Forward-Looking Statements

This quarterly report contains forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiary include, but are not limited to, changes in interest rates, national and regional economic conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Company's market area, changes in real estate market values in the Company's market area, changes in relevant accounting principles and guidelines and the inability of third party service providers to perform.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, the Company does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

In the preparation of our consolidated financial statements, we have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States.

Certain accounting policies involve significant judgments and assumptions by us that have a material impact on the carrying value of certain assets and liabilities. We consider these accounting policies to be critical accounting policies. The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of operations.

Critical Accounting Policies

Allowance for Loan Losses - The allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Among the material estimates required to establish the allowance are:
overall economic conditions; value of collateral; strength of guarantors; loss exposure at default; the amount and timing of future cash flows on impacted loans; and determination of loss factors to be applied to the various elements of the portfolio. All of these estimates are subject to significant change. The Company estimates that a 10 percent increase in the loss factors used on the loan portfolio would increase the allowance for loan losses at September 30, 2009 by approximately $2.9 million, of which $0.6 million would relate to consumer loans, $1.8 million to commercial loans and $0.5 million to residential mortgage loans. These sensitivity analyses do not represent management's expectations of the increase in loss factors, but are provided as hypothetical scenarios to assess the sensitivity of the allowance for loan losses to change in key inputs. We believe the loss factors currently in use are appropriate in order to evaluate the allowance for loan losses at the balance sheet dates. The process of determining the level of the allowance for loan losses requires a high degree of judgment. It is possible that others, given the same information, may at any point in time reach different reasonable conclusions.

Management reviews the level of the allowance at least quarterly and establishes the provision for loan losses based upon an evaluation of the portfolio, past loss experience, current economic conditions and other factors related to the collectability of the loan portfolio. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the Federal Deposit Insurance Corporation and the Pennsylvania Department of Banking, as an integral part of their examination process, periodically review our allowance for loan losses. Such agencies may require us to recognize adjustments to the allowance based on judgments about information available to them at the time of the examination. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings.

Income Taxes - The Company estimates income tax expense based on amounts expected to be owed to the various tax jurisdictions in which the Company conducts business. On a quarterly basis, management assesses the reasonableness of its effective tax rate based upon its current estimate of the amount and components of net income, tax credits and the applicable statutory tax rates expected for the full year. The estimated income tax expense is recorded in the Consolidated Statement of Operations.

The Company uses the asset and liability method of accounting for income taxes as prescribed in FASB ASC Topic 740 for Income Taxes. Under this method, deferred tax assets and tax liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and tax liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company exercises significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and tax assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance would result in additional income tax expense in the period, which would negatively affect earnings.

Goodwill and Intangible Assets - Net assets of companies acquired in purchase transactions are recorded at fair value at the date of acquisition and, as such, the historical cost basis of individual assets and liabilities are adjusted to reflect their fair value. Identified intangibles are amortized on an accelerated or straight-line basis over the period benefited. Goodwill is not amortized but is reviewed for potential impairment on an annual basis, or if events or circumstances indicate a potential impairment, at the reporting unit level. The impairment test is performed in two phases. The first step of the goodwill impairment test compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however, if the carrying amount of the reporting unit exceeds its fair value, an additional procedure must be performed. That additional procedure compares the implied fair value of the reporting unit's goodwill (as defined in FASB ASC Topic 350 for Intangibles - Goodwill and Other) with the carrying amount of that goodwill. An impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value. The Company performed an impairment test during the quarter ended September 30, 2009 and recorded a charge of $1.0 million for impairment of goodwill relating to the Bank's insurance brokerage subsidiary.

Other intangible assets subject to amortization are evaluated for impairment in accordance with authoritative guidance. An impairment loss will be recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of the intangible is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. Intangible assets included customer relationships and other related intangibles that are amortized on a straight-line basis using estimated lives of nine to 13 years for customer relationships and two to four years for other intangibles. At September 30, 2009 no impairment was recorded for intangible assets.

Background and Overview

The Company is a community-based, diversified financial services company providing consumer and commercial banking services. Its principal subsidiary, Beneficial Bank (the "Bank"), has served individuals and businesses in the Delaware Valley area for more than 155 years. The Company is the oldest and largest bank headquartered in Philadelphia, Pennsylvania with 68 offices in the greater Philadelphia and Southern New Jersey regions. During the second quarter of 2009, the Company consolidated four branches. Each of the affected offices has another Beneficial branch within at least a 1.4 mile radius. During the third quarter of 2009, the Bank relocated one branch to a new building in New Jersey. Insurance services are offered through Beneficial Insurance Services, LLC and wealth management services are offered through Beneficial Advisors, LLC, both wholly owned subsidiaries of the Bank.

