the expense reduction program finalized during the first quarter will improve operating efficiency and better position our Company when economic conditions improve. Credit costs continue to have a significant impact on our business and we expect these costs to remain elevated throughout 2011. Despite a difficult quarter, we increased net interest income, grew non-interest deposits and decreased borrowings. We will continue to be focused on improving our core profitability as we manage through the current credit environment."

Highlights for the three months ended March 31, 2011:

Balance Sheet

At March 31, 2011, total assets of $4.9 billion were consistent with total assets at December 31, 2010. Beneficial has been positioning the balance sheet for rising interest rates by shortening the duration of different asset classes, which resulted in an increase within cash and cash equivalents of $175.3 million and a decrease in investments of $166.5 million.

Total deposits increased $13.3 million, or 0.34%, to $3.96 billion at March 31, 2011, compared to $3.94 billion at December 31, 2010, as non-interest checking increased $29.8 million while interest bearing deposits decreased $16.5 million.

At March 31, 2011, Beneficial's stockholders' equity equaled $608.6 million, or 12.4% of total assets, compared to $615.5 million, or 12.5% of total assets, at December 31, 2010.

Net Interest Income

For the three months ended March 31, 2011, Beneficial reported net interest income of $36.7 million, an increase of $392 thousand for the same quarter a year ago and down $382 thousand from the three months ending December 31, 2010. The net interest margin decreased 7 basis points to 3.27% for the three months ended March 31, 2011, from 3.34% for the same quarter in 2010, but was up 3 basis points from the net interest margin of 3.24% reported for the three months ending December 31, 2010. We continue to see deposit increases in excess of our growth in loans which has resulted in an increase in our investment portfolio. However, the low interest rate environment has reduced the yields on our investment portfolio, decreasing the rate on our interest earning assets. This decrease in yield on interest earning assets has been offset by reductions in rates paid on our deposits and lower borrowings costs.

Non-interest Income

For the three months ended March 31, 2011, non interest income was $6.5 million, a decrease of $1.8 million for the same quarter a year ago and down $410 thousand from the quarter ending December 31, 2010. Non-interest income decreased $1.8 million from the same period in 2010, primarily due to a $1.8 million decrease in the gain on the sale of securities. Non-interest income decreased from the three months ended December 31, 2010, primarily due to a reduction in the cash surrender value of life insurance in the amount of $919 thousand and a $113 thousand decrease in checking fees, partially offset by an increase in insurance and advisory commission income of $596 thousand.

Non-interest Expense

Non-interest expense totaled $34.2 million for the three months ended March 31, 2011, which increased $3.7 million, or 12.2%, compared to the same period in 2010. The increase was primarily due to the $4.1 million restructuring charge recorded in connection with our expense reduction initiatives, as well as increased FDIC insurance, and loan and REO expenses, which were partially offset by reductions in salaries and benefits, marketing, and occupancy expenses.

Non-interest expense increased $1.1 million, or 3.4%, to $34.2 million for the three months ended March 31, 2011 compared to $33.1 million for the three months ended December 31, 2010 primarily due to the restructuring charge mentioned above, partially offset by real estate owned gains and lower professional fees.

Asset Quality

Non-performing loans, including loans 90 days past due and still accruing, totaled $145.2 million, or 2.96% of total assets, at March 31, 2011, up from $123.7 million, or 2.51% of total assets at December 31, 2010. The increase in non-performing loans was due primarily to commercial construction and commercial real estate loans. During the quarter we charged off all collateral deficiencies related to these loans. Non-performing assets at March 31, 2011 consisted of $25.1 million, or 15.5%, of government guaranteed student loans where Beneficial has little risk of credit loss. Net charge-offs during the three-month period ended March 31, 2011 were $8.0 million, compared to $7.6 million during the three months ended December 31, 2010. The charge-offs during the quarter consisted primarily of one commercial construction loan totaling $4.9 million and several consumer loans that were charged off when they became 90 days delinquent. In 2011, a significant portion of our commercial real estate and commercial construction portfolios contractually matures (approximately 33%). We expect that market conditions, coupled with the large amount of commercial maturities, will result in an elevated provision for credit losses in 2011. We continue to charge-off the collateral deficiency on all classified collateral dependent loans across all portfolios once they are 90 days delinquent. The allowance for loan losses at March 31, 2011 totaled $47.4 million, or 1.7% of total loans outstanding, compared to $45.4 million, or 1.6% of total loans outstanding, at December 31, 2010.

