FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1995
OR
[ ] 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: 0-10957
NATIONAL PENN BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2215075
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Philadelphia and Reading Avenues, Boyertown, PA 19512
(Address of principal executive offices) (Zip Code)
(610) 367-6001
(Registrant's telephone number, including area code)
N/A
(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 .
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at November 8, 1995
Common Stock ($2.50 par value) (No.) 7,572,541 Shares
Page 1 of 16 pages
<PAGE>
TABLE OF CONTENTS
Part I - Financial Information. Page
Item 1. Financial Statements ..............................3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .....8
Part II - Other Information.
Item 1. Legal Proceedings ................................15
Item 2. Changes in Securities ............................15
Item 3. Defaults Upon Senior Securities ..................15
Item 4. Submission of Matters to a Vote of
Security Holders .................................15
Item 5. Other Information ................................15
Item 6. Exhibits and Reports on Form 8-K .................15
Signatures ..................................................................16
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET Sept. 30 Dec. 31
(Dollars in thousands, except per share data) 1995 1994
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Cash and due from banks $35,361 $33,195
Interest bearing deposits in banks 2,228 964
Federal funds sold --- ---
---------- ----------
Total cash and cash equivalents 37,589 34,159
Securities held to maturity
(approximate market value of $87,708 and
$97,459 at 1995 and 1994, respectively) 85,718 99,229
Securities available for sale at market value 157,953 138,873
---------- ----------
Total Investment Securities 243,671 238,102
Loans, net of unearned discount 915,186 830,612
Less allowance for possible loan losses (19,693) (19,310)
---------- ----------
Net Loans 895,493 811,302
Other assets 51,766 53,611
---------- ----------
Total Assets $1,228,519 $1,137,174
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing deposits $124,814 $121,273
Interest bearing deposits
(Includes certificates of deposit in excess of $100:
1995 - $91,649; 1994 - $65,630) 780,656 743,367
---------- ----------
Total Deposits 905,470 864,640
Securities sold under repurchase agreements
and federal funds purchased 129,831 50,274
Short-term borrowings 6,168 47,967
Long-term obligations 71,778 77,777
Accrued interest and other liabilities 15,898 11,645
---------- ----------
Total Liabilities 1,129,145 1,052,303
Commitments and contingent liabilities --- ---
Shareholders' equity
Preferred stock, no stated par value;
authorized 1,000,000 shares, none issued --- ---
Common stock, par value $2.50 per share;
20,000,000 shares authorized; 7,269,494
shares issued and 7,206,407 shares
outstanding at September 30, 1995;
7,234,126 shares issued and 7,135,347
shares outstanding at December 31, 1994 18,173 18,083
Additional paid-in-capital 57,283 57,263
Retained earnings 23,298 16,598
Valuation adjustment for securities
available for sale, net of tax 2,346 (4,011)
Treasury stock (63,087 shares at cost at
September 30, 1995 and 98,779 shares at
cost at December 31, 1994) (1,726) (3,062)
---------- ----------
Total Shareholders' Equity 99,374 84,871
---------- ----------
Total Liabilities and Shareholders' Equity $1,228,519 $1,137,174
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
Note: The Balance Sheet at Dec. 31, 1994 has been derived from the audited
financial statements at that date.
