UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2014

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-33476

BENEFICIAL MUTUAL BANCORP, INC.

(Exact name of registrant as specified in its charter)

United States		56-2480744
(State or other jurisdiction of incorporation or		(I.R.S. Employer Identification No.)
organization)

1818 Market Street, Philadelphia, Pennsylvania		19103
(Address of principal executive offices)		(Zip Code)

(215) 864-6000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large Accelerated Filer o		Accelerated Filer x

Non-Accelerated Filer o		Smaller Reporting Company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of ~~August 1~~November 3, 2014, there were 75,~~314~~155,592 shares of the registrant’s common stock outstanding. Of such shares outstanding, 45,792,775 were held by Beneficial Savings Bank MHC and 29,~~521~~362,817 shares were publicly held.

Table of Contents

BENEFICIAL MUTUAL BANCORP, INC.

Table of Contents

		Page No.
Part I. Financial Information
Item 1.	Financial Statements (unaudited)
	Unaudited Condensed Consolidated Statements of Financial Condition as of June 30, 2014 and December 31, 2013	1
	Unaudited Condensed Consolidated Statements of Financial Condition as of September 30, 2014 and December 31, 2013	1
	Unaudited Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2014 and 2013	2
	Unaudited Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2014 and 2013	2
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the Six Months Ended June 30, 2014 and 2013	3
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the Nine Months Ended September 30, 2014 and 2013	3
	Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2014	4
	Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2014	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2014 and 2013	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4445
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6264
Item 4.	Controls and Procedures	6466
Part II. Other Information
Item 1.	Legal Proceedings	6467
Item 1A.	Risk Factors	6467
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6567
Item 3.	Defaults Upon Senior Securities	6567
Item 4.	Mine Safety Disclosures	6567
Item 5.	Other Information	6567
Item 6.	Exhibits	6567
Signatures		6769

Table of Contents

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements

PART I. FINANCIAL INFORMATION

~~BENEFICIAL~~Item ~~MUTUAL BANCORP, INC~~1. ~~AND~~Financial ~~SUBSIDIARIES~~Statements

~~Unaudited~~BENEFICIAL ~~Condensed~~MUTUAL ~~Consolidated~~BANCORP, INC. ~~Statements~~AND ~~of Financial Condition~~SUBSIDIARIES

~~(Dollars~~Unaudited inCondensed ~~thousands,~~Consolidated ~~except~~Statements ~~per~~of ~~share~~Financial ~~amounts)~~Condition

	June 30,			December 31,
	2014			2013
ASSETS
CASH AND CASH EQUIVALENTS:
Cash and due from banks	$	57,853		$	41,801
Overnight investments	196,115			313,882
Total cash and cash equivalents	253,968			355,683
INVESTMENT SECURITIES:
Available-for-sale, at fair value (amortized cost of $830,467 and $1,042,208 at June 30, 2014 and December 31, 2013, respectively)	840,551			1,034,180
Held-to-maturity (estimated fair value of $644,944 and $514,633 at June 30, 2014 and December 31, 2013, respectively)	644,061			528,829
Federal Home Loan Bank stock, at cost	15,606			17,417
Total investment securities	1,500,218			1,580,426
LOANS:	2,369,335			2,341,807
Allowance for loan losses	(52,624		)	(55,649		)
Net loans	2,316,711			2,286,158
ACCRUED INTEREST RECEIVABLE	13,396			13,999
BANK PREMISES AND EQUIPMENT, Net	79,089			71,753
OTHER ASSETS:
Goodwill	121,973			121,973
Bank owned life insurance	42,050			41,414
Other intangibles	7,073			8,007
Other assets	91,256			104,000
Total other assets	262,352			275,394
TOTAL ASSETS	$	4,425,734		$	4,583,413
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Non-interest bearing deposits	$	319,082		$	291,109
Interest-bearing deposits	3,186,383			3,368,907
Total deposits	3,505,465			3,660,016
Borrowed funds	250,379			250,370
Other liabilities	57,231			57,881
Total liabilities	3,813,075			3,968,267
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred Stock - $.01 par value; 100,000,000 shares authorized, None issued or outstanding as of June 30, 2014 and December 31, 2013	—			—
Common Stock - $.01 par value 300,000,000 shares authorized, 82,490,407 and 82,298,707 issued and 75,566,636 and 77,123,026 outstanding, as of June 30, 2014 and December 31, 2013, respectively	825			823
Additional paid-in capital	360,521			356,963
Unearned common stock held by employee stock ownership plan	(15,204		)	(16,102		)
Retained earnings	349,073			342,025
Accumulated other comprehensive loss	(12,867		)	(21,354		)
Treasury Stock at cost 6,923,771 shares and 5,175,681 shares as of June 30, 2014and December 31,2013, respectively	(69,689		)	(47,209		)
Total stockholders’ equity	612,659			615,146
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	4,425,734		$	4,583,413

(Dollars in thousands, except per share amounts)

See accompanying notes to unaudited condensed consolidated financial statements.

	September 30,			December 31,
	2014			2013
ASSETS

CASH AND CASH EQUIVALENTS:
Cash and due from banks	$	46,986		$	41,801
Overnight investments	185,440			313,882
Total cash and cash equivalents	232,426			355,683

INVESTMENT SECURITIES:
Available-for-sale, at fair value (amortized cost of $794,086 and $1,042,208 at September 30, 2014 and December 31, 2013, respectively)	798,599			1,034,180
Held-to-maturity (estimated fair value of $619,794 and $514,633 at September 30, 2014 and December 31, 2013, respectively)	623,139			528,829
Federal Home Loan Bank stock, at cost	15,606			17,417
Total investment securities	1,437,344			1,580,426
LOANS:	2,388,797			2,341,807
Allowance for loan losses	(51,714		)	(55,649		)
Net loans	2,337,083			2,286,158
ACCRUED INTEREST RECEIVABLE	13,610			13,999
BANK PREMISES AND EQUIPMENT, Net	78,990			71,753
OTHER ASSETS:
Goodwill	121,973			121,973
Bank owned life insurance	42,386			41,414
Other intangibles	6,605			8,007
Other assets	89,475			104,000
Total other assets	260,439			275,394
TOTAL ASSETS	$	4,359,892		$	4,583,413
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Non-interest bearing deposits	$	358,439		$	291,109
Interest-bearing deposits	3,084,735			3,368,907
Total deposits	3,443,174			3,660,016
Borrowed funds	250,383			250,370
Other liabilities	54,685			57,881
Total liabilities	3,748,242			3,968,267

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred Stock - $.01 par value; 100,000,000 shares authorized, None issued or outstanding as of September 30, 2014 and December 31, 2013	—			—
Common Stock - $.01 par value 300,000,000 shares authorized, 82,530,107 and 82,298,707 issued and 75,155,592 and 77,123,026 outstanding, as of September 30, 2014 and December 31, 2013, respectively	825			823
Additional paid-in capital	361,816			356,963
Unearned common stock held by employee stock ownership plan	(14,755		)	(16,102		)
Retained earnings	355,596			342,025
Accumulated other comprehensive loss	(16,126		)	(21,354		)
Treasury Stock at cost 7,374,515 shares and 5,175,681 shares as of September 30, 2014 and December 31,2013, respectively	(75,706		)	(47,209		)
Total stockholders’ equity	611,650			615,146
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	4,359,892		$	4,583,413

1See accompanying notes to unaudited condensed consolidated financial statements.

~~Table of Contents~~1

~~BENEFICIAL~~Table ~~MUTUAL~~of ~~BANCORP, INC. AND SUBSIDIARIES~~Contents

~~Unaudited~~BENEFICIAL ~~Condensed~~MUTUAL ~~Consolidated~~BANCORP, INC. ~~Statements~~AND ~~of Income~~SUBSIDIARIES

~~(Dollars~~Unaudited inCondensed ~~thousands,~~Consolidated ~~except~~Statements ~~per~~of ~~share amounts)~~Income

	For the Three Months Ended					For the Six Months Ended
	June 30,		June 30,			June 30,		June 30,
	2014		2013			2014		2013
INTEREST INCOME:
Interest and fees on loans	$	26,202	$	29,052		$	52,660	$	58,708
Interest on overnight investments	190		203			379		384
Interest and dividends on investment securities:
Taxable	7,736		7,741			15,530		15,150
Tax-exempt	658		702			1,321		1,418
Total interest income	34,786		37,698			69,890		75,660
INTEREST EXPENSE:
Interest on deposits:
Interest bearing checking accounts	422		719			865		1,519
Money market and savings deposits	1,349		1,642			2,678		3,263
Time deposits	1,988		2,057			3,989		4,180
Total	3,759		4,418			7,532		8,962
Interest on borrowed funds	1,810		2,052			3,611		3,905
Total interest expense	5,569		6,470			11,143		12,867
Net interest income	29,217		31,228			58,747		62,793
Provision for loan losses	250		5,000			1,750		10,000
Net interest income after provision for loan losses	28,967		26,228			56,997		52,793
NON-INTEREST INCOME:
Insurance and advisory commission and fee income	1,609		1,690			3,690		3,784
Service charges and other income	4,503		4,322			7,705		8,091
Mortgage banking income	115		511			240		752
Net gain on sale of investment securities	94		804			297		1,637
Total non-interest income	6,321		7,327			11,932		14,264
NON-INTEREST EXPENSE:
Salaries and employee benefits	14,783		14,347			29,793		28,335
Occupancy expense	2,436		2,503			6,054		5,018
Depreciation, amortization and maintenance	2,117		2,398			4,594		4,631
Marketing expense	736		1,113			1,621		2,040
Intangible amortization expense	467		468			934		935
FDIC Insurance	805		947			1,588		1,898
Merger and restructuring charges	—		(159		)	—		(159		)
Professional fees	1,034		948			2,389		2,882
Classified loan and other real estate owned related expense	627		1,969			969		3,084
Other	6,205		5,741			12,502		11,325
Total non-interest expense	29,210		30,275			60,444		59,989
Income before income taxes	6,078		3,280			8,485		7,068
Income tax expense	1,502		374			1,437		949
NET INCOME	$	4,576	$	2,906		$	7,048	$	6,119
EARNINGS PER SHARE — Basic	$	0.06	$	0.04		$	0.10	$	0.08
EARNINGS PER SHARE — Diluted	$	0.06	$	0.04		$	0.09	$	0.08
Average common shares outstanding — Basic	73,558,881		76,073,297			73,898,088		76,224,037
Average common shares outstanding — Diluted	74,192,047		76,244,150			74,497,031		76,413,437

(Dollars in thousands, except per share amounts)

See accompanying notes to the unaudited condensed consolidated financial statements.

	For the Three Months Ended					For the Nine Months Ended
	September 30,			September 30,		September 30,		September 30,
	2014			2013		2014		2013
INTEREST INCOME:
Interest and fees on loans	$	27,133		$	28,374	$	79,792	$	87,082
Interest on overnight investments	131			202		510		586
Interest and dividends on investment securities:
Taxable	7,098			8,039		22,629		23,190
Tax-exempt	604			692		1,925		2,110
Total interest income	34,966			37,307		104,856		112,968

INTEREST EXPENSE:
Interest on deposits:
Interest bearing checking accounts	408			704		1,273		2,223
Money market and savings deposits	1,354			1,708		4,032		4,971
Time deposits	1,942			2,051		5,931		6,231
Total	3,704			4,463		11,236		13,425
Interest on borrowed funds	1,831			2,053		5,442		5,958
Total interest expense	5,535			6,516		16,678		19,383
Net interest income	29,431			30,791		88,178		93,585
Provision for loan losses	(1,550		)	1,500		200		11,500
Net interest income after provision for loan losses	30,981			29,291		87,978		82,085

NON-INTEREST INCOME:
Insurance and advisory commission and fee income	1,761			1,778		5,452		5,563
Service charges and other income	3,330			3,378		11,034		11,469
Mortgage banking income	211			131		451		884
Net gain on sale of non-performing commercial loans HFS	1,583			—		1,583		—
Net gain on sale of investment securities	328			297		625		1,933
Total non-interest income	7,213			5,584		19,145		19,849

NON-INTEREST EXPENSE:
Salaries and employee benefits	15,271			14,634		45,064		42,969
Occupancy expense	2,267			2,402		8,321		7,420
Depreciation, amortization and maintenance	2,202			2,215		6,796		6,846
Marketing expense	727			1,457		2,348		3,497
Intangible amortization expense	468			468		1,402		1,403
FDIC Insurance	723			888		2,312		2,786
Merger and restructuring charges	—			—		—		(159		)
Professional fees	1,009			1,640		3,398		4,522
Classified loan and other real estate owned related expense	398			1,449		1,368		4,533
Other	5,983			5,637		18,484		16,963
Total non-interest expense	29,048			30,790		89,493		90,780

Income before income taxes	9,146			4,085		17,630		11,154
Income tax expense	2,622			585		4,059		1,535
NET INCOME	$	6,524		$	3,500	$	13,571	$	9,619

EARNINGS PER SHARE — Basic	$	0.09		$	0.05	$	0.18	$	0.13
EARNINGS PER SHARE — Diluted	$	0.09		$	0.05	$	0.18	$	0.13

Average common shares outstanding — Basic	72,871,533			75,870,327		73,552,143		76,104,838
Average common shares outstanding — Diluted	73,508,928			76,129,245		74,165,261		76,346,536

2See accompanying notes to the unaudited condensed consolidated financial statements.

