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

PHILADELPHIA, April 21, 2017 (GLOBE NEWSWIRE) — Beneficial Bancorp, Inc. (“Beneficial”) (NASDAQ:BNCL), the parent company of Beneficial Bank (the “Bank”), today announced its financial results for the quarter ended March 31, 2017.  Beneficial recorded net income of $8.4 million, or $0.11 per diluted share, for the quarter ended March 31, 2017 compared to net income of $5.0 million, or $0.07 per diluted share, for the quarter ended March 31, 2016.

On April 20, 2017, Beneficial declared a cash dividend of 6 cents per share, payable on or after May 11, 2017, to common shareholders of record at the close of business on May 1, 2017.

Highlights for the quarter ended March 31, 2017 are as follows:

  • Net interest margin increased to 3.04% for the quarter ended March 31, 2017 compared to 2.87% for the same period in 2016.  Our net interest margin has benefited from organic loan growth, the impact of the Conestoga Bank acquisition completed during the second quarter of 2016, and continued improvement in the mix of our balance sheet from a year ago.
  • For the quarter ended March 31, 2017, net interest income increased $8.6 million, or 26.5%, to $40.8 million compared to $32.2 million for the same period in 2016, primarily due to the Conestoga Bank acquisition and strong organic loan growth.
  • For the quarter ended March 31, 2017, our loan portfolio increased $45.7 million, or 1.1% (4.5% annualized growth) due primarily to increases in our commercial real estate portfolio.
     
  • During the quarter ended March, 31, 2017, the Company recorded a $668 thousand net gain on the sale of $7.3 million of the guaranteed portion of SBA loans.
     
  • Charge-offs continue to remain low.  Net charge-offs for the quarter ended March 31, 2017 totaled $766 thousand, or 8 basis points annualized of average loans, compared to net charge-offs of $267 thousand, or 3 basis points annualized of average loans, in the same period in the prior year.
     
  • For the quarter ended March 31, 2017, our deposits increased $60.7 million, or 1.5%, due primarily to a $40.6 million increase in savings and club accounts.
     
  • We remain focused on deploying our capital.  Our tangible capital to tangible assets decreased to 15.07% at March 31, 2017 compared to 19.64% at March 31, 2016.  The decrease in this ratio can be attributed to share repurchases and cash dividends, as well as the impact of the acquisition of Conestoga Bank.  Tangible book value per share totaled $11.20 at March 31, 2017.

Gerard Cuddy, Beneficial’s President and CEO, stated “Despite high business and consumer optimism, we saw some slow down in loan demand during the first quarter that we believe is related to some hesitancy of borrowers until there is greater clarity on tax, trade, and infrastructure spending policies.  Our results during the quarter were benefitted from the successful integration of Conestoga Bank and continued organic loan growth.  Our focus remains on employee engagement, a superior customer experience, prudent capital management and organic growth to continue to improve Beneficial’s financial performance.”

Balance Sheet
Total assets increased $123.2 million, or 2.1%, to $5.86 billion at March 31, 2017 compared to $5.74 billion at December 31, 2016.  The increase in total assets was primarily due to an increase in cash and cash equivalents and loan growth, partially offset by a decline in investment securities.   

Cash and cash equivalents increased $133.0 million, or 46.3%, to $420.1 million at March 31, 2017 from $287.0 million at December 31, 2016.  The increase in cash and cash equivalents was primarily driven by growth in deposits and an increase in borrowed funds to meet projected liquidity needs and lock in lower funding rates.

Investments decreased $54.2 million, or 5.0%, to $1.02 billion at March 31, 2017 compared to $1.08 billion at December 31, 2016, as we continued to focus on improving our balance sheet mix by reducing the percentage of our assets in investments and growing our loan portfolio.  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 increased $45.7 million, or 1.1%, to $4.06 billion at March 31, 2017 from $4.01 billion at December 31, 2016.  The increase in loans was primarily due to organic growth in our commercial real estate portfolio.  During the first quarter we discontinued offering indirect auto loans as other lending channels provided higher levels of profitability and returns on capital.  The indirect auto portfolio totaled $219.1 million, or 5.4% of the total loan portfolio, at March 31, 2017 down $15.5 million, or 6.6% from $234.6 million at December 31, 2016.  This portfolio will continue to run-off over its remaining average life of approximately 4 years.