The Bank recorded a provision for loan losses of $10.0 million during the three months ended March 31, 2011, compared to a provision of $8.0 million for the three months ended December 31, 2010. The increase in the provision was primarily driven by increases in non-performing loans and delinquencies experienced during the quarter due to continued weakness in our region's economy. We continue to rigorously review our loan portfolio to ensure that the collateral values remain sufficient to support the outstanding balances. We will continue to work diligently to maximize the recovery of balances that have been charged off.

Capital

Our capital ratios remained relatively consistent compared to the prior quarter. The Company's capital position remains strong relative to current regulatory requirements. The Company continues to have substantial liquidity as the inflows of deposits have largely been retained in cash or invested in high quality government-backed securities. In addition, the Company continues to have significant available borrowing capacity from its contingent funding sources. Our capital ratios as of March 31, 2011 compared to December 31, 2010 as well as our excess capital over regulatory minimums to be considered well capitalized are as follows:

               
Minimum Well Excess Capital
3/31/2011 12/31/2010 Capitalized Ratio 3/31/2011
 
Tangible Capital 10.10% 10.16%
Tier 1 Capital (to average assets) 9.08% 8.89% 5% $192,772
Tier 1 Capital (to risk weighted assets) 15.91% 15.69% 6% $267,295
Total Capital (to risk weighted assets) 17.17% 16.95% 10% $193,402
 

About Beneficial Mutual 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 65 offices in the greater Philadelphia and South 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 MUTUAL BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Financial Condition
(Dollars in thousands, except share amounts)
 
 
    March 31,     December 31,     March 31,
2011 2010 2010
ASSETS:
Cash and Cash Equivalents:
Cash and due from banks $46,300 $33,778 $41,102
Interest-bearing deposits 219,287   56,521   7,457  
Total cash and cash equivalents 265,587 90,299 48,559
 
Trading Securities - 6,316 3,526
 
Investment Securities:
Available-for-sale 1,385,388 1,541,991 1,453,697
Held-to-maturity 77,912 86,609 71,534
Federal Home Loan Bank stock, at cost 22,082   23,244   28,068  
Total investment securities 1,485,382   1,651,844   1,553,299  
 
Loans: 2,775,715 2,796,402 2,785,122
Allowance for loan losses (47,411 ) (45,366 ) (46,390 )
Net loans 2,728,304 2,751,036 2,738,732
 
Accrued Interest Receivable 19,095 19,566 20,062
 
Bank Premises and Equipment, net 61,994 64,339 67,162
 
Other Assets:
Goodwill 110,486 110,486 110,486
Bank owned life insurance 34,169 33,818 32,740
Other intangibles 16,059 16,919 19,547
Other assets 180,876   185,162   115,865  
Total other assets 341,590   346,385   278,638  
Total Assets $4,901,952   $4,929,785   $4,709,978  
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Deposits:
Non-interest bearing deposits $311,890 $282,050 $268,379
Interest bearing deposits 3,643,693   3,660,254   3,320,670  
Total deposits 3,955,583 3,942,304 3,589,049
Borrowed funds 260,321 273,317 408,304
Other liabilities 77,408   98,617   66,214  
Total liabilities 4,293,312   4,314,238   4,063,567  
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock - $.01 par value - - -
Common Stock — $.01 par value 823 823 823
Additional paid-in capital 348,941 348,415 345,900
Unearned common stock held by employee stock ownership plan (21,827 ) (22,587 ) (24,736 )
Retained earnings (partially restricted) 303,334 304,232 320,722
Accumulated other comprehensive (loss) income, net (9,177 ) (1,882 ) 7,298
Treasury stock, at cost (13,454 ) (13,454 ) (3,596 )
Total stockholders' equity 608,640   615,547   646,411  
Total Liabilities and Stockholders' Equity $4,901,952   $4,929,785   $4,709,978  
 