~~Table of Contents~~2

~~BENEFICIAL~~Table ~~MUTUAL~~of ~~BANCORP, INC. AND SUBSIDIARIES~~Contents

~~Unaudited~~BENEFICIAL ~~Condensed~~MUTUAL ~~Consolidated~~BANCORP, INC. ~~Statements~~AND ~~of Comprehensive Income~~SUBSIDIARIES

~~(Dollars~~Unaudited inCondensed ~~thousands)~~Consolidated Statements of Comprehensive Income

	For the Six Months Ended
	June 30,
	2014			2013
Net Income	$	7,048		$	6,119
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) on available-for-sale securities arising during the period (net of deferred tax of $6,765 and $9,250 for the six months ended June 30, 2014 and 2013, respectively)	11,644			(15,850		)
Unrealized losses on available-for-sale securities transferred to held-to-maturity during the period (net of deferred tax of $1,990 for the six months ended June 30, 2014)	(3,426		)	—
Accretion of unrealized losses on available-for-sale securities transferred to held-to-maturity (net of deferred tax of $109 for the six months ended June 30, 2014)	189			—
Reclassification adjustment for net gains on available-for-sale securities included in net income (net of tax of $109 and $555 for the six months ended June 30, 2014 and 2013, respectively)	(188		)	(952		)
Defined benefit pension plans:
Pension losses, other postretirement and postemployment benefit plan adjustments (net of tax of $265 and $405 for the six months ended June 30, 2014 and 2013, respectively)	268			735
Total other comprehensive income (loss)	8,487			(16,067		)
Comprehensive income (loss)	$	15,535		$	(9,948	)

(Dollars in thousands)

See accompanying notes to the unaudited condensed consolidated financial statements.

	For the Nine Months Ended
	September 30,
	2014			2013

Net Income	$	13,571		$	9,619
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) on available-for-sale securities arising during the period (net of deferred tax of $4,838 and $9,076 for the nine months ended September 30, 2014 and 2013, respectively)	8,328			(15,552		)
Unrealized losses on available-for-sale securities transferred to held-to-maturity during the period (net of deferred tax of $1,990 for the nine months ended September 30, 2014)	(3,426		)	—
Accretion of unrealized losses on available-for-sale securities transferred to held-to-maturity (net of deferred tax of $185 for the nine months ended September 30, 2014)	319			—
Reclassification adjustment for net gains on available-for-sale securities included in net income (net of tax of $230 and $663 for the nine months ended September 30, 2014 and 2013, respectively)	(395		)	(1,139		)
Defined benefit pension plans:
Pension losses, other postretirement and postemployment benefit plan adjustments (net of tax of $397 and $648 for the nine months ended September 30, 2014 and 2013, respectively)	402			1,078
Total other comprehensive income (loss)	5,228			(15,613		)
Comprehensive income (loss)	$	18,799		$	(5,994	)

3See accompanying notes to the unaudited condensed consolidated financial statements.

~~Table of Contents~~3

~~BENEFICIAL~~Table ~~MUTUAL~~of ~~BANCORP, INC. AND SUBSIDIARIES~~Contents

~~Unaudited~~BENEFICIAL ~~Condensed~~MUTUAL ~~Consolidated~~BANCORP, INC. ~~Statements~~AND ~~of Changes in Stockholders’ Equity~~SUBSIDIARIES

~~(Dollars~~Unaudited inCondensed ~~thousands,~~Consolidated ~~except~~Statements ~~share~~of ~~amounts)~~Changes in Stockholders’ Equity

	Number of Shares Issued	Common Stock		Additional Paid in Capital		Common Stock held by KSOP			Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
BALANCE, JANUARY 1, 2014	82,298,707	$	823	$	356,963	$	(16,102	)	$	342,025	$	(47,209	)	$	(21,354	)	$	615,146
Net Income									7,048								7,048
KSOP shares committed to be released				244		898											1,142
Stock option expense				765													765
Restricted stock expense				501													501
Stock options exercised	191,700	2		2,048													2,050
Purchase of treasury stock											(22,480		)				(22,480		)
Net unrealized gains on AFS securities arising during the period (net of deferred tax of $6,765)														11,644			11,644
Unrealized losses on AFS securities transferred to HTM during the period (net of deferred tax of $1,990)														(3,426		)	(3,426		)
Accretion of unrealized losses on AFS securities transferred to HTM (net of deferred tax of $109 for the six months ended June 30, 2014)														189			189
Reclassification adjustment for net gains on AFS securities included in net income (net of tax of $109)														(188		)	(188		)
Pension, other post retirement and postemployment benefit plan adjustments (net of tax of $265)														268			268
BALANCE, JUNE 30, 2014	82,490,407	$	825	$	360,521	$	(15,204	)	$	349,073	$	(69,689	)	$	(12,867	)	$	612,659

(Dollars in thousands, except share amounts)

See accompanying notes to the unaudited condensed consolidated financial statements.

	Number of Shares Issued	Common Stock		Additional Paid in Capital		Common Stock held by KSOP			Retained Earnings		Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
BALANCE, JANUARY 1, 2014	82,298,707	$	823	$	356,963	$	(16,102	)	$	342,025	$	(47,209	)	$	(21,354	)	$	615,146
Net Income									13,571								13,571
KSOP shares committed to be released				396		1,347											1,743
Stock option expense				1,162													1,162
Restricted stock expense				776													776
Stock options exercised (includes tax benefit of $68)	231,400	2		2,519													2,521
Purchase of treasury stock											(28,497		)				(28,497		)
Net unrealized gains on AFS securities arising during the period (net of deferred tax of $4,838)														8,328			8,328
Unrealized losses on AFS securities transferred to HTM during the period (net of deferred tax of $1,990)														(3,426		)	(3,426		)
Accretion of unrealized losses on AFS securities transferred to HTM during the period (net of deferred tax of $185)														319			319
Reclassification adjustment for net gains on AFS securities included in net income (net of tax of $230)														(395		)	(395		)
Pension, other post retirement and postemployment benefit plan adjustments (net of tax of $397)														402			402
BALANCE SEPTEMBER 30, 2014	82,530,107	$	825	$	361,816	$	(14,755	)	355,596		$	(75,706	)	$	(16,126	)	$	611,650

4See accompanying notes to the unaudited condensed consolidated financial statements.

~~Table of Contents~~4

~~BENEFICIAL~~Table ~~MUTUAL~~of ~~BANCORP, INC. AND SUBSIDIARIES~~Contents

~~Unaudited~~BENEFICIAL ~~Condensed~~MUTUAL ~~Consolidated~~BANCORP, INC. ~~Statements~~AND ~~of Cash Flows~~SUBSIDIARIES

~~(Dollars~~Unaudited inCondensed ~~thousands)~~Consolidated Statements of Cash Flows

	For the Six Months Ended June 30,
	2014			2013
OPERATING ACTIVITIES:
Net income	$	7,048		$	6,119
Adjustment to reconcile net income to net cash (used in) provided by operating activities:
Provision for loan losses	1,750			10,000
Depreciation and amortization	3,092			3,107
Intangible amortization	934			935
Net gain on sale of investments	(297		)	(1,637		)
Accretion of discount on investments	(210		)	(502		)
Amortization of premium on investments	2,880			6,040
Gain on sale of loans	(103		)	(315		)
Deferred income taxes	2,212			—
Net loss from disposition of premises and equipment	26			231
Proceeds from sale of fixed assets held for sale	—			(582		)
Other real estate impairment	376			298
Net (gain) loss on sale of other real estate	(995		)	30
Amortization of KSOP	1,142			838
Increase in bank owned life insurance	(636		)	(707		)
Stock based compensation	1,266			1,390
Origination of loans held for sale	(6,162		)	(15,307		)
Proceeds from sale of loans	17,065			13,791
Changes in assets and liabilities:
Accrued interest receivable	603			479
Accrued interest payable	(122		)	(53		)
Income taxes receivable	1,632			1,160
Other liabilities	6			(22,542		)
Other assets	273			6,856
Net cash provided by (used in) operating activities	31,780			9,629
INVESTING ACTIVITIES:
Loans originated or acquired	(332,839		)	(265,732		)
Principal repayment on loans	289,431			318,537
Purchases of investment securities available for sale	(30,999		)	(214,733		)
Proceeds from sales of investment securities available for sale	3,088			25,401
Proceeds from maturities, calls or repayments of investment securities available for sale	67,075			155,530
Purchases of investment securities held to maturity	—			(177,109		)
Proceeds from sales of investment securities held to maturity	—			2,173
Proceeds from maturities, calls or repayments of investment securities held to maturity	36,144			81,513
Net sales of money market and mutual funds	13,711			17,100
Redemption (purchase) of Federal Home Loan Bank stock	1,811			(2,203		)
Proceeds from sale other real estate owned	4,778			6,476
Purchases of premises and equipment	(10,515		)	(3,720		)
Proceeds from sale of premises and equipment	24			—
Cash (used) received in other investing activities	(232		)	77
Net cash provided by (used in) investing activities	41,477			(56,690		)
FINANCING ACTIVITIES:
Increase in borrowed funds	6,000			81,000
Repayment of borrowed funds	(5,991		)	(55,991		)
Net decrease in checking, savings and demand accounts	(127,345		)	(157,672		)
Net decrease in time deposits	(27,206		)	(32,232		)
Proceeds from the exercise of stock options	2,050			26
Purchase of treasury stock	(22,480		)	(4,852		)
Net cash used in financing activities	(174,972		)	(169,721		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(101,715		)	(216,782		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	355,683			489,908
CASH AND CASH EQUIVALENTS, END OF YEAR	$	253,968		$	273,126
SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND NON-CASH INFORMATION:
Cash payments for interest	$	11,265		$	12,920
Cash received for income taxes	(2,410		)	(277		)
Cash payment for pension contribution	—			24,000
Transfers of loans to other real estate owned	306			2,250
Transfers of securities at fair value from available for sale to held to maturity	152,200			—
Transfers of bank branches to fixed assets held for sale	36			—
Loans transferred from held in portfolio to held for sale	6,270			—

(Dollars in thousands)

See accompanying notes to the unaudited condensed consolidated financial statements.

	For the Nine Months Ended September 30,
	2014			2013
OPERATING ACTIVITIES:
Net income	$	13,571		$	9,619
Adjustment to reconcile net income to net cash provided by operating activities:
Provision for loan losses	200			11,500
Depreciation and amortization	4,532			4,639
Intangible amortization	1,402			1,403
Net gain on sale of investments	(625		)	(1,933		)
Accretion of discount on investments	(300		)	(664		)
Amortization of premium on investments	4,460			8,322
Gain on sale of residential loans held for sale	(216		)	(256		)
Net gain on sale of non-performing commercial loans HFS	(1,583		)	—
Deferred income taxes	1,935			216
Net loss from disposition of premises and equipment	28			112
Proceeds from sale of fixed assets held for sale	—			(582		)
Other real estate impairment	486			597
Net (gain) loss on sale of other real estate	(1,315		)	13
Amortization of KSOP	1,742			1,249
Increase in bank owned life insurance	(972		)	(1,042		)
Stock based compensation	1,938			2,095
Origination of loans held for sale	(9,920		)	(17,659		)
Proceeds from sale of loans	33,065			17,602
Changes in assets and liabilities:
Accrued interest receivable	389			693
Accrued interest payable	(290		)	(177		)
Income taxes payable	4,023			1,746
Other liabilities	(2,106		)	(21,832		)
Other assets	1,572			8,846
Net cash provided by operating activities	52,016			24,507
INVESTING ACTIVITIES:
Loans originated or acquired	(513,933		)	(400,194		)
Principal repayment on loans	441,124			492,692
Purchases of investment securities available for sale	(30,985		)	(214,734		)
Proceeds from sales of investment securities available for sale	6,496			29,939
Proceeds from maturities, calls or repayments of investment securities available for sale	108,551			210,048
Purchases of investment securities held to maturity	—			(177,109		)
Proceeds from sales of investment securities held to maturity	—			2,173
Proceeds from maturities, calls or repayments of investment securities held to maturity	56,603			108,618
Net sales of money market and mutual funds	4,701			8,341
Redemption (purchase) of Federal Home Loan Bank stock	1,811			(1,033		)
Proceeds from sale other real estate owned	5,173			6,618
Purchases of premises and equipment	(11,857		)	(5,100		)
Proceeds from sale of premises and equipment	24			266
Cash (used) received in other investing activities	(176		)	383
Net cash provided by investing activities	67,532			60,908
FINANCING ACTIVITIES:
Increase in borrowed funds	12,000			87,000
Repayment of borrowed funds	(11,987		)	(86,986		)
Net decrease in checking, savings and demand accounts	(182,993		)	(133,942		)
Net decrease in time deposits	(33,849		)	(46,313		)
Proceeds from the exercise of stock options	2,453			33
Excess tax benefit related to stock based compensation awards	68			—
Purchase of treasury stock	(28,497		)	(11,483		)
Net cash used in financing activities	(242,805		)	(191,691		)
NET DECREASE IN CASH AND CASH EQUIVALENTS	(123,257		)	(106,276		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	355,683			489,908
CASH AND CASH EQUIVALENTS, END OF YEAR	$	232,426		$	383,632
SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND NON-CASH INFORMATION:
Cash payments for interest	$	16,968		$	19,560
Cash received for income taxes	(1,970		)	(497		)
Cash payment for pension contribution	—			24,000
Transfers of loans to other real estate owned	337			1,303
Transfers of securities at fair value from available for sale to held to maturity	152,200			—

5See accompanying notes to the unaudited condensed consolidated financial statements.

