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Beneficial Bancorp, Inc. Announces Second Quarter Results and Cash Dividend to Shareholders

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PHILADELPHIA, July 20, 2018 (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, 2018.  Beneficial recorded net income of $11.9 million and $21.7 million, or $0.16 and $0.30 per diluted share, for the three and six months ended June 30, 2018, respectively, compared to net income of $9.5 million and $17.8 million, or $0.13 and $0.24 per diluted share, for the three and six months ended June 30, 2017.

On July 19, 2018, the Company declared a cash dividend of 6 cents per share, payable on or after August 9, 2018, to common shareholders of record at the close of business on July 30, 2018.

Highlights for the three and six months ended June 30, 2018 are as follows:

  • Net interest margin totaled 3.34% and 3.28% for the three and six months ended June 30, 2018 compared to 3.07% and 3.06% for the same periods in 2017, respectively.  Net interest income increased $3.4 million, or 8.1%, and $5.8 million, or 7.0%, for the three and six months ended June 30, 2018 compared to the same periods in the prior year.  During the three months ended June 30, 2018, the net interest margin was benefited $1.7 million, or 13 basis points, by loan prepayment income.  Net interest margin and net interest income also increased due to higher yields on the investment and loan portfolios following the recent Federal Reserve Bank federal funds rate increases.

  • During the six months ended June 30, 2018, our core commercial real estate portfolio increased $20.2 million, 2.4% annualized growth, and our residential real estate portfolio increased $27.1 million, 5.7% annualized growth.

  • Net charge-offs for the six months ended June 30, 2018, totaled $2.9 million, or 14 basis points annualized of average loans, compared to net charge-offs of $1.3 million, or 6 basis points annualized of average loans, in the same period in 2017.

  • During the three and six months ended June 30, 2018, the Company recorded a $523 thousand and an $831 thousand net gain on the sale of $7.3 million and $12.1 million of the guaranteed portion of SBA loans, respectively.
     
  • Asset quality metrics continued to remain strong with non-performing assets to total assets, excluding government guaranteed student loans, of 0.36% as of June 30, 2018.  Our allowance for loan losses totaled $43.1 million, or 1.07% of total loans, as of June 30, 2018, compared to $43.3 million, or 1.07% of total loans, as of December 31, 2017.
     
  • Our effective tax rate decreased to 23.9% and 23.1% for the three and six months ended June 30, 2018 compared to 33.3% and 31.6% for the same periods in the prior year as a result of the Tax Cuts and Jobs Act of 2017, which was enacted on December 22, 2017 and lowered the federal corporate tax rate to 21% from 35%.
     
  • During the six months ended June 30, 2018, the Company purchased 945,400 shares under its previously announced stock repurchase plan.  Our tangible capital to tangible assets increased to 15.19% at June 30, 2018, compared to 15.17% at June 30, 2017.  Tangible book value per share totaled $11.35 at June 30, 2018.

Gerard Cuddy, Beneficial's President and CEO, stated "Our financial results continue to improve, driven by a rise in interest rates, continued favorable asset quality and management of our expense base.  We are seeing some growth in our commercial real estate and residential lending businesses in line with the overall growth rate of the economy.  We are working diligently to build out the Neumann Finance team and infrastructure and expect to start booking leases late in the third quarter 2018 which we expect to positively impact future loan and revenue growth."

Balance Sheet
Total assets decreased $28.5 million, or 0.5%, to $5.77 billion at June 30, 2018, compared to $5.80 billion at December 31, 2017.  The decrease in total assets was primarily due to a decrease in total investment securities and loans, partially offset by an increase in cash and cash equivalents.

Cash and cash equivalents increased $29.2 million, or 5.2%, to $586.8 million at June 30, 2018, from $557.6 million at December 31, 2017.  The increase in cash and cash equivalents was primarily driven by investment maturities and repayments and a decrease in our total loan portfolio.

Investments decreased $54.8 million, or 6.3%, to $816.1 million at June 30, 2018, compared to $870.8 million at December 31, 2017. 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.

