FORM 10-Q/A No. 1
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, 1997
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 October 31, 1997
Common Stock ($1.875 par value) (No.) 10,618,645 Shares
<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) 1997 1996
(Unaudited) (Note)
----------- -----------
ASSETS
<S> <C> <C>
Cash and due from banks $50,533 $40,194
Interest bearing deposits in banks 1,280 1,802
Federal funds sold 2,500 --
----------- -----------
Total cash and cash equivalents 54,313 41,996
Investment securities available for sale at market value 316,276 236,814
Loans, less allowance for loan losses of $24,851 and
$22,746 in 1997 and 1996 respectively 1,080,297 1,028,334
Other assets 56,052 50,869
----------- -----------
Total Assets $1,506,938 $1,358,013
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing deposits $147,900 $145,107
Interest bearing deposits
(Includes certificates of deposit in excess of $100,000 or greater:
1997 - $116,887; 1996 - $97,115) 925,489 835,701
----------- -----------
Total Deposits 1,073,389 980,808
Securities sold under repurchase agreements
and federal funds purchased 93,555 164,996
Short-term borrowings 8,161 6,931
Long-term obligations 155,460 76,110
Guaranteed preferred beneficial interests in
Company's subordinated debentures 40,250 --
Accrued interest and other liabilities 16,498 14,447
----------- -----------
Total Liabilities 1,387,313 1,243,292
Commitments and contingent liabilities -- --
Shareholders' equity
Preferred stock, no stated par value;
authorized 1,000,000 shares, none issued -- --
Common stock, par value $1.875 per share;
authorized 26,666,667 shares; issued and outstanding
1997 - 10,675,006; 1996 - 8,002,648, net of shares
in Treasury: 1997 - 43,032; 1996 - 31,204 20,085 20,085
Additional paid-in-capital 82,476 83,707
Retained earnings 14,573 4,398
Net unrealized gains on securities available for sale 3,611 7,357
Treasury stock at cost (1,120) (826)
----------- -----------
Total Shareholders' Equity 119,625 114,721
----------- ===========
Total Liabilities and Shareholders' Equity $1,506,938 $1,358,013
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
Note: The Balance Sheet at Dec. 31, 1996 has been derived from the audited
financial statements at that date.
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NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(Dollars in thousands, except per share data) September 30 September 30
------------------------------------------------
1997 1996 1997 1996
-------- -------- -------- --------
INTEREST INCOME
<S> <C> <C> <C> <C>
Loans including fees $26,033 $23,196 $75,656 $67,123
Deposits in banks 22 15 66 44
Federal funds sold 42 47 93 160
Investment securities 4,414 3,893 11,727 11,410
-------- -------- -------- --------
Total interest income 30,511 27,151 87,542 78,737
-------- -------- -------- --------
INTEREST EXPENSE
Deposits 10,564 8,675 29,663 25,400
Federal funds purchased, borrowed funds and
securities sold under repurchase agreements 3,684 3,052 9,905 8,750
-------- -------- -------- --------
Total interest expense 14,248 11,727 39,568 34,150
-------- -------- -------- --------
Net interest income 16,263 15,424 47,974 44,587
Provision for loan losses 1,200 975 3,600 2,925
-------- -------- -------- --------
Net interest income after provision
for loan losses 15,063 14,449 44,374 41,662
-------- -------- -------- --------
OTHER INCOME
Trust and investment management income 683 548 2,006 1,752
Service charges on deposit accounts 1,013 885 2,974 2,478
Net gains (losses) on sale of securities and mortgages 620 (57) 1,462 (72)
Other 979 978 2,782 2,227
-------- -------- -------- --------
Total other income 3,295 2,354 9,224 6,385
-------- -------- -------- --------
OTHER EXPENSES
Salaries, wages and employee benefits 6,563 5,703 19,450 16,161
Net premises and equipment 1,818 1,726 5,544 5,123
Other operating 3,267 3,216 8,946 8,858
-------- -------- -------- --------
Total other expenses 11,648 10,645 33,940 30,142
-------- -------- -------- --------
Income before income taxes 6,710 6,158 19,658 17,905
Applicable income tax expense 1,991 1,872 6,020 5,511
-------- -------- -------- --------
Net income $4,719 $4,286 $13,638 $12,394
======== ======== ======== ========
PER SHARE OF COMMON STOCK
Net income $0.45 $0.40 $1.30 $1.16
Dividends paid in cash 0.21 0.16 0.58 0.48
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
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<PAGE>
NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended September 30,
(Dollars in thousands)
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net income $13,638 $12,394
Adjustments to reconcile net income to net
cash provided by (used in) operating activities
Provision for loan and lease losses 3,600 2,925
Depreciation and amortization 2,627 2,406
Net gains (losses) on sale of securities and mortgages 1,462 (72)
Mortgage loans originated for resale (15,610) (16,045)
Sale of mortgage loans originated for resale 15,610 16,045
Other (4,888) (3,892)
--------- ---------
Net cash provided by (used in) operating activities 16,439 13,761
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of investment securities - available for sale 12,584 30,034
Proceeds from maturities of investment securities - held to maturity 14,008 18,133
Proceeds from maturities of investment securities - available for sale 740 740
Purchase of investment securities (107,581) (54,776)
Proceeds from sales of loans -- --
Net increase in loans (55,563) (73,380)
Purchases of premises & equipment (2,333) (2,070)
--------- ---------
Net cash provided by (used in) investing activities (138,145) (81,319)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in:
Deposits 92,581 56,680
Repurchase agreements, fed funds & short-term borrowings (70,211) 53,101
Long-term borrowings & subordinated capital note 119,600 (35,479)
(Increase) decrease in treasury stock (294) 389
Issuance of common stock under dividend reinvestment plan (1,231) 49
Cash dividends (6,422) (5,252)
--------- ---------
Net cash provided by (used in) financing activities 134,023 69,488
Net increase (decrease) in cash and cash equivalents 12,317 1,930
Cash and cash equivalents at January 1 41,996 41,209
--------- ---------
Cash and cash equivalents at September 30 $54,313 $43,139
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
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<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, 1996.