~~Table of Contents~~5

~~BENEFICIAL~~Table ~~MUTUAL~~of ~~BANCORP, INC.~~Contents

~~NOTES~~BENEFICIAL TOMUTUAL ~~UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~BANCORP, INC.

~~NOTE~~NOTES 1TO —UNAUDITED ~~SUMMARY~~CONDENSED OFCONSOLIDATED ~~SIGNIFICANT~~FINANCIAL ~~ACCOUNTING PRINCIPLES~~STATEMENTS

~~Basis~~NOTE of1 ~~Presentation~~— SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

~~The~~Basis accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto contained in the Annual Report on Form 10-K filed by Beneficial Mutual Bancorp, Inc. (the “Company” or “Beneficial”) with the U.S. Securities and Exchange Commission on March 10, 2014. The results for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2014 or any other period.Presentation

~~Principles~~The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of ~~Consolidation~~Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto contained in the Annual Report on Form 10-K filed by Beneficial Mutual Bancorp, Inc. (the “Company” or “Beneficial”) with the U.S. Securities and Exchange Commission on March 10, 2014. The results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2014 or any other period.

~~The~~Principles ~~unaudited interim condensed consolidated financial statements include the accounts~~ of the Company and its subsidiaries. Specifically, the financial statements include the accounts of Beneficial Mutual Savings Bank, the Company’s wholly owned subsidiary (“Beneficial Bank” or the “Bank”), and the Bank’s wholly owned subsidiaries. The Bank’s wholly owned subsidiaries are: (i) Beneficial Advisors, LLC, which offers wealth management services and non-deposit investment products, (ii) Neumann Corporation, a Delaware corporation formed to manage certain investments, (iii) Beneficial Insurance Services, LLC, which provides insurance services to individual and business customers and (iv) BSB Union Corporation, a leasing company. Additionally, the Company has subsidiaries that hold other real estate acquired in foreclosure or transferred from the commercial real estate loan portfolio. All significant intercompany accounts and transactions have been eliminated. The various services and products support each other and are interrelated. Management makes significant operating decisions based upon the analysis of the entire Company and financial performance is evaluated on a company-wide basis. Accordingly, the various financial services and products offered are aggregated into one reportable operating segment: community banking as under guidance in the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC” or “codification”) Topic 280 for Segment Reporting.Consolidation

~~Use~~The unaudited interim condensed consolidated financial statements include the accounts of ~~Estimates~~the Company and its subsidiaries. Specifically, the financial statements include the accounts of Beneficial Mutual Savings Bank, the Company’s wholly owned subsidiary (“Beneficial Bank” or the “Bank”), and the Bank’s wholly owned subsidiaries. The Bank’s wholly owned subsidiaries are: (i) Beneficial Advisors, LLC, which offers wealth management services and non-deposit investment products, (ii) Neumann Corporation, a Delaware corporation formed to manage certain investments, (iii) Beneficial Insurance Services, LLC, which provides insurance services to individual and business customers and (iv) BSB Union Corporation, a leasing company. Additionally, the Company has subsidiaries that hold other real estate acquired in foreclosure or transferred from the ~~Preparation~~commercial real estate loan portfolio. All significant intercompany accounts and transactions have been eliminated. The various services and products support each other and are interrelated. Management makes significant operating decisions based upon the analysis of the entire Company and financial performance is evaluated on a company-wide basis. Accordingly, the various financial services and products offered are aggregated into one reportable operating segment: community banking as outlined under guidance in the Financial ~~Statements~~Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC” or “codification”) Topic 280 for Segment Reporting.

~~These~~Use ~~unaudited interim condensed consolidated financial statements are prepared in conformity with GAAP. The preparation~~ of ~~the~~Estimates ~~consolidated financial statements~~ in ~~conformity with GAAP requires management to make estimates and assumptions that affect~~ the ~~reported~~Preparation ~~amounts~~ of ~~assets~~Financial and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the allowance for loan losses, goodwill and other intangible assets, income taxes, postretirement benefits, and the fair value of investment securities.Statements

~~NOTE~~These 2unaudited —interim ~~NATURE~~condensed OFconsolidated ~~OPERATIONS~~financial statements are prepared in conformity with GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the allowance for loan losses, goodwill and other intangible assets, income taxes, postretirement benefits, and the fair value of investment securities.

~~The~~NOTE ~~Company~~2 is— aNATURE ~~federally~~OF chartered stock holding company and owns 100% of the outstanding common stock of the Bank, a Pennsylvania chartered stock savings bank. The Bank offers a variety of consumer and commercial banking services to individuals, businesses, and nonprofit organizations through 58 offices throughout the Philadelphia and Southern New Jersey area. The Bank is supervised and regulated by the Pennsylvania Department of Banking and Securities (“the Department”) and the Federal Deposit Insurance Corporation (the “FDIC”). The Company is regulated by the Board of Governors of the Federal Reserve System (“the Federal Reserve Board”). The deposits of the Bank are insured up to the applicable legal limits by the Deposit Insurance Fund of the FDIC.OPERATIONS

~~NOTE~~The 3Company —is ~~CHANGES~~a INfederally ~~AND~~chartered ~~RECLASSIFICATIONS~~stock ~~OUT~~holding OFcompany ~~ACCUMULATED~~and ~~OTHER~~owns ~~COMPREHENSIVE~~100% ~~INCOME~~of the outstanding common stock of the Bank, a Pennsylvania chartered stock savings bank. The Bank offers a variety of consumer and commercial banking services to individuals, businesses, and nonprofit organizations through 58 offices throughout the Philadelphia and Southern New Jersey area. The Bank is supervised and regulated by the Pennsylvania Department of Banking and Securities (~~LOSS~~the “Department”) and the Federal Deposit Insurance Corporation (the “FDIC”). The Company is regulated by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”). The deposits of the Bank are insured up to the applicable legal limits by the Deposit Insurance Fund of the FDIC.

~~The~~On ~~following~~August 14, ~~tables~~2014, ~~present~~the boards of directors of the ~~changes~~Company inand Beneficial Savings Bank MHC, the ~~balances~~Bank’s ofparent ~~each~~mutual ~~component~~holding company, and the board of ~~accumulated~~trustees ~~other~~of ~~comprehensive~~the ~~income~~Bank adopted a Plan of Conversion and Reorganization (the “~~AOCI~~Plan of Conversion”), ~~for~~pursuant to which the ~~six~~Bank ~~months~~will ~~ended~~reorganize ~~June~~from the two-tier mutual holding company structure to the stock holding company structure. Pursuant to the Plan of Conversion: (1) ~~30,~~Beneficial ~~2014~~Savings Bank MHC will merge with and ~~June 30~~into the Company, ~~2013~~with the Company being the surviving entity (the “MHC Merger”); (2) the Company will merge with and into a newly formed Maryland corporation named Beneficial Bancorp, Inc. ~~All~~ ~~amounts~~(the ~~are~~“Holding ~~presented~~Company”); ~~net~~(3) the Bank will become a wholly-owned subsidiary of ~~tax.~~the Holding Company; (4) the shares of common stock of the Company held by persons other than Beneficial Savings Bank MHC (whose shares will be canceled) will be converted into

Table of Contents

	Net unrealized
	holding gains on
	available-for-sale			Defined benefit
(Dollars in thousands)	securities			pension plan items			Total
Beginning balance, January 1, 2014	$	(5,078	)	$	(16,276	)	$	(21,354	)
Changes in other comprehensive loss before reclassifications:
Unrealized holding gains on AFS securities	11,644			—			11,644
Unrealized losses on AFS securities transferred to HTM	(3,426		)	—			(3,426		)
Accretion of unrealized losses on AFS securities transferred to HTM	189			—			189
Amount reclassified from accumulated other comprehensive loss	(188		)	268			80
Net current-period other comprehensive income	8,219			268			8,487
Ending balance, June 30, 2014	$	3,141		$	(16,008	)	$	(12,867	)

shares of common stock of the Holding Company pursuant to an exchange ratio designed to preserve the percentage ownership interests of such persons; and (5) the Holding Company will offer and sell shares of its common stock to certain depositors of the Bank and others in the community and institutional investors in the manner and subject to the priorities set forth in the Plan of Conversion.

	Net unrealized
	holding gains on
	available-for-sale			Defined benefit
(Dollars in thousands)	securities			pension plan items			Total
Beginning balance, January 1, 2013	$	18,703		$	(25,730	)	$	(7,027	)
Changes in other comprehensive loss before reclassifications	(15,850		)	—			(15,850		)
Amount reclassified from accumulated other comprehensive loss	(952		)	735			(217		)
Net current-period other comprehensive (loss) income	(16,802		)	735			(16,067		)
Ending balance, June 30, 2013	$	1,901		$	(24,995	)	$	(23,094	)

At the time of conversion, liquidation accounts will be established in an amount equal to the percentage of the outstanding shares of the Company owned by Beneficial Savings Bank MHC before the MHC Merger, multiplied by the Company’s total stockholders’ equity as reflected in the latest statement of financial condition contained in the final offering prospectus for the conversion, plus the value of the net assets of Beneficial Savings Bank MHC as reflected in the latest statement of financial condition of Beneficial Savings Bank MHC before the effective date of the conversion. The liquidation accounts will be maintained for the benefit of eligible account holders and supplemental eligible account holders (collectively, “eligible depositors”) who continue to maintain their deposit accounts in the Bank after the conversion. In the event of a complete liquidation of the Bank or the Bank and the Holding Company (and only in such event), eligible depositors who continue to maintain accounts shall be entitled to receive a distribution from the liquidation account before any liquidation may be made with respect to common stock. Neither the Holding Company nor the Bank may declare or pay a cash dividend if the effect thereof would cause its equity to be reduced below either the amount required for the liquidation account or the regulatory capital requirements applicable to the Bank or the Holding Company.

The ~~following~~transactions ~~tables~~contemplated ~~present~~by ~~reclassifications~~the ~~out~~Plan of ~~AOCI~~Conversion byare ~~component~~subject ~~for~~to approval by the ~~six~~shareholders ~~months~~of ~~ended~~the ~~June 30~~Company, the depositors of the Bank and the Board of Governors of the Federal Reserve System. Meetings of the Company’s shareholders and the Bank’s depositors are expected to be held to approve the Plan of Conversion in the fourth calendar quarter of 2014. If the conversion and ~~June 30~~offering are completed, ~~2013:~~eligible conversion and offering costs will be netted against the offering proceeds. If the conversion and offering are terminated, such costs will be expensed.

~~For the Six Months Ended June 30, 2014~~ 7

~~(Dollars~~Table inof ~~thousands)~~Contents

Details about accumulated	Amount reclassified			Affected line item in
other comprehensive loss	from accumulated other			the consolidated statements
components	comprehensive loss			of operations
Unrealized gains and losses on available-for-sale securities
	$	(297	)	Net gain on sale of investment securities
	109			Income tax expense
	$	(188	)	Net of tax
Amortization of defined benefit pension items
Transition obligation	$	82	(1)	Other non-interest expense
Prior service costs	(263		)(1)	Other non-interest expense
Net recognized actuarial losses	714		(1)	Other non-interest expense
	$	533		Total before tax
	(265		)	Income tax benefit
	$	268		Net of tax

NOTE 3 — CHANGES IN AND RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

~~(1) These~~The ~~accumulated~~following ~~other~~tables ~~comprehensive~~present ~~income~~the ~~(loss)~~changes ~~components~~in ~~are~~the ~~included~~balances inof ~~the~~each ~~computation~~component of ~~net~~accumulated ~~periodic~~other ~~pension~~comprehensive ~~cost. See~~income ~~Note~~(“AOCI”) 13for -the ~~Pension~~nine months ended September 30, 2014 and ~~Other~~September 30, ~~Postretirement~~2013. All ~~Benefits~~amounts ~~for~~are ~~additional~~presented ~~details~~net of tax.