3
<PAGE>
<TABLE>
<CAPTION>
NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
(Dollars in thousands, except per share data) September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans including fees $21,214 $17,791 $60,917 $51,399
Deposits in banks 21 12 51 68
Federal funds sold 105 8 110 22
Investment securities 4,096 3,866 12,062 10,098
------- ------- ------- -------
Total interest income 25,436 21,677 73,140 61,587
------- ------- ------- -------
INTEREST EXPENSE
Deposits 8,381 6,070 24,254 16,263
Federal funds purchased, borrowed funds and
securities sold under repurchase agreements 3,156 1,470 7,978 3,981
------- ------- ------- -------
Total interest expense 11,537 7,540 32,232 20,244
------- ------- ------- -------
Net interest income 13,899 14,137 40,908 41,343
Provision for loan losses 750 750 2,250 2,450
------- ------- ------- -------
Net interest income after provision
for loan losses 13,149 13,387 38,658 38,893
------- ------- ------- -------
OTHER INCOME
Trust Services 481 368 1,329 1,044
Service charges on deposit accounts 685 644 1,982 1,930
Net gains (losses) on sale of securities and mortgages 125 (46) 428 (358)
Other 855 462 2,100 1,448
------- ------- ------- -------
Total other income 2,146 1,428 5,839 4,064
------- ------- ------- -------
OTHER EXPENSES
Salaries, wages and employee benefits 5,015 4,910 14,865 13,860
Net premises and equipment 1,617 1,390 4,336 4,111
Other operating 3,084 3,187 9,012 9,146
------- ------- ------- -------
Total other expenses 9,716 9,487 28,213 27,117
------- ------- ------- -------
Income before income taxes 5,579 5,328 16,284 15,840
Applicable income tax expense 1,684 1,619 4,914 4,874
------- ------- ------- -------
Net income $3,895 $3,709 $11,370 $10,966
====== ====== ======= =======
PER SHARE OF COMMON STOCK
Net income $0.54 $0.52 $1.58 $1.53
Dividends paid in cash 0.22 0.19 0.64 0.54
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
4
<PAGE>
NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended September 30,
(Dollars in thousands)
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $11,370 $10,966
Adjustments to reconcile net income to net
cash provided by (used in) operating activities
Provision for loan and lease losses 2,250 2,450
Depreciation and amortization 2,166 1,744
Net gains (losses) on sale of securities and mortgages 428 (357)
Mortgage loans originated for resale (7,046) (15,273)
Sale of mortgage loans originated for resale 7,046 15,273
Other 7,235 (8,920)
------- -------
Net cash provided by (used in) operating activities 23,449 5,883
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of investment securities - available for sale 6,578 ---
Proceeds from maturities of investment securities - held to maturity 8,375 29,350
Proceeds from maturities of investment securities - available for sale 740
Purchase of investment securities (14,905) (115,031)
Proceeds from sales of loans --- ---
Net increase in loans (86,441) (65,642)
Purchases of premises & equipment (3,731) (5,649)
------- -------
Net cash provided by (used in) investing activities (89,384) (156,972)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in:
Deposits 40,830 126,428
Repurchase agreements, fed funds & short-term borrowings 37,758 21,121
Long-term borrowings & subordinated capital note (5,999) 16,500
(Increase) decrease in treasury stock 1,336 (3,832)
Issuance of common stock under dividend reinvestment plan 110 710
Cash dividends (4,670) (4,023)
------- -------
Net cash provided by (used in) financing activities 69,365 156,904
Net increase (decrease) in cash and cash equivalents 3,430 5,815
Cash and cash equivalents at January 1 34,159 29,767
------- -------
Cash and cash equivalents at September 30 $37,589 $35,582
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
5
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. The financial information included herein is unaudited;
however, such information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management, necessary to a
fair statement of the results for the interim periods. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1994.
2. The results of operations for the nine-month period ended September 30, 1995
are not necessarily indicative of the results to be expected for the full year.
3. Per share data are based on the weighted average number of shares outstanding
of 7,185,698 and 7,165,367 for 1995 and 1994, respectively, and are computed
after giving retroactive effect to a 5% stock dividend paid on October 31, 1994.
4. On July 26, 1995, the Company's Board of Directors declared a 5% stock
dividend payable on October 31, 1995 to shareholders of record on September 29,
1995.
