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National Penn Bancshares, Inc. Announces $125 Million Share Repurchase Plan and Reports Fourth Quarter and Full Year 2014 Results

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National Penn Bancshares, Inc. (Nasdaq: NPBC) reported net income of $24.5 million, or $0.17 per diluted share, for the fourth quarter of 2014, compared to net income of $25.3 million or $0.18 per diluted share, in the prior quarter. Exclusive of non-recurring costs associated with the acquisition of TF Financial Corporation (“TF Financial”), adjusted net income for the quarter was $26.5 million, or $0.18 per share. Net income for the year was $98.7 million, or $0.70 per diluted share, while adjusted net income was $100.8 million, or $0.71 per share, compared to adjusted net income of $98.1 million, or $0.67 per diluted share, for 2013. Adjusted return on average assets, exclusive of non-recurring costs, remained strong at 1.14% and 1.16% for the fourth quarter and full year 2014, respectively.

National Penn also announced that its Board of Directors approved a 2015 common share repurchase plan of $125 million. The repurchase may be accomplished from time to time in various ways including open market purchases, accelerated share repurchases, or negotiated transactions. Share repurchases, and the amount and timing of any repurchases, will be dependent on factors including requirements of federal securities laws, the company’s capital position and needs, market conditions, and other capital management objectives and opportunities.

“The strength of our balance sheet and the strong earnings profile allow us to continue to return capital to our shareholders,” said Scott V. Fainor, president and CEO of National Penn. “This share repurchase plan, coupled with a 10% increase in the cash dividend paid in the fourth quarter, illustrate our commitment to enhancing shareholder value. We are pleased with our strong performance for the year and further encouraged by the positive momentum reflected by our second consecutive quarter of increased loan growth.”

Net Interest Margin and Loan Growth

Net interest income increased to $67.6 million in the fourth quarter from $64.2 million in the third quarter, benefitting from the acquisition of TF Financial on October 24, 2014 with assets of approximately $800 million. The net interest margin declined from 3.43% to 3.33%, primarily as a result of the holding company senior debt issuance late in the third quarter which further enhanced holding company liquidity for the share repurchase plan and other capital planning initiatives. Exclusive of loans acquired from TF Financial, total loans grew at an annualized rate of 6% in the fourth quarter, somewhat offsetting the impact of the prolonged low interest rate environment.

Asset Quality

Although asset quality metrics remain strong, non-performing loans increased in the quarter to $59.1 million from $42.9 million in the third quarter. Classified and criticized loans however, exclusive of TF Financial, declined by approximately $35 million in the fourth quarter. The increase in non-performing loans was primarily driven by one commercial credit which was downgraded from classified to non-performing. The provision for loan losses was increased to $3.5 million from $1.0 million in the prior quarter. A credit mark of 2.7% was recorded on the TF Financial loan portfolio of approximately $600 million.

Other Income and Operating Expenses

Other income in the quarter was enhanced by increased mortgage activity and the related gain on sale of these loans, and the impact of TF Financial.

Operating expenses were relatively comparable on a quarterly basis, totaling $51.8 million in the fourth quarter of 2014 and $52.2 million in the prior quarter, despite the increased expenses associated with TF Financial. The anticipated synergies were realized as the systems conversion was accomplished on an expedited basis. Reflective of year end results, operating expenses for the quarter also reflected reduced expense for incentive compensation.

Capital

National Penn’s Board of Directors declared a first quarter 2015 dividend of eleven cents ($0.11) per common share to shareholders of record as of Monday, February 2, 2015, payable on Tuesday, February 17, 2015. At December 31, 2014, and inclusive of the TF Financial acquisition, capital remained strong as National Penn’s tier 1 common and tangible common equity to tangible assets ratios were 12.82% and 9.30%, respectively.

“I appreciate the contributions of our team throughout 2014,” said Scott V. Fainor. “Due to their efforts, we achieved another year of consistent, high-level performance, reflected by our adjusted return on assets of 1.16%. Additionally, we accomplished many strategic initiatives, including the expedited closing and conversion of TF Financial, an increased rate of loan growth, and the enhancement of our holding company liquidity which position us well for 2015 and beyond.”

About National Penn Bancshares, Inc.:

National Penn Bancshares, Inc., with approximately $9.8 billion in assets, is a bank holding company headquartered in Allentown, Pennsylvania. National Penn Bank operates 127 branch offices comprising 119 branches in Pennsylvania, seven in New Jersey and one in Maryland.

National Penn’s financial services affiliates are National Penn Wealth Management, N.A., including its National Penn Investors Trust Company division; Institutional Advisors LLC; and National Penn Insurance Services Group, Inc.

National Penn Bancshares, Inc. common stock is traded on the Nasdaq Stock Market under the symbol “NPBC”. Please visit our Web site at www.nationalpennbancshares.com to see our regularly posted material information.

Statement Regarding Non-GAAP Financial Measures

This release, including the attached Financial Highlights and financial data tables, contains supplemental financial information determined by methods other than in accordance with U.S. generally accepted accounting principles (“GAAP”). National Penn’s management uses these non-GAAP measures in its analysis of National Penn’s performance. These measures should not be considered a substitute for GAAP basis measures nor should they be viewed as a substitute for operating results determined in accordance with GAAP. Management believes the presentation of the following non-GAAP financial measures, which exclude the impact of the specified items, provides useful supplemental information that is essential to a proper understanding of the financial results of National Penn.