Comparison of Financial Condition at September 30, 2009 and December 31, 2008

Total assets increased $443.0 million, or 11.1%, to $4.4 billion at September 30, 2009 from $4.0 billion at December 31, 2008. The increase in total assets was primarily due to increases in net loans outstanding of $320.5 million, an increase in cash and cash equivalents of $104.0 million and an increase of $27.3 million in investment securities; offset by a decrease in other assets of $9.5 million and a decrease in bank premises and equipment of $1.1 million for the nine months ended September 30, 2009. Total deposits increased $540.5 million, or 19.7%, to $3.3 billion at September 30, 2009 compared to $2.7 billion at December 31, 2008. The largest contributor to this increase was growth in core deposits of $617.8 million to $2.3 billion at September 30, 2009 from $1.7 billion at December 31, 2008. Interest bearing deposits increased $536.1 million, or 21.3%, to $3.1 billion at September 30, 2009 from $2.5 billion at December 31, 2008 and non-interest bearing deposits increased $4.5 million to $230.9 million at September 30, 2009 from $226.4 million at December 31, 2008. Stockholders' equity increased $24.7 million, or 4.1%, to $635.3 million at September 30, 2009 compared to $610.5 million at December 31, 2008. The increase in stockholders' equity resulted primarily from increased earnings for the nine months ended September 30, 2009 and an increase in accumulated other comprehensive income of $13.1 million related to an increase in unrealized gains in available-for-sale securities.

Comparison of Operating Results for the Three Months Ended September 30, 2009 and September 30, 2008

General - The Company recorded net income of $5.8 million, or $0.07 per share, for the three months ended September 30, 2009, compared to net income of $4.3 million, or $0.05 per share, for the same period in 2008. The increase in net income was primarily the result of a reduction in the provision for loan losses of $1.2 million and an increase of $3.6 million in net interest income, partially offset by a $1.0 million impairment charge to goodwill relating to the Company's insurance brokerage subsidiary.

Net Interest Income - The Company's net interest income increased $3.6 million, or 12.3%, to $32.7 million for the three months ended September 30, 2009 from $29.1 million for the same period in 2008. Total interest income increased $0.4 million to $48.4 million for the three months ended September 30, 2009 from the same period in 2008. This was due to an increase in average interest earning assets of $0.5 billion to $4.3 billion for the three months ended September 30, 2009 from the same period in 2008 and a decrease in the average yield on interest earning assets of 63 basis points to 5.00% for the three months ended September 30, 2009 compared to 5.63% for the same period in 2008. Total interest expense decreased $3.2 million to $15.8 million for the three months ended September 30, 2009 from the same period in 2008. This was partially due to a decrease in average time deposits of $43.5 million for the three months ended September 30, 2009. The resulting cost on interest bearing liabilities decreased 77 basis points from 2.64% for the three months ended September 30, 2008 to 1.87% for the three months ended September 30, 2009.

Provision for Loan Losses - The Bank recorded a provision for loan losses of $2.0 million during the three months ended September 30, 2009, a decrease from a provision of $3.2 million recorded for the same three-month period in 2008. The allowance for loan losses at September 30, 2009 totaled $42.7 million, or 1.55% of total loans outstanding, compared to $25.2 million, or 1.09% of total loans outstanding, at September 30, 2008. The provision for loan losses was determined by management to be an appropriate amount to maintain a balance of allowance for loan losses at a level necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimable at the balance sheet date.

Non-interest Income - Non-interest income of $6.5 million remained relatively unchanged from the three months ended September 30, 2008, as the $1.3 million increase in gains on sale of investment securities available for sale, net of impairment charges, was offset by a decline in insurance commission and related income of $0.9 million and a decline in service charges and other income of $0.4 million. As a result of an evaluation of unrealized losses on securities due to the current interest rate levels relative to the Company's cost and near term prospects of the issuers in relation to the severity of the decline, the Company recorded an other-than- temporary impairment charge of $0.2 million during the three months ended September 30, 2009 compared to an impairment charge of $0.3 million for the three months ended September 30, 2008. Insurance commission income decreased during the three months ended September 30, 2009 to $1.8 million compared to $2.7 million during the same three months of 2008, primarily as a result of the overall economic environment.