Loans decreased $10.8 million, or 0.3%, to $4.02 billion at June 30, 2018, from $4.03 billion at December 31, 2017.  During the six months ended June 30, 2018, our core commercial real estate portfolio increased $20.2 million, or 2.4% annualized growth, and our residential real estate portfolio increased $27.1 million, representing 5.7% annualized growth.  However, this growth was offset by a $60.5 million decrease in our total consumer loan portfolio, which was due primarily to a $33.8 million decrease in indirect auto loans resulting from our planned run-off of this portfolio segment.  As previously disclosed, we decided to exit the indirect lending business in the first quarter of 2017.

Deposits increased $10.0 million, or 0.2%, to $4.16 billion at June 30, 2018, from $4.15 billion at December 31, 2017.  Deposit growth was primarily achieved through organic core deposit growth of $55.4 million in interest business checking accounts and $24.4 million of growth in time deposits, partially offset by the maturity of $74.6 million of higher cost brokered certificates of deposit, which we did not renew given our excess liquidity position.

Borrowings decreased $25.4 million to $515.0 million at June 30, 2018.  During the six months ended June 30, 2018, the Company paid off $25.8 million of a higher cost trust preferred debenture.

Stockholders' equity decreased $12.3 million, or 1.2%, to $1.02 billion at June 30, 2018, from $1.03 billion at December 31, 2017.  The decrease in stockholders' equity was primarily due to the declaration of cash dividends and stock repurchases, partially offset by net income of $21.7 million.

Net Interest Income
For the three months ended June 30, 2018, net interest income was $45.1 million, an increase of $3.4 million, or 8.1%, from the three months ended June 30, 2017. The increase in net interest income was primarily due to an increase in yields on the investment and loan portfolios following recent Federal Reserve Bank federal funds rate increases. The Company paid off $25.8 million of a higher cost trust preferred debenture during the three months ended March 31, 2018. The net interest margin totaled 3.34% for the quarter ended June 30, 2018 as compared to 3.07% for the same period in 2017. During the three months ended June 30, 2018, the net interest margin was positively impacted by 13 basis points due to loan prepayments compared to a 3 basis point positive impact during the three months ended June 30, 2017. Also during the three months ended June 30, 2018, the net interest margin was negatively impacted 13 basis points by higher cash levels due to slower than anticipated loan growth as average cash for the period totaled $512.9 million, an increase of $170.5 million from $342.4 million during the three months ended June 30, 2017.

For the six months ended June 30, 2018, Beneficial reported net interest income of $88.3 million, an increase of $5.8 million, or 7.0%, from the six months ended June 30, 2017. The increase in net interest income was primarily due to an increase in yields on the investment and loan portfolios following recent Federal Reserve Bank federal funds rate increases.  Our net interest margin increased to 3.28% for the six months ended June 30, 2018, from 3.06% for the same period in 2017.

Non-interest Income
For the three months ended June 30, 2018, non-interest income totaled $7.4 million, a decrease of $37 thousand, or 0.5%, from the three months ended June 30, 2017.  The decrease was primarily due to a $331 thousand net decrease in income from bank-owned life insurance, partially offset by a $239 thousand increase in the net gain on the sale of SBA loans recorded during the three months ended June 30, 2018 compared to the same period in the prior year.

For the six months ended June 30, 2018, non-interest income totaled $14.0 million, a decrease of $440 thousand, or 3.0%, from the six months ended June 30, 2017.  The decrease was primarily due to a $335 thousand net decrease in income from bank-owned life insurance recorded during the six months ended June 30, 2018 compared to the same period in the prior year.

Non-interest Expense
For the three months ended June 30, 2018, non-interest expense totaled $35.3 million, an increase of $1.1 million, or 3.1%, from the three months ended June 30, 2017.  The increase in non-interest expense was primarily due to an increase in salaries and employee benefits of $1.2 million due primarily to enhanced medical coverage provided to our entire employee base, annual merit increases, an increase to our minimum wage and the costs associated with the build out of Neumann Finance.

For the six months ended June 30, 2018, non-interest expense totaled $71.6 million, an increase of $2.1 million, or 3.0%, from the six months ended June 30, 2017. The increase in non-interest expense was primarily due to an increase in salaries and employee benefits of $2.3 million due primarily to enhanced medical coverage provided to our entire employee base, annual merit increases, an increase in our minimum wage and the costs associated with the build out of Neumann Finance.  Marketing expense increased $1.3 million due to the production and airing of a new television commercial. These increases were partially offset by a decline of $740 thousand in intangible amortization expense as a result of certain intangible assets reaching the end of their estimated lives, as well as an $837 thousand decrease in other expenses primarily due to declines in loan and on-line banking expenses.

