Beneficial Mutual Bancorp, Inc. (“Beneficial”) (NASDAQGS: BNCL), the parent company of Beneficial Mutual Savings Bank (the “Bank” or the “Company”), today announced its financial results for the three and nine months ended September 30, 2010.

Beneficial recorded a net loss of $21.7 million, or $0.28 per share, for the quarter ended September 30, 2010, compared to net income of $5.8 million, or $0.07 per share, for the quarter ended September 30, 2009. A net loss for the nine months ended September 30, 2010 totaled $8.6 million, or $0.11 per share, compared to net income of $10.9 million, or $0.14 per share for the nine months ended September 30, 2009.

During the third quarter, the Company saw considerable deterioration in the value of a number of large collateral dependent commercial real estate loans. Additionally, the Company has seen a pronounced slowdown in the commercial real estate market limiting traditional refinance and repayment sources. The Company now believes the recovery for commercial real estate in its region will take longer than previously anticipated causing continued downward pressure on property valuations. As a result, during the third quarter the Company recorded a significantly elevated provision for credit losses of $51.1 million compared to $2.0 million in the third quarter of 2009. The provision was primarily driven by specific reserves required for commercial real estate loans that the Company had previously designated as criticized loans and a decision to charge-off the collateral deficiency on all of its criticized loans (those classified as special mention, substandard, doubtful, or loss), including those currently performing. Additionally, as a result of this decision, the Company reversed $2.6 million of interest that was accrued on these loans resulting in a 24 basis point reduction to net interest margin for the quarter. Beneficial intends to work diligently with its commercial real estate customers to maximize the recovery of these loans.

Although we saw deterioration in the collateral of our existing criticized asset portfolio, we have not seen any increases in total criticized loans, as both the number and the absolute dollar amount of criticized loans has remained consistent.

At September 30, 2010, the Company’s allowance for loan losses totaled $45.0 million and non-performing assets were $133.7 million, resulting in an allowance for loan losses to nonperforming asset ratio of 33.6% compared to an allowance for loan losses of $45.9 million, non-performing assets of $162.9 million, and an allowance for loan losses to nonperforming asset ratio of 28.1% at December 31, 2009.

Gerard Cuddy, Beneficial’s President and CEO, stated “We are taking the most prudent course of action given our view of the current economic environment which significantly weakened during the quarter, and a number of challenges facing our industry. We see no evidence of an economic recovery in our region and believe any economic recovery will take place over a significantly longer period of time than originally anticipated. As a result, we have addressed all known collateral deficiencies for all of our criticized commercial loans including those that are performing. This puts Beneficial in the best possible position to meet its opportunities in the future”.

Beneficial’s capital levels and liquidity at September 30, 2010 are among the top for our bank peer group with excess capital above the well capitalized levels of $202.1 million to $276.5 million as shown below:
   
9/30/10 9/30/10

Capital Ratios

Excess Capital
 
Tangible Capital 10.60 %
Tier 1 Capital (to average assets) 9.26 % $202,077
Tier 1 Capital (to risk weighted assets) 16.20 % $276,533
Total Capital (to risk weighted assets) 17.46 % $202,172

Highlights for the quarter ended September 30, 2010:
  • Total assets increased $225.5 million and $454.1 million, or 4.8% and 10.2%, to $4.9 billion at September 30, 2010 compared to $4.7 billion at December 31, 2009 and $4.4 billion at September 30, 2009.
  • Total deposits increased $349.1 million and $576.1 million, or 9.9% and 17.6%, to $3.9 billion at September 30, 2010 up from $3.5 billion at December 31, 2009 and $3.3 billion at September 30, 2009.
  • Net interest margin increased to 3.35% for the nine months ended September 30, 2010 from 3.27% for the nine months ended September 30, 2009, an increase of 8 basis points.
  • Allowance for loan losses totaled $45.0 million with non-performing assets (NPAs) dropping to $133.7 million or 17.9% at September 30, 2010 as compared to $162.9 million as of December 31, 2009.
  • Capital levels remain strong with total equity equal to 12.9% of total assets and tangible capital to tangible assets of 10.6%.

