News Column

TF Financial Corporation Reports Second Quarter 2014 Results and Quarterly Dividend

July 29, 2014

NEWTOWN, Pa., July 29, 2014 (GLOBE NEWSWIRE) -- TF Financial Corporation (the "Company") (Nasdaq:THRD) today reported net income of $585,000 ($0.19 per diluted share) for the second quarter of 2014, compared with $1,381,000 ($0.45 per share) for the first quarter of 2014. Included in net income for the second quarter was $981,000 after tax ($0.31 per quarterly diluted share) of merger-related expenses incurred in connection with the Company's previously announced execution of an Agreement and Plan of Merger (the "Merger Agreement") with National Penn Bancshares, Inc. ("National Penn"). Excluding these expenses, adjusted net income for the second quarter of 2014 was $1,566,000 ($0.50 per diluted share).

Net income for the six month period ended June 30, 2014 was $1,966,000 ($0.63 per diluted share). Excluding the merger expenses of $981,000 after tax ($0.32 per year to date diluted share), adjusted net income for the first six months of 2014 was $2,947,000 ($0.95 per diluted share). The Company also announced that its Board of Directors declared a quarterly dividend of $0.12 per share, payable on August 15, 2014 to shareholders of record on August 8, 2014.

"As previously announced on June 4, the Boards of Directors of National Penn Bancshares, Inc. and TF Financial Corporation on June 3 entered into a definitive merger agreement whereby National Penn will acquire TF Financial and its wholly-owned subsidiary, 3rd Fed Bank. Upon completion of the merger, this should substantially enhance our ability to serve our customers with a broader range of products and services, locations, ATMs, etc." said Kent C. Lufkin, president and CEO of TF Financial. "The combined franchises expand National Penn's footprint into new attractive markets and our people look forward to joining this larger, dynamic, growth-oriented organization."

Results for the second quarter included:

• On June 3, 2014, the Company entered into the Merger Agreement with National Penn, which provides for the merger of the Company with and into National Penn and the conversion of each outstanding share of Company common stock into, at the election of the holder, either $42.00 in cash or 4.22 shares of National Penn common stock. The aggregate elections are subject to limitations set forth in the Merger Agreement. Completion of the merger is subject to receipt of the approval of TF Financial Corporation shareholders and receipt of all regulatory approvals and is expected to be completed in the fourth quarter of 2014.• In addition, as previously reported, on July 2, 2013 the Company completed the acquisition of Roebling Financial Corp, Inc. ("Roebling") and its wholly owned subsidiary, Roebling Bank. The Company issued 306,873 shares of its common stock and paid $7.3 million in cash for Roebling, and acquired approximately $148.7 million in total assets, $102.0 million in loans receivable, and $127.8 million in total deposits contained in Roebling's five branches. Thus, for comparative purposes, operating results of the Company for the three and six month periods ended June 30, 2014 include the effects of the Roebling acquisition, while operating results for the three and six month periods ended June 30, 2013 do not.• Pre-tax income was $1,085,000 for the quarter, compared with $1,872,000 for the first quarter of 2014. However, pre-tax income for the second quarter of 2014 included expenses related to the merger with National Penn of $1,068,000 on a pre-tax basis. Thus, without these merger-related expenses, pre-tax earnings would have been $2,153,000 or an increase of $281,000 over the first quarter, largely on the strength of an increase in service fee income and gains on sales of loans, and a reduction in operating expenses due to focused efforts at expense control.• Net interest income was $6,639,000 for the second quarter of 2014, compared with $6,640,000 for the first quarter of 2014. The Company's net interest margin was 3.46% compared with 3.53% during the first quarter of 2014. Loan yields decreased during the quarter due to the day count during the second quarter when compared with the first quarter, due to the repayment during the second quarter of some higher yielding loans which were replaced by loans with lower interest rates, and due to non-cash adjustments related to accrued interest during the first quarter and loan fee amortization differences between the first and second quarters of 2014.• Asset quality metrics showed significant improvement at quarter-end as compared to year-end 2013, with total non-performing assets at 1.18% of total assets at June 30, 2014, down from 1.67% at year-end 2013, and non-performing loans at $4.2 million at quarter-end compared with $8.3 million at December 31, 2013.• The provision for loan losses was $100,000 and net charge-offs were $14,000 during the quarter. The Company's allowance for loan losses was $4,148,000 or 99.6% of non-performing loans at quarter end.• Total loans outstanding were $610.2 million, a 0.2% increase during the quarter. Mortgage loans originated for sale were $7.4 million compared with $3.5 million during the first quarter of 2014. The corresponding gain on sale of loans was $101,000 during the quarter, compared with $74,000 during the first quarter.• At quarter end, total deposits were $686.0 million, compared with $683.9 million at December 31, 2013. The deposit mix continues to improve: at June 30, 2014 core checking, savings, and money market accounts were 73.5% of total deposits compared with 72.1% at December 31, 2013.• Book value per share and tangible book value per share were $31.15 and $29.63, respectively, at June 30, 2014, compared with $30.13 and $28.60, respectively, at December 31, 2013. Regulatory capital comprised Tier 1 Leverage and Total Risk-Based ratios of 10.71% and 17.45%, respectively, at June 30, 2014, compared with 10.35% and 17.46%, respectively, at December 31, 2013. Capital levels are well above the regulatory minimums required to be considered well-capitalized.