 
BENEFICIAL MUTUAL BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
 
 
    For the Three Months Ended
March 31,     December 31,     March 31,
2011 2010 2010
INTEREST INCOME:
Interest and fees on loans $35,827 $36,812 $36,513
Interest on overnight investments 102 116 125
Interest on trading securities 26 16 34
Interest and dividends on investment securities:
Taxable 9,972 10,481 12,267
Tax-exempt 992   1,060   1,141
Total interest income 46,919   48,485   50,080
 
INTEREST EXPENSE:
Interest on deposits:
Interest bearing checking accounts 2,430 2,926 2,559
Money market and savings deposits 2,405 2,463 2,273
Time deposits 3,119   3,088   4,580
Total 7,954 8,477 9,412
Interest on borrowed funds 2,269   2,930   4,364
Total interest expense 10,223   11,407   13,776
 
Net interest income 36,696 37,078 36,304
 
Provision for loan losses 10,000   8,000   4,950
Net interest income after provision for loan losses 26,696   29,078  

31,354

 
NON-INTEREST INCOME:
Insurance and advisory commission and fee income 2,537 1,941 3,010
Service charges and other income 3,693 4,859 3,264
Gain on sale of investment securities available-for-sale 186 16 2,003
Trading securities profits 81   91   27
Total non-interest income 6,497   6,907   8,304
 
NON-INTEREST EXPENSE:
Salaries and employee benefits 15,009 14,733 15,633
Occupancy expense 3,093 2,848 3,145
Depreciation, amortization and maintenance 2,248 2,401 2,177
Marketing expense 897 857 1,045
Intangible amortization expense 860 858 883
FDIC insurance 1,639 1,541 1,322
Restructuring charge 4,096 - -
Other 6,361   9,836   6,280
Total non-interest expense 34,203   33,074   30,485
(Loss) Income before income taxes (1,010 ) 2,911   9,173
 
Income tax (benefit) expense (112 ) 3,267   1,646
NET (LOSS) INCOME $(898 ) $(356 ) $7,527
 
(LOSS) EARNINGS PER SHARE — Basic and Diluted $(0.01 ) $(0.00 ) $0.10
 
Average common shares outstanding — Basic 77,006,186 77,215,313 77,785,046
Average common shares outstanding — Diluted 77,006,186 77,215,313 77,915,633
Actual common shares outstanding 80,717,553 80,717,553 81,853,553
 
 
BENEFICIAL MUTUAL BANCORP, INC. AND SUBSIDIARIES
Selected Consolidated Financial and Other Data of the Company (Unaudited)
(Dollars in thousands)
 
 
    Three Months Ended
March 31, 2011     December 31, 2010     March 31, 2010
Average     Yield / Average     Yield / Average     Yield /
Description (in thousands) Balance     Rate Balance     Rate Balance     Rate
 
Investment Securities: $ 1,701,557 2.61 % $ 1,784,843 2.62 % $ 1,570,425 3.46 %
Trading Securities 9,027 1.19 % 7,324 0.85 % 10,699 1.27 %
Overnight investments 162,961 0.25 % 182,355 0.25 % 203,892 0.25 %
Stock 22,766 0.08 % 25,348 0.55 % 28,068 0.72 %
Other Investment securities 1,506,803 2.91 % 1,569,816 2.93 % 1,327,766 4.02 %
 
Loans: 2,796,336 5.16 % 2,784,525 5.27 % 2,788,168 5.27 %
Residential 704,235 4.92 % 690,899 5.07 % 661,789 5.41 %
Commercial Real Estate 785,784 5.08 % 780,283 5.21 % 781,226 4.73 %
Business and Small Business 527,567 5.65 % 528,199 5.71 % 527,381 5.69 %
Personal Loans   778,750     5.11 %   785,144     5.21 %   817,772     5.40 %
 