Balance Sheet

Total assets increased $225.5 million, or 4.8%, to $4.9 billion at September 30, 2010 compared to $4.7 billion at December 31, 2009. The growth in total assets was primarily attributable to an increase in trading and investment securities of $140.0 million, other assets of $82.2 million and cash and cash equivalents of $36.4 million. Beneficial’s loan portfolio balance remained stable during 2010 at $2.8 billion despite low demand for both consumer and business loans as consumers and businesses continue to deleverage and remain cautious about the economy.

Total deposits increased $349.1 million, or 9.9%, to $3.9 billion at September 30, 2010 compared to $3.5 billion at December 31, 2009. Increases in checking accounts of $338.5 million and savings accounts of $133.3 million were partially offset by decreases in time deposits of $80.3 million and money market accounts of $54.0 million.

Net Interest Income and Margin

For the quarter ended September 30, 2010, Beneficial reported net interest income of $35.1 million, an increase of $2.4 million, or 7.4%, from the same quarter in 2009. The net interest margin decreased 25 basis points to 3.14% for the quarter ended September 30, 2010, from 3.39% for the same quarter in 2009. The interest reversal on criticized loans accounted for 24 basis points of that decline. For the nine months ended September 30, 2010 net interest income increased $18.0 million to $110.5 million compared to $92.6 million for the nine months ended September 30, 2009 with net interest margin increasing 8 basis points to 3.35%. Asset growth coupled with an improvement in our deposit mix to lower cost deposit categories were the primary reasons for the Company’s margin expansion.

Non-interest Income

Non-interest income declined to $5.7 million for the quarter ended September 30, 2010, from $6.5 million recorded for the same quarter in 2009. Results for the quarter ended September 30, 2009 include $1.4 million of gains on the sale of investment securities available for sale compared to $0.4 million for the quarter ended September 30, 2010.

For the nine months ended September 30, 2010, non-interest income decreased to $20.3 million from $20.6 million for the nine months ended September 30, 2009. During the nine months ended September 30, 2010, Beneficial recorded gains on the sale of investments of $2.4 million compared to $5.5 million of gains on the sale of investments for the nine months ended September 30, 2009. Results for the nine months ended September 30, 2010 included $0.1 million of impairment charges on investment securities compared to a $1.4 million impairment charge recorded on investment securities during the nine months ended September 30, 2009. For the nine months ended September 30, 2010 insurance and advisory commission income, and services charges and other income increased $0.4 million and $0.9 million, respectively.

Non-interest Expense

Non-interest expense for the quarter ended September 30, 2010 increased $2.8 million or 9.3% to $33.4 million and increased $6.6 million, or 7.4%, to $95.3 million for the nine months ended September 30, 2009 compared to the same periods ended September 30, 2009. The increases were primarily due to increases in salaries and benefits from normal merit increases, as well as growth in the number of employees. The Company also had increases in marketing expenses as it continued to enhance its product offerings and visibility in the marketplace. Other expenses increased during the quarter primarily due to increased costs for internet banking, debit card reward programs, and expenses for other real estate owned. For the nine months ended September 30, 2010 the Company’s efficiency ratio improved to 72.8% from 78.3% for the nine months ended September 30, 2009.

Asset Quality

Non-performing assets, including loans 90 days past due and still accruing, decreased to $133.7 million, or 2.73% of total assets at September 30, 2010 from $162.9 million, or 3.49% of total assets at December 31, 2009. Included in non-performing loans at September 30, 2010 is $26.4 million, or 19.7% of total non-performing assets, that are government guaranteed student loans where Beneficial has no risk of credit loss. Net charge-offs during the quarter ended September 30, 2010 were $57.0 million, compared to $2.5 million during the quarter ended September 30, 2009. Provisions for credit losses of $51.1 million were recorded for the quarter, with the allowance for loan losses at September 30, 2010 remaining consistent at 1.6% of total loans outstanding, as compared to 1.6% of total loans outstanding, at December 31, 2009.

The $51.1 million provision for loan losses recorded for the quarter ended September 30, 2010 was primarily driven by increased reserves required for commercial real estate loans as a result of considerable deterioration in the value of a number of the Company’s large commercial real estate loans, a pronounced slowdown in the commercial real estate market and a challenged overall economic environment in the Company’s region that it does not see recovering anytime in the near future.

