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: June 30, 1998
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 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 August 7, 1998
Common Stock (no stated par value) (No.) 13,143,086 Shares
<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 Operation ..... 8
Item 3. Quantitative and Qualitative Disclosures about
Market Risk....................................... 13
Part II - Other Information.
Item 1. Legal Proceedings ................................ 14
Item 2. Changes in Securities............................. 14
Item 3. Defaults Upon Senior Securities................... 14
Item 4. Submission of Matters to a Vote of
Security Holders.................................. 14
Item 5. Other Information ................................ 15
Item 6. Exhibits and Reports on Form 8-K.................. 15
Signature................................................................... 16
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET June 30 Dec. 31
(Dollars in thousands, except per share data) 1998 1997
(Unaudited) (Note)
----------- -----------
ASSETS
<S> <C> <C>
Cash and due from banks $ 43,218 $ 40,009
Interest bearing deposits in banks 1,567 1,089
Federal funds sold -- --
----------- -----------
Total cash and cash equivalents 44,785 41,098
Trading account securities 20,388 --
Investment securities available for sale at market value 406,222 321,760
Loans, less allowance for loan losses of $27,142 and
$25,122 in 1998 and 1997 respectively 1,141,132 1,097,662
Other assets 87,178 73,858
----------- -----------
Total Assets 1,699,705 1,534,378
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Non-interest bearing deposits $ 158,692 $ 146,772
Interest bearing deposits
(Includes certificates of deposit $100,000 or greater:
1998 - $106,189; 1997 - $110,447) 970,919 968,828
----------- -----------
Total Deposits 1,129,611 1,115,600
Securities sold under repurchase agreements
and federal funds purchased 130,857 77,225
Short-term borrowings 9,930 6,109
Long-term obligations 250,460 155,460
Guaranteed preferred beneficial interests in
Company's subordinated debentures 40,250 40,250
Accrued interest and other liabilities 15,084 16,546
----------- -----------
Total Liabilities 1,576,192 1,411,190
Commitments and contingent liabilities -- --
Shareholders' equity
Preferred stock, no stated par value;
authorized 1,000,000 shares, none issued -- --
Common stock, no stated par value;
authorized 50,000,000 shares; issued and outstanding
1998 - 13,183,970; 1997 - 13,284,175, net of shares
in Treasury: 1998 - 223,999; 1997 - 104,623 100,198 101,748
Retained earnings 22,349 17,337
Net unrealized gains on securities available for sale 7,928 7,531
Treasury stock at cost (6,962) (3,428)
----------- -----------
Total Shareholders' Equity 123,513 123,188
----------- -----------
Total Liabilities and Shareholders' Equity $ 1,699,705 $ 1,534,378
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
Note: The Balance Sheet at Dec. 31, 1997 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 Six Months Ended
(Dollars in thousands, except per share data) June 30 June 30
-------------------------------------------------
1998 1997 1998 1997
--------- --------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans including fees $ 26,582 $ 25,239 $ 52,691 $ 49,623
Deposits in banks 32 27 48 44
Federal funds sold 13 33 24 51
Trading Assets 203 -- 203 0
Investment securities 5,750 3,564 10,923 7,313
-------- -------- -------- --------
Total interest income 32,580 28,863 63,889 57,031
-------- -------- -------- --------
INTEREST EXPENSE
Deposits 11,022 9,906 21,954 19,099
Federal funds purchased, borrowed funds and
securities sold under repurchase agreements 5,620 2,945 9,956 6,221
-------- -------- -------- --------
Total interest expense 16,642 12,851 31,910 25,320
-------- -------- -------- --------
Net interest income 15,938 16,012 31,979 31,711
Provision for loan losses 1,200 1,200 2,400 2,400
-------- -------- -------- --------
Net interest income after provision
for loan losses 14,738 14,812 29,579 29,311
-------- -------- -------- --------
OTHER INCOME
Trust and investment management income 832 687 1,592 1,323
Service charges on deposit accounts 1,076 1,007 2,109 1,961
Net gains (losses) on sale of securities and mortgages 1 (74) 444 842
Trading revenue 185 -- 185 --
Other 1,847 1,014 3,372 1,803
-------- -------- -------- --------
Total other income 3,941 2,634 7,702 5,929
-------- -------- -------- --------
OTHER EXPENSES
Salaries, wages and employee benefits 6,825 6,481 13,611 12,887
Net premises and equipment 1,827 1,786 3,710 3,726
Other operating 3,912 2,807 7,088 5,679
-------- -------- -------- --------
Total other expenses 12,564 11,074 24,409 22,292
-------- -------- -------- --------
Income before income taxes 6,115 6,372 12,872 12,948
Applicable income tax expense 1,275 1,987 3,044 4,029
-------- -------- -------- --------
Net income $ 4,840 $ 4,385 $ 9,828 $ 8,919