5. On January 1, 1995 the Company adopted Statement of Financial Accounting
Standards (SFAS) NO. 114, "Accounting for Creditors for Impairment of a Loan,"
as amended by SFAS No. 118, "Accounting for Creditors for Impairment of a Loan -
Income Recognition and Disclosures." SFAS No. 114 requires that a creditor
measure impairment based on the present value of expected future cash flows
discounted at the loan's effective interest rate, except that as a practical
expedient, a creditor may measure impairment based on a loan's observable market
price, or the fair value of collateral if the loan is collateral dependent.
Regardless of the measurement method, a creditor must measure impairment based
on the fair value of the collateral when the creditor determines that
foreclosure is probable. SFAS No. 118 allows creditors to use existing methods
for recognizing interest income on impaired loans.
The Company has identified a loan as impaired when it is probable that
interest and principal will not be collected according to the contractual terms
of the loan agreement. The accrual of interest is discontinued in such loans and
no income is recognized until all recorded amounts of interest and principal are
recovered in full.
6
<PAGE>
Loan impairment is measured by estimating the expected future cash flows
and discounting them at the respective effective interest rate or by valuing the
underlying collateral. The recorded investment in these loans and the valuation
for credit losses related to loan impairment are as follows:
September 30,
1995
Principal amount of impaired loans $7,988,000
Accrued interest ---
Deferred loan costs ---
---------
7,988,000
Less valuation allowance 1,097,000
---------
$6,891,000
==========
On January 1, 1995 a valuation for credit losses related to impaired loans
was established. The activity in this allowance for the nine months ending
September 30, 1995 is as follows:
Valuation allowance at beginning of period $1,913,000
Provision for loan impairment 161,000
Direct charge-offs (1,346,000)
Recoveries 369,000
----------
Valuation allowance at end of period $1,097,000
Total cash collected on impaired loans during the nine months ended
September 30, 1995 was $842,000, of which $369,000 was credited to the principal
balance outstanding on such loans and $473,000 was recognized as interest
income. Interest that would have been accrued on impaired loans during the first
nine months of 1995 was $539,000.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion and analysis is intended to assist in
understanding and evaluating the major changes in the financial condition and
earnings performance of the Company with a primary focus on an analysis of
operating results.
FINANCIAL CONDITION
Total assets increased to $1.229 billion, an increase of $91.3 million or
8.0% over the $1.137 billion at December 31, 1994. This increase is reflected
primarily in the loan category, the result of the investment of deposits, the
Company's primary source of funds.
Total cash and cash equivalents increased $3.4 million or 10.0% at
September 30, 1995 when compared to December 31, 1994. This increase was due to
an increase in due from banks and interest bearing deposits in banks.
Loans increased to $915.2 million at September 30, 1995. The increase of
$84.6 million or 10.2% compared to December 31, 1994 was primarily the result of
the investment of deposits. Loans originated for immediate resale during the
first nine months of the year amounted to $7.0 million. The Company's credit
quality is reflected by the annualized ratio of net charge-offs to average total
loans of .29% for the third quarter and the level of non-performing loans to
total loans of .87% at September 30, 1995. The Company has no significant
exposure to energy and agricultural- related loans. Non-performing loans at
December 31, 1994 were 1.12% of total loans.
Investments, the Company's secondary use of funds, increased $5.6 million
or 2.3% to $243.7 million at September 30, 1995 when compared to December 31,
1994. The increase was primarily in Mortgage-Backed Securities and Marketable
Equity Securities.
As the primary source of funds, aggregate deposits of $905.5 million at
September 30, 1995 increased $40.8 million or 4.7% compared to December 31,
1994. Interest-bearing deposits increased $37.3 million or 5.0% to $780.7
million at September 30, 1995 compared to $743.4 million at December 31, 1994.
Certificates of deposit in excess of $100,000 increased $26.0 million. In
addition to deposits, earning assets are funded to some extent through purchased
funds and borrowings. These include securities sold under repurchase agreements,
federal funds purchased, short-term borrowings and long-term debt obligations.