The Company continues to rigorously review its loan portfolio to ensure that the collateral values remain sufficient to support the outstanding loan balances. In addition, Beneficial will continue to work diligently to maximize the recovery of loans charged off.

Capital

Stockholders’ equity totaled $634.1 million, or 12.9%, of total assets at September 30, 2010 compared to $637.0 million, or 13.6% of total assets at December 31, 2009. Beneficial’s tangible equity to tangible assets totaled 10.6% at September 30, 2010 compared to 11.1% at December 31, 2009 and 11.7% at September 30, 2009.

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 Southern 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 MUTUAL BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Financial Condition
(Dollars in thousands, except share amounts)
  September 30,   June 30,   December 31,   September 30,
2010 2010 2009 2009
ASSETS:
Cash and Cash Equivalents:
Cash and due from banks $38,223 $39,600 $39,739 $147,975
Overnight investments 177,887   186,504   139,962   423  
Total cash and cash equivalents 216,110 226,104 179,701 148,398
 
Trading Securities - 25,575 31,825 -
 
Investment Securities:
Available-for-sale 1,419,095 1,233,508 1,287,106 1,165,253
Held-to-maturity 88,782 114,843 48,009 52,176
Federal Home Loan Bank stock, at cost 27,168   28,068   28,068   28,068  
Total investment securities 1,535,045   1,376,419   1,363,183   1,245,497  
Loans: 2,768,753 2,809,701 2,790,119 2,750,949
Allowance for loan losses (44,959 ) (50,895 ) (45,855 ) (42,742 )
Net loans 2,723,794 2,758,806 2,744,264 2,708,207
 
Accrued Interest Receivable 18,483 20,029 19,375 19,264
 
Bank Premises and Equipment, net 69,466 71,309 81,255 77,402
Other Assets:
Goodwill 110,486 110,486 110,486 110,486
Bank owned life insurance 33,464 33,131 32,357 31,971
Other intangibles 17,777 18,663 20,430 21,311
Other assets 174,561   235,776   90,804   82,531  
Total other assets 336,288   398,056   254,077   246,299  
Total Assets $4,899,186   $4,876,298   $4,673,680   $4,445,067  
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Liabilities:
Deposits:
Non-interest bearing deposits $292,159 $279,268 $242,412 $230,856
Interest bearing deposits 3,566,144   3,338,181   3,266,835   3,051,369  
Total deposits 3,858,303 3,617,449 3,509,247 3,282,225
Borrowed funds 343,313 393,308 433,620 443,616
Other liabilities 63,481   206,362   93,812   83,957  
Total liabilities 4,265,097   4,217,119   4,036,679   3,809,798  
Commitments and Contingencies
Stockholders’ Equity:
Preferred Stock - $.01 par value - - - -
Common Stock - $.01 par value 823 823 823 823
Additional paid-in capital 347,581 346,759 345,356 344,663
Unearned common stock held by employee stock ownership plan (23,073 ) (23,899 ) (25,489 ) (26,385 )
Retained earnings (partially restricted) 304,589 326,319 313,195 307,004
Accumulated other comprehensive income, net 12,752 14,330 6,712 12,760
Treasury stock, at cost (8,583 ) (5,153 ) (3,596 ) (3,596 )
Total stockholders’ equity 634,089   659,179   637,001   635,269  
 
Total Liabilities and Stockholders’ Equity $4,899,186   $4,876,298   $4,673,680   $4,445,067  
 
BENEFICIAL MUTUAL BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
   
For the Three Months Ended For the Nine Months Ended
September 30,   September 30, September 30,   September 30,
2010 2009 2010 2009
INTEREST INCOME:
Interest and fees on loans $35,480 $36,244 $109,940 $103,522
Interest on overnight investments 151 - 321 2
Interest on trading securities 14 - 70 -
Interest and dividends on investment securities:
Taxable 10,497 11,293 35,146 37,294
Tax-exempt 1,150   902   3,552   2,108  
Total interest income 47,292 48,439 149,029 142,926
 
INTEREST EXPENSE:
Interest on deposits:
Interest bearing checking accounts 2,556 2,319 7,616 6,415
Money market and savings deposits 2,441 2,515 7,045 8,669
Time deposits 3,395   6,176   11,621   21,160  
Total 8,392 11,010 26,282 36,244
Interest on borrowed funds 3,810   4,749   12,208   14,108  
Total interest expense 12,202   15,759   38,490   50,352  
 