About TF Financial Corporation

TF Financial Corporation is a holding company whose principal subsidiary is 3rdFed Bank, which operates 18 full service retail and commercial banking offices in Philadelphia and Bucks Counties in Pennsylvania, and in Mercer, Burlington and Ocean Counties in New Jersey. Deposits at 3rdFed Bank are insured up to the maximum amount by the Federal Deposit Insurance Corporation (FDIC). In addition, the Bank's website can be found at www.3rdfedbank.com.

Forward Looking Statements

Statements contained in this news release that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by TF Financial Corporation with the Securities and Exchange Commission from time to time.   The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company.

Non-GAAP Financial Measures

Included in this release or the financial tables included herewith are references to pre-tax income, net income and diluted earnings per share determined by methods other than in accordance with Accounting Principles Generally Accepted in the United States of America ("GAAP"). We believe the presentation of pre-tax income, net income and diluted earnings per share excluding the following significant and non-recurring items provides the reader with a better understanding of operating results of the Company:

• Merger-related costs associated with the National Penn merger have been added back to net income on an after-tax basis, at the Company's marginal tax rate of 34% if tax deductible.• The purchase accounting gain, which is non-taxable, associated with the Roebling transaction has been deducted from net income, and merger-related costs, including conversion costs, associated with the Roebling merger have been added back to net income on an after-tax basis, at the Company's marginal tax rate of 34% if tax deductible.• Net proceeds from bank-owned life insurance claims, which are after tax, have been deducted from net income.

Additional Information About the Merger and Where to Find It

In connection with the proposed merger transaction, National Penn will file with the Securities and Exchange Commission a Registration Statement on Form S-4 that will include a Proxy Statement of the Company, and a Prospectus of National Penn, as well as other relevant documents concerning the proposed transaction. Shareholders are urged to read the Registration Statement and the Proxy Statement/Prospectus regarding the merger when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information.

A free copy of the Proxy Statement/Prospectus, as well as other filings containing information about National Penn and the Company, may be obtained at the SEC's Internet site (http://www.sec.gov). You will also be able to obtain these documents, free of charge, from National Penn at www.nationalpennbancshares.com under the heading "Documents/SEC Filings" or from the Company by accessing the Company's website at www.3rdfedbank.com under the section "Investor Relations" and under the heading "SEC Filings."

National Penn and the Company and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of the Company in connection with the proposed merger. Information about the directors and executive officers of National Penn is set forth in the proxy statement for National Penn's 2014 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 12, 2014. Information about the directors and executive officers of the Company is set forth in the proxy statement for the Company's 2014 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on March 26, 2014. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Proxy Statement/Prospectus regarding the proposed merger when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph.