In the aggregate, these funds totaled $207.8 million at September 30, 1995, a
$31.8 million or 18.0% increase compared to $176.0 million December 31, 1994.
The increase is reflected in short-term obligations, primarily securities sold
under repurchase agreement and federal funds purchased.
8
<PAGE>
Shareholders' equity increased $14.5 million or 17.1% at September 30, 1995
to $99.4 million compared to the $84.9 million at December 31, 1994. This
increase was due to the retention of earnings and the change in valuation
adjustment for securities available for sale. Cash dividends paid during the
first nine months of 1995 increased $679,000 or 17.4% compared to the cash
dividends paid during the first nine months of 1994. Earnings retained during
the first nine months of 1995 were 59.7% of total earnings compared to 64.4%
during the first nine months of 1994.
RESULTS OF OPERATIONS
Net income for the quarter ended September 30, 1995 was $3.9 million, 5.0%
more than the $3.7 million reported for the same period in 1994. For the first
nine months, net income reached $11.4 million, or 3.7% more than the $10.9
million reported for the first nine months of 1994. The Company's performance
has been and will continue to be in part influenced by the strength of the
economy and conditions in the real estate market.
Net interest income is the difference between interest income on assets and
interest expense on liabilities. Net interest income decreased $.2 million or
1.7% to $13.9 million during the third quarter of 1995 from $14.1 million in the
third quarter 1994. For the comparative nine month period, net interest income
decreased $.4 million or 1.1%. The decrease in net interest income is a result
of growth in loan outstandings and higher rates on loans that was more than
offset by growth in deposits and higher rates on deposits and borrowings.
Interest rate risk is a major concern in forecasting earnings potential. The
Company's prime rate from January 1, 1995 to January 31, 1995 was 8.50%. From
February 1, 1995 to July 6, 1995, the prime rate was 9.0%. On July 7, 1995, the
prime rate changed to 8.75%. The Company's prime rate was 6.0% from January 1
through March 23, 1994. From March 24 to April 18, 1994, the prime rate was
6.25%. From April 19 to May 17, 1994, the prime rate was 6.75%. From May 18,
1994 to August 15, 1994, the prime rate was 7.25%. On August 16, 1994, the prime
rate was changed to 7.75%. Interest expense during the first nine months of 1995
increased $11.9 million or 59.2% compared to the prior year's nine months.
Despite the current rate environment, the cost of attracting and holding
deposited funds is an ever-increasing expense in the banking industry. These
increases are the real costs of deposit accumulation and retention, including
FDIC insurance costs and branch overhead expenses. Such costs are necessary for
continued growth and to maintain and increase market share of available
deposits.
The provision for loan and lease losses is determined by periodic reviews
of loan quality, current economic conditions, loss experience and loan growth.
Based on these factors, the provision
9
<PAGE>
for loan and lease losses remained constant for the third quarter and decreased
$200,000 for the first nine months of 1995 compared to the same periods in 1994.
The allowance for loan and lease losses of $19.7 million at September 30, 1995
and $19.3 million at December 31, 1994 as a percentage of total loans was 2.2%
and 2.3%, respectively. The Company's net charge-offs of $1,867,000 and
$1,690,000 during the first nine months of 1995 and 1994, respectively,
continues to be comparable to that of the Company's peers, as reported in the
Bank Holding Company Performance Report.
"Total other income" increased $718,000 or 50.3% during the third quarter
of 1995, as a result of increases in other income of $393,000, gains on sale of
securities and mortgages of $171,000, trust income of $113,000 and service
charges on deposit accounts of $41,000. Year to date, other income increased
$1,775,000 or 43.7% when compared to the first nine months of 1994 as a result
of gains on the sale of securities and mortgages of $786,000, other income of
$652,000, trust income of $285,000 and service charges on deposit accounts 0f
$52,000. "Total other expenses" increased $229,000 or 2.4% during the quarter
ended September 30, 1995 as a result of increases in net premises and equipment
of $227,000, salaries, wages and employee benefits of $105,000. These increases
were partially offset by a decrease in other operating expenses of $103,000.