======== ======== ======== ========
PER SHARE OF COMMON STOCK
Net income per share - basic $ 0.37 $ 0.33 $ 0.74 $ 0.67
Net income per share - diluted 0.36 0.32 0.73 0.66
Dividends paid in cash 0.17 0.15 0.34 0.28
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
4
<PAGE>
NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1998
(Dollars in thousands) Net Unrealized
Gain (Loss) on
Common Stock Additional Securities Compre-
----------------------- Paid-in Retained Available hensive Treasury
Shares Par Value Capital Earnings for Sale Income Stock Total
---------- --------- ---------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 10,606,726 $20,085 $81,663 $17,337 $7,531 -- ($3,428) $123,188
Comprehensive income:
Net income -- -- -- 9,828 -- 9,828 -- $9,828
Unrealized gains(losses) on
securities available for sale,
net of taxes and reclass-
ification adjustment (see
disclosure) -- -- -- -- 397 889 -- $397
----------
Comprehensive income $10,717
==========
Conversion to no par value stock -- 80,113 (80,113) -- -- -- --
5 for 4 stock split 2,677,449
Cash dividends declared -- -- -- (4,816) -- -- ($4,816)
Effect of treasury stock
transactions (100,205) -- (1,550) -- -- (3,534) ($5,084)
------------ -------- ---------- ---------- ---------- --------- ----------
Balance at June 30, 1998 13,183,970 $100,198 $0 $22,349 $7,928 ($6,962) $123,513
============ ======== ========== ========== ========== ========= ==========
Disclosure of reclassification
amount:
Unrealized holding loss
arising during period $889
Less: reclassification adjustment
for gains included in net income (492)
----------
Net unrealized loss on securities $397
==========
SIX MONTHS ENDED JUNE 30, 1997
(Dollars in thousands) Net Unrealized
Gain (Loss) on
Common Stock Additional Securities Compre-
----------------------- Paid-in Retained Available hensive Treasury
Shares Par Value Capital Earnings for Sale Income Stock Total
---------- --------- ---------- ---------- --------- ---------- --------- ----------
Balance at December 31, 1996 8,002,648 $20,085 $83,707 $7,357 $4,398 -- ($826) $114,721
Comprehensive income:
Net income -- -- -- 8,919 -- 8,919 -- $8,919
Unrealized gains(losses) on
securities available for sale,
net of taxes and reclass-
ification adjustment (see
disclosure) -- -- -- -- (1,497) (847) -- ($1,497)
----------
Comprehensive income $8,072
==========
Conversion to no par value stock -- 83,268 (83,268) -- -- --
4 for 3 stock split 2,677,497
Cash dividends declared -- -- -- (4,164) -- -- ($4,164)
Effect of treasury stock
transactions 17,529 -- (439) -- -- 385 ($54)
----------- --------- ---------- ---------- ---------- --------- ----------
Balance at June 30, 1997 10,697,674 $103,353 $0 $12,112 $2,901 ($441) $117,925
=========== ========= ========== ========== ========== ========= ==========
Disclosure of reclassification
amount:
Unrealized holding loss
arising during period ($847)
Less: reclassification adjustment
for gains included in net income (650)
----------
Net unrealized loss on securities ($1,497)
==========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended June 30,
(Dollars in thousands)
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 9,828 $ 8,919
Adjustments to reconcile net income to net
cash provided by (used in) operating activities
Provision for loan losses 2,400 2,400
Depreciation and amortization 1,782 1,696
Net gains (losses) on sale of securities and mortgages 444 842
Trading-related assets (20,388) --
Mortgage loans originated for resale (31,864) (8,068)
Sale of mortgage loans originated for resale 31,864 8,068
Other (15,787) (2,333)
--------- ---------
Net cash provided by (used in) operating activities (21,721) 11,524
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of investment securities - available for sale 48,500 11,655
Proceeds from maturities of investment securities - available for sale 9,242 14,629
Purchase of investment securities - available for sale (142,022) (41,488)
Proceeds from sales of loans -- --
Net increase in loans (45,869) (45,859)
Purchases of premises & equipment (1,007) (1,475)
--------- ---------
Net cash provided by (used in) investing activities (131,156) (62,538)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in:
Deposits 14,011 88,702
Repurchase agreements, fed funds & short-term borrowings 57,453 (85,602)
Long-term borrowings 95,000 25,000
Proceeds from issuance of preferred securities -- 40,250
(Increase) decrease in treasury stock (3,534) 385
Issuance of common stock under dividend reinvestment plan (1,550) (439)
Cash dividends (4,815) (4,166)
--------- ---------
Net cash provided by (used in) financing activities 156,565 64,130
Net increase (decrease) in cash and cash equivalents 3,688 13,116
Cash and cash equivalents at January 1 41,098 41,996
--------- ---------
Cash and cash equivalents at June 30 $ 44,786 $ 55,112
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
6
<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, 1997.
