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: March 31, 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 April 30, 1997
Common Stock ($2.50 par value) (No.) 8,006,886 Shares
Page 1 of 14 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 ...7
Part II - Other Information.
Item 1. Legal Proceedings .......................................12
Item 2. Changes in Securities ...................................12
Item 3. Defaults Upon Senior Securities .........................12
Item 4. Submission of Matters to a Vote of
Security Holders ...............................12
Item 5. Other Information .......................................12
Item 6. Exhibits and Reports on Form 8-K ........................13
Signatures.................................................................14
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
March 31 Dec. 31
1997 1996
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Cash and due from banks $ 44,877 $ 40,194
Interest bearing deposits in banks 2,700 1,802
Federal funds sold 11,500 --
----------- -----------
Total cash and cash equivalents 59,077 41,996
Investment securities available for sale at market value 222,961 236,814
Loans, less allowance for loan losses of $23,340 and
$22,746 in 1997 and 1996 respectively 1,049,080 1,028,334
Other assets 54,022 50,869
----------- -----------
Total Assets $ 1,385,140 $ 1,358,013
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing deposits $ 148,765 $ 145,107
Interest bearing deposits
(Includes certificates of deposit $100,000 or greater:
1997 - $112,122; 1996- $97,115) 882,981 835,701
----------- -----------
Total deposits 1,031,746 980,808
Securities sold under repurchase agreements
and federal funds purchased 113,745 164,996
Short-term borrowings 6,919 6,931
Long-term obligations 101,110 76,110
Accrued interest and other liabilities 17,167 14,447
----------- -----------
Total Liabilities 1,270,687 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 $2.50 per share;
authorized 20,000,000 shares; issued and outstanding
1997 - 7,995,590; 1996 - 8,002,648, net of shares
in Treasury: 1997 - 38,262; 1996 - 31,204 20,085 20,085
Additional paid-in-capital 83,718 83,707
Retained earnings 9,975 4,398
Net unrealized gains on securities available for sale 1,812 7,357
Treasury stock, at cost (1,137) (826)
----------- -----------
Total Shareholders' Equity 114,453 114,721
----------- -----------
Total Liabilities and Shareholders' Equity $ 1,385,140 $ 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.
3
<PAGE>
NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
(Dollars in thousands, except per share data) March 31
1997 1996
<S> <C> <C>
INTEREST INCOME
Loans, including fees $ 24,384 $ 21,892
Deposits in banks 17 9
Federal funds sold 18 100
Investment securities 3,749 3,718
-------- --------
Total interest income 28,168 25,719
-------- --------
INTEREST EXPENSE
Deposits 9,193 8,198
Federal funds purchased, borrowed funds and
securities sold under repurchase agreements 3,276 3,071
-------- --------
Total interest expense 12,469 11,269
-------- --------
Net interest income 15,699 14,450
Provision for loan losses 1,200 975
-------- --------
Net interest income after provision
for loan losses 14,499 13,475
-------- --------
OTHER INCOME
Trust income 636 631
Service charges on deposit accounts 954 783
Net gains (losses) on sale of securities and mortgages 916 (103)
Other 789 634
-------- --------
Total other income 3,295 1,945
-------- --------
OTHER EXPENSES
Salaries, wages and employee benefits 6,406 5,024
Net premises and equipment 1,940 1,804
Other operating 2,872 2,621
-------- --------
Total other expenses 11,218 9,449
-------- --------
Income before income taxes 6,576 5,971
Applicable income tax expense 2,042 1,856
-------- --------
Net income $ 4,534 $ 4,115
======== ========
PER SHARE OF COMMON STOCK
Net income 0.57 0.51
Dividends paid in cash 0.24 0.21
</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>
Three Months Ended March 31,
(Dollars in thousands) 1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,534 $ 4,115
Adjustments to reconcile net income to net
cash provided by (used in) operating activities
Provision for loan losses 1,200 975
Depreciation and amortization 827 747
Net gains (losses) on sale of securities and mortgages 916 (103)
Mortgage loans originated for resale (4,249) (7,307)
Sale of mortgage loans originated for resale 4,249 7,307