Year to date, other expenses increased $1,096,000 or 4.0% when compared to the
first nine months of 1994. Of this year-to-date increase, salaries and benefits
increased $1,005,000 and net premises amd equipment of $225,000. These increases
were partially offset by a decrease in other operating expenses of $134,000.
Income before income taxes increased by $251,000 or 4.7% compared to the
third quarter of 1994. In comparing the first nine months of 1995 to 1994,
income before income taxes increased $444,000 or 2.8%. Income taxes increased
$65,000 for the quarter and $40,000 the nine month period.
LIQUIDITY AND INTEREST RATE SENSITIVITY
The primary functions of asset/liability management are to assure adequate
liquidity and maintain an appropriate balance between interest-earning assets
and interest-bearing liabilities. Liquidity management involves the ability to
meet the cash flow requirements of customers who may be either depositors
wanting to withdraw funds or borrowers needing assurance that sufficient funds
will be available to meet their credit needs. Funding affecting short-term
liquidity, including deposits, repurchase agreements, fed funds purchased, and
short-term borrowings, increased $78.6 million from year end 1994. Long-term
borrowings decreased $6.0 million during the first nine months of 1995.
The goal of interest rate sensitivity management is to avoid fluctuating
net interest margins, and to enhance consistent growth of net interest income
through periods of changing interest rates.
10
<PAGE>
Such sensitivity is measured as the difference in the volume of assets and
liabilities in the existing portfolio that are subject to repricing in a future
time period.
The following table shows separately the interest rate sensitivity of each
category of interest-earning assets and interest-bearing liabilities at
September 30, 1995:
Repricing Periods (1)
One Year
Within Through Over
One Year Five Years Five Years
(In Thousands)
Assets
Interest-bearing deposits
at banks $ 2,228 $ -- $ --
Investment securities 53,882 68,315 121,474
Loans and leases 383,195 374,538 157,453
Other assets 4,627 -- 82,500
-------- -------- --------
443,932 442,853 361,427
-------- -------- --------
Liabilities and equity
Noninterest-bearing deposits 124,814 -- --
Interest-bearing deposits 319,403 228,105 233,148
Borrowed funds 182,190 4,085 21,502
Other liabilities -- -- 35,591
Hedging instruments 100,000 (90,000) (10,000)
Shareholders' equity -- -- 99,374
-------- -------- --------
726,407 142,190 379,615
-------- -------- --------
Interest sensitivity gap (282,475) 300,663 (18,188)
-------- -------- ---------
Cumulative interest rate
sensitivity gap ($282,475) $ 18,188 $ --
========== ========= ========
(1) Savings and NOW deposits are scheduled for repricing based on
historical deposit decay rate analyses, as well as historical moving
averages of run-off for the Company's deposits in these categories.
Interest rate sensitivity is a function of the repricing characteristics of
the Company's assets and liabilities. These characteristics include the volume
of assets and liabilities repricing, the timing of the repricing, and the
relative levels of repricing. Attempting to minimize the interest rate
sensitivity gaps is a continual challenge in a changing rate environment. Based
on the Company's gap position as reflected in the above table, current accepted
theory would indicate that net interest income would increase in a falling rate
environment and would decrease in a rising rate environment. An interest rate
gap table does not, however, present a complete picture of the impact of
interest rate changes on net interest income. First, changes in the general
level of interest rates do not affect all categories of
11
<PAGE>
assets and liabilities equally or simultaneously. Second, assets and liabilities
which can contractually reprice within the same period may not, in fact, reprice
at the same time or to the same extent. Third, the table represents a one-day
position; variations occur daily as the Company adjusts its interest sensitivity
throughout the year. Fourth, assumptions must be made to construct such a table.