  • Tangible common equity excludes goodwill and intangible assets and preferred equity. Banking and financial institution regulators also exclude goodwill and intangible assets from shareholders’ equity when assessing the capital adequacy of a financial institution. Tangible common equity provides a method to assess the Company’s tangible capital trends.
  • Tangible book value expresses tangible common equity on a per share basis. Tangible book value provides a method to assess the level of tangible net assets on a per share basis.
  • Adjusted net income and adjusted return on average assets exclude the effects of certain gains and losses, adjusted for taxes when applicable. Adjusted net income and adjusted return on average assets provide methods to assess earnings performance by excluding items that management believes are not comparable among the periods presented.
  • Efficiency ratio expresses operating expenses as a percentage of fully-taxable equivalent net interest income plus non-interest income. Operating expenses exclude items from non-interest expense that management believes are not comparable among the periods presented. Non-interest income is also adjusted to exclude items that management believes are not comparable among the periods presented. Efficiency ratio is used as a method for management to assess its operating expense level and to compare to financial institutions of varying sizes.

Management believes the use of non-GAAP measures will help readers compare National Penn’s current results to those of prior periods as presented in the accompanying Financial Highlights and financial data tables.

Cautionary Statement Regarding Forward-Looking Information

This release contains forward-looking information about National Penn Bancshares, Inc. that is intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,” “project,” “could,” “plan,” “goal,” “potential,” “pro forma,” “seek,” “intend,” or “anticipate” or the negative thereof or comparable terminology, and include discussions of strategy, financial projections, guidance and estimates (including their underlying assumptions), statements regarding plans, objectives, expectations or consequences of announced transactions, and statements about the future performance, operations, products and services of National Penn and its subsidiaries. National Penn cautions readers not to place undue reliance on these statements.

National Penn’s business and operations are subject to a variety of risks, uncertainties and other factors. Consequently, actual results and experience may materially differ from those contained in any forward-looking statements. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the following: difficult conditions in the capital markets and the economy generally, regulatory requirements or other actions mandated by National Penn’s regulators, recent and ongoing changes to the state and federal regulatory schemes under which National Penn and other financial services companies operate (including the Dodd-Frank Act and regulations adopted or to be adopted to implement that Act), delayed improvement in the credit quality of loans, the effect of credit risk exposure, the ability to strategically manage our capital position and to raise capital, allowance for loan losses may prove inadequate, variations in interest rates, the geographic concentration of National Penn’s operations, declines in the value of National Penn’s assets and the effect of any resulting impairment charges, competition for personnel and from other financial institutions, interruptions or breaches of National Penn’s security systems, the development and maintenance of National Penn’s information technology, potential dilution of National Penn’s shareholders, the ability of National Penn and its subsidiaries to pay dividends, severe weather and natural disasters, and the nature and frequency of litigation and other similar proceedings to which National Penn may be a party. Additional risks, uncertainties and other factors relating to the acquisition of TF Financial Corporation include, but are not limited to: expected benefits may not materialize in the timeframe expected or at all, or may be more costly to achieve; the parties are unable to successfully implement integration strategies; and diversion of management time on merger-related issues. These risks and others are described in greater detail in National Penn’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as well as in National Penn’s Quarterly Reports on Form 10-Q and other documents filed by National Penn with the SEC after the date thereof. National Penn makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances occurring or existing after the date any forward-looking statement is made.