Total Interest Earning Assets $ 4,497,893 4.19 % $ 4,569,368 4.23 % $ 4,358,593 4.62 %
 
Deposits: $ 3,640,149 0.89 % $ 3,645,172 0.92 % $ 3,315,082 1.15 %
Savings 707,519 0.72 % 677,377 0.73 % 555,234 0.71 %
Money Market 622,845 0.75 % 620,670 0.77 % 641,958 0.82 %
Demand 408,754 0.25 % 387,606 0.26 % 350,057 0.31 %
Demand - Municipals   1,025,436     0.86 %   1,107,952     0.96 %   858,230     1.08 %
Total Core Deposits 2,764,554 0.71 % 2,793,605 0.77 % 2,405,479 0.81 %
 
Time Deposits 875,595 1.44 % 851,567 1.45 % 909,603 2.04 %
 
Borrowings   267,131     3.44 %   314,836     3.69 %   425,150     4.16 %
 
Total Interest Bearing Liabilities $ 3,907,280 1.06 % $ 3,960,008 1.14 % $ 3,740,232 1.50 %
 
Non-interest bearing deposits 281,391 282,863 249,675
 
Net interest margin 3.27 % 3.24 % 3.34 %
 
 
BENEFICIAL MUTUAL BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
 
 
ASSET QUALITY INDICATORS:            

(Dollars in thousands)

March 31, 2011 December 31, 2010 March 31, 2010
 
Non-performing assets:
Non-accruing loans $120,102 $95,803 $72,309
Accruing loans past due 90 days or more* 25,112   27,932   48,313  
Total non-performing loans** $145,214 $123,735 120,622
Troubled debt restructurings - - 22,412
Real estate owned 16,449   16,694   8,202  
Total non-performing assets $161,663   $140,429   $151,236  
 
Non-performing loans to total loans 5.23 % 4.42 % 4.33 %
Non-performing loans to total assets 2.96 % 2.51 % 2.56 %
Non-performing assets to total assets 3.30 % 2.85 % 3.21 %
Non-performing assets less accruing loans
Past due 90 days or more to total assets 2.79 % 2.28 % 2.19 %
 

*Includes $25.1 million, $27.9 million and $31.7 million in government guaranteed student loans as of March 31, 2011, December 31, 2010 and March 31, 2010, respectively.

** Includes $27.7 million, $26.7 million and $22.4 million of troubled debt restructured loans (TDRs) as of March 31, 2011 December 31, 2010 and March 31, 2010, respectively

 

Impaired loan charge offs and payments as a percentage of the principal balance at March 31, 2011 are as follows:

                               
For the Three Months Ended March 31, 2011 (Dollars in thousands)    

Recorded

Investment

   

Unpaid Principal

Balance

   

Charge-offs and

Payments

   

% of Unpaid

Principal

Balance

Impaired Loans by Category:            
Commercial Real Estate $ 30,464 $ 41,199 $ (10,735 ) 26.06 %
Commercial Business 26,843 32,393 (5,550 ) 17.13 %
Commercial Construction 45,878 67,609 (21,731 ) 32.14 %
Residential Real Estate 15,953 16,674 (721 ) 4.32 %
Residential Construction 106 205 (99 ) 48.29 %
Consumer Personal   858       993       (135 )     13.60 %
Total Impaired Loans $ 120,102     $ 159,073     $ (38,971 )     24.50 %
 

Key Performance ratios (annualized) are as follows for the three month periods indicated:

 
    For the Three Months Ended
March 31,     December 31,     March 31,
2011 2010 2010
 
Return on average assets (0.06 )% (0.04 )% 0.64 %
Return on average equity (0.48 )% (0.28 )% 4.74 %
Net interest margin 3.27 % 3.24 % 3.34 %
Efficiency ratio 78.91 % 75.35 % 68.16 %
Tangible common equity 10.10 % 10.16 % 11.27 %
 

Beneficial Mutual Bancorp, Inc.
Thomas D. Cestare
Executive Vice President and Chief Financial Officer
215-864-6009

Source: Beneficial Mutual Bancorp, Inc.

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