Other (71) (1,135)
-------- --------
Net cash provided by operating activities 7,406 4,599
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of investment securities - available for sale 11,655 --
Proceeds from maturities of investment securities - held to maturity -- --
Proceeds from maturities of investment securities - available for sale 10,830 15,518
Purchase of investment securities - available for sale (12,610) (14,852)
Proceeds from sales of loans -- --
Net increase in loans (21,946) (9,684)
Purchases of premises & equipment (690) (822)
-------- --------
Net cash (used in) investing activities (12,761) (9,840)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in:
Deposits 50,938 22,919
Repurchase agreements, fed funds & short-term borrowings (51,263) 17,125
Long-term borrowings 25,000 (15,000)
(Increase) decrease in treasury stock (311) 426
Issuance of common stock under dividend reinvestment plan (11) (13)
Cash dividends (1,917) (1,752)
-------- --------
Net cash provided by financing activities 22,436 23,705
Net increase in cash and cash equivalents 17,081 18,464
Cash and cash equivalents at January 1 41,996 41,209
-------- --------
Cash and cash equivalents at March 31 $ 59,077 $ 59,673
======== ========
</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 consolidated 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 three month period ended March 31, 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 7,996,948 and 7,994,472 for 1997 and 1996, respectively, and are computed
after giving retroactive effect to a 5% stock dividend paid on October 31, 1996.
4. New Accounting Pronouncement - 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.
5. 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 $8,407,000 at March 31, 1997,
all of which are non-accrual loans. The allowance for loan loss associated with
these impaired loans was $1,070,000 at March 31, 1997. The Company recognizes
income on impaired loans under the cash basis when the loans are both current
and the collateral on the 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.
6
<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 $1.385 billion, an increase of $27.1 million
or 2.0% over the $1.358 billion at December 31, 1996. This increase is reflected
primarily in the loan category and federal funds sold, the result of the
investment of deposits, the Company's primary source of funds.
Total cash and cash equivalents increased $17.1 million or 40.7% at
March 31, 1997 when compared to December 31, 1996. This increase was primarily
in federal funds sold and cash and due from banks.
Loans increased to $1.049 billion at March 31, 1997. The increase of
$20.7 million or 2.0% compared to December 31, 1996 was primarily the result of
the investment of deposits and long-term borrowings. Loans originated for
immediate resale during the first three months of the year amounted to $4.2
million. The Company's credit quality is reflected by the annualized ratio of
net charge-offs to total loans of .23% for the first quarter of 1997 versus .14%
for the year 1996, and the ratio of non-performing assets to total loans of
1.27% at March 31, 1997 compared to 1.21% at December 31, 1996. Non-performing
assets, including non-accruals, loans 90 days past due, restructured loans and
other real estate owned, were $13.6 million at March 31, 1997 compared to $12.7
million at December 31, 1996. Of these amounts, non-accrual loans represented
$8.4 million and $8.7 million at March 31, 1997 and December 31, 1996,
respectively. Loans 90 days past due and still accruing interest were $4.9
million and $3.7 million at March 31, 1997 and December 31, 1996, respectively.
Other real estate owned was $231,000 and $319,000 at March 31, 1997 and December
31, 1996, respectively. The Company had no restructured loans at March 31, 1997
or December 31, 1996. The allowance for loan and lease losses to total
non-performing assets was 171.8% and 179.2% at March 31, 1997 and December 31,
1996, respectively. The Company has no significant exposure to energy and
agricultural-related loans.
Investments, the Company's secondary use of funds, decreased $13.9
million or .5.8% to $223.0 million at March 31, 1997 when compared to December
31, 1996. The decrease is due to investment sales and maturities and the
amortization of mortgage-backed securities, which was partially offset by
investment purchases of $12.6 million.