2. The results of operations for the nine-month period ended September 30, 1997,
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 10,504,038 and 10,671,969 for 1997 and 1996, respectively, and are computed
after giving retroactive effect to a 4-for-3 stock split paid July 31, 1997 and
a 5% stock dividend paid on October 31, 1996.
4. On September 24, 1997, the Company's Board of Directors declared a cash
dividend of .21 per share payable on November 17, 1997, to shareholders of
record on October 31, 1997.
5. New Accounting Pronouncements - The Financial Accounting Standards Board has
issued Statement of Financial Accounting Standards No. 128, "Earnings Per
Share," which is effective for financial statements issued after December 15,
1997. Early adoption of the new standard is not permitted. The new standard
eliminates primary and fully diluted earnings per share and requires
presentation of basic and diluted earnings per share together with disclosure of
how the per share amounts were computed. The adoption of this new standard is
not expected to have a material impact on the disclosure of earnings per share
in the financial statements. The effect of adopting this new standard has not
been determined.
The Financial Accounting Standards Board has issued Statement of
Accounting Standards No. 130, "Reporting Comprehensive Income," which is
effective for years beginning after December 15, 1997. This new standard
requires entities presenting a complete set of financial statements to include
details of comprehensive income. Comprehensive income consists of net income or
loss for the current period and income, expenses, gains, and losses that bypass
the income statement and are reported directly in a separate component of
equity. The Company has not analyzed this statement nor determined the effect on
its financial statements at the present time.
The Financial Accounting Standards Board has issued Statement of
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information," in June of 1997, which is effective for all periods
beginning after December 15, 1997. SFAS 131 requires that public business
enterprises report certain information about operating segments in complete sets
of financial statements of the enterprise and in condensed financial statements
of interim periods issued to shareholders. It also requires that public business
enterprises report certain information about their products and services, the
geographic areas in which they operate, and their major customers. The Company
has not yet adopted this statement, but does not expect its effects to be
material.
6. The Company identifies 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 balance of impaired loans was $6,953,000 at September 30,
1997, all of which are nonaccrual loans. The allowance for loan loss associated
with these impaired loans was $593,000 at September 30, 1997. The Company
recognizes income on impaired loans under the cash basis when the loans are both
current and the collateral on the
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<PAGE>
loan is sufficient to cover the outstanding obligation to the Company. If these
factors do not exist, the Company will not recognize income on such loans.
7. On May 22, 1997, the Company issued 41.5 million of 9.00% of junior
subordinated deferrable interest debentures (the "debentures") to NPB Capital
Trust (the "Trust"), a Delaware business trust, in which the Company owns all of
the common equity. The debentures are the sole asset of the Trust. The Trust
issued $40.25 million of preferred securities to investors. The Company's
obligations under the debentures and related documents, taken together,
constitute a full and unconditional guarantee by the Company of the Trust's
obligations under the preferred securities. Although the debentures will be
treated as debt of the Company, they currently qualify for tier 1 capital
treatment in an amount up to 25% of total tier 1 capital. The preferred
securities are redeemable by the Company on or after June 30, 2002, or earlier
in the event the deduction of related interest for federal income taxes is
prohibited, treatment as tier 1 capital is no longer permitted or certain other
contingencies arise. The preferred securities must be redeemed upon maturity of
the debentures in 2027. See "Liquidity and Interest Rate Sensitivity" and
"Capital Adequacy" below.
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<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 12, 1997 By /s/ Wayne R. Weidner
Wayne R. Weidner, Executive
Vice President
Dated: November 12, 1997 By /s/ Gary L. Rhoads
Gary L. Rhoads, Principal
Financial Officer
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