Financial Update for National Penn Bancshares, Inc. (NPBC) for 12/31/2014
Unaudited, dollars in thousands except share and per share data
As of
12/31/2014 9/30/2014 12/31/2013
SUMMARY BALANCE SHEET
Total assets $ 9,750,865 $ 8,633,000 $ 8,591,848
Investment securities and other securities 2,519,215 2,381,751 2,396,298
Total loans 6,146,457 5,469,842 5,338,219
Deposits 6,729,745 6,287,936 6,072,578
Borrowings 1,720,404 1,141,766 1,282,289
Shareholders’ equity 1,188,639 1,107,184 1,131,866
Tangible book value per common share (2) $ 5.96 $ 6.06 $ 5.94
Tangible common equity / tangible assets (2) 9.30 % 10.08 % 10.41 %
ACQUIRED ASSETS/LIABILITIES (as of 10/24/2014)
Investment securities $ 124,288
Total loans 595,241
Deposits 658,432
Three Months Ended Twelve Months Ended
12/31/2014 9/30/2014 12/31/2013 12/31/2014 12/31/2013
EARNINGS
Total interest income $ 75,990 $ 71,368 $ 72,085 $ 288,019 $ 288,279
Total interest expense 8,346 7,138 8,013 30,905 36,217
Net interest income 67,644 64,230 64,072 257,114 252,062
Provision for loan losses 3,500 1,000 1,000 5,751 5,250
Net interest income after provision for loan losses 64,144 63,230 63,072 251,363 246,812
Net gains from fair value changes of subordinated debentures 2,111
Net gains on investment securities 13 21 54
Other non-interest income 23,417 22,871 22,714 92,154 95,902
Acquisition related expenses 2,878 2,878
Loss on debt extinguishment 64,888
Corporate reorganization expense 6,000 6,000
Other non-interest expense 51,836 52,158 51,833 208,445 211,023
Income before income taxes 32,860 33,943 27,953 132,215 62,968
Income tax expense 8,383 8,623 6,741 33,509 9,581
Net income $ 24,477 $ 25,320 $ 21,212 $ 98,706 $ 53,387
PERFORMANCE RATIOS
Net interest margin 3.33 % 3.43 % 3.51 % 3.40 % 3.51 %
Return on average assets 1.05 % 1.17 % 1.00 % 1.13 % 0.64 %
Adjusted return on average assets (3) 1.14 % 1.17 % 1.19 % 1.16 % 1.18 %
Return on average shareholders’ equity 8.30 % 9.11 % 7.44 % 8.86 % 4.72 %
Return on average tangible common equity (1) 11.09 % 11.97 % 9.72 % 11.72 % 6.18 %
Adjusted return on average tangible common equity 12.02 % 11.97 % 11.51 % 11.97 % 11.36 %
Efficiency ratio (4) 54.53 % 57.29 % 57.00 % 57.06 % 57.80 %
PER SHARE
Basic earnings $ 0.17 $ 0.18 $ 0.15 $ 0.70 $ 0.37
Diluted earnings 0.17 0.18 0.15 0.70 0.37
Adjusted diluted earnings 0.18 0.18 0.17 0.71 0.67
Dividends 0.11 0.10 0.10 0.41 0.30 (a)
Average shares – basic 145,277,964 139,275,683 145,761,496 141,281,690 145,602,670
Average shares – diluted 145,850,861 139,825,134 146,244,467 141,823,607 146,044,058
(1) RECONCILIATION TABLES FOR NON-GAAP FINANCIAL MEASURES
Three Months Ended Twelve Months Ended
12/31/2014 9/30/2014 12/31/2013 12/31/2014 12/31/2013
Return on average tangible common equity
Return on average shareholders’ equity 8.30 % 9.11 % 7.44 % 8.86 % 4.72 %
Effect of goodwill and intangibles 2.79 % 2.86 % 2.28 % 2.86 % 1.46 %
Return on average tangible common equity 11.09 % 11.97 % 9.72 % 11.72 % 6.18 %
Average tangible equity
Average shareholders’ equity $ 1,169,815 $ 1,102,608 $ 1,130,943 $ 1,113,535 $ 1,130,290
Average goodwill and intangibles (294,238 ) (263,410 ) (265,516 ) (271,684 ) (266,851 )
Average tangible common equity $ 875,577 $ 839,198 $ 865,427 $ 841,851 $ 863,439
Adjusted net income reconciliation
Net income $ 24,477 $ 25,320 $ 21,212 $ 98,706 $ 53,387
After tax acquisition related expenses 2,054 2,054
After tax unrealized fair value gain on subordinated debentures (1,372 )
After tax loss on debt extinguishment 42,177
After tax corporate reorganization expense 3,900 3,900
Adjusted net income $ 26,531 $ 25,320 $ 25,112 $ 100,760 $ 98,092
Diluted earnings per share
Net income $ 0.17 $ 0.18 $ 0.15 $ 0.70 $ 0.37
After tax acquisition related expenses 0.01 0.01
After tax unrealized fair value gain on subordinated debentures (0.01 )
After tax loss on debt extinguishment 0.29
After tax corporate reorganization expense 0.03 0.03
Adjusted net income $ 0.18 $ 0.18 $ 0.17 (b) $ 0.71 $ 0.67 (b)
(a) In lieu of a first quarter 2013 cash dividend, the Company paid an additional dividend of $0.10 per share in the fourth quarter of 2012
(b) Difference in summation of quarterly and year-to-date adjusted net income per share due to rounding
Financial Update for National Penn Bancshares, Inc. (NPBC) for 12/31/2014
Unaudited, dollars in thousands except share and per share data
As of
12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013
ASSETS
Cash and due from banks $ 110,784 $ 96,856 $ 138,530 $ 128,991 $ 102,241
Interest-earning deposits with banks 303,055 98,512 73,384 55,335 181,282
Total cash and cash equivalents 413,839 195,368 211,914 184,326 283,523
Investment securities available-for-sale, at fair value 1,530,661 1,461,586 1,463,479 1,442,304 1,894,107
Investment securities held-to-maturity 921,042 864,234 892,536 918,340 438,445
Other securities 67,512 55,931 64,494 63,760 63,746
Loans held-for-sale 4,178 3,890 2,275 5,171 4,951
Loans 6,142,279 5,465,952 5,403,756 5,372,556 5,333,268
Allowance for loan losses (90,675 ) (88,927 ) (89,848 ) (93,252 ) (96,367 )
Loans, net 6,051,604 5,377,025 5,313,908 5,279,304 5,236,901
Premises and equipment, net 116,414 110,392 110,972 97,707 96,232