2. The results of operations for the six-month period ended June 30, 1998 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 13,199,215 and 13,358,435 for 1998 and 1997, respectively, and on the
weighted average number of diluted shares outstanding of 13,530,708 and
13,569,804 for 1998 and 1997, respectively, and are computed after giving
retroactive effect to a 5-for-4 stock split paid July 31, 1998.
4. On June 24, 1998, the Company's Board of Directors declared a five-for-four
stock split payable on July 31, 1998 to shareholders of record on July 15, 1998
and a cash dividend of $.19 per share payable on August 17, 1998, to
shareholders of record on July 31, 1998.
5. In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activity." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments imbedded in other contracts, and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. If certain conditions are met, a derivative may be specifically
designated as a hedge. The accounting for changes in the fair value of a
derivative (gains and losses) depends on the intended use of the derivative and
resulting designation. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. Earlier application is permitted
only as of the beginning of any fiscal quarter. The Company is currently
reviewing the provisions of SFAS No. 133.
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 $5,518,000 at June 30, 1998,
all of which are non-accrual loans. The allowance for loan loss associated with
these impaired loans was $793,000 at June 30, 1998. 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.
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 $1.699 billion, an increase of $165.3 million
or 10.8% over the $1.534 billion at December 31, 1997. This increase is
reflected primarily in the investment category, the result of the investment of
deposits, the Company's primary source of funds, short-term borrowings and
long-term borrowings.
Total cash and cash equivalents increased $3.7 million or 8.9% at June
30, 1998 when compared to December 31, 1997. This increase was primarily in cash
and due from banks.
Loans increased to $1.141 billion at June 30, 1998. The increase of
$43.5 million or 4.0% compared to December 31, 1997 was primarily the result of
the investment of deposits and long-term borrowings. Loans originated for
immediate resale during the first six months of 1998 amounted to $31.9 million.
The Company's credit quality is reflected by the annualized ratio of net
charge-offs to total loans of .06% through the second quarter of 1998 versus
.20% for the year 1997, and the ratio of non-performing assets to total loans of
.69% at June 30, 1998 compared to .89% at December 31 1997. Non-performing
assets, including non-accruals, loans 90 days past due, restructured loans and
other real estate owned, were $8.1 million at June 30, 1998 compared to $10.0
million at December 31, 1997. Of these amounts, non-accrual loans represented
$5.5 million and $6.8 million at June 30, 1998 and December 31, 1997,
respectively. Loans 90 days past due and still accruing interest were $2.3
million and $2.8 million at June 30, 1998 and December 31, 1997, respectively.
Other real estate owned was $270,000 and $375,000 at June 30, 1998 and December
31, 1997, respectively. The Company had no restructured loans at June 30, 1998
or December 31, 1997. The allowance for loan losses to non-performing assets was
336.4% and 251.6% at June 30, 1998 and December 31, 1997, respectively. As is
evident from the above amounts relative to non-performing assets, there have
been no significant changes between December 31, 1997 and June 30, 1998. The
Company has no significant exposure to energy and agricultural-related loans.