For example, non-interest bearing deposits are assigned a repricing interval
within one year, although history indicates a significant amount of these
deposits will not move into interest bearing categories regardless of the
general level of interest rates. Finally, the repricing distribution of interest
sensitive assets may not be indicative of the liquidity of those assets.
The Company anticipates volatile interest rate levels for the remainder of
1995, with no clear indication of sustainable rising or falling rates. Given
this assumption, the Company's asset/liability strategy for 1995 is to move
toward a smaller negative gap (interest-bearing liabilities subject to repricing
equal interest-earning assets subject to repricing) for periods up to a year.
The impact of a volatile interest rate environment on net interest income is not
expected to be significant to the Company's results of operations. Effective
monitoring of these interest sensitivity gaps is the priority of the Company's
asset/liability management committee.
CAPITAL ADEQUACY
The following table sets forth certain capital performance ratios.
Sept. 30, Dec. 31,
1995 1994
CAPITAL LEVELS
Tier 1 leverage ratio 7.41% 7.35%
Tier 1 risk-based ratio 10.86 10.85
Total risk-based ratio 12.13 12.11
CAPITAL PERFORMANCE
Return on average assets(annualized) 1.29 1.41
Return on average equity(annualized) 16.46 17.30
Earnings retained 59.70 63.50
Internal capital growth(annualized) 8.00 11.32
The Company's capital ratios above compare favorably to the minimum
required amounts of Tier 1 and total capital to "risk- weighted" assets and the
minimum Tier 1 leverage ratio, as defined by banking regulators. At September
30, 1995, the Company was required to have minimum Tier 1 and total capital
ratios of 4.0% and 8.0%, respectively, and a minimum Tier 1 leverage ratio of
12
<PAGE>
3.0%. In order for the Company to be considered "well capitalized", as defined
by banking regulators, the Company must have Tier 1 and total capital ratios of
6.0% and 10.0%, respectively, and a minimum Tier 1 leverage ratio of 5.0%. The
Company currently meets the criteria for a well capitalized institution, and
management believes that, under current regulations, the Company will continue
to meet its minimum capital requirements in the foreseeable future. At present,
the Company has no commitments for significant capital expenditures.
The Company is not under any agreement with regulatory authorities nor is
the Company aware of any current recommendations by the regulatory authorities
which, if such recommendations were implemented, would have a material effect on
liquidity, capital resources or operations of the Company.
FUTURE OUTLOOK
In February 1994, the Company's Board of Directors approved the repurchase
of up to 200,000 shares of its common stock in open market or negotiated
transactions. To date, a total of 167,140 shares have been repurchased at an
aggregate cost of $5,112,000.
In August 1995, the Company opened two more supermarket branches located in
Allentown and Bethlehem, PA. The Company considers supermarket branches to be a
strategic delivery system for banks in the future.
The Company will continue its work on the installation of platform
automation during 1995. Through platform automation, the Company expects to
increase efficiencies and re-focus its efforts to improve productivity, in order
to provide faster and improved service to our customers, at the same time
reducing costs to contrubute to improved profitability. The platform automation
project may lead to in excess of $1 million in capital expenditures.
On August 8, 1995, the FDIC reduced the insurance assessments that most
Bank Insurance Fund-member banks must pay on insured deposits to $.04 per $100
of deposits from the then current rate of $.23 per $100 of deposits, but
continued Savings Association Insurance Fund premiums at the then current level
of $.23 per $100 of deposits. Because the Company acquired approximately $225
million of SAIF-insured deposits from savings associations from 1990 to the
present, the Company must continue to pay insurance assessments on these
acquired deposits at $.23 per $100 of deposits. The reduction in rate on
BIF-insured deposits to $.04 was retroactive to June 1, 1995. As a result, the
Company received a refund of approximately $400,000.