Non-interest Expense - Non-interest expense increased $3.9 million, or 14.6%, to $30.5 million during the three months ended September 30, 2009 compared to $26.6 million during the same period in 2008. The increase was primarily due to an increase in FDIC deposit insurance expense of $1.0 million, the recording of a non-cash charge of $1.0 million for impairment of goodwill related to the Bank's insurance brokerage subsidiary and an increase in salaries and employee benefits of $0.6 million during the three months ended September 30, 2009. Amortization of intangibles expense decreased $14.0 thousand to $0.9 million for the three months ended September 30, 2009 from the same period in 2008. The core deposit intangible is being amortized on an accelerated basis resulting in a decrease in amortization expense.

Income Taxes - Income tax expense totaled $0.8 million for the three months ended September 30, 2009, reflecting an effective tax rate of 12.1%, compared to income tax expense of $1.4 million, reflecting an effective tax rate of 24.5%, for the same period in 2008. The decrease was primarily due to increases in tax exempt investments, projected increases in income tax credits related to affordable housing investments and a reduction to the valuation allowance related to capital losses.

The income tax rates differ from the statutory rate of 35% principally because of tax-exempt investments, non-taxable income related to bank-owned life insurance, bank-qualified tax exempt investments and tax credits received on low income housing partnerships. These tax credits relate to investments maintained by the Bank as a limited partner in partnerships that sponsor affordable housing projects utilizing low-income housing credits pursuant to Section 42 of the Internal Revenue Code.

The following table summarizes average balances and average yields and costs for the three-month periods ended September 30, 2009 and 2008.

(Dollars in thousands)
                                      Three Months Ended                            Three Months Ended
                                      September 30, 2009                            September 30, 2008
                                            Interest                                      Interest
                             Average           And          Yield/         Average           And          Yield/
                             Balance        Dividends        Cost          Balance        Dividends        Cost
Assets:
Interest-bearing demand
deposits                   $     2,624     $         2          0.35 %   $       696     $         4          2.30 %
Loans                        2,744,443          36,244          5.29       2,270,019          33,563          5.91
Investment securities          181,346           1,553          3.43         170,252           1,576          3.70
Mortgage-backed
securities                     730,702           9,063          4.96         793,782          10,727          5.41
Collateralized mortgage
obligations                    134,073           1,487          4.44         180,208           2,196          4.87
Other interest-earning
assets                          85,184              90          0.42           3,441              14          1.63
Total interest-earning
assets                       3,878,372          48,439          5.00       3,418,398          48,080          5.63
Non-interest earning
assets                         461,015                                       349,442
Total assets               $ 4,339,387     $    48,439                   $ 3,767,840     $    48,080

Liabilities and
stockholders' equity:
Interest-earning
checking accounts          $   887,801     $     2,319          1.04     $   448,102     $     1,410          1.26
Money market accounts          626,934           1,866          1.18         519,729           3,157          2.43
Savings accounts               426,152             649          0.60         403,620             699          0.69
Time deposits                  961,621           6,176          2.55       1,005,091           8,748          3.48
Total interest-bearing
deposits                     2,902,508          11,010          1.50       2,376,542          14,014          2.36

Federal Home Loan Bank
advances                       174,750           1,865          4.23         205,589           2,029          3.95
Repurchase agreements          240,000           2,692          4.45         216,685           2,375          4.38
Statutory Trust
Debentures                      25,293             146          2.31          25,275             292          4.62
Other borrowings                 3,570              46          5.15          50,595             279          2.21
Total interest-bearing
liabilities                  3,346,121          15,759          1.87       2,874,686          18,989          2.64
Non-interest-bearing
deposits                       267,218                                       254,299
Other
non-interest-bearing
liabilities                    101,052                                        28,486
Total liabilities            3,714,391          15,759                     3,157,471          18,989

Total stockholders'
equity                         624,996                                       610,369
Total liabilities and
stockholders' equity       $ 4,339,387                                   $ 3,767,840

Net interest income                        $    32,680                                   $    29,091

Interest rate spread                                            3.13 %                                        2.99 %

Net interest margin                                             3.39 %                                        3.41 %
Average interest-earning
assets to average
interest-bearing
liabilities                                                   115.91 %                                      118.91 %

Comparison of Operating Results for the Nine Months Ended September 30, 2009 and September 30, 2008

General - The Company recorded net income of $10.9 million, or $0.14 per share, for the nine months ended September 30, 2009 compared to net income of $19.5 million, or $0.25 per share, for the comparable period in 2008. During the second quarter of 2008, the Company recorded a non-recurring curtailment gain related to pension plan modifications. The pre-tax impact of this curtailment gain was $7.3 million.