	Net unrealized
	holding gains on
	available-for-sale			Defined benefit
(Dollars in thousands)	securities			pension plan items			Total

Beginning balance, January 1, 2014	$	(5,078	)	$	(16,276	)	$	(21,354	)
Changes in other comprehensive loss before reclassifications:
Unrealized holding gains on AFS securities	8,328			—			8,328
Unrealized losses on AFS securities transferred to HTM	(3,426		)	—			(3,426		)
Accretion of unrealized losses on AFS securities transferred to HTM	319			—			319
Amount reclassified from accumulated other comprehensive loss	(395		)	402			7
Net current-period other comprehensive income	4,826			402			5,228
Ending balance, September 30, 2014	$	(252	)	$	(15,874	)	$	(16,126	)

Table of Contents

	Net unrealized
	holding gains on
	available-for-sale			Defined benefit
(Dollars in thousands)	securities			pension plan items			Total

Beginning balance, January 1, 2013	$	18,703		$	(25,730	)	$	(7,027	)
Changes in other comprehensive loss before reclassifications	(15,552		)	—			(15,552		)
Amount reclassified from accumulated other comprehensive loss	(1,139		)	1,078			(61		)
Net current-period other comprehensive (loss) income	(16,691		)	1,078			(15,613		)
Ending balance, September 30, 2013	$	2,012		$	(24,652	)	$	(22,640	)

~~For~~The following tables present reclassifications out of AOCI by component for the ~~Six~~nine ~~Months~~months ~~Ended~~ended ~~June~~September 30, ~~2013~~2014 and September 30, 2013:

(Dollars in thousands)

For the Nine Months Ended September 30, 2014
(Dollars in thousands)
Details about accumulated	Amount reclassified			Affected line item in
other comprehensive loss	from accumulated other			the consolidated statements
Components	comprehensive loss			of operations
Unrealized gains and losses on available-for-sale securities
	$	(625	)	Net gain on sale of investment securities
	230			Income tax expense
	$	(395	)	Net of tax
Amortization of defined benefit pension items
Transition obligation	$	122	(1)	Other non-interest expense
Prior service costs	(395		)(1)	Other non-interest expense
Net recognized actuarial losses	1,072		(1)	Other non-interest expense
	$	799		Total before tax
	(397		)	Income tax benefit
	$	402		Net of tax

Details about accumulated	Amount reclassified			Affected line item in
other comprehensive loss	from accumulated other			the consolidated statements
components	comprehensive loss			of operations
Unrealized gains and losses on available-for-sale securities
	$	(1,507	)	Net gain on sale of investment securities
	555			Income tax expense
	$	(952	)	Net of tax
Amortization of defined benefit pension items
Transition obligation	$	82	(1)	Other non-interest expense
Prior service costs	(264		)(1)	Other non-interest expense
Net recognized actuarial losses	1,322		(1)	Other non-interest expense
	$	1,140		Total before tax
	(405		)	Income tax benefit
	$	735		Net of tax

(1) These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost. See Note 13 - Pension and Other Postretirement Benefits for additional details.

~~NOTE~~Table 4of ~~— EARNINGS PER SHARE~~Contents

The following table presents a calculation of basic and diluted earnings per share for the three and six months ended June 30, 2014 and 2013. Earnings per share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding. The difference between common shares issued and basic average common shares outstanding, for purposes of calculating basic earnings per share, is a result of subtracting unallocated employee stock ownership plan (“ESOP”) shares and unvested restricted stock shares. See Note 14 for further discussion of stock grants.

For the Nine Months Ended September 30, 2013
(Dollars in thousands)
Details about accumulated	Amount reclassified			Affected line item in
other comprehensive loss	from accumulated other			the consolidated statements
Components	comprehensive loss			of operations
Unrealized gains and losses on available-for-sale securities
	$	(1,802	)	Net gain on sale of investment securities
	663			Income tax expense
	$	(1,139	)	Net of tax

Amortization of defined benefit pension items
Transition obligation	$	130	(1)	Other non-interest expense
Prior service costs	(402		)(1)	Other non-interest expense
Net recognized actuarial losses	1,998		(1)	Other non-interest expense
	$	1,726		Total before tax
	(648		)	Income tax benefit
	$	1,078		Net of tax

	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands, except share and per share amounts)	2014		2013		2014		2013
Basic and diluted earnings per share:
Net income	$	4,576	$	2,906	$	7,048	$	6,119
Basic average common shares outstanding	73,558,881		76,073,297		73,898,088		76,224,037
Effect of dilutive securities	633,166		170,853		598,943		189,400
Dilutive average shares outstanding	74,192,047		76,244,150		74,497,031		76,413,437
Net earnings per share
Basic	$	0.06	$	0.04	$	0.10	$	0.08
Diluted	$	0.06	$	0.04	$	0.09	$	0.08

~~Anti-dilutive~~NOTE ~~shares~~4 ~~are~~— ~~common~~EARNINGS ~~stock~~PER equivalents with weighted average exercise prices in excess of the weighted average market value for the periods presented. For the three and six months ended June 30, 2014, there were 674,500 outstanding options that were anti-dilutive and therefore excluded from the earnings per share calculation. For the three and six months ended June 30, 2013, there were 2,782,200 and 2,781,500 outstanding options, respectively, that were anti-dilutive and therefore excluded from the earnings per share calculation.SHARE

~~NOTE~~The 5following —table ~~INVESTMENT~~presents ~~SECURITIES~~a calculation of basic and diluted earnings per share for the three and nine months ended September 30, 2014 and 2013. Earnings per share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding. The difference between common shares issued and basic average common shares outstanding, for purposes of calculating basic earnings per share, is a result of subtracting unallocated employee stock ownership plan (“ESOP”) shares and unvested restricted stock shares. See Note 14 for further discussion of stock grants.

The amortized cost and estimated fair value of investments in debt and equity securities at June 30, 2014 and December 31, 2013 are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands, except share and per share amounts)	2014		2013		2014		2013

Basic and diluted earnings per share:
Net income	$	6,524	$	3,500	$	13,571	$	9,619
Basic average common shares outstanding	72,871,533		75,870,327		73,552,143		76,104,838
Effect of dilutive securities	637,395		258,918		613,118		241,698
Dilutive average shares outstanding	73,508,928		76,129,245		74,165,261		76,346,536
Net earnings per share
Basic	$	0.09	$	0.05	$	0.18	$	0.13
Diluted	$	0.09	$	0.05	$	0.18	$	0.13

8Anti-dilutive shares are common stock equivalents with weighted average exercise prices in excess of the weighted average market value for the periods presented. For the three and nine months ended September 30, 2014, there were 667,500 outstanding options that were anti-dilutive and therefore excluded from the earnings per share calculation. For the three and nine months ended September 30, 2013, there were 2,753,800 and 2,755,100 outstanding options, respectively, that were anti-dilutive and therefore excluded from the earnings per share calculation.

~~Table~~NOTE of5 ~~Contents~~— INVESTMENT SECURITIES

	June 30, 2014
	Investment Securities Available-for-Sale
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
U.S. Government Sponsored Enterprise (“GSE”) and Agency Notes	$	10,455	$	1	$	27	$	10,429
GNMA guaranteed mortgage certificates	5,433		193		—		5,626
GSE mortgage-backed securities	696,969		11,230		3,497		704,702
GSE collateralized mortgage obligations	52,222		104		63		52,263
Municipal bonds	60,766		2,163		—		62,929
Money market and mutual funds	4,622		—		20		4,602
Total	$	830,467	$	13,691	$	3,607	$	840,551

The amortized cost and estimated fair value of investments in debt and equity securities at September 30, 2014 and December 31, 2013 are as follows:

	June 30, 2014
	September 30, 2014
	Investment Securities Held-to-Maturity
	Investment Securities Available-for-Sale
				Gross		Gross		Estimated
	Amortized			Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost			Gains		Losses		Value
GSE mortgage-backed securities	$	588,905	(1)	$	5,008	$	3,751	$	590,162
U.S. Government Sponsored
GSE collateralized mortgage obligations	51,801		(1)	50		537		51,314
Enterprise (“GSE”) and Agency Notes	$	9,321		$	—	$	12	$	9,309
Municipal bonds	1,355			103		—		1,458
GNMA guaranteed mortgage certificates	5,204			183		—		5,387
Foreign bonds	2,000			10		—		2,010
GSE mortgage-backed securities	666,308			8,660		6,105		668,863
Total	$	644,061		$	5,171	$	4,288	$	644,944
GSE collateralized mortgage obligations	48,865			71		204		48,732
Municipal bonds	50,760			1,962		—		52,722
Money market and mutual funds	13,628			—		42		13,586
Total	$	794,086		$	10,876	$	6,363	$	798,599

(1) Amounts include the remaining unamortized portion of the unrealized loss of $5.1 million at June 30, 2014 that was recognized in accumulated other comprehensive income on February 28, 2014 (the day on which certain securities were transferred from available-for-sale to held-to-maturity).9

	December 31, 2013
	Investment Securities Available-for-Sale
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
U.S. Government Sponsored Enterprise (“GSE”) and Agency Notes	$	12,968	$	—	$	51	$	12,917
GNMA guaranteed mortgage certificates	5,815		204		—		6,019
GSE mortgage-backed securities	840,787		9,538		17,227		833,098
GSE collateralized mortgage obligations	98,708		82		2,361		96,429
Municipal bonds	65,593		1,836		—		67,429
Money market, mutual funds and certificates of deposit	18,337		—		49		18,288
Total	$	1,042,208	$	11,660	$	19,688	$	1,034,180

Table of Contents

	September 30, 2014
	Investment Securities Held-to-Maturity
				Gross		Gross		Estimated
	Amortized			Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost			Gains		Losses		Value

GSE mortgage-backed securities	$	570,380	(1)	$	2,748	$	6,027	$	567,101
GSE collateralized mortgage obligations	49,519		(1)	182		353		49,348
Municipal bonds	1,240			97		—		1,337
Foreign bonds	2,000			8		—		2,008

Total	$	623,139		$	3,035	$	6,380	$	619,794

~~Table~~(1) Amounts include the remaining unamortized portion at September 30, 2014 of ~~Contents~~the unrealized loss of $5.1 million that was recognized in accumulated other comprehensive income on February 28, 2014 (the day on which certain securities were transferred from available-for-sale to held-to-maturity).

	December 31, 2013
	Investment Securities Held-to-Maturity
	Investment Securities Available-for-Sale
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value
GSE mortgage-backed securities	$	502,556	$	650	$	14,389	$	488,817
U.S. Government Sponsored Enterprise (“GSE”) and Agency Notes	$	12,968	$	—	$	51	$	12,917
GSE collateralized mortgage obligations	20,863		61		654		20,270
GNMA guaranteed mortgage certificates	5,815		204		—		6,019
Municipal bonds	3,410		125		—		3,535
GSE mortgage-backed securities	840,787		9,538		17,227		833,098
Foreign bonds	2,000		11		—		2,011
GSE collateralized mortgage obligations	98,708		82		2,361		96,429
Total	$	528,829	$	847	$	15,043	$	514,633
Municipal bonds	65,593		1,836		—		67,429
Money market, mutual funds and certificates of deposit	18,337		—		49		18,288
Total	$	1,042,208	$	11,660	$	19,688	$	1,034,180

During the six months ended June 30, 2014, the Bank sold $3.1 million of mortgage-backed securities and $182 thousand of other securities that resulted in an aggregate gain of $297 thousand.