T F FINANCIAL CORPORATION
UNAUDITED FINANCIAL INFORMATION
(dollars in thousands except per share data)QUARTER ENDEDSIX MONTHS ENDED
 6/30/20143/31/201412/31/20139/30/20136/30/20136/30/20146/30/2013
               
               
EARNINGS SUMMARY              
               
Interest income  $ 7,600  $ 7,599  $ 7,809  $ 7,903  $ 6,744  $ 15,199  $ 13,601
Interest expense 961 959 988 1,018 938 1,920 1,917
Net interest income 6,639 6,640 6,821 6,885 5,806 13,279 11,684
Loan loss provision  100  --   --   --  400 100 839
Non-interest income 803 722 694 2,046 1,947 1,525 3,342
Non-interest expense 6,257 5,490 5,157 6,782 5,132 11,747 10,162
Income before taxes  1,085 1,872 2,358 2,149 2,221 2,957 4,025
Income taxes 500 491 772 183 421 991 1,002
Net income  $ 585  $ 1,381  $ 1,586  $ 1,966  $ 1,800  $ 1,966  $ 3,023
               
               
PER SHARE INFORMATION              
               
Earnings per share, basic   $ 0.19  $ 0.45  $ 0.52  $ 0.64  $ 0.66  $ 0.64  $ 1.10
Earnings per share, diluted   $ 0.19  $ 0.45  $ 0.52  $ 0.64  $ 0.66  $ 0.63  $ 1.10
               
Weighted average basic shares (000's)  3,066  3,062  3,056  3,053  2,743  3,064  2,741
Weighted average diluted shares (000's)   3,115  3,081  3,068  3,053  2,743  3,098  2,741
               
Dividends paid   $ 0.12  $ 0.12  $ 0.10  $ 0.10  $ 0.05  $ 0.24  $ 0.10
               
               
RECONCILIATION OF NON-GAAP DISCLOSURES TO GAAP:            
               
Net income (GAAP)  $ 585  $ 1,381  $ 1,586  $ 1,966  $ 1,800  $ 1,966  $ 3,023
Deduct:              
Purchase gain associated with Roebling acquisition  --   --   94  (1,214)  --   --   -- 
Proceeds from bank-owned life insurance  --   --   --   --   (934)  --   (934)
Add back:              
Merger-related costs:              
Tax deductible 257  --   9  45  --   257  -- 
Income taxes (benefit)  (87)  --   (3)  (15)  --   (87)  -- 
Non tax deductible 811  --   12  57  295  811  615
Conversion costs:              
Tax deductible  --   --   14  1,403  --   --   -- 
Income taxes (benefit)  --   --   (5)  (477)  --   --   -- 
               
Adjusted net income (non-GAAP)  $ 1,566  $ 1,381  $ 1,707  $ 1,765  $ 1,161  $ 2,947  $ 2,704
               
Adjusted diluted earnings per share (non-GAAP)  $ 0.50  $ 0.45  $ 0.56  $ 0.58  $ 0.42  $ 0.95  $ 0.99
               
               
FINANCIAL RATIOS              
               
Annualized return on average assets 0.28% 0.67% 0.75% 0.92% 1.01% 0.47% 0.86%
Annualized return on average equity 2.40% 5.84% 6.71% 8.55% 8.55% 4.09% 7.25%
Efficiency ratio (1) 67.97% 72.74% 65.81% 66.15% 68.07% 71.91% 67.97%
               
               
REGULATORY CAPITAL RATIOS              
Tier 1 leverage ratio 10.71% 10.39% 10.35% 10.21% 10.74%    
Total risk-based capital ratio 17.45% 16.93% 17.46% 17.50% 18.77%    
Tier 1 risk-based capital ratio 16.67% 16.18% 16.23% 16.25% 17.51%    
               
               
               
               
T F FINANCIAL CORPORATION
UNAUDITED FINANCIAL INFORMATION
(dollars in thousands except per share data)QUARTER ENDEDSIX MONTHS ENDED
 6/30/20143/31/201412/31/20139/30/20136/30/20136/30/20146/30/2013
AVERAGE BALANCES              
               
Loans  $ 610,880  $ 610,590  $ 619,498  $ 622,416  $ 524,728  $ 610,736  $ 525,000
Mortgage-backed securities 56,004 48,185 47,568 50,737 37,523 52,116 39,744
Investment securities 77,745 80,063 82,213 86,942 68,211 78,897 66,680
Other interest-earning assets 45,432 46,666 36,694 35,294 39,111 46,045 34,022
Total earning assets 790,061 785,504 785,973 795,389 669,573 787,794 665,446
Non-earning assets 50,412 50,462 49,164 48,404 45,938 50,437 46,252
Total assets 840,473 835,966 835,137 843,793 715,511 838,231 711,698
               