Accrued interest receivable 29,491 27,839 26,953 27,408 27,130
Bank owned life insurance 171,775 151,443 150,237 149,045 147,869
Other real estate owned and other repossessed assets 4,867 1,561 1,758 2,138 1,278
Goodwill 302,244 258,279 258,279 258,279 258,279
Other intangible assets, net 8,757 4,803 5,476 6,156 6,854
Unconsolidated investments 8,124 8,167 8,205 8,214 8,713
Other assets 120,357 112,482 107,887 115,229 123,820
TOTAL ASSETS $ 9,750,865 $ 8,633,000 $ 8,618,373 $ 8,557,381 $ 8,591,848
LIABILITIES
Non-interest bearing deposits $ 1,085,158 $ 990,438 $ 1,031,271 $ 1,028,572 $ 970,051
Interest bearing deposits 5,644,587 5,297,498 5,077,212 5,110,852 5,102,527
Total deposits 6,729,745 6,287,936 6,108,483 6,139,424 6,072,578
Customer repurchase agreements 607,705 580,290 587,686 561,170 551,736
Repurchase agreements 50,000 50,000 50,000
Federal Home Loan Bank advances 910,378 359,155 601,246 557,434 603,232
Senior long-term debt 125,000 125,000
Subordinated debentures 77,321 77,321 77,321 77,321 77,321
Accrued interest payable and other liabilities 112,077 96,114 92,229 89,583 105,115
TOTAL LIABILITIES 8,562,226 7,525,816 7,516,965 7,474,932 7,459,982
SHAREHOLDERS’ EQUITY
Common stock 1,390,130 1,388,513 1,387,304 1,386,265 1,387,966
Accumulated deficit (135,246 ) (143,514 ) (154,909 ) (167,191 ) (175,990 )
Accumulated other comprehensive loss (10,991 ) (7,922 ) (474 ) (5,295 ) (21,157 )
Treasury stock (55,254 ) (129,893 ) (130,513 ) (131,330 ) (58,953 )
TOTAL SHAREHOLDERS’ EQUITY 1,188,639 1,107,184 1,101,408 1,082,449 1,131,866
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 9,750,865 $ 8,633,000 $ 8,618,373 $ 8,557,381 $ 8,591,848
PER SHARE DATA
Book value $ 8.08 $ 7.95 $ 7.91 $ 7.78 $ 7.76
Tangible book value (2) $ 5.96 $ 6.06 $ 6.02 $ 5.88 $ 5.94
Dividends – quarterly $ 0.11 $ 0.10 $ 0.10 $ 0.10 $ 0.10
Shares outstanding (end of period, net of treasury) 147,136,084 139,305,117 139,240,318 139,145,669 145,798,751
(2) RECONCILIATION TABLE FOR NON-GAAP FINANCIAL MEASURES
Total shareholders’ equity $ 1,188,639 $ 1,107,184 $ 1,101,408 $ 1,082,449 $ 1,131,866
Goodwill and intangibles (311,001 ) (263,082 ) (263,755 ) (264,435 ) (265,133 )
Tangible common equity $ 877,638 $ 844,102 $ 837,653 $ 818,014 $ 866,733
Shares outstanding 147,136,084 139,305,117 139,240,318 139,145,669 145,798,751
Tangible book value per share $ 5.96 $ 6.06 $ 6.02 $ 5.88 $ 5.94
Total assets $ 9,750,865 $ 8,633,000 $ 8,618,373 $ 8,557,381 $ 8,591,848
Goodwill and intangibles (311,001 ) (263,082 ) (263,755 ) (264,435 ) (265,133 )
Tangible assets $ 9,439,864 $ 8,369,918 $ 8,354,618 $ 8,292,946 $ 8,326,715
Tangible common equity/tangible assets 9.30 % 10.08 % 10.03 % 9.86 % 10.41 %
(3) RECONCILIATION TABLE FOR NON-GAAP FINANCIAL MEASURES
Adjusted net income (1) $ 26,531 $ 25,320 $ 26,199 $ 22,710 $ 25,112
Average assets $ 9,269,113 $ 8,569,734 $ 8,512,845 $ 8,479,686 $ 8,385,094
Adjusted return on average assets (annualized) 1.14 % 1.17 % 1.23 % 1.09 % 1.19 %
Financial Update for National Penn Bancshares, Inc. (NPBC) for 12/31/2014
Unaudited, dollars in thousands except share and per share data
For the Quarter Ended For the Twelve Months Ended
12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013 12/31/2014 12/31/2013
INTEREST INCOME
Loans, including fees $ 58,532 $ 53,857 $ 52,476 $ 52,582 $ 54,600 $ 217,447 $ 220,158
Investment securities
Taxable 11,273 11,365 11,694 11,121 10,912 45,453 40,497
Tax-exempt 6,129 6,114 6,329 6,404 6,534 24,976 27,421
Deposits with banks 56 32 29 26 39 143 203
Total interest income 75,990 71,368 70,528 70,133 72,085 288,019 288,279
INTEREST EXPENSE
Deposits 4,616 4,483 4,671 4,773 5,166 18,543 22,379
Customer repurchase agreements 432 399 400 393 407 1,624 1,805
Repurchase agreements 197 608 601 615 1,406 2,571
Short-term borrowings 1 1 41
Federal Home Loan Bank advances 1,398 1,297 1,369 1,548 1,287 5,612 6,329
Senior long-term debt 1,365 227 1,592
Subordinated debentures 535 535 528 529 538 2,127 3,092
Total interest expense 8,346 7,138 7,577 7,844 8,013 30,905 36,217
Net interest income 67,644 64,230 62,951 62,289 64,072 257,114 252,062
Provision for loan losses 3,500 1,000 1,251 1,000 5,751 5,250
Net interest income after provision for loan losses 64,144 63,230 62,951 61,038 63,072 251,363 246,812
NON-INTEREST INCOME
Wealth management 7,123 6,945 7,133 6,866 6,609 28,067 27,309
Service charges on deposit accounts 3,725 3,826 3,534 3,384 3,827 14,469 15,234
Insurance commissions and fees 2,979 3,029 3,209 3,597 3,028 12,814 12,692
Cash management and electronic banking fees 4,951 4,720 4,869 4,526 4,782 19,066 18,914
Mortgage banking 1,213 987 936 716 902 3,852 6,500
Bank owned life insurance 1,341 1,238 1,218 1,198 1,389 4,995 5,116
Earnings (losses) of unconsolidated investments (43 ) (20 ) (9 ) (477 ) 57 (549 ) 710
Gain on sale of non-performing loans 946 946
Other operating income 2,128 2,146 2,560 1,660 2,120 8,494 9,427
Net gains from fair value changes of subordinated debentures 2,111
Net gains on sales of investment securities 13 8 21 54
Total non-interest income 23,430 22,871 24,396 21,478 22,714 92,175 98,067
NON-INTEREST EXPENSE