	December 31, 2013
	Investment Securities Held-to-Maturity
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
(Dollars in thousands)	Cost		Gains		Losses		Value

GSE mortgage-backed securities	$	502,556	$	650	$	14,389	$	488,817
GSE collateralized mortgage obligations	20,863		61		654		20,270
Municipal bonds	3,410		125		—		3,535
Foreign bonds	2,000		11		—		2,011

Total	$	528,829	$	847	$	15,043	$	514,633

During the first quarter of 2014, the Bank transferred five debt securities at a fair value of $152.2 million from available-for-sale securities to held-to-maturity securities as management has the intent and ability to hold these securities to maturity. On the date of transfer, the securities had a par value of $155.9 million. The difference between the fair value and the par value was $3.7 million, which included a $5.4 million unrealized loss and a $1.7 million unamortized premium, and will be accreted into interest income over the expected life of the securities. This amount will be equally offset by the amortization of the unrealized loss at the date of transfer, which is included in accumulated other comprehensive income.10

~~Management~~Table evaluates securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. The Company determines whether the unrealized losses are temporary in accordance with guidance under FASB ASC Topic 320 for Investments - Debt and Equity Securities. The evaluation is based upon factors such as the creditworthiness of the issuers/guarantors, the underlying collateral, if applicable, and the continuing performance of the securities. Management also evaluates other facts and circumstances that may be indicative of an OTTI condition. This includes, but is not limited to, an evaluation of the type of security, length of time and extent to which the fair value has been less than cost, and near-term prospects of the issuer. The likelihood of recovering the Company’s investment, whether the Company has the intent to sell the investment or that it is more likely than not that the Company will be required to sell the investment before recovery is also used to determine the nature of the decline in market value of the securities.Contents

~~The~~During ~~Company records~~ the ~~credit~~nine ~~portion~~months ofended ~~OTTI through earnings based on the credit impairment estimates generally derived from cash flow analyses. The remaining unrealized loss~~September 30, ~~due to factors other than credit~~2014, isthe ~~recorded~~Bank insold ~~other comprehensive income (“OCI”). The Company had an unrealized loss of~~ $76.25 million ~~related~~of ~~to its GSE and agency~~ mortgage-backed securities asand ~~of June 30, 2014. Additionally, the Company had an unrealized loss of~~ $~~600~~273 thousand onof ~~GSE~~other ~~collateralized~~securities ~~mortgage~~that ~~obligations~~resulted ~~and~~in an ~~unrealized~~aggregate ~~loss~~gain of $47625 thousand ~~on other debt securities and mutual funds as of June 30, 2014~~.

~~GSE~~During ~~Mortgage~~the first quarter of 2014, the Bank transferred five debt securities at a fair value of $152.2 million from available-~~Backed~~for-sale ~~Securities~~securities to held-to-maturity securities as management has the intent and ability to hold these securities to maturity. On the date of transfer, the securities had a par value of $155.9 million. The difference between the fair value and the par value was $3.7 million, which included a $5.4 million unrealized loss and a $1.7 million unamortized premium, and will be accreted into interest income over the expected life of the securities. This net amount will be equally offset by the amortization of the unrealized loss at the date of transfer, which is included in accumulated other comprehensive income.

~~The~~Management ~~Company’s~~evaluates ~~investments~~securities ~~that~~for ~~were~~other-than-temporary inimpairment a(“OTTI”) ~~loss~~at ~~position~~least ~~for~~on ~~greater~~a ~~than~~quarterly 12basis, ~~months~~and ~~included~~more ~~GSE~~frequently ~~mortgage-backed~~when ~~securities~~economic ~~with~~or anmarket ~~unrealized~~concerns ~~loss~~warrant ofsuch 1evaluation.~~2%.~~ The Company’s ~~investments~~determines ~~that~~whether ~~were~~the unrealized losses are temporary in aaccordance ~~loss~~with ~~position~~guidance ~~for~~under ~~less~~FASB ~~than~~ASC 12Topic ~~months~~320 ~~included~~for ~~GSE~~Investments - Debt and ~~agency~~Equity ~~mortgage-backed~~Securities. ~~securities~~The ~~with~~evaluation anis ~~unrealized~~based ~~loss~~upon factors such as the creditworthiness of 0the issuers/guarantors, the underlying collateral, if applicable, and the continuing performance of the securities.~~8%.~~ ~~The~~Management ~~unrealized~~also ~~loss~~evaluates isother ~~due~~facts toand ~~current~~circumstances ~~interest~~that ~~rate~~may ~~levels~~be ~~relative~~indicative toof ~~the~~an ~~Company’s~~OTTI ~~cost~~condition. ~~Because~~This ~~the~~includes, ~~unrealized~~but ~~losses~~is ~~are~~not ~~due~~limited to, ~~current~~an ~~interest~~evaluation ~~rate~~of ~~levels~~the ~~relative~~type of security, length of time and extent to which the ~~Company’s~~fair ~~cost~~value ~~and~~has ~~not~~been ~~credit~~less ~~quality~~than cost, and ~~because~~near-term prospects of the issuer. The likelihood of recovering the Company’s ~~does~~investment, ~~not~~whether ~~intend~~the Company has the intent to sell the ~~investments~~investment ~~and~~or that it is ~~not~~ more likely than not that the Company will be required to sell ~~these~~the ~~investments~~investment before recovery ofis ~~its~~also ~~amortized~~used ~~cost,~~to ~~which~~determine ~~may~~the benature atof ~~maturity,~~ the ~~Company~~decline ~~does~~in ~~not~~market ~~consider~~value ~~these~~of ~~investments~~the ~~to be other-than temporarily impaired at June 30, 2014~~securities.

~~GSE~~The ~~Collateralized~~Company ~~Mortgage~~records ~~Obligations~~the credit portion of OTTI through earnings based on the credit impairment estimates generally derived from cash flow analyses. The remaining unrealized loss, due to factors other than credit, is recorded in other comprehensive income (~~CMOs~~“OCI”). The Company had an unrealized loss of $12.1 million related to its GSE mortgage-backed securities as of September 30, 2014. Additionally, the Company had an unrealized loss of $557 thousand on GSE collateralized mortgage obligations and an unrealized loss of $54 thousand on other debt securities and mutual funds as of September 30, 2014.

~~The~~Mortgage-Backed Company’s investments that were in a loss position for greater than 12 months included GSE CMOs with an unrealized loss of 1.4% as of June 30, 2014. The Company’s investments that were in a loss position for less than 12 months included GSE CMOs with an unrealized loss of 0.4% as of June 30, 2014.Securities

The Company’s investments that were in a loss position for greater than 12 months included GSE mortgage-backed securities with an unrealized loss of 2.1%. The Company’s investments that were in a loss position for less than 12 months included GSE mortgage-backed securities with an unrealized loss of 0.6%. The unrealized loss is due to current interest rate levels relative to the Company’s cost. Because the unrealized losses are due to current interest rate levels relative to the Company’s cost and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell these investments before recovery of its amortized cost, which may be at maturity, the Company does not consider these investments to be other-than temporarily impaired at September 30, 2014.

10Collateralized Mortgage Obligations (CMOs)

~~Table~~The Company’s investments that were in a loss position for greater than 12 months included GSE CMOs with an unrealized loss of ~~Contents~~1.8% as of September 30, 2014. The Company’s investments that were in a loss position for less than 12 months included GSE CMOs with an unrealized loss of 0.4% as of September 30, 2014. The unrealized loss is due to current interest rate levels relative to the Company’s cost. Because the unrealized losses are due to current interest rate levels relative to the Company’s cost and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell these investments before recovery of its amortized cost, which may be at maturity, the Company does not consider these investments to be other-than temporarily impaired at September 30, 2014.

Company will be required to sell these investments before recovery of its amortized cost, which may be at maturity, the Company does not consider these investments to be other-than temporarily impaired at June 30, 2014.11

~~Other~~Table ~~Debt~~of ~~Securities~~Contents

~~The~~Other ~~Company~~Debt reviewed its portfolio for the six months ended June 30, 2014, and with respect to the remaining debt securities in an unrealized loss position, the unrealized loss is not credit quality related and the Company does not intend to sell, and it is not more likely than not that the Company will be required to sell, these securities in a loss position prior to their anticipated recovery.Securities

The ~~following~~Company ~~tables~~reviewed ~~provide~~its ~~information~~portfolio onfor the ~~gross~~nine ~~unrealized~~months ~~losses~~ended ~~and~~September 30, ~~fair~~2014, ~~market~~and ~~value~~with ofrespect to the ~~Company’s~~remaining ~~investments~~debt ~~with~~securities in an unrealized ~~losses~~loss ~~that~~position, ~~are~~the unrealized loss is not ~~deemed~~credit toquality berelated ~~other~~and ~~than~~the ~~temporarily~~Company ~~impaired,~~does ~~aggregated~~not byintend ~~investment~~to ~~category~~sell, and ~~length~~it ofis ~~time~~not more likely than not that ~~individual~~the ~~securities~~Company ~~have~~will ~~been~~be inrequired ato ~~continuous~~sell, ~~unrealized~~these securities in a loss position atprior ~~June 30,~~to ~~2014~~their ~~and~~anticipated ~~December 31, 2013:~~recovery.

	At June 30, 2014
	Less than 12 months				12 months or longer				Total
			Unrealized				Unrealized				Unrealized
(Dollars in thousands)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
GSE and agency notes	$	10,284	$	27	$	—	$	—	$	10,284	$	27
GSE mortgage-backed securities	31,163		249		558,254		6,999		589,417		7,248
Collateralized mortgage obligations	53,961		228		25,485		372		79,446		600
Subtotal, debt securities	95,408		504		583,739		7,371		679,147		7,875
Mutual Funds	—		—		1,106		20		1,106		20
Total temporarily impaired securities	$	95,408	$	504	$	584,845	$	7,391	$	680,253	$	7,895

The following tables provide information on the gross unrealized losses and fair market value of the Company’s investments with unrealized losses that are not deemed to be other than temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2014 and December 31, 2013:

At December 31, 2013

At September 30, 2014

Less than 12 months

12 months or longer

Total

Unrealized

(Dollars in thousands)

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

GSE and agency notes

129,~~816~~309

5112

—

129,~~816~~309

5112

Mortgage-backed securities

1159,~~075,483~~420

~~31,616~~975

—526,113

—11,157

1685,~~075,483~~533

3112,~~616~~132

Collateralized mortgage obligations

7128,~~780~~600

~~876~~110

3624,~~463~~181

~~2,139~~447

~~108~~52,~~243~~781

~~3,015~~557

Subtotal, debt securities

1197,~~160,079~~329

321,~~543~~097

36550,~~463~~294

211,~~139~~604

1747,~~196,542~~623

3412,~~682~~701

Mutual Funds

~~1,261~~—

49—

—1,000

—42

1,~~261~~000

4942

Total temporarily impaired securities

1197,~~161,340~~329

321,~~592~~097

36551,~~463~~294

211,~~139~~646

1748,~~197,803~~623

3412,~~731~~743

The following table sets forth the stated maturities of the investment securities at June 30, 2014 and December 31, 2013. Maturities for mortgage-backed securities are dependent upon the rate environment and prepayments of the underlying loans. For purposes of this table they are presented separately.

	At December 31, 2013
	Less than 12 months				12 months or longer				Total
			Unrealized				Unrealized				Unrealized
(Dollars in thousands)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
GSE and agency notes	$	12,816	$	51	$	—	$	—	$	12,816	$	51
Mortgage-backed securities	1,075,483		31,616		—		—		1,075,483		31,616
Collateralized mortgage obligations	71,780		876		36,463		2,139		108,243		3,015
Subtotal, debt securities	$	1,160,079	$	32,543	$	36,463	$	2,139	$	1,196,542	$	34,682
Mutual Funds	1,261		49		—		—		1,261		49
Total temporarily impaired securities	$	1,161,340	$	32,592	$	36,463	$	2,139	$	1,197,803	$	34,731

11The following table sets forth the stated maturities of the investment securities at September 30, 2014 and December 31, 2013. Maturities for mortgage-backed securities are dependent upon the rate environment and prepayments of the underlying loans. For purposes of this table they are presented separately.