Investments, the Company's secondary use of funds, increased $84.5
million or 26.3% to $406.2 million at June 30, 1998 when compared to December
31, 1997. The increase is due to investment purchases of $142.0 million,
primarily in municipal securities, which was partially offset by investment
sales and maturities and the amortization of mortgage-backed securities.
A new line item on the consolidated balance sheet is "Trading account
securities" of $20.4 million at June 30, 1998. This represents investment
securities that are actively traded by the Company with the goal of generating
higher total returns. Investors Trust Company, a subsidiary of the Company,
manages this portfolio. Interest income from these securities appears on the
consolidated statements of income on the line item "Trading assets." Trading
gains and losses, both realized and unrealized, appear on the line item "Trading
revenue" in the "Other Income" category.
As the primary source of funds, aggregate deposits of $1.130 billion at
June 30, 1998 increased $14.0 million or 1.3% compared to December 31, 1997. The
increase in deposits during the first six month of 1998 was primarily in
non-interest bearing deposits which increased $11.9 million while interest
bearing deposits increased $2.1 million. Certificates of deposit in excess of
$100,000 decreased $4.3 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
$431.5 million at June 30, 1998, and $279.0 million at December 31, 1997. The
increase of $152.5 million represents an increase in long-term obligations of
$95.0 million and an increase in short-term borrowings, primarily securities
sold under repurchase agreements and federal funds purchased of $53.6 million.
8
<PAGE>
Shareholders' equity increased slightly through June 30, 1998. This
increase was due to an increase in earnings retained and a slight increase 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 increase in market value of the Company's investment
portfolio. Cash dividends paid during the first six months of 1998 increased
$701,000 or 18.2% compared to the cash dividends paid during the first six
months of 1997. Earnings retained during the first six months of 1998 were 53.8%
compared to 56.9% during the first six months of 1997.
RESULTS OF OPERATIONS
Net income for the quarter ended June 30, 1998 was $4.8 million, 10.4%
more than the $4.4 million reported for the same period in 1997. For the first
six months, net income reached $9.8 million, or 10.1% more than the $8.9 million
reported for the first six months of 1997. 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 $74,000 or
.5% to $15.9 million during the second quarter of 1998 from $16.0 million in the
second quarter 1997. For the comparative six month period, net interest income
increased $268,000 or .8% to $31.9 million from $31.7 million in 1997. 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. On March 26, 1997, the prime rate changed to
8.50%. Interest expense during the first six months of 1998 increased $6.6
million or 26.0% compared to the prior year's first six 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 remained
the same for the six month period ended June 30, 1998 compared to the same
period in 1997. The allowance for loan and lease losses of $27.1 million at June
30, 1998 and $25.1 million at December 31, 1997 as a percentage of total loans
was 2.3% and 2.2%, respectively. The Company's net charge-offs of $379,000 and
$1,140,000 during the first six months of 1998 and 1997, 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 $1.3 million or 49.6% during the second
quarter of 1998, as a result of increased other income of $833,000, trading
revenue of $185,000, increased trust and investment management income of
$145,000, and increased service charges on deposit accounts of $69,000. Year to
date, other income increased $1.8 million or 29.9% when compared to the first
six months of 1997 as a result of increased other income of $1.6 million,
increased trust and investment management income of $269,000, trading revenue of
$185,000, and increased services charges on deposit accounts of $148,000. This
was partially offset by a decrease in net gains (losses) on sale of securities
and mortgages of $398,000. "Total other expenses" increased $1.5 million or
13.5% during the quarter ended June 30, 1998 and increased $2.1 million or 9.5%
for the six month period. Of this year-to-date increase, other operating
expenses increased $1.4 million or 24.8%, salaries, wages and benefits increased
$724,000 or 5.6%, and net premises and equipment decreased $16,000 or .4%.
Income before income taxes decreased by $257,000 or 4.0% compared to
the second quarter of 1997. In comparing the first six months of 1998 to 1997,
income before income taxes increased $76,000 or .6%. Income taxes decreased
$712,000 for the quarter and decreased $985,000 the six month period.
9
<PAGE>
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 $71.5 million from year end
1997. Long-term borrowings increased $95.0 million during the first six months
of 1998.