Salaries, wages and employee benefits 27,836 29,655 28,887 29,201 29,035 115,579 117,000
Premises and equipment 8,254 7,769 7,709 8,212 7,721 31,944 30,447
FDIC insurance 1,344 1,140 1,200 1,317 1,356 5,001 5,467
Other operating expenses 14,402 13,594 14,318 13,607 13,721 55,921 58,109
Acquisition related expenses 2,878 2,878
Loss on debt extinguishment 64,888
Corporate reorganization expense 6,000 6,000
Total non-interest expense 54,714 52,158 52,114 52,337 57,833 211,323 281,911
Income before income taxes 32,860 33,943 35,233 30,179 27,953 132,215 62,968
Income tax expense 8,383 8,623 9,034 7,469 6,741 33,509 9,581
NET INCOME $ 24,477 $ 25,320 $ 26,199 $ 22,710 $ 21,212 $ 98,706 $ 53,387
PER SHARE
Basic earnings $ 0.17 $ 0.18 $ 0.19 $ 0.16 $ 0.15 $ 0.70 $ 0.37
Diluted earnings $ 0.17 $ 0.18 $ 0.19 $ 0.16 $ 0.15 $ 0.70 $ 0.37
Adjusted diluted earnings $ 0.18 $ 0.18 $ 0.19 $ 0.16 $ 0.17 $ 0.71 $ 0.67
Average shares – basic 145,277,964 139,275,683 139,191,923 141,360,180 145,761,496 141,281,690 145,602,670
Average shares – diluted 145,850,861 139,825,134 139,719,980 141,877,066 146,244,467 141,823,607 146,044,058
SUPPLEMENTAL DATA (annualized, average)
Return on assets 1.05 % 1.17 % 1.23 % 1.09 % 1.00 % 1.13 % 0.64 %
Adjusted return on assets (3) 1.14 % 1.17 % 1.23 % 1.09 % 1.19 % 1.16 % 1.18 %
Return on shareholders’ equity 8.30 % 9.11 % 9.67 % 8.42 % 7.44 % 8.86 % 4.72 %
Return on tangible common equity (1) 11.09 % 11.97 % 12.77 % 11.11 % 9.72 % 11.72 % 6.18 %
Adjusted return on tangible common equity 12.02 % 11.97 % 12.77 % 11.11 % 11.51 % 11.97 % 11.36 %
Efficiency ratio (4) 54.53 % 57.29 % 57.02 % 59.60 % 57.00 % 57.06 % 57.80 %
(4) RECONCILIATION TABLE FOR NON-GAAP FINANCIAL MEASURES
Efficiency ratio calculation
Non-interest expense $ 54,714 $ 52,158 $ 52,114 $ 52,337 $ 57,833 $ 211,323 $ 281,911
Less:
Acquisition related expenses 2,878 2,878
Loss on debt extinguishment 64,888
Corporate reorganization expense 6,000 6,000
Operating expenses $ 51,836 $ 52,158 $ 52,114 $ 52,337 $ 51,833 $ 208,445 $ 211,023
Net interest income (taxable equivalent) $ 71,641 $ 68,166 $ 66,992 $ 66,351 $ 68,223 $ 273,150 $ 269,219
Non-interest income 23,430 22,871 24,396 21,478 22,714 92,175 98,067
Less:
Net gains from fair value changes of subordinated debentures 2,111
Net gains on investment securities 13 8 21 54
Adjusted revenue $ 95,058 $ 91,037 $ 91,388 $ 87,821 $ 90,937 $ 365,304 $ 365,121
Efficiency ratio 54.53 % 57.29 % 57.02 % 59.60 % 57.00 % 57.06 % 57.80 %
Financial Update for National Penn Bancshares, Inc. (NPBC) for 12/31/2014
Unaudited, dollars in thousands except share and per share data
For the Quarter Ended For the Twelve Months Ended
12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013 12/31/2014 12/31/2013
CHARGE-OFFS
Loan charge-offs $ 3,781 $ 3,097 $ 5,125 $ 5,018 $ 7,523 $ 17,021 $ 24,993
Recoveries on loans (2,029 ) (1,176 ) (1,721 ) (652 ) (2,127 ) (5,578 ) (5,155 )
Net loan charge-offs $ 1,752 $ 1,921 $ 3,404 $ 4,366 $ 5,396 $ 11,443 $ 19,838
Net loan charge-offs to average total loans (annualized) 0.12 % 0.14 % 0.25 % 0.33 % 0.41 % 0.21 % 0.38 %
NET CHARGE-OFF DETAIL
Commercial and industrial loans $ (537 ) $ 19 $ 2,049 $ 1,150 $ 5,157 $ 2,681 $ 12,150
Commercial real estate-permanent 245 1,072 599 423 (523 ) 2,339 1,064
Commercial real estate-construction (628 ) (221 ) 90 30 (167 ) (729 ) 215
Total commercial real estate loans (383 ) 851 689 453 (690 ) 1,610 1,279
Residential mortgages 1,139 138 162 1,681 56 3,120 2,120
Home equity lines and loans 723 355 389 784 439 2,251 2,512
All other consumer loans 810 558 115 298 434 1,781 1,777
Total consumer loans 2,672 1,051 666 2,763 929 7,152 6,409
Net loans charged-off $ 1,752 $ 1,921 $ 3,404 $ 4,366 $ 5,396 $ 11,443 $ 19,838
As of
12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013
ASSET QUALITY AND OTHER DATA
Non-accrual commercial and industrial loans $ 21,931 $ 11,205 $ 9,641 $ 13,501 $ 14,935
Non-accrual commercial real estate-permanent 7,915 2,887 4,811 3,513 4,258
Non-accrual commercial real estate-construction 8,113 8,547 9,674 10,425 12,128
Total non-accrual commercial real estate loans 16,028 11,434 14,485 13,938 16,386
Non-accrual residential mortgages 7,706 6,803 6,265 6,779 7,037
Non-accrual home equity lines and loans 3,426 3,961 3,631 4,041 4,787
All other non-accrual consumer loans 1,746 1,467 1,495 1,701 1,731
Total non-accrual consumer loans 12,878 12,231 11,391 12,521 13,555
Total non-accrual loans 50,837 34,870 35,517 39,960 44,876
Restructured loans 8,255 7,996 7,969 8,152 7,715
Total non-performing loans 59,092 42,866 43,486 48,112 52,591
Acquired other real estate owned 3,675
Other real estate owned and repossessed assets 1,192 1,561 1,758 2,138 1,278
Total other real estate owned and repossessed assets 4,867 1,561 1,758 2,138 1,278
Total non-performing assets 63,959 44,427 45,244 50,250 53,869
Loans 90+ days past due & still accruing 2,183 2,961 2,097 2,310 3,466
Total non-performing assets and loans 90+ days past due $ 66,142 $ 47,388 $ 47,341 $ 52,560 $ 57,335
Allowance for loan losses $ 90,675 $ 88,927 $ 89,848 $ 93,252 $ 96,367
Allowance for loan losses/non-performing loans 153.4 % 207.5 % 206.6 % 193.8 % 183.2 %