Table of Contents

	September 30, 2014				December 31, 2013
	Amortized		Estimated		Amortized		Estimated
(Dollars are in thousands)	Cost		Fair Value		Cost		Fair Value

Available-for-sale:
Due in one year or less	$	—	$	—	$	4,241	$	4,286
Due after one year through five years	8,619		8,855		8,016		8,328
Due after five years through ten years	35,337		36,287		49,623		50,659
Due after ten years	16,125		16,889		16,693		17,085
Mortgage-backed securities	720,377		722,982		945,310		935,546
Money market and mutual funds	13,628		13,586		18,325		18,276
Total	$	794,086	$	798,599	$	1,042,208	$	1,034,180

Held-to-maturity:
Due in one year or less	$	1,990	$	1,996	$	2,540	$	2,573
Due after one year through five years	995		1,051		2,490		2,543
Due after five years through ten years	255		298		380		430
Due after ten years	—		—		—		—
Mortgage-backed securities	619,899		616,449		523,419		509,087
Total	$	623,139	$	619,794	$	528,829	$	514,633

	June 30, 2014				December 31, 2013
	Amortized		Estimated		Amortized		Estimated
(Dollars are in thousands)	Cost		Fair Value		Cost		Fair Value
Available-for-sale:
Due in one year or less	$	599	$	603	$	4,241	$	4,286
Due after one year through five years	9,290		9,579		8,016		8,328
Due after five years through ten years	45,206		46,291		49,623		50,659
Due after ten years	16,126		16,885		16,693		17,085
Mortgage-backed securities	754,624		762,591		945,310		935,546
Money market and mutual funds	4,622		4,602		18,325		18,276
Total	$	830,467	$	840,551	$	1,042,208	$	1,034,180
Held-to-maturity:
Due in one year or less	$	1,985	$	1,992	$	2,540	$	2,573
Due after one year through five years	990		1,038		2,490		2,543
Due after five years through ten years	380		438		380		430
Due after ten years	—		—		—		—
Mortgage-backed securities	640,706		641,476		523,419		509,087
Total	$	644,061	$	644,944	$	528,829	$	514,633

AtTable ~~June 30, 2014 and December 31, 2013, $141.9 million and $296.8 million, respectively,~~ of securities were pledged to secure municipal deposits. At June 30, 2014 and December 31, 2013, the Company had $34.0 million and $33.2 million, respectively, of securities pledged as collateral on secured borrowings. At June 30, 2014, the Company had $73 thousand of securities pledged as collateral on interest rate swaps. At December 31, 2013, the Company had no securities pledged as collateral on interest rate swaps.Contents

At ~~June~~September 30, 2014 and December 31, 2013, ~~the Company held stock in the Federal Home Loan Bank (“FHLB”) of Pittsburgh totaling~~ $15144.65 million and $17296.48 million, respectively~~. The~~, ~~Company~~of ~~accounts~~securities ~~for~~were ~~the~~pledged ~~stock~~to ~~based~~secure onmunicipal ~~guidance~~deposits. At ~~which~~September 30, ~~requires~~2014 ~~that~~and ~~the~~December 31, ~~investment~~2013, bethe ~~carried~~Company athad ~~cost~~$32.6 million and be$33.2 ~~evaluated~~million, ~~for~~respectively, ~~impairment~~of ~~based~~securities pledged as collateral on ~~the~~secured ~~ultimate~~borrowings. At ~~recoverability~~September 30, of2014, the ~~par~~Company ~~value.~~had ~~The~~$63 ~~Company~~thousand ~~evaluated~~of ~~its~~securities ~~holdings~~pledged inas ~~FHLB~~collateral ~~stock~~on atinterest ~~June~~rate swaps. At December 3031, ~~2014~~2013, ~~and~~the ~~believes~~Company ~~its~~had ~~holdings~~no insecurities ~~the~~pledged ~~stock~~as ~~are~~collateral ~~ultimately~~on ~~recoverable~~interest atrate ~~par~~swaps.

~~NOTE~~At September 30, 2014 and December 31, 2013, the Company held stock in the Federal Home Loan Bank (“FHLB”) of Pittsburgh totaling $15.6 —million ~~LOANS~~and $17.4 million, respectively. The Company accounts for the stock based on guidance which requires that the investment be carried at cost and be evaluated for impairment based on the ultimate recoverability of the par value. The Company evaluated its holdings in FHLB stock at September 30, 2014 and believes its holdings in the stock are ultimately recoverable at par.

~~Loans~~NOTE at6 ~~June 30,~~— ~~2014 and December 31, 2013 are summarized as follows:~~LOANS

(Dollars in thousands)	June 30, 2014			December 31, 2013
Commercial:
Commercial real estate	$	633,828		$	584,133
Commercial business loans	379,332			378,663
Commercial construction	42,271			38,067
Total commercial loans	1,055,431			1,000,863
Residential:
Residential real estate	674,954			683,700
Residential construction	274			277
Total residential loans	675,228			683,977
Consumer loans:
Home equity & lines of credit	224,788			234,154
Personal	34,891			40,892
Education	201,846			206,521
Automobile	177,151			175,400
Total consumer loans	638,676			656,967
Total loans	2,369,335			2,341,807
Allowance for losses	(52,624		)	(55,649		)
Loans, net	$	2,316,711		$	2,286,158

Loans at September 30, 2014 and December 31, 2013 are summarized as follows:

(Dollars in thousands)	September 30, 2014			December 31, 2013
Commercial:
Commercial real estate	$	634,385		$	584,133
Commercial business loans	391,819			378,663
Commercial construction	55,326			38,067
Total commercial loans	1,081,530			1,000,863

Residential:
Residential real estate	668,080			683,700
Residential construction	271			277
Total residential loans	668,351			683,977

Consumer loans:
Home equity & lines of credit	226,337			234,154
Personal	31,683			40,892
Education	199,153			206,521
Automobile	181,743			175,400
Total consumer loans	638,916			656,967
Total loans	2,388,797			2,341,807

Allowance for losses	(51,714		)	(55,649		)
Loans, net	$	2,337,083		$	2,286,158

~~Table of Contents~~13

~~Included~~Table ~~in the balance~~ of residential loans are approximately $1.4 million and $780 thousand of loans held for sale at June 30, 2014 and December 31, 2013, respectively. These loans are carried at the lower of cost or estimated fair value, on an aggregate basis. Loans held for sale are loans originated by the Bank to be sold to a third party under contractual obligation to purchase the loans from the Bank. For the three and six months ended June 30, 2014, the Bank sold residential mortgage loans with an unpaid principal balance of approximately $2.8 million and $4.7 million, respectively, and recorded mortgage banking income of approximately $115 thousand and $240 thousand, respectively. The Bank retained the related servicing rights for the loans that were sold to Fannie Mae and receives a 25 basis point servicing fee from the purchaser of the loans.Contents

Included in the balance of ~~commercial~~residential loans are approximately $~~6.3~~801 ~~million~~thousand ofand ~~non-performing~~$780 thousand of loans held for sale asat ~~of June~~September 30, 2014 ~~that~~and ~~are~~December 31, ~~expected~~2013, ~~to be sold during the third quarter of 2014~~respectively. These loans are ~~being~~ carried at the lower of cost or ~~market. There~~estimated ~~were~~fair novalue, ~~commercial~~on ~~loans~~an aggregate basis. Loans held for sale asare ofloans ~~December 31,~~originated ~~2013~~by the Bank to be sold to a third party under contractual obligation to purchase the loans from the Bank. ~~During~~For the ~~quarter~~three and nine months ended September 30, 2014, the ~~Company~~Bank sold residential mortgage loans with an unpaid principal balance of approximately $114.34 million ofand ~~non-performing~~$9.1 ~~commercial~~million, ~~loans~~respectively, and recorded amortgage banking income of approximately $~~913~~211 thousand ~~net~~and ~~recovery~~$451 thousand, respectively. ~~There~~The ~~were~~Bank noretained ~~non-performing~~the ~~commercial~~related servicing rights for the loans that were sold ~~during~~to Fannie Mae and receives a 25 basis point servicing fee from the ~~year~~purchaser ~~ended~~of ~~December 31,~~the ~~2013~~loans.

~~Commercial~~During ~~business~~the ~~loans~~three ~~include~~months ~~shared~~ended ~~national~~September 30, ~~credits~~2014, ~~which~~the ~~are~~Company ~~participations~~recorded ina ~~loans or loan commitments of at least~~ $201.06 million ~~that~~net ~~are~~gain ~~shared~~and bya ~~three~~$766 orthousand ~~more~~net ~~banks. Included~~charge-off inon the ~~shared~~sale ~~national~~of ~~credit portfolio are purchased participations and assignments in leveraged lending transactions~~$11. ~~Leveraged~~0 ~~lending~~million ~~transactions~~of ~~are generally used to support a merger~~non-performing orcommercial ~~acquisition-related transaction, to back a recapitalization of a company’s balance sheet or to refinance debt~~loans. ~~When~~ ~~considering~~In aaddition, ~~participation~~during in the ~~leveraged~~three ~~lending~~months ~~market~~ended June 30, 2014, the Company ~~will~~sold ~~participate~~$11.3 ~~only~~million inof ~~first~~non-performing ~~lien~~commercial ~~senior secured term~~ loans ~~that are highly rated (investment grade) by the rating agencies~~ and ~~that~~recorded ~~trade~~a in$913 ~~active~~thousand ~~secondary~~net ~~markets~~recovery. ~~The~~There ~~Company~~were ~~actively~~no ~~monitors~~non-performing ~~the~~commercial ~~secondary market for these types of~~ loans tosold ~~ensure~~during ~~that it maintains flexibility to sell such loans in~~ the ~~event~~year ofended ~~deteriorating credit quality. To further minimize risk and based on our current capital levels and loan portfolio~~December 31, ~~the Company has limited the total amount of leveraged loans to $150~~2013.~~0 million with no single obligor exceeding $15.0 million while maintaining single industry concentrations below 30%. The Company may reevaluate these limits in future periods.~~

~~The~~Commercial business loans include shared national ~~credit~~credits, ~~loans~~which are ~~typically~~participations ~~variable~~in ~~rate~~loans ~~with~~or ~~terms~~loan ~~ranging~~commitments ~~from~~of ~~one~~at toleast ~~seven~~$20.0 ~~years~~million that are shared by three or more banks. AtIncluded ~~June 30,~~in ~~2014,~~the shared national ~~credits~~credit ~~totaled~~portfolio ~~$93~~are purchased participations and assignments in leveraged lending transactions.1 Leveraged ~~million~~lending transactions are generally used to support a merger- or acquisition-related transaction, ~~which~~to ~~included~~back ~~$54.8~~a ~~million~~recapitalization of a company’s balance sheet or to refinance debt. When considering a participation in the leveraged lending ~~transactions~~market, the Company will participate only in first lien senior secured term loans that are highly rated (investment grade) by the rating agencies and that trade in active secondary markets. ~~All~~The ofCompany actively monitors the secondary market for these types of loans ~~were~~to ~~classified~~ensure asthat ~~pass~~it ~~rated~~maintains asflexibility ~~June 30,~~to ~~2014~~sell assuch ~~all~~loans ~~payments~~in ~~are~~the event of deteriorating credit quality. To further minimize risk and based on our current capital levels and loan portfolio, the ~~loans~~Company ~~are~~has ~~performing~~limited inthe ~~accordance~~total amount of leveraged loans to $150.0 million with ~~their~~no ~~contractual~~single ~~terms~~obligor exceeding $15.0 million while maintaining single industry concentrations below 30%. The Company may reevaluate these limits in future periods.

~~Allowance~~The ~~for~~shared ~~Loan~~national ~~Losses~~credit loans are typically variable rate with terms ranging from one to seven years. At September 30, 2014, shared national credits totaled $153.1 million, which included $99.3 million of leveraged lending transactions. All of these loans were classified as pass rated as of September 30, 2014 as all payments are current and the loans are performing in accordance with their contractual terms.

~~The~~Allowance ~~allowance~~ for ~~loan~~Loan losses is a valuation allowance for probable losses inherent in the loan portfolio. The Company evaluates the appropriateness of the allowance for loan losses balance on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings. The Company’s methodology for assessing the appropriateness of the allowance for loan losses consists of: (1) a specific valuation allowance on identified problem loans; (2) a general valuation allowance on the remainder of the loan portfolio; and (3) an unallocated component. Management established an unallocated reserve to cover uncertainties that the Company believes have resulted in losses that have not yet been allocated to specific elements of the general component. Such factors include uncertainties in economic Losses

13The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. The Company evaluates the appropriateness of the allowance for loan losses balance on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings. The Company’s methodology for assessing the appropriateness of the allowance for loan losses consists of: (1) a specific valuation allowance on identified problem loans; (2) a general valuation allowance on the remainder of the loan portfolio; and (3) an unallocated component. Management established an unallocated reserve to cover uncertainties that the Company believes have resulted in losses that have not yet been allocated to specific elements of the general component. Such factors include uncertainties in economic conditions and in identifying triggering events that directly correlate to subsequent loss rates, changes in appraised value of underlying collateral, risk factors that have not yet manifested themselves in loss allocation factors and historical loss experience data that may not precisely correspond to the current

~~Table of Contents~~14

~~conditions~~Table ~~and in identifying triggering events that directly correlate to subsequent loss rates, changes in appraised value~~ of underlying collateral, risk factors that have not yet manifested themselves in loss allocation factors and historical loss experience data that may not precisely correspond to the current portfolio or economic conditions. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodology for estimating general losses in the portfolio. The appropriate allowance level is estimated based upon factors and trends identified by the Company at the time the consolidated financial statements are prepared. Management continuously evaluates its allowance methodology; however, the unallocated allowance is subject to changes each reporting period.Contents

~~Although~~portfolio ~~the~~or ~~Company~~economic ~~determines~~conditions. ~~the~~The ~~amount~~unallocated ofcomponent ~~each element~~ of the allowance ~~separately,~~reflects the ~~entire~~margin ~~allowance~~of ~~for~~imprecision ~~loan~~inherent ~~losses~~in isthe ~~available~~underlying toassumptions ~~absorb~~used ~~losses~~ in the ~~loan~~methodology ~~portfolio.~~for ~~The~~estimating ~~Company~~general ~~charges-off~~losses in the ~~collateral~~portfolio. orThe ~~discounted~~appropriate ~~cash~~allowance ~~flow~~level ~~deficiency~~is onestimated ~~all~~based ~~loans~~upon atfactors ~~90 days past due~~ and astrends aidentified ~~result,~~by nothe ~~specific~~Company ~~valuation allowance was maintained~~ at ~~June 30,~~the ~~2014~~time orthe ~~December 31,~~consolidated ~~2013~~financial ~~for~~statements ~~non-performing~~are ~~loans~~prepared. ~~The~~ ~~summary~~Management ~~activity~~continuously inevaluates ~~the~~its allowance ~~for loan losses for all portfolios for the six months ended June 30, 2014 and 2013 and for the year ended December 31, 2013, is as follows:~~methodology.