As the primary source of funds, aggregate deposits of $1.032 billion at
March 31, 1997 increased $50.9 million or 5.2% compared to December 31, 1996.
The increase in deposits during the first three months of 1997 was primarily in
interest bearing deposits which increased $47.3 million while non-interest
bearing deposits increased $3.7 million. Certificates of deposit in excess of
$100,000 increased $15.0 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 aggregate, these funds totaled
$221.8 million at March 31, 1997, and $248.0 million at December 31, 1996. The
decrease of $26.3 million represents a shift from short-term obligations,
primarily securities sold under repurchase agreement and federal funds purchased
to long-term obligations and federal funds sold.
Shareholders' equity decreased slightly through March 31, 1997. This
decrease was due to a decrease in the change in valuation adjustment for
securities available for sale, which represents the accounting treatment
required under Statement of Financial Accounting Standards 115, "Accounting for
Certain Investments in Debt and Equity Securities," applied to the decrease in
market value of the Company's investment portfolio. Cash dividends paid during
the first three months of 1997 increased $248,000 or 14.8% compared to the cash
dividends paid during the first three months of 1996. Earnings retained during
the first three months of 1997 were 57.7% compared to 59.4% during the first
three months of 1996.
7
<PAGE>
RESULTS OF OPERATIONS
Net income for the quarter ended March 31, 1997 was $4.5 million, 10.2%
more than the $4.1 million reported for the same period in 1996. 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 increased $1.2 million
or 8.6% to $15.7 million during the first quarter of 1997 from $14.5 million in
the first quarter 1996. The increase in interest income is a result of growth in
loan outstandings and higher rates on loans that was partially 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, 1997 to March 25, 1997 was 8.25%. On March 26, 1997, the prime rate
changed to 8.50%. Interest expense during the first three months of 1997
increased $1.2 million or 10.6% compared to the prior year's three 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 for loan and lease losses
increased $225,000 for the first quarter of 1997 compared to the same period in
1996. The allowance for loan and lease losses of $23.3 million at March 31, 1997
and $22.7 million at December 31, 1996, as a percentage of total loans, was 2.2%
at both dates. The Company's net charge-offs of $606,000 and $617,000 during the
first three months of 1997 and 1996, respectively, continue to be comparable to
those of the Company's peers, as reported in the Bank Holding Company
Performance Report.
"Total other income" increased $1.4 million or 69.4% during the first
quarter of 1997, as a result of increased gains on the sale of securities and
mortgages of $1.0 million, increased service charges on deposit accounts of
$171,000, increased other income of $155,000, and increased trust income of
$5,000. "Total other expenses" increased $1.8 million or 18.7% during the
quarter ended March 31, 1997. Of this amount, salaries, wages and employee
benefits increased $1.4 million, other expenses increased $251,000 and premises
and equipment increased $136,000.
Income before income taxes increased by $605,000 or 10.1% compared to
the first quarter of 1996. Income taxes increased $186,000 or 10.0%, compared to
the first quarter of 1996.
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, decreased $325,000 from year end 1996.
Long-term borrowings increased $25.0 million during the first three months of
1997.
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. 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.