Deposits increased $60.7 million, or 1.5%, to $4.22 billion at March 31, 2017 from $4.16 billion at December 31, 2016.  Deposit growth was primarily achieved through organic core deposit growth of $40.6 million in savings and club accounts.

Borrowings increased $50.0 million to $540.4 million at March 31, 2017 and are being used as a low cost funding source to replace higher cost brokered CDs and fund organic loan growth.

Stockholders’ equity increased $16.2 million, or 1.6%, to $1.03 billion at March 31, 2017 from $1.01 billion at December 31, 2016.  The increase in stockholders’ equity was primarily due to the issuance of 823,487 shares from the exercise of stock options resulting in an increase in additional paid in capital and net income for the first quarter of 2017, partially offset by the declaration of cash dividends during the quarter ended March 31, 2017.

Net Interest Income
For the quarter ended March 31, 2017, net interest income was $40.8 million, an increase of $8.6 million, or 26.5%, from the quarter ended March 31, 2016.  The increase in net interest income was primarily due to the impact of the Conestoga Bank acquisition as well as improvement in our balance sheet mix and related interest earning assets with growth occurring in our higher yielding loan portfolio and a reduction in investments.  Our average loans increased $1.1 billion or 36.6% for the first quarter of 2017 compared to the same period a year ago while average investments decreased $199.5 million or 13.2%.  The net interest margin totaled 3.04% for the quarter ended March 31, 2017 as compared to 2.87% for the same period in 2016.  During the quarter ended March 31, 2017, the net interest margin was negatively impacted 6 basis points by higher cash levels as we have established excess liquidity to lock in lower funding costs to meet our future projected liquidity needs.  We expect cash levels to decrease during the remainder of the year as we fund future loan growth.

Non-interest Income
For the quarter ended March 31, 2017, non-interest income totaled $7.1 million, an increase of $1.7 million, or 32.3%, from the quarter ended March 31, 2016.  The increase was primarily due to a $668 thousand net gain on the sale of $7.3 million of the guaranteed portion of SBA loans, a $293 thousand increase in interchange fees, a $253 thousand increase in mortgage banking income, and a $249 thousand increase in limited partnership earnings recorded during the quarter ended March 31, 2017.

Non-interest Expense
For the quarter ended March 31, 2017, non-interest expense totaled $35.4 million, an increase of $5.0 million, or 16.6%, from the quarter ended March 31, 2016.  The increase in non-interest expense was primarily due to a $3.0 million increase in salaries and employee benefits and an $899 thousand increase in board fees primarily due to compensation associated with equity awards granted under the 2016 Omnibus Incentive Plan as well as annual merit increases. The increase in non-interest expense during the quarter ended March 31, 2017 can also be attributed to a $442 thousand increase in occupancy expense related to the acquisition of Conestoga Bank, a $189 thousand increase in marketing expense, and a $182 thousand increase in professional fees. These increases to non-interest expense were partially offset by an $838 thousand decrease in merger and restructuring charges related to the acquisition of Conestoga Bank and the Bank’s expense management reduction program that was announced in April 2016. 

Income Taxes
For the quarter ended March 31, 2017, we recorded a provision for income taxes of $3.5 million, reflecting an effective tax rate of 29.6%, compared to a provision for income taxes of $2.2 million, reflecting an effective tax rate of 30.7%, for the quarter ended March 31, 2016.  During the quarter ended March 31, 2017, the effective tax rate was lowered by the impact of stock option exercises.  Management believes the effective tax rate for the remainder of 2017 will likely remain closer to the 35.0% statutory tax rate.