Net interest income 35,090 32,680 110,539 92,574
 
Provision for loan losses 51,050   2,000   62,200   12,100  
Net interest (loss) income after provision for loan losses

(15,960

)

30,680
  48,339   80,474  

 
NON-INTEREST INCOME:
Insurance and advisory commission and fee income 1,944 1,818 6,716 6,281
Service charges and other income 3,387 3,456 11,076 10,217
Impairment charge on securities available-for-sale (88 ) (195 ) (88 ) (1,425 )
Gain on sale of investment securities available-for-sale 370 1,383 2,374 5,548
Trading securities profits 123   -   235   -  
Total non-interest income 5,736   6,462   20,313   20,621  
 
NON-INTEREST EXPENSE:
Salaries and employee benefits 15,580 14,583 46,316 42,865
Occupancy expense 2,906 2,970 8,966 9,072
Depreciation, amortization and maintenance 2,443 2,277 6,859 6,724
Marketing expense 2,392 1,138 5,041 4,124
Intangible amortization expense 886 892 2,653 2,674
Impairment of goodwill - 976 - 976
FDIC Insurance 1,361 1,052 4,065 4,384
Other 7,783   6,634   21,415   17,891  
Total non-interest expense 33,351   30,522   95,315   88,710  
 
(Loss) Income before income taxes (43,575 ) 6,620   (26,663 ) 12,385  
 
Income tax (benefit) expense (21,845 ) 800   (18,057 ) 1,487  
 
NET (LOSS) INCOME $(21,730 ) $5,820   $(8,606 ) $10,898  
 
(LOSS) EARNINGS PER SHARE – Basic $(0.28 ) $0.07 ($0.11 ) $0.14
(LOSS) EARNINGS PER SHARE – Diluted $(0.28 ) $0.07 ($0.11 ) $0.14
 
Average common shares outstanding – Basic 77,541,313 77,651,098 77,721,359 77,695,061
Average common shares outstanding – Diluted 77,541,313 77,675,526 77,721,359 77,707,151
 
BENEFICIAL MUTUAL BANCORP, INC. AND SUBSIDIARIES
Selected Consolidated Financial and Other Data of the Company (Unaudited)
(Dollars in thousands)
  September 30,

2010
  June 30,

2010
 

December 31, 2009
  September 30,

2009
 
ASSET QUALITY INDICATORS :
Non-performing assets:
Non-accruing loans $89,205 $68,555 $72,307 $73,692
Accruing loans past due 90 days or more* 27,106     66,990   81,512   61,243  
Total non-performing loans** $116,311 $135,545 $153,819 $134,935
 
Real estate owned 17,438     10,720   9,061   8,194  
 
Total non-performing assets $133,749     $146,265   $162,880   $143,129  
 
Non-performing loans to total loans 4.20 % 4.03 % 4.32 % 4.39 %
 
Non-performing loans to total assets 2.37 % 2.32 % 2.58 % 2.72 %
 
Non-performing assets to total assets 2.73 % 3.00 % 3.49 % 3.22 %
 
Non-performing assets less accruing loans

Past due 90 days or more to total assets

2.18

%

2.08

%

2.45

%
2.16 %

* Includes $26.4 million, $24.8 million, $36.8 million and $21.0 million in government guaranteed student loans as of September 30, 2010, June 30, 2010, December 31, 2009 and September 30, 2009, respectively.

** Includes $26.5 million, $34.8 million, $33.3 million and $14.2 million of troubled debt restructured loans (TDRs) as of September 30, 2010, June 30, 2010, December 31, 2009 and September 30, 2009, respectively.
     

For the Three Months Ended September 30,
For the Nine Months

Ended September 30,
2010 2009 2010 2009
PERFORMANCE RATIOS:
(annualized)
Return on average assets (1.78 )% 0.53 % (0.24 )% 0.35 %
Return on average equity (13.23 )% 3.69 % (1.74 )% 2.36 %
Net interest margin 3.14 % 3.39 % 3.35 % 3.27 %
Efficiency ratio 81.84 % 78.08 % 72.80 % 78.34 %
Tangible Common Equity 10.60 % 11.67 % 10.60 % 11.67 %

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