	Six Months Ended						Year Ended
	June 30,						December 31,
(Dollars in thousands)	2014			2013			2013
Balance, beginning of year	$	55,649		$	57,649		$	57,649
Provision for loan losses	1,750			10,000			13,000
Charge-offs	(8,506		)	(10,624		)	(20,337		)
Recoveries	3,731			1,637			5,337
Balance, end of period	$	52,624		$	58,662		$	55,649

Although the Company determines the amount of each element of the allowance separately, the entire allowance for loan losses is available to absorb losses in the loan portfolio. The Company charges-off the collateral or discounted cash flow deficiency on all loans at 90 days past due and as a result, no specific valuation allowance was maintained at September 30, 2014 or December 31, 2013 for non-performing loans. The summary activity in the allowance for loan losses for all portfolios for the nine months ended September 30, 2014 and 2013 and for the year ended December 31, 2013, is as follows:

The following table sets forth the activity in the allowance for loan losses by portfolio for the six months ended June 30, 2014 and the year ended December 31, 2013:

	Nine Months Ended						Year Ended
	September 30,						December 31,
(Dollars in thousands)	2014			2013			2013

Balance, beginning of year	$	55,649		$	57,649		$	57,649
Provision for loan losses	200			11,500			13,000
Charge-offs	(11,419		)	(14,578		)	(20,337		)
Recoveries	7,284			2,289			5,337

Balance, end of period	$	51,714		$	56,860		$	55,649

14The following table sets forth the activity in the allowance for loan losses by portfolio for the nine months ended September 30, 2014 and the year ended December 31, 2013:

Table of Contents

	COMMERCIAL									RESIDENTIAL					CONSUMER
September 30, 2014 (Dollars in thousands)	Real Estate			Business			Construction			Real Estate			Construction		Home Equity & Equity Lines			Personal			Education			Auto			Unallocated		Total
Allowance for credit losses:
Beginning balance	$	22,089		$	19,301		$	3,188		$	2,200		$	—	$	3,133		$	2,687		$	306		$	2,195		$	550	$	55,649
Charge-offs	(5,311		)	(3,822		)	—			(489		)	—		(180		)	(509		)	(76		)	(1,032		)	—		(11,419		)
Recoveries	2,937			2,857			733			87			—		163			66			—			441			—		7,284
Provision	1,286			(862		)	(1,772		)	(76		)	—		238			(256		)	63			1,579			—		200
Allowance ending balance	$	21,001		$	17,474		$	2,149		$	1,722		$	—	$	3,354		$	1,988		$	293		$	3,183		$	550	$	51,714

Allowance ending balance
Individually evaluated for impairment(1)	$	—		$	—		$	—		$	—		$	—	$	—		$	—		$	—		$	—		$	—	$	—
Collectively evaluated for impairment	21,001			17,474			2,149			1,722			—		3,354			1,988			293			3,183			550		51,714
Loans acquired with deteriorated credit quality(1)	—			—			—			—			—		—			—			—			—			—		—
Total Allowance	$	21,001		$	17,474		$	2,149		$	1,722		$	—	$	3,354		$	1,988		$	293		$	3,183		$	550	$	51,714

Loans receivable:
Ending balance
Individually evaluated for impairment(1)	$	19,109		$	1,980		$	402		$	11,521		$	271	$	1,591		$	167		$	—		$	163		$	—	$	35,204
Collectively evaluated for impairment	615,276			389,726			54,840			656,373			—		224,746			31,516			199,153			181,580			—		2,353,210
Loans acquired with deteriorated credit quality(1)	—			113			84			186			—		—			—			—			—			—		383
Total Portfolio	$	634,385		$	391,819		$	55,326		$	668,080		$	271	$	226,337		31,683			$	199,153		$	181,743		$	—	$	2,388,797

	COMMERCIAL									RESIDENTIAL					CONSUMER
June 30, 2014 (Dollars in thousands)	Real Estate			Business			Construction			Real Estate			Construction		Home Equity & Equity Lines			Personal			Education			Auto			Unallocated		Total
Allowance for credit losses:
Beginning balance	$	22,089		$	19,301		$	3,188		$	2,200		$	—	$	3,133		$	2,687		$	306		$	2,195		$	550	$	55,649
Charge-offs	(3,434		)	(3,669		)	—			(372		)	—		(119		)	(183		)	(54		)	(675		)	—		(8,506		)
Recoveries	2,348			421			422			58			—		139			39			—			304			—		3,731
Provision (credit)	1,097			1,940			(1,403		)	100			—		(230		)	(436		)	29			653			—		1,750
Allowance ending balance	$	22,100		$	17,993		$	2,207		$	1,986		$	—	$	2,923		$	2,107		$	281		$	2,477		$	550	$	52,624
Allowance ending balance
Individually evaluated for impairment(1)	$	—		$	—		$	—		$	—		$	—	$	—		$	—		$	—		$	—		$	—	$	—
Collectively evaluated for impairment	22,100			17,993			2,207			1,986			—		2,923			2,107			281			2,477			550		52,624
Loans acquired with deteriorated credit quality(1)	—			—			—			—			—		—			—			—			—			—		—
Total Allowance	$	22,100		$	17,993		$	2,207		$	1,986		$	—	$	2,923		$	2,107		$	281		$	2,477		$	550	$	52,624
Loans receivable:
Ending balance
Individually evaluated for impairment(1)	$	22,910		$	9,941		$	1,437		$	12,243		$	130	$	1,578		$	163		$	—		$	171		$	—	$	48,573
Collectively evaluated for impairment	610,918			369,280			40,723			662,525			144		223,210			34,728			201,846			176,980			—		2,320,354
Loans acquired with deteriorated credit quality(1)	—			111			111			186			—		—			—			—			—			—		408
Total Portfolio	$	633,828		$	379,332		$	42,271		$	674,954		$	274	$	224,788		$	34,891		$	201,846		$	177,151		$	—	$	2,369,335

(1) Loans acquired with deteriorated credit quality and loans modified under a troubled debt restructuring that are performing in accordance with their modified terms and have been returned to accrual status are evaluated on an individual basis.

15Table of Contents

Table of Contents

	COMMERCIAL									RESIDENTIAL						CONSUMER
December 31, 2013 (Dollars in thousands)	Real Estate			Business			Construction			Real Estate			Construction			Home Equity & Equity Lines			Personal			Education			Auto			Unallocated		Total
Allowance for credit losses:
Beginning balance	$	21,994		$	18,088		$	8,242		$	2,293		$	142		$	2,397		$	2,062		$	303		$	1,578		$	550	$	57,649
Charge-offs	(7,795		)	(5,340		)	(3,539		)	(836		)	(215		)	(740		)	(654		)	(105		)	(1,113		)	—		(20,337		)
Recoveries	1,785			902			1,058			430			—			255			182			—			725			—		5,337
Provision	6,105			5,651			(2,573		)	313			73			1,221			1,097			108			1,005			—		13,000
Allowance ending balance	$	22,089		$	19,301		$	3,188		$	2,200		$	—		$	3,133		$	2,687		$	306		$	2,195		$	550	$	55,649

Allowance ending balance
Individually evaluated for impairment(1)	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—	$	—
Collectively evaluated for impairment	22,089			19,301			3,188			2,200			—			3,133			2,687			306			2,195			550		55,649
Loans acquired with deteriorated credit quality(1)	—			—			—			—			—			—			—			—			—			—		—
Total Allowance	$	22,089		$	19,301		$	3,188		$	2,200		$	—		$	3,133		$	2,687		$	306		$	2,195		$	550	$	55,649

Loans receivable:
Ending balance
Individually evaluated for impairment(1)	$	28,027		$	26,022		$	2,518		$	12,827		$	130		$	1,120		$	107		$	—		$	151		$	—	$	70,902
Collectively evaluated for impairment	555,998			352,641			35,345			670,686			147			233,034			40,785			206,521			175,249			—		2,270,406
Loans acquired with deteriorated credit quality(1)	108			—			204			187			—			—			—			—			—			—		499
Total Portfolio	$	584,133		$	378,663		$	38,067		$	683,700		$	277		$	234,154		$	40,892		$	206,521		$	175,400		$	—	$	2,341,807

	COMMERCIAL									RESIDENTIAL						CONSUMER
December 31, 2013 (Dollars in thousands)	Real Estate			Business			Construction			Real Estate			Construction			Home Equity & Equity Lines			Personal			Education			Auto			Unallocated		Total
Allowance for credit losses:
Beginning balance	$	21,994		$	18,088		$	8,242		$	2,293		$	142		$	2,397		$	2,062		$	303		$	1,578		$	550	$	57,649
Charge-offs	(7,795		)	(5,340		)	(3,539		)	(836		)	(215		)	(740		)	(654		)	(105		)	(1,113		)	—		(20,337		)
Recoveries	1,785			902			1,058			430			—			255			182			—			725			—		5,337
Provision (credit)	6,105			5,651			(2,573		)	313			73			1,221			1,097			108			1,005			—		13,000
Allowance ending balance	$	22,089		$	19,301		$	3,188		$	2,200		$	—		$	3,133		$	2,687		$	306		$	2,195		$	550	$	55,649
Allowance ending balance
Individually evaluated for impairment(1)	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—	$	—
Collectively evaluated for impairment	22,089			19,301			3,188			2,200			—			3,133			2,687			306			2,195			550		55,649
Loans acquired with deteriorated credit quality(1)	—			—			—			—			—			—			—			—			—			—		—
Total Allowance	$	22,089		$	19,301		$	3,188		$	2,200		$	—		$	3,133		$	2,687		$	306		$	2,195		$	550	$	55,649
Loans receivable:
Ending balance
Individually evaluated for impairment(1)	$	28,027		$	26,022		$	2,518		$	12,827		$	130		$	1,120		$	107		$	—		$	151		$	—	$	70,902
Collectively evaluated for impairment	555,998			352,641			35,345			670,686			147			233,034			40,785			206,521			175,249			—		2,270,406
Loans acquired with deteriorated credit quality(1)	108			—			204			187			—			—			—			—			—			—		499
Total Portfolio	$	584,133		$	378,663		$	38,067		$	683,700		$	277		$	234,154		$	40,892		$	206,521		$	175,400		$	—	$	2,341,807

~~The~~Table ~~provision for loan losses charged to expense is based upon past loan loss experience and an evaluation~~ of estimated losses in the current loan portfolio, including the evaluation of impaired loans under FASB ASC Topic 310 for Loans and Debt Securities. Under FASB ASC Topic 310 for Receivables, for all loan segments a loan is considered to be impaired when, based upon current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan. An insignificant delay or insignificant shortfall in amount of payments does not necessarily result in the loan being identified as impaired. When all or a portion of the loan is deemed uncollectible, the uncollectible portion is charged-off. The measurement is based either on the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral if the loan is collateral dependent. Most of the Company’s commercial loans are collateral dependent and, therefore, the Company uses the value of the collateral to measure the loss. Any collateral or discounted cash flow deficiency for loans that are 90 days past due are charged-off. Impairment losses are included in the provision for loan losses. Large groups of homogeneous loans are collectively evaluated for impairment, except for those loans restructured under a troubled debt restructuring.Contents

~~Classified~~The provision for loan losses charged to expense is based upon past loan loss experience and an evaluation of estimated losses in the current loan portfolio, including the evaluation of impaired loans under FASB ASC Topic 310 for Loans and Debt Securities. Under FASB ASC Topic 310 for Receivables, for all loan segments a loan is considered to be impaired when, based upon current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan. An insignificant delay or insignificant shortfall in amount of payments does not necessarily result in the loan being identified as impaired. When all or a portion of the loan is deemed uncollectible, the uncollectible portion is charged-off. The measurement is based either on the fair value of the collateral if the loan is collateral dependent, the liquidation value, or the present value of expected future cash flows discounted at the loan’s effective interest rate. Most of the Company’s commercial loans are collateral dependent and, therefore, the Company uses the value of the collateral to measure the loss. Any collateral or discounted cash flow deficiency for loans that are 90 days past due are charged-off. Impairment losses are included in the provision for loan losses. Large groups of homogeneous loans are collectively evaluated for impairment, except for those loans restructured under a troubled debt restructuring.