Deposits 687,805 684,900 684,085 691,646 570,271 686,361 565,536
FHLB advances and other borrowed money 47,627 48,872 50,259 55,358 53,303 48,246 54,701
Total interest bearing liabilities 735,432 733,772 734,344 747,004 623,574 734,607 620,237
Non-interest bearing liabilities 7,149 6,316 6,951 5,528 7,508 6,734 7,363
Stockholders' equity 97,892 95,878 93,842 91,261 84,429 96,890 84,098
Total liabilities & stockholders' equity  $ 840,473  $ 835,966  $ 835,137  $ 843,793  $ 715,511  $ 838,231  $ 711,698
               
               
SPREAD AND MARGIN ANALYSIS (TAX EQUIVALENT)              
               
Average yield on:              
Loans 4.36% 4.43% 4.41% 4.43% 4.56% 4.40% 4.62%
Mortgage-backed securities 2.49% 2.60% 2.38% 2.52% 2.63% 2.54% 2.63%
Investment securities 4.12% 4.06% 4.04% 3.71% 4.19% 4.09% 4.30%
Other interest-earning assets 0.04% 0.03% 0.04% 0.06% 0.14% 0.03% 0.11%
Total interest-earning assets 3.95% 4.02% 4.04% 4.03% 4.15% 3.99% 4.24%
               
Average cost of:              
Deposits 0.45% 0.45% 0.45% 0.46% 0.50% 0.45% 0.51%
FHLB advances and other borrowed money 1.57% 1.60% 1.62% 1.57% 1.70% 1.59% 1.75%
Total interest-bearing liabilities 0.52% 0.53% 0.53% 0.54% 0.60% 0.53% 0.62%
               
Interest rate spread 3.43% 3.49% 3.51% 3.49% 3.55% 3.46% 3.62%
Net interest margin 3.46% 3.53% 3.54% 3.53% 3.59% 3.50% 3.66%
               
               
               
               
T F FINANCIAL CORPORATION
UNAUDITED FINANCIAL INFORMATION
(dollars in thousands except per share data)QUARTER ENDEDSIX MONTHS ENDED
 6/30/20143/31/201412/31/20139/30/20136/30/20136/30/20146/30/2013
INTEREST INCOME AND EXPENSE DETAIL              
               
Interest income on:              
Loans  $ 6,636  $ 6,677  $ 6,882  $ 6,947  $ 5,963  $ 13,313  $ 12,029
Mortgage-backed securities  348  309  285  322  246  657  519
Investment securities  798  801  837  814  713  1,599  1,421
Other interest-earning assets  4  3  4  5  14  7  18
Total interest-earning assets  $ 7,786  $ 7,790  $ 8,008  $ 8,088  $ 6,936  $ 15,576  $ 13,987
               
               
Interest expense on:              
Deposits  $ 774  $ 766  $ 783  $ 799  $ 712  $ 1,540  $ 1,443
FHLB advances and other borrowed money  187  193  205  219  226  380  474
Total interest-bearing liabilities  $ 961  $ 959  $ 988  $ 1,018  $ 938  $ 1,920  $ 1,917
               
Net interest income: tax equivalent basis  $ 6,825  $ 6,831  $ 7,020  $ 7,070  $ 5,998  $ 13,656  $ 12,070
Tax equivalent adjustment on investment securities  186  191  199  185  192  377  386
Net interest income  $ 6,639  $ 6,640  $ 6,821  $ 6,885  $ 5,806  $ 13,279  $ 11,684
               
NON-INTEREST INCOME DETAIL              
               
Service fees, charges and other  $ 558  $ 511  $ 560  $ 560  $ 454  $ 1,069  $ 951
Impairment adjustment to mortgage servicing rights  (6)  5  19  32  196  (1)  229
Bank-owned life insurance  134  131  135  136  137  265  280
Proceeds from bank-owned life insurance  --   --   --   --   934  --   934
Gain on sale of investment securities  16  1  4  --   --   17  -- 
Gain on sale of loans  101  74  70  104  226  175  531
Gain on disposition of real estate  --   --   --   --   --   --   417
Purchase gain associated with Roebling acquisition  --   --   (94)  1,214  --   --   -- 
               