8
<PAGE>
The following table shows separately the interest rate sensitivity of
each category of interest-earning assets and interest-bearing liabilities at
March 31, 1997:
<TABLE>
<CAPTION>
Repricing Periods
Three Months One Year
Within Three Through One Through five Over Five Years
Months Year Years
Assets (in thousands)
<S> <C> <C> <C> <C>
Interest-bearing deposits at
banks $ 2,700 $ -- $ -- $ --
Investment securities 9,422 30,423 112,623 70,493
Loans and leases 299,933 146,277 445,998 156,872
Other assets 18,870 -- -- 91,529
--------- --------- --------- ---------
330,925 176,700 558,621 318,894
--------- --------- --------- ---------
Liabilities and equity
Noninterest-bearing deposits 148,765 -- -- --
Interest-bearing deposits 216,934 162,184 269,880 233,983
Borrowed funds 116,175 76,000 15,110 14,489
Other liabilities -- -- -- 17,167
Hedging instruments 80,000 -- (80,000) --
Shareholder's equity -- -- -- 114,453
--------- --------- --------- ---------
561,874 238,184 204,990 380,092
--------- --------- --------- ---------
Interest sensitivity gap (230,949) (61,484) 353,631 (61,198)
--------- --------- --------- ---------
Cumulative interest rate sensitivity
gap $(230,949) $(292,433) $ 61,198 $ --
========= ========= ========= =========
<FN>
(1) Adjustable rate loans are included in the period in which interest
rates are next scheduled to adjust rather than in the period in which
they are due. Fixed rate loans are included in the period in which they
are scheduled to be repaid and are adjusted to take into account
estimated prepayments based upon assumptions estimating prepayments in
the interest rate environment prevailing during the first calendar
quarter of 1997. The table assumes prepayments and scheduled principal
amortization of fixed-rate loans and mortgage-backed securities, and
assumes that adjustable rate mortgages will reprice at contractual
repricing intervals. There has been no adjustment for the impact of
future commitments and loans in process.
(2) 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.
While generally subject to immediate withdrawal, management considers a
portion of these accounts to be core deposits having significantly
longer effective maturities based upon the Company's historical
retention of such deposits in changing interest rate environments.
Specifically, 24.8% of these deposits are considered repriceable within
three months and 75.2% are considered repriceable in the over five
years category.
</FN>
</TABLE>
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
assets
9
<PAGE>
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 1997, with no clear indication of sustainable rising or falling rates. Given
this assumption, the Company's asset/liability strategy for 1997 is to maintain
a negative gap (interest-bearing liabilities subject to repricing exceed
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.
March 31, December 31,
1997 1996
CAPITAL LEVELS
Tier 1 leverage ratio 7.83% 7.83%
Tier 1 risked-based ratio 10.65 10.82
Total risked-based ratio 11.91 12.09
CAPITAL PERFORMANCE
Return on average assets (annualized) 1.33 1.31
Return on average equity (annualized) 15.60 15.60
Earnings retained 57.70 58.50
Internal capital growth 9.12 7.60
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 March 31,
1997, 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 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 June 1996, the Company's Board of Directors approved the repurchase
of up to 380,000 shares of its common stock from time to time in open market or
negotiated transactions. Repurchased shares will be used for general corporate
purposes, including the Company's dividend reinvestment plan and stock based
compensation plans. To date, a total of 76,250 shares have been repurchased at
an aggregate cost of $2.0 million.
10
<PAGE>
During the remainder of 1997, the Company intends to open up one new
supermarket branch.. The Company also intends to install up to eight new cash
dispenser ATMs at off-site or remote locations throughout its general market
area. These new initiatives, if completed, are not expected to start
contributing to profits until 1998 and beyond so that 1997 earnings may be
somewhat negatively impacted by the initial costs of these new facilities.
For 1997, FDIC insurance premiums have been reduced on approximately
$225 million of the Company's deposits at branches acquired from Sellersville
Savings and Loan Association and Central Pennsylvania Savings Association to an
annual rate of 6.44 cents per hundred dollars of deposits, more comparable to
the 1.29 cents per hundred dollars of deposits now charged on commercial bank
deposits. This is the result of the FDIC recapitalizing the Savings Association
Insurance Fund through one-time assessments in 1996 on all financial
institutions owning thrift deposits. The Company's one-time assessment paid to
this fund on November 30, 1996 amounted to $1.2 million, and will result in
lower FDIC costs in 1997.
Penncore Financial Services Corporation, Newtown, PA has announced its
intent to be acquired by ML Bancorp, Inc., Villanova PA. The Company has a 20%
ownership interest in Penncore and, at the deal price of $36.56 per share, gives
the Company an unrealized gain of approximately $1 million on this transaction.