On November 7, 1995, U.S. Senate and House negotiators reached agreement on
legislation to recapitalize the SAIF through a one-
13
<PAGE>
time assessment of $.85 per $100 of SAIF-insured deposits, to be paid in late
1995 or early 1996. Commercial banking companies which purchased SAIF-insured
deposits, such as the Company, may be assessed at a 20% lower rate. If the
Company is subjected to the full assessment of $.85 per $100 of SAIF-insured
deposits, it could result in a total payment of approximately $1.9 million by
the Company. The Company's $400,000 refund discussed above was not taken into
income but was placed in a designated reserve account to be used as a partial
offset to the anticipated one-time assessment.
The Company cannot predict if the pending legislation will be enacted as
presently proposed, but expects that any legislation recapitalizing SAIF will
likely impose additional deposit insurance costs on the Company attributable to
its acquired SAIF-insured deposits. These costs may have a material adverse
effect on the Company's earnings when incurred.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to Vote of Security Holders.
None
Item 5. Other Information.
The registrant's banking subisidiary, National Penn Bank, opened a
full-service supermarket branch in Bethlehem, Northampton County, on August 21,
1995. National Penn Bank opened remote ATMs at Commons Boulevard and Tuckerton
Road, Reading, Muhlenberg Township, on September 11, 1995, at Alvernia College,
Reading, Berks County, on September 14, 1995 and at Boyertown Area Senior High
School, Boyertown, Berks County on September 20, 1995. The Registrant also
anticipates that National Penn Bank will close its Hamilton Mall Branch,
Allentown, Lehigh County, in early 1996.
In February 1994, the Registrant's Board of Directors approved the
repurchase of up to 200,000 shares of its common stock in open market or
negotiated transactions. At September 30, 1995, a total of 167,140 shares have
been repurchased at an aggregate cost of $5,112,000.
On October 31, 1995, the Registrant paid a 5% stock dividend to
shareholders of record as of September 29, 1995.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K. The Registrant filed a Report on Form 8-K
dated September 28, 1995, reporting information under Item 5, Other Events.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
NATIONAL PENN BANCSHARES, INC.
(Registrant)
Dated: November 8, 1995 By /s/ Lawrence T. Jilk, Jr.
--------------------------
Lawrence T. Jilk, Jr., President
and Chief Executive Officer
Dated: November 8, 1995 By /s/ Gary L. Rhoads
-------------------
Gary L. Rhoads, Principal
Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000700733
<NAME> NATIONAL PENN BANCSHARES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 35,361
<INT-BEARING-DEPOSITS> 2,228
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 157,953
<INVESTMENTS-CARRYING> 85,718
<INVESTMENTS-MARKET> 87,708
<LOANS> 915,186
<ALLOWANCE> 19,693
<TOTAL-ASSETS> 1,228,519
<DEPOSITS> 905,470
<SHORT-TERM> 135,999
<LIABILITIES-OTHER> 15,898
<LONG-TERM> 71,778
<COMMON> 18,173
0
0
<OTHER-SE> 81,201
<TOTAL-LIABILITIES-AND-EQUITY> 1,228,519
<INTEREST-LOAN> 60,917
<INTEREST-INVEST> 12,062
<INTEREST-OTHER> 161
<INTEREST-TOTAL> 73,140
<INTEREST-DEPOSIT> 24,254
<INTEREST-EXPENSE> 32,232
<INTEREST-INCOME-NET> 40,908
<LOAN-LOSSES> 2,250
<SECURITIES-GAINS> 428
<EXPENSE-OTHER> 28,213
<INCOME-PRETAX> 16,284
<INCOME-PRE-EXTRAORDINARY> 11,370
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,370
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.58
<YIELD-ACTUAL> 7.60
<LOANS-NON> 7,989
<LOANS-PAST> 1,618
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 19,310
<CHARGE-OFFS> 2,928
<RECOVERIES> 1,061
<ALLOWANCE-CLOSE> 19,693
<ALLOWANCE-DOMESTIC> 16,070
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,623
</TABLE>