Asset Quality
Non-accruing loans, excluding government guaranteed student loans, increased $11.9 million, or 98.3%, to $23.9 million at March 31, 2017 compared to $12.1 million at December 31, 2016.  Our ratio of non-performing assets to total assets, excluding government guaranteed student loans, increased to 0.41% at March 31, 2017 compared to 0.22% at December 31, 2016.  The increase in non-accruing loans can primarily be attributed to the downgrade to doubtful and change to non-accrual of a $9.6 million shared national credit.  The Company has reviewed the status of this shared national credit and determined that no charge off or specific reserves were required as of March 31, 2017.

As a result of loan growth and charge-offs during the quarter, we recorded a $600 thousand provision for loan losses during the quarter ended March 31, 2017 compared to no provision for loan losses during the quarter ended March 31, 2016.  Net charge-offs for the quarter ended March 31, 2017 totaled $766 thousand, or 8 basis points annualized of average loans compared to net charge-offs of $267 thousand, or 3 basis points annualized of average loans, in the same period in the prior year.

Our allowance for loan losses totaled $43.1 million, or 1.06% of total loans, as of March 31, 2017 compared to $43.3 million, or 1.08% of total loans, as of December 31, 2016 and $45.2 million, or 1.44% of total loans, as of March 31, 2016. 

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 March 31, 2017, Beneficial’s tangible capital to tangible assets totaled 15.07%. In addition, at March 31, 2017, we had the ability to borrow up to $2.0 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:

  3/31/2017   12/31/2016   3/31/2016   Minimum Well
Capitalized Ratio
  Capital in Excess
of Minimum
3/31/2017
                   
Tier 1 Leverage (to average assets) 16.18%     16.15%     20.58%     5.0%     $626,341
Common Equity Tier 1 Capital (to risk weighted assets) 21.37%     21.45%     29.15%     6.5%       613,360
Tier 1 Capital (to risk weighted assets) 21.97%     22.06%     29.89%     8.0%       576,482
Total Capital Ratio (to risk weighted assets) 23.03%     23.14%     31.14%     10.0%       537,405
                   

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

  3/31/2017   12/31/2016   3/31/2016     Minimum Well
Capitalized Ratio
  Capital in Excess
of Minimum
3/31/2017
                     
Tier 1 Leverage (to average assets) 14.68%     14.76%     16.81%       5.0%     $542,152
Common Equity Tier 1 Capital (to risk weighted assets) 19.95%     20.17%     24.42%       6.5%       554,367
Tier 1 Capital (to risk weighted assets) 19.95%     20.17%     24.42%       8.0%       492,549
Total Capital Ratio (to risk weighted assets) 21.00%     21.25%     25.67%       10.0%       453,507
                     

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 62 offices in the greater Philadelphia and South New Jersey regions. Insurance services are offered through Beneficial Insurance Services, LLC and wealth management services are offered through the Beneficial Advisors, LLC, both wholly owned subsidiaries of the Bank. Equipment leasing services are offered through Beneficial Equipment Leasing Corporation, which is a wholly owned subsidiary 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, changes in the quality or composition of Beneficial’s loan or investment portfolios, our ability to successfully integrate the assets, liabilities, customers, systems and employees of Conestoga Bank into our operations and our ability to realize related revenue synergies and cost savings within expected time frames. 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)

    March 31,   December 31,   March 31,
      2017       2016       2016  
ASSETS:            
Cash and Cash Equivalents:            
Cash and due from banks   $45,777     $45,791     $40,381  
Interest-bearing deposits     374,302       241,255       71,384  
Total cash and cash equivalents     420,079       287,046       111,765  
             
Investment Securities:            
Available-for-sale     438,467       451,544       582,402  
Held-to-maturity     559,441       602,529       673,222  
Federal Home Loan Bank stock, at cost     23,231       21,231       8,786  
Total investment securities     1,021,139       1,075,304       1,264,410  
             
Loans and leases:     4,056,262       4,010,568       3,151,785  
Allowance for loan and lease losses     (43,095)       (43,261)       (45,234)  
Net loans and leases     4,013,167       3,967,307       3,106,551  
             