Allowance for loan losses/non-performing assets and loans 90+ days past due (excluding acquired other real estate owned)

145.2 % 187.7 % 189.8 % 177.4 % 168.1 %

Allowance for loan losses/non-performing assets and loans 90+ days past due

137.1 % 187.7 % 189.8 % 177.4 % 168.1 %

Allowance for loan losses/total loans (excluding acquired loans at period end)

1.63 % 1.63 % 1.66 % 1.73 % 1.81 %
Allowance for loan losses/total loans 1.48 % 1.63 % 1.66 % 1.73 % 1.81 %
Provision/charge-offs, net 199.8 % 52.1 % 0.0 % 28.7 % 18.5 %
Classified loans excluding acquired classified loans $ 153,255 $ 169,790 $ 173,610 $ 174,465 $ 191,589
Acquired classified loans 9,534
Total classified loans $ 162,789 $ 169,790 $ 173,610 $ 174,465 $ 191,589
Classified loans/total loans (excluding acquired loans at period end) 2.75 % 3.10 % 3.21 % 3.24 % 3.59 %
Total classified loans/total loans 2.65 % 3.10 % 3.21 % 3.24 % 3.59 %
Delinquent loans (c) $ 22,300 $ 20,171 $ 17,316 $ 16,819 $ 29,435
Delinquent loans/total loans 0.36 % 0.37 % 0.32 % 0.31 % 0.55 %
Non-performing loans/total loans 0.96 % 0.78 % 0.80 % 0.89 % 0.99 %
REGULATORY CAPITAL DATA
Tier 1 Capital $ 963,629 $ 927,023 $ 913,126 $ 888,565 $ 941,926
Tier 1 Leverage Ratio 10.78 % 11.18 % 11.09 % 10.83 % 11.63 %
Tier 1 Ratio 13.91 % 14.77 % 14.64 % 14.44 % 15.46 %
Total Capital $ 1,050,295 $ 1,005,629 $ 991,235 $ 965,705 $ 1,018,316
Total Capital Ratio 15.16 % 16.02 % 15.89 % 15.69 % 16.72 %
Total Risk-Weighted Assets $ 6,929,235 $ 6,278,140 $ 6,237,016 $ 6,155,090 $ 6,091,183
(c) Includes loans 30-89 days past due and loans 90+ days past due and still accruing
Financial Update for National Penn Bancshares, Inc. (NPBC) for 12/31/2014
Unaudited, dollars in thousands except share and per share data
As of
Earning Assets / Liabilities 12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013