NON-INTEREST EXPENSE DETAIL              
               
Compensation and benefits  $ 3,206  $ 3,383  $ 3,269  $ 3,125  $ 2,842  6,589  5,659
Occupancy and equipment  829  907  833  867  709  1,736  1,406
Professional fees  278  305  174  211  230  583  518
Merger-related costs  1,068  --   21  102  295  1,068  615
Marketing and advertising  76  144  53  132  132  220  171
FDIC insurance premiums  125  134  91  188  132  259  242
Loss (gain) on REO, net (2)  11  --   (1)  71  198  11  375
Operating expenses of REO (2)  24  13  37  43  37  37  84
Other operating  640  604  666  640  557  1,244  1,092
Conversion costs (3)  --   --   14  1,403  --   --   -- 
               
T F FINANCIAL CORPORATION
UNAUDITED FINANCIAL INFORMATION
(dollars in thousands except per share data)PERIOD ENDED    
 6/30/20143/31/201412/31/20139/30/20136/30/2013    
DEPOSIT INFORMATION              
               
               
Non-interest checking  $ 75,458  $ 70,197  $ 68,133  $ 69,157  $ 58,697    
Interest checking 111,140 116,507 114,184 108,341 78,923    
Money market 187,495 186,028 180,215 179,612 159,015    
Savings 130,020 132,335 130,878 131,432 109,446    
CD's 181,875 187,143 190,492 193,283 165,331    
               
OTHER INFORMATION              
               
Per Share              
               
Book value   $ 31.15  $ 30.78  $ 30.13  $ 29.48  $ 29.36    
Tangible book value   $ 29.63  $ 29.26  $ 28.60  $ 27.94  $ 27.84    
Closing market price  $ 42.78  $ 29.85  $ 28.16  $ 27.88  $ 25.40    
               
Balance Sheet              
               
Loans, net of acquired loans  $ 522,734  $ 517,114  $ 527,207  $ 532,045  $ 531,464    
Acquired loans 87,492 91,923 93,885 97,667  --     
Cash and cash equivalents 48,291 60,175 45,310 31,004 44,958    
Mortgage-backed securities 57,615 53,495 46,769 48,709 34,206    
Investment securities 76,955 80,111 82,103 85,330 68,459    
Total assets 839,566 846,016 835,689 833,334 714,781    
Total deposits 685,988 692,210 683,902 681,825 571,412    
FHLB advances and other borrowed money 47,120 48,311 49,605 50,990 52,534    
Stockholders' equity 98,175 96,958 94,875 92,811 83,453    
               
Asset Quality              
               
Non-performing loans  $ 4,164  $ 3,217  $ 8,332  $ 6,881  $ 5,973    
Allowance for loan losses   $ 4,148  $ 4,062  $ 6,575  $ 6,691  $ 6,916    
Net charge-offs   $ 14  $ 2,513  $ 116  $ 225  $ 146    
Allowance for loan losses to non-performing loans 99.62% 126.27% 78.91% 97.24% 115.79%    
Allowance for loan losses to gross loans excluding acquired loans 0.79% 0.79% 1.25% 1.26% 1.30%    
Non-performing loans to gross loans  0.68% 0.53% 1.34% 1.09% 1.12%    
Non-performing loans to total assets 0.50% 0.38% 1.00% 0.83% 0.84%    
REO (2)  $ 5,711  $ 6,108  $ 5,601  $ 5,786  $ 6,177    
REO to total assets (2) 0.68% 0.72% 0.67% 0.69% 0.86%    
Non-performing assets to total assets 1.18% 1.10% 1.67% 1.52% 1.70%    
               
               
Statistical              
               
Shares outstanding (000's)  3,152  3,150  3,149  3,148  2,842    
Number of branch offices  18  18  18  18  13    
Full time equivalent employees  205  204  203  206  166    
               
(1) The efficiency ratio is non-interest expense excluding merger-related and conversion costs and loss on REO divided by net interest income on a tax equivalent basis plus non-interest income excluding impairment adjustment to mortgage servicing rights, gain on sale of investment securities, proceeds from bank owned life insurance and gain on disposition of real estate and purchase gain associated with Roebling Bank acquisition.
(2) REO is real estate acquired through foreclosure.
(3) Conversion costs are mainly retention and severance payments paid to transition employees, and amounts paid to terminate various data processing contracts.
               

CONTACT: Dennis R. Stewart, EVP/CFO (215) 579-4000

Source: TF Financial Corporation


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