Accrued interest receivable     16,715       16,635       14,794  
             
Bank premises and equipment, net     74,302       75,444       72,465  
             
Other assets:            
Goodwill     169,002       169,125       121,973  
Bank owned life insurance     79,891       80,664       65,095  
Other intangibles     3,878       4,446       3,915  
Other assets     63,646       62,622       53,726  
Total other assets     316,417       316,857       244,709  
Total assets   $5,861,819     $5,738,593     $4,814,694  
             
LIABILITIES AND STOCKHOLDERS’ EQUITY:            
Liabilities:            
Deposits:            
Non-interest bearing deposits   $539,987     $518,294     $409,716  
Interest bearing deposits     3,678,869       3,639,894       3,100,774  
Total deposits     4,218,856       4,158,188       3,510,490  
Borrowed funds     540,427       490,423       190,410  
Other liabilities     72,570       76,226       67,206  
Total liabilities     4,831,853       4,724,837       3,768,106  
Commitments and contingencies            
Stockholders’ equity:            
Preferred stock – $.01 par value                  
Common stock – $.01 par value     842       834       831  
Additional paid-in capital     784,245       772,925       789,978  
Unearned common stock held by            
employee stock ownership plan     (28,929)       (29,546)       (31,397)  
Retained earnings     403,093       399,620       387,974  
Accumulated other comprehensive loss, net     (25,345)       (25,833)       (18,562)  
Treasury stock, at cost     (103,940)       (104,244)       (82,236)  
Total stockholders’ equity     1,029,966       1,013,756       1,046,588  
Total liabilities and stockholders’ equity   $5,861,819     $5,738,593     $4,814,694  
             

BENEFICIAL BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Income
(Dollars in thousands, except per share amounts)

  For the Three Months Ended
  March 31,   December 31,   March 31,
    2017       2016       2016  
INTEREST INCOME:          
Interest and fees on loans and leases $41,487     $40,312     $29,990  
Interest on overnight investments   529       346       259  
Interest and dividends on investment securities:          
Taxable   5,356       5,578       6,360  
Tax-exempt   22       191       325  
Total interest income   47,394       46,427       36,934  
           
INTEREST EXPENSE:          
Interest on deposits:          
Interest bearing checking accounts   602       608       466  
Money market and savings deposits   1,461       1,469       1,322  
Time deposits   2,187       2,212       1,628  
Total   4,250       4,289       3,416  
Interest on borrowed funds   2,370       2,245       1,278  
Total interest expense   6,620       6,534       4,694  
Net interest income   40,774       39,893       32,240  
Provision for loan losses   600       485        
Net interest income after provision for loan losses   40,174       39,408       32,240  
           
NON-INTEREST INCOME:          
Insurance and advisory commission and fee income   2,093       1,524       1,990  
Service charges and other income   4,099       6,034       3,385  
Mortgage banking and SBA income   879       641       (28)  
Net loss on sale of investment securities   (3)       (3)       (4)  
Total non-interest income   7,068       8,196       5,343  
           
NON-INTEREST EXPENSE:          
Salaries and employee benefits   18,828       18,478       15,817  
Occupancy expense   2,735       2,553       2,293  
Depreciation, amortization and maintenance   2,416       2,478       2,317  
Marketing expense   1,102       1,571       913  
Intangible amortization expense   568       578       474  
FDIC insurance   432       208       553  
Merger and restructuring charges               838  
Professional fees   1,211       1,560       1,029  
Classified loan and other real estate owned related expense   268       326       292  
Other   7,807       7,725       5,807  
Total non-interest expense   35,367       35,477       30,333  
           
Income before income taxes   11,875       12,127       7,250  
Income tax expense   3,520       4,507       2,227  
           
NET INCOME $8,355     $7,620     $5,023  
           
EARNINGS PER SHARE – Basic $0.11     $0.10     $0.07  
EARNINGS PER SHARE – Diluted $0.11     $0.10     $0.07  
           
DIVIDENDS DECLARED PER SHARE $0.06     $0.06     $ –  
           
Average common shares outstanding – Basic   70,041,340       69,693,775       76,162,515  
Average common shares outstanding – Diluted   70,822,040       70,559,186       76,993,671  
           