Loan portfolio composition (regulatory):

Commercial / industrial $ 852,804 $ 804,283 $ 815,168 $ 865,533 $ 796,797
Commercial real estate (d) 2,172,858 1,994,773 1,993,408 1,943,744 1,926,978
Residential mortgage 1,550,378 1,181,503 1,155,551 1,161,220 1,181,020
Real estate construction and land development 261,916 260,054 242,047 243,216 256,483
Home equity 875,903 817,723 803,553 787,334 794,709
Consumer 239,807 224,614 216,478 210,395 209,729
Other 192,791 186,892 179,826 166,285 172,503
Total 6,146,457 5,469,842 5,406,031 5,377,727 5,338,219
Investment securities and other securities 2,519,215 2,381,751 2,420,509 2,424,404 2,396,298
Other earning assets 303,055 98,512 73,384 55,335 181,282
Total earning assets (net of loan loss reserve) $ 8,878,052 $ 7,861,178 $ 7,810,076 $ 7,764,214 $ 7,819,432
(d) Includes owner occupied

Loan portfolio composition (internal):

Commercial & industrial
Business purpose, real estate secured $ 929,999 $ 897,812 $ 884,697 $ 861,101 $ 885,135
Business purpose, not secured by real estate 995,051 944,207 968,183 1,002,296 939,121
Owner occupied commercial real estate
Permanent 623,712 566,007 590,148 593,595 589,765
Construction / development 51,105 49,826 45,924 47,505 46,415
Leasing 18 41 97 228
Total commercial & industrial 2,599,867 2,457,870 2,488,993 2,504,594 2,460,664
Commercial real estate
Non-owner occupied
Permanent 1,229,318 1,086,346 1,042,928 1,021,271 994,838
Construction / development 203,542 208,728 182,506 183,586 198,334
Total commercial real estate 1,432,860 1,295,074 1,225,434 1,204,857 1,193,172
Total commercial 4,032,727 3,752,944 3,714,427 3,709,451 3,653,836
Consumer
Residential mortgage (personal purpose)
Permanent 893,732 644,919 644,322 637,273 643,506
Construction 14,625 16,004 13,128 10,922 8,719
Total residential mortgages 908,357 660,923 657,450 648,195 652,225
Home equity and direct installment 253,358 162,188 172,785 180,996 193,089
Home equity lines of credit 660,472 614,298 591,331 572,301 569,519
Total home equity 913,830 776,486 764,116 753,297 762,608
Private banking credit lines 96,689 95,049 95,324 94,582 99,859
Indirect vehicle and other 190,676 180,550 172,439 167,031 164,740
All other consumer 287,365 275,599 267,763 261,613 264,599
Total consumer 2,109,552 1,713,008 1,689,329 1,663,105 1,679,432
Loans 6,142,279 5,465,952 5,403,756 5,372,556 5,333,268
Loans held-for-sale 4,178 3,890 2,275 5,171 4,951
Total loans $ 6,146,457 $ 5,469,842 $ 5,406,031 $ 5,377,727 $ 5,338,219

Deposit composition:

Savings $ 678,294 $ 544,625 $ 552,885 $ 547,255 $ 526,576
NOW accounts 1,913,399 1,981,608 1,689,381 1,667,272 1,655,425
Money market accounts 1,827,233 1,658,815 1,684,410 1,680,900 1,670,035
Time deposits less than $100k 891,964 797,535 831,390 870,921 896,700
Time deposits $100k or greater 333,697 314,915 319,146 344,504 353,791
Total interest bearing deposits 5,644,587 5,297,498 5,077,212 5,110,852 5,102,527
Non-interest bearing deposits 1,085,158 990,438 1,031,271 1,028,572 970,051
Total deposits $ 6,729,745 $ 6,287,936 $ 6,108,483 $ 6,139,424 $ 6,072,578
Financial Update for National Penn Bancshares, Inc. (NPBC) for 12/31/2014
Unaudited, dollars in thousands except share and per share data
Quarterly, as of Twelve Months, as of
12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013 12/31/2014 12/31/2013
Avg Bal Yield Avg Bal Yield Avg Bal Yield Avg Bal Yield Avg Bal Yield Avg Bal Yield Avg Bal Yield
Total loans* $ 5,932,806 3.96 % $ 5,406,073 4.00 % $ 5,360,641 3.97 % $ 5,342,648 4.04 % $ 5,256,841 4.17 % $ 5,511,872 3.99 % $ 5,238,606 4.25 %
Investment securities* 2,470,862 3.32 % 2,400,867 3.43 % 2,414,063 3.56 % 2,409,287 3.53 % 2,375,893 3.50 % 2,423,876 3.46 % 2,338,023 3.54 %
Interest earning deposits 124,710 0.18 % 85,310 0.15 % 67,112 0.17 % 69,222 0.15 % 89,530 0.17 % 86,737 0.16 % 101,603 0.20 %
Total earning assets 8,528,378 3.72 % 7,892,250 3.79 % 7,841,816 3.81 % 7,821,157 3.85 % 7,722,264 3.92 % 8,022,485 3.79 % 7,678,232 3.98 %
Total assets 9,269,113 8,569,734 8,512,845 8,479,686 8,385,094 8,709,629 8,330,441
Savings 638,913 0.10 % 549,589 0.10 % 550,336 0.10 % 534,699 0.10 % 524,647 0.10 % 568,618 0.10 % 520,022 0.10 %
NOW accounts 1,987,346 0.15 % 1,845,595 0.15 % 1,717,629 0.14 % 1,618,547 0.13 % 1,873,519 0.14 % 1,793,436 0.14 % 1,648,660 0.14 %
Money market accounts 1,788,019 0.22 % 1,681,361 0.22 % 1,687,193 0.21 % 1,671,200 0.21 % 1,649,960 0.23 % 1,707,194 0.22 % 1,650,376 0.27 %
Time deposits 1,210,685 0.88 % 1,132,513 0.96 % 1,179,576 1.03 % 1,233,794 1.06 % 1,273,664 1.07 % 1,188,923 0.98 % 1,388,789 1.08 %
Total interest bearing deposits 5,624,963 0.33 % 5,209,058 0.34 % 5,134,734 0.36 % 5,058,240 0.38 % 5,321,790 0.39 % 5,258,171 0.35 % 5,207,847 0.43 %
Non-interest bearing deposits 1,078,218 1,005,457 1,006,120 968,129 984,037 1,014,758 933,849
Total deposits 6,703,181 0.27 % 6,214,515 0.29 % 6,140,854 0.31 % 6,026,369 0.32 % 6,305,827 0.33 % 6,272,929 0.30 % 6,141,696 0.36 %
Customer repurchase agreements 589,944 0.29 % 546,119 0.29 % 546,284 0.29 % 541,041 0.29 % 529,541 0.30 % 555,954 0.29 % 529,770 0.34 %
Repurchase agreements 0.00 % 16,032 4.87 % 50,000 4.87 % 50,000 4.87 % 50,000 4.87 % 28,836 4.87 % 74,496 3.45 %
Short-term borrowings 0.00 % 0.00 % 407 0.63 % 0.00 % 54 0.00 % 101 0.63 % 9,680 0.42 %
Federal Home Loan Bank advances 503,081 1.10 % 505,349 1.02 % 521,753 1.05 % 596,818 1.05 % 190,670 2.68 % 531,421 1.06 % 269,488 2.35 %
Senior long-term debt 125,000 4.33 % 20,380 4.42 % 0.00 % 0.00 % 0.00 % 36,644 4.34 % 0.00 %
Subordinated debentures 77,321 2.75 % 77,321 2.75 % 77,321 2.74 % 77,321 2.77 % 77,321 2.76 % 77,321 2.75 % 89,128 3.47 %
Total deposits and borrowings 7,998,527 0.41 % 7,379,716 0.38 % 7,336,619 0.41 % 7,291,549 0.44 % 7,153,413 0.44 % 7,503,206 0.41 % 7,114,258 0.51 %
Total interest bearing liabilities $ 6,920,309 0.48 % $ 6,374,259 0.44 % $ 6,330,499 0.48 % $ 6,323,420 0.50 % $ 6,169,376 0.52 % $ 6,488,448 0.48 % $ 6,180,409 0.59 %
Net interest margin (FTE) 3.33 % 3.43 % 3.43 % 3.44 % 3.51 % 3.40 % 3.51 %
Wealth assets under management, at period end $ 2,501,015 $ 2,411,463 $ 2,574,509 $ 2,497,185 $ 2,504,717
*Fully taxable equivalent (“FTE”) basis, using a 35% effective tax rate
Financial Update for National Penn Bancshares, Inc. (NPBC) for 12/31/2014
Unaudited
STATES OF OPERATION AND BANKING OFFICES BY STATE (LATEST AVAILABLE DATA)
Quarterly, as of
12/31/2014 9/30/2014 6/30/2014 3/31/2014 12/31/2013

PA

Total number of retail branch offices 119 110 110 118 119
Total number of insured subsidiaries
(Bank & Thrift subsidiaries) 1 1 1 1 1
Total number of ATMs 127 120 117 123 124

NJ

Total number of retail branch offices 7
Total number of insured subsidiaries
(Bank & Thrift subsidiaries)
Total number of ATMs 6

MD

Total number of retail branch offices 1 1 1 1 1
Total number of insured subsidiaries
(Bank & Thrift subsidiaries)
Total number of ATMs 1 1 1 1 1

TOTAL

Total number of retail branch offices 127 111 111 119 120
Total number of insured subsidiaries
(Bank & Thrift subsidiaries) 1 1 1 1 1
Total number of ATMs 134 121 118 124 125
EOP employees (full-time equivalent) 1,658 1,549 1,574 1,591 1,631

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