Income Taxes
For the three months ended June 30, 2018, we recorded a provision for income taxes of $3.7 million, reflecting an effective tax rate of 23.9%, compared to a provision for income taxes of $4.7 million, reflecting an effective tax rate of 33.3% for the three months ended June 30, 2017.  For the six months ended June 30, 2018, we recorded a provision for income taxes of $6.5 million, reflecting an effective tax rate of 23.1%, compared to a provision for income taxes of $8.2 million, reflecting an effective tax rate of 31.6%, for the six months ended June 30, 2017.  The decrease in the effective tax rate in the three and six months ended June 30, 2018 compared to the same period a year ago is primarily due to the passage of the Tax Cuts and Jobs Act of 2017, which was enacted on December 22, 2017 and lowered the federal corporate tax rate to 21% from 35%.

Asset Quality
Non-accruing loans, excluding government guaranteed student loans, increased $365 thousand to $20.9 million at June 30, 2018, compared to $20.5 million at December 31, 2017.  Our ratio of non-performing assets to total assets, excluding government guaranteed student loans, remained the same at 0.36% at both June 30, 2018 and December 31, 2017.  As a result of charge-offs, we recorded a $1.7 million and $2.7 million provision for loan losses during the three and six months ended June 30, 2018, respectively, compared to a $750 thousand and $1.4 million provision for loan losses during the same periods in the prior year.  Our allowance for loan losses totaled $43.1 million, or 1.07% of total loans, as of June 30, 2018, compared to $43.1 million, or 1.07% of total loans, as of March 31, 2018, and $43.3 million, or 1.07% of total loans, as of December 31, 2017.

Capital
Beneficial's and the Bank's capital position remains strong relative to current regulatory requirements. Beneficial and the Bank continue to have substantial liquidity that has been retained in cash or invested in high quality government-backed securities. As of June 30, 2018, Beneficial's tangible capital to tangible assets totaled 15.19%. In addition, at June 30, 2018, we had the ability to borrow up to $2.2 billion combined from the Federal Home Loan Bank of Pittsburgh and the Federal Reserve Bank of Philadelphia. Beneficial's capital ratios are considered to be well capitalized and are as follows:

                   
              Minimum Well   Excess Capital
  6/30/2018     12/31/2017     6/30/2017     Capitalized Ratio   6/30/2018
                   
Tier 1 Leverage (to average assets) 15.65 %   16.19 %   16.06 %   5.0 %   $ 593,322
Common Equity Tier 1 Capital (to risk weighted assets) 21.69 %   22.12 %   20.88 %   6.5 %     610,602
Tier 1 Capital (to risk weighted assets) 21.69 %   22.76 %   21.47 %   8.0 %     550,319
Total Capital Ratio (to risk weighted assets) 22.77 %   23.84 %   22.51 %   10.0 %     513,135
                   

The Bank's capital ratios are considered to be well capitalized and are as follows:

                     
                Minimum Well   Excess Capital
  6/30/2018     12/31/2017     6/30/2017       Capitalized Ratio   6/30/2018
                     
Tier 1 Leverage (to average assets) 13.20 %   14.46 %   14.75 %     5.0 %   $ 456,616
Common Equity Tier 1 Capital (to risk weighted assets) 18.31 %   20.34 %   19.74 %     6.5 %     474,069
Tier 1 Capital (to risk weighted assets) 18.31 %   20.34 %   19.74 %     8.0 %     413,835
Total Capital Ratio (to risk weighted assets) 19.38 %   21.42 %   20.77 %     10.0 %     376,716
                     

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 61 offices in the greater Philadelphia and South New Jersey regions. Insurance services are offered through Beneficial Insurance Services, LLC, which is a wholly owned subsidiary of the Bank. Equipment leasing services are offered through Beneficial Equipment Leasing Corporation, which is a wholly owned subsidiary of the Bank.  For

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