BENEFICIAL BANCORP, INC. AND SUBSIDIARIES
Unaudited Selected Consolidated Financial and Other Data
(Dollars in thousands)

  For the Three Months Ended
  March 31, 2017   December 31, 2016   March 31, 2016
  Average Yield /   Average Yield /   Average Yield /
  Balance Rate   Balance Rate   Balance Rate
                 
Investment securities: $1,306,704 1.81%     $1,354,169 1.81%     $1,506,173 1.84%  
Overnight investments   261,607 0.82%       247,937 0.56%       205,383 0.50%  
Stock   22,545 4.65%       20,448 4.61%       8,787 4.45%  
Other investment securities   1,022,552 2.00%       1,085,784 2.04%       1,292,003 2.04%  
                             
Loans and leases:   4,063,153 4.10%       3,925,797 4.07%       2,975,549 4.02%  
Residential   894,589 3.89%       862,152 3.97%       734,020 4.16%  
Commercial real estate   1,642,713 4.05%       1,528,946 3.95%       1,087,469 3.94%  
Business and small business   866,015 4.32%       868,435 4.24%       531,762 3.77%  
Personal   659,836 4.17%       666,264 4.22%       622,298 4.22%  
                             
Total interest earning assets $5,369,857 3.54%     $5,279,966 3.49%     $4,481,722 3.29%  
                 
Deposits: $3,654,673 0.47%     $3,623,434 0.47%     $3,067,501 0.45%  
Savings   1,290,405 0.34%       1,256,693 0.34%       1,155,603 0.34%  
Money market   448,439 0.34%       447,094 0.35%       399,739 0.34%  
Demand   917,011 0.24%       902,731 0.24%       763,857 0.23%  
Demand – municipals   128,463 0.19%       130,187 0.18%       128,946 0.11%  
Total core deposits   2,784,318 0.30%       2,736,705 0.30%       2,448,145 0.29%  
                 
Time deposits   870,355 1.02%       886,729 0.99%       619,356 1.06%  
                 
Borrowings   523,258 1.81%       470,856 1.87%       190,462 2.70%  
                 
Total interest bearing liabilities $4,177,931 0.64%     $4,094,290 0.63%     $3,257,963 0.58%  
                 
Non-interest bearing deposits   506,097       508,516       395,940  
                 
Net interest margin   3.04%       3.00%       2.87%  
                 

ASSET QUALITY INDICATORS March 31,   December 31,   March 31,
(Dollars in thousands)   2017       2016       2016  
           
Non-performing assets:          
Non-accruing loans $23,930     $12,069     $13,731  
Accruing loans past due 90 days or more   16,805       14,843       21,223  
Total non-performing loans   40,735       26,912       34,954  
           
Real estate owned   346       821       827  
           
Total non-performing assets $41,081     $27,733     $35,781  
           
Non-performing loans to total loans and leases   1.00%       0.67%       1.11%  
Non-performing assets to total assets   0.70%       0.48%       0.74%  
Non-performing assets less accruing government guaranteed          
student loans past due 90 days or more to total assets   0.41%     0.22%     0.30%  
ALLL to total loans and leases   1.06%       1.08%       1.44%  
ALLL to non-performing loans   105.79%       160.75%       129.41%  
ALLL to non-performing loans, excluding government          
guaranteed student loans   180.09%       358.45%       329.43%  
           

Key performance ratios (annualized) are as follows for the three months ended (unaudited):

  For the Three Months Ended
  March 31,   December 31,   March 31,
  2017   2016   2016
PERFORMANCE RATIOS:          
(annualized)          
Return on average assets 0.59%     0.53%     0.42%  
Return on average equity 3.35%     2.97%     1.87%  
Net interest margin 3.04%     3.00%     2.87%  
Net charge-off ratio 0.08%     0.17%     0.03%  
Efficiency ratio 73.92%     73.77%     80.71%  
Efficiency ratio (excluding merger & restructuring charges) 73.92%     73.77%     78.48%  
Tangible common equity 15.07%     15.10%     19.64%  

 

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