The merger is expected to be completed in late August or early September of this
year, although no assurance can be given that it will be completed. The Company
has two remaining 20% ownership interests in de novo banks.
This report contains forward-looking statements concerning earnings,
asset quality, and other future events. Actual results could differ materially
due to, among other things, the risks and uncertainties discussed in Exhibit 99
to the Company's Report on Form 10-K for 1996, which is incorporated herein by
reference. Readers are cautioned not to place undue reliance on these
statements. The Company undertakes no obligation to publicly release or update
any of these statements.
11
<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.
Not applicable.
Item 5. Other Information.
The Registrant's banking subsidiary, National Penn Bank (the "Bank")
relocated its Emaus branch (Lehigh County) to the Valley Farm Market during the
first quarter 1997, and the Bank's First Main Line Bank Division opened a new
branch in Wynnewood ( Montgomery County).
During April 1997, the Bank installed six new automated teller machines
("ATMs") in various convenience store locations in Berks County and Montgomery
County.
During first quarter 1997, the Bank also entered into an agreement to
sell the real estate where it presently operates its branch facility in
Warminster (Bucks County). The Registrant anticipates that later in 1997 the
Bank will relocate its present Warminster branch to a new full-service branch
located elsewhere in Warminster.
The Registrant also anticipates that the Bank will open one additional
supermarket branch in Boyertown (Berks County) later this year and install eight
new ATMs in various locations in second quarter 1997. Seven of these new ATMs
are expected to be installed in convenience store locations.
During the first quarter, Bruce G. Kilroy joined the Bank as President
of the Bank's newly formed Lehigh Valley Division. In April 1997, Bruce L.
Ressler was named Senior Vice President - Chief Information Officer of the Bank.
In June 1996, the Registrant's Board of Directors approved the
repurchase of up to 380,000 common shares of the Registrant, to be used for
general corporate purposes, including the Registrant's dividend reinvestment
plan and stock based compensation plans. The stock repurchase plan authorizes
the Registrant to make repurchases from time to time in open market or privately
negotiated transactions. At March 31, 1997, a total of 76,250 shares have been
repurchased at an aggregate cost of $2.0 million.
12
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 10.1 - National Penn Bancshares, Inc. Capital
Accumulation Plan Amendment 1997-1.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K. The Registrant did not file any Reports
on Form 8-K during the quarterly period ended March 31, 1997.
13
<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: May 6, 1997 By /s/ Wayne R. Weidner
---------------------
Wayne R. Weidner, Executive
Vice President
Dated: May 6, 1997 By /s/ Gary L. Rhoads
-------------------
Gary L. Rhoads, Principal
Financial Officer
14
Exhibit 10.1
NATIONAL PENN BANCSHARES, INC.
CAPITAL ACCUMULATION PLAN
AMENDMENT 1997-1
Effective April 1, 1997
The National Penn Bancshares, Inc. Capital Accumulation Plan (the "Plan") is
amended as follows:
1. Section 2.4.2(f) is amended by changing the vesting schedule for the
Matching Account to read as follows:
Matching Account
Years of Service Percent Vested
Less than 1 Year 0%
1 but less than 2 25%
2 but less than 3 50%
3 or more 100%
2. The second paragraph of Section 2.5.5 is amended to read as follows:
A Participant may, upon written request, request a distribution of part or
all of his balance in his Predecessor Employer A, B, and C accounts or
Rollover Account at any time.
3. The last sentence of the second paragraph of Section 2.5.6 is amended to
read as follows:
And effective, April 1, 1997, a Participant may request a hardship
withdrawal of his vested amount from his Non-Elective Account. A
Participant can also request a hardship withdrawal of any Qualified
Non-Elective Contributions which were made before January 1, 1986.
4. The second paragraph of Section 3.11.3 is amended to replace "Employee"
with "Plan Participant" wherever it appears in this paragraph.
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<CIK> 0000700733
<NAME> NATIONAL PENN BANCSHARES, INC.
<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
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<TOTAL-ASSETS> 1,385,140
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