~~The~~Classified Bank’s credit review process includes a risk classification of all commercial and residential loans that includes pass, special mention, substandard and doubtful. The classification of a loan may change based on changes in the creditworthiness of the borrower. The description of the risk classifications are as follows:Loans

AThe loan is classified as pass when payments are current and it is performing under the original contractual terms. A loan is classified as special mention when the borrower exhibits potential credit weakness or a downward trend which, if not checked or corrected, will weaken the asset or inadequately protect the Bank’s ~~position. While~~credit ~~potentially~~review ~~weak,~~process ~~the~~includes ~~borrower is currently marginally acceptable; no loss of principal or interest is envisioned. A loan is classified as substandard when the borrower has~~ a ~~well-defined~~risk ~~weakness~~classification ~~or weaknesses that jeopardize the orderly liquidation~~ of ~~the~~all ~~debt.~~commercial ~~A substandard loan is inadequately protected by the current net worth~~ and ~~paying~~residential ~~capacity~~loans ofthat ~~the~~includes ~~obligor~~pass, ~~normal~~special ~~repayment from this borrower is in jeopardy~~mention, ~~and~~substandard ~~there is a distinct possibility that a partial loss of interest~~ and~~/or~~ ~~principal will occur if the deficiencies are not corrected~~doubtful. The Aclassification ~~loan~~of ~~is classified as doubtful when~~ a ~~borrower has all weaknesses inherent in a~~ loan ~~classified~~may aschange ~~substandard~~based ~~with~~on ~~the~~changes ~~added provision that: (1) the weaknesses make collection of debt~~ in ~~full on~~ the ~~basis~~creditworthiness of ~~currently existing facts, conditions and values highly questionable and improbable; (2) serious problems exist to~~ the ~~point~~borrower. ~~where~~The adescription ~~partial loss~~ of ~~principal is likely; and (3)~~ the ~~possibility~~risk ofclassifications ~~loss~~are ~~is extremely high, but because of certain important, reasonably specific pending factors which may work to the advantage and strengthening of the assets, its classification~~ as ~~an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation~~ follows:

16A loan is classified as pass when payments are current and it is performing under the original contractual terms. A loan is classified as special mention when the borrower exhibits potential credit weakness or a downward trend which, if not checked or corrected, will weaken the asset or inadequately protect the Bank’s position. While potentially weak, the borrower is currently marginally acceptable; no loss of principal or interest is envisioned. A loan is classified as substandard when the borrower has a well-defined weakness or weaknesses that jeopardize the orderly liquidation of the debt. A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor, normal repayment from this borrower is in jeopardy, and there is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. A loan is classified as doubtful when a borrower has all weaknesses inherent in a loan classified as substandard with the added provision that: (1) the weaknesses make collection of debt in full on the basis of currently existing facts, conditions and values highly questionable and improbable; (2) serious problems exist to the point where a partial loss of principal is likely; and (3) the possibility of loss is extremely high, but because of certain important, reasonably specific pending factors which may work to the advantage and strengthening of the assets, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens and additional refinancing plans. The Company charges-off the collateral or discounted cash flow deficiency on all loans classified as substandard or worse. In all cases,

~~Table of Contents~~17

~~procedures,~~Table capital injection, perfecting liens and additional refinancing plans. The Company charges-off the collateral or discounted cash flow deficiency on all loans classified as substandard or worse. In all cases, loans are placed on non-accrual when 90 days past due or earlier if collection of ~~principal or interest is considered doubtful.~~Contents

~~The~~loans ~~following~~are ~~tables~~placed ~~set~~on ~~forth~~non-accrual ~~the~~when ~~amounts~~90 ~~and~~days ~~percentage~~past ofdue ~~the~~or ~~portfolio~~earlier ofif ~~classified~~collection ~~asset~~of ~~categories~~principal ~~for~~or ~~the~~interest ~~commercial~~is ~~and~~considered ~~residential loan portfolios at June 30, 2014 and December 31, 2013:~~doubtful.

~~Commercial~~The following tables set forth the amounts and ~~Residential~~percentage ~~Loans~~of the portfolio of classified asset categories for the commercial and residential loan portfolios at September 30, 2014 and December 31, 2013:

~~Credit~~Commercial ~~Risk~~and ~~Internally~~Residential ~~Assigned~~Loans

~~(Dollars~~Credit inRisk ~~thousands)~~Internally Assigned

	June 30, 2014
	Commercial				Commercial				Commercial				Residential				Residential
	Real Estate				Business				Construction				Real Estate				Construction				Total
Grade
Pass	$	573,643	91	%	$	354,418	93	%	$	38,413	91	%	$	669,515	99	%	$	144	53	%	$	1,636,133	94	%
Special Mention	28,297		4	%	3,426		1	%	1,545		4	%	—		—	%	—		—	%	33,268		2	%
Substandard	31,888		5	%	21,488		6	%	2,313		5	%	5,439		1	%	130		47	%	61,258		4	%
Doubtful	—		—	%	—		—	%	—		—	%	—		—	%	—		—	%	—		—	%
Total	$	633,828	100	%	$	379,332	100	%	$	42,271	100	%	$	674,954	100	%	$	274	100	%	$	1,730,659	100	%

(Dollars in thousands)

	December 31, 2013
	September 30, 2014
	Commercial				Commercial				Commercial				Residential				Residential
	Real Estate				Business				Construction				Real Estate				Construction				Total
Grade
Pass	$	~~511~~590,~~527~~525	8893	%	$	~~318~~369,~~190~~110	8494	%	$	3252,~~719~~433	8695	%	$	~~675~~662,~~667~~844	99	%	$	~~147~~141	5352	%	$	1,~~538~~675,~~250~~053	9196	%
Special Mention	2528,~~806~~756		45	%	219,~~714~~546		62	%	21,~~006~~536		53	%	—		—	%	—		—	%	4939,~~526~~838		32	%
Substandard	4615,~~800~~104		82	%	3813,~~759~~163		104	%	31,~~342~~357		92	%	85,~~033~~236		1	%	130		4748	%	9734,~~064~~990		62	%
Doubtful	—		—	%	—		—	%	—		—	%	—		—	%	—		—	%	—		—	%
Total	$	~~584~~634,~~133~~385	100	%	$	~~378~~391,~~663~~819	100	%	$	3855,~~067~~326	100	%	$	~~683~~668,~~700~~080	100	%	$	~~277~~271	100	%	$	1,~~684~~749,~~840~~881	100	%

The Bank’s credit review process is based on payment history for all consumer loans. The collateral deficiency on consumer loans is charged-off when they become 90 days delinquent with the exception of education loans which are guaranteed by the U.S. government. The following tables set forth the consumer loan risk profile based on payment activity as of June 30, 2014 and December 31, 2013:

	December 31, 2013
	Commercial				Commercial				Commercial				Residential				Residential
	Real Estate				Business				Construction				Real Estate				Construction				Total
Grade
Pass	$	511,527	88	%	$	318,190	84	%	$	32,719	86	%	$	675,667	99	%	$	147	53	%	$	1,538,250	91	%
Special Mention	25,806		4	%	21,714		6	%	2,006		5	%	—		—	%	—		—	%	49,526		3	%
Substandard	46,800		8	%	38,759		10	%	3,342		9	%	8,033		1	%	130		47	%	97,064		6	%
Doubtful	—		—	%	—		—	%	—		—	%	—		—	%	—		—	%	—		—	%
Total	$	584,133	100	%	$	378,663	100	%	$	38,067	100	%	$	683,700	100	%	$	277	100	%	$	1,684,840	100	%

17The Bank’s credit review process is based on payment history for all consumer loans. The collateral deficiency on consumer loans is charged-off when they become 90 days delinquent with the exception of education loans which are guaranteed by the U.S. government. The following tables set forth the consumer loan risk profile based on payment activity as of September 30, 2014 and December 31, 2013:

~~Table of Contents~~18

~~Consumer~~Table ~~Credit~~of ~~Exposure~~Contents

Consumer Credit ~~Risk Profile Based on Payment Activity~~Exposure

~~(Dollars~~Credit inRisk ~~thousands)~~Profile Based on Payment Activity

	June 30, 2014
	Home Equity & Lines of Credit				Personal				Education				Auto				Total
Performing	$	223,306	99	%	$	34,741	100	%	$	185,027	92	%	$	176,980	100	%	$	620,054	97	%
Non-performing	1,482		1	%	150		—	%	16,819		8	%	171		—	%	18,622		3	%
Total	$	224,788	100	%	$	34,891	100	%	$	201,846	100	%	$	177,151	100	%	$	638,676	100	%

(Dollars in thousands)

	December 31, 2013
	September 30, 2014
	Home Equity & Lines of Credit				Personal				Education				Auto				Total
Performing	$	~~233~~224,~~201~~904	~~100~~99	%	$	4031,~~785~~527	100	%	$	~~182~~178,~~111~~233	8889	%	$	~~175~~181,~~249~~580	100	%	$	~~631~~616,~~346~~244	96	%
Non-performing	~~953~~1,433		—1	%	~~107~~156		—	%	2420,~~410~~920		1211	%	~~151~~163		—	%	2522,~~621~~672		4	%
Total	$	~~234~~226,~~154~~337	100	%	$	4031,~~892~~683	100	%	$	~~206~~199,~~521~~153	100	%	$	~~175~~181,~~400~~743	100	%	$	~~656~~638,~~967~~916	100	%

Loans Acquired with Deteriorated Credit Quality

	December 31, 2013
	Home Equity & Lines of Credit				Personal				Education				Auto				Total
Performing	$	233,201	100	%	$	40,785	100	%	$	182,111	88	%	$	175,249	100	%	$	631,346	96	%
Non-performing	953		—	%	107		—	%	24,410		12	%	151		—	%	25,621		4	%
Total	$	234,154	100	%	$	40,892	100	%	$	206,521	100	%	$	175,400	100	%	$	656,967	100	%

~~The~~Loan ~~outstanding~~Delinquencies ~~principal balance~~ and ~~related carrying amount of loans acquired with deteriorated credit quality, for which the Company applies the provisions of ASC 310~~Non-~~30,~~accrual ~~as of June 30, 2014, are as follows:~~Loans

	June 30,
(Dollars in thousands)	2014
Outstanding principal balance	$	829
Carrying amount	408

The Company monitors the past due and non-accrual status of loans in determining the loss classification, impairment status and the allowance for loan losses. Generally, all loans past due 90 days or more are put on non-accrual status. Education loans greater than 90 days delinquent continue to accrue interest as they are U.S. government guaranteed with little risk of credit loss.

~~Loan~~The ~~Delinquencies~~following tables provide information about delinquent and ~~Non~~non-accrual ~~Loans~~loans in the Company’s portfolio at the dates indicated:

~~The~~Table ~~following~~of ~~tables provide information about delinquent and non-accrual loans in the Company’s portfolio at the dates indicated:~~Contents

18Aged Analysis of Past Due and Non-accrual Financing Receivables

~~Table~~As of ~~Contents~~September 30, 2014

Aged Analysis of Past Due and Non-accrual Financing Receivables

Recorded

30-59

60-89

> 90

Investment

Days

Total

>90 Days

Past

Financing

And

Non-

(Dollars in thousands)

Due

Current

Receivables

Accruing

Commercial:

As of June 30, 2014

Commercial real estate	$	—	—	%	$	—	—	%	$	1,618	6	%	$	1,618	3	%	$	632,767	27	%	$	634,385	27	%	$	—	$	2,762	20	%
Commercial business loans	43		—	%	—		—	%	723		3	%	766		1	%	391,053		17	%	391,819		16	%	—		1,062		7	%
Commercial construction	—		—	%	—		—	%	402		1	%	402		—	%	54,924		2	%	55,326		2	%	—		402		3	%
Total commercial	$	43	—	%	$	—	—	%	$	2,743	10	%	$	2,786	4	%	$	1,078,744	46	%	$	1,081,530	45	%	$	—	$	4,226	30	%

Residential:
Residential real estate	$	1,665	9	%	$	254	2	%	$	3,193	12	%	$	5,112	10	%	$	662,968	28	%	$	668,080	28	%	$	—	$	8,180	57	%
Residential construction	—		—	%	—		—	%	271		1	%	271		—	%	—		—	%	271		—	%	—		271		1	%
Total residential	$	1,665

Filing Compare · Beneficial Mutual Bancorp Inc