Net Interest Income - For the nine months ended September 30, 2009 net interest income increased $8.3 million, or 9.9%, to $92.6 million. This increase was due primarily to an increase in interest and fees on loans and a decrease in interest expense related to money market, savings and time deposits. The net interest margin was 3.27% for the nine months ended September 30, 2009, a 7 basis point decrease from the same period in 2008.

Provision for Loan Losses - Total charge-offs during the nine months ended September 30, 2009 were $7.0 million, or 0.27% of average loans outstanding, compared to the $4.4 million, or 0.20% of average loans outstanding, as reported for the nine-month period ended September 30, 2008. Net charge-offs during the nine months ended September 30, 2009 included the charge-off of several loans to one borrower during the first quarter of 2009 totaling $1.5 million, a $1.2 million land development loan and $1.3 million related to consumer loans.

The provision for loan losses was $12.1 million for the nine months ended September 30, 2009, compared to $5.8 million for the same period in 2008. The provision includes $8.9 million related to specific commercial loans, with the remainder related to portfolio growth and the ongoing evaluation of risk factors applied to the loan portfolio, reflecting the continued weakness in the economic environment during the quarter. The icnrease in the provision for loan losses in the 2009 period compared to the same period in 2008 was determined by management to be an amount necessary to maintain a balance of allowance for loan losses at a level necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimable at the balance sheet date.

Non-interest Income - Non-interest income increased $0.9 million, or 4.5%, to $20.6 million for the nine months ended September 30, 2009 compared to $19.7 million for the same period in 2008. The increase in non-interest income was due to an increase in net gain on the sale of investment securities available for sale of $5.1 million, partially offset by a decline in insurance commission and related income of $1.6 million for nine month period ended September 30, 2009 from the same period in 2008.

Non-interest Expense - Non-interest expense increased $17.5 million, or 24.6%, to $88.7 million for the nine months ended September 30, 2009 from $71.2 million during the same period in 2008. The increase was primarily due to increases in expense related to the FDIC deposit insurance assessments of $4.1 million, increases in salaries and employee benefits of $2.8 million and the non-cash expense of $1.0 million related to impairment of goodwill, in addition to a pension curtailment gain of $7.3 million recorded during the nine months ended September 30, 2008.

Income Taxes - Income tax expense was $1.5 million for the six months ended September 30, 2009, reflecting an effective tax rate of 12.0%, compared income tax expense of $7.6 million, reflecting an effective tax rate of 27.9% for the same period in 2008. The decrease was due primarily to a decrease in income before income taxes of $14.6 million to $12.4 million for the nine months ended September 30, 2009, as well as increases in tax exempt investment, projected increases in income tax credits related to affordable housing investments and a reduction to the valuation allowance related to capital losses.

The tax rates differ from the statutory rate of 35% principally because of tax-exempt investments, non-taxable income related to bank-owned life insurance, bank-qualified tax exempt investments and tax credits received on low income housing partnerships. These credits relate to investments maintained by the Bank as a limited partner in partnerships that sponsor affordable housing projects utilizing low-income housing credits pursuant to Section 42 of the Internal Revenue Code.

The following table summarizes average balances and average yields and costs for the nine-month periods ended September 30, 2009 and 2008.

(Dollars in thousands)               Nine Months Ended                            Nine Months Ended
                                     September 30, 2009                           September 30, 2008
                                           Interest                                     Interest
                            Average          And          Yield/         Average          And          Yield/
                            Balance       Dividends        Cost          Balance       Dividends        Cost
Assets:
Interest-bearing demand
deposits                  $     1,965     $        7          0.48 %   $     3,626     $       65          2.39 %
Loans                       2,608,751        103,522          5.30       2,199,299         98,755          5.99
Investment securities         142,633          3,776          3.53         214,843          8,417          5.22
Mortgage-backed
securities                    793,907         30,309          5.09         727,169         29,359          5.38
Collateralized mortgage
obligations                   151,608          5,030          4.42         191,667          7,072          4.92
Other interest-earning
assets                         67,434            282          0.56          26,459            522          2.63
Total interest-earning
assets                      3,766,298        142,926          5.06       3,363,063        144,190          5.72

Non-interest earning
assets                        389,711                                      363,701
Total assets              $ 4,156,009     $  142,926          4.59     $ 3,726,764     $  144,190

Liabilities and
stockholders' equity:
Interest-earning
checking accounts         $   754,491          6,415          1.13     $   420,999          3,931          1.24
Money market accounts         594,340          6,885          1.55         478,262          9,222          2.57
. . .