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.
The following table shows separately the interest rate sensitivity of
each category of interest-earning assets and interest-bearing liabilities at
June 30, 1998:
<TABLE>
<CAPTION>
Repricing Periods (1)
Three Months One Year
Within Three Through One Through Five Over
Months Year Years Five Years
(In Thousands)
<S> <C> <C> <C> <C>
Assets
Interest-bearing deposits
at banks $1,567 $ -- $ -- $ --
Investment securities 45,845 45,664 111,984 202,729
Trading account securities 20,388 -- -- --
Loans and leases 335,353 159,631 464,823 181,325
Other assets 4,560 -- -- 125,836
--------- --------- --------- ---------
407,713 205,295 576,807 509,890
--------- --------- --------- ---------
Liabilities and equity
Noninterest-bearing deposits 158,692 -- -- --
Interest-bearing deposits 297,173 243,456 178,075 252,215
Borrowed funds 134,011 631 222,500 34,105
Preferred securities -- -- -- 40,250
Other liabilities -- -- -- 15,084
Hedging instruments 60,000 -- (60,000) --
Shareholders' equity -- -- -- 123,513
--------- --------- --------- ---------
649,876 244,087 340,575 465,167
--------- --------- --------- ---------
Interest sensitivity gap (242,163) (38,792) 236,232 44,723
--------- --------- --------- ---------
Cumulative interest rate
sensitivity gap ($242,163) ($280,955) $(47,723) $ --
========= ========= ========= =========
</TABLE>
(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 second calendar quarter of 1998. 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.
10
<PAGE>
(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, 30.2% of these deposits are considered repriceable
within three months and 69.8% are considered repriceable in the over five years
category.
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 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 1998, with no clear indication of sustainable rising or falling rates. Given
this assumption, the Company's asset/liability strategy for 1998 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.
June 30, Dec. 31,
1998 1997
CAPITAL LEVELS
Tier 1 leverage ratio 9.75% 9.84%
Tier 1 risk-based ratio 12.68 13.49
Total risk-based ratio 14.03 14.91
CAPITAL PERFORMANCE
Return of average assets (annualized) 1.23 1.31
Return on average equity (annualized) 16.00 15.90
Earnings retained 53.80 55.30
Internal capital growth (annualized) 8.58 8.35
11
<PAGE>
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 June 30,
1998, 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
As previously reported on the Company's Form 8-K dated July 21, 1998,
the Company has entered into an agreement to acquire Elverson National Bank and,
in connection therewith, has rescinded its stock repurchase program.
On June 15, 1998, National Asian Bank, a division of National Penn Bank
(the "Bank") was opened in Elkins Park, Pennsylvania. The Company expects to
open in 1998, a new non-bank subsidiary called Penn Securities, Inc., a
full-service broker/dealer program, offering a wide range of investment
products. Start-up costs for these two operations may have a negative impact on
1998 earnings and beyond.
On July 16, 1998, the Bank announced a unique commitment to its
customers. If the Bank is acquired within the next five years and changes its
name, all new qualifying Bank customers will receive a $1,000 bonus. This offer
is expected to attract new customers to the Bank and may therefore have an
impact on earnings in 1998 and beyond.
The Company expects to spend approximately $300,000 in 1998 to modify
its computer information systems enabling proper processing of transactions
related to the year 2000 and beyond. The Company has evaluated appropriate
courses of corrective action, including replacement of certain systems whose
associated costs would be recorded as assets and amortized. Accordingly, the
Company does not expect the amounts required to be expensed over the next three
years to have a material effect on its financial position or results of
operations. The amount expensed to date in 1998 is immaterial.
The Company converted its mainframe hardware and software to new fully
integrated systems in May 1998. The Company expects that these new systems will
offer improved operating efficiencies and enhanced customer service and
reporting. These new initiatives are not expected to start contributing to
profits until 1999 and beyond, so that 1998 earnings may be somewhat negatively
impacted by the initial costs of these new items.
First Capitol Bank, York, PA, has announced its intent to be acquired
by Susquehanna Bancshares, Inc., Lititz, PA. The Company has a 20% ownership
interest in First Capitol and, at the deal price of $50.02 per share, has an
unrealized gain of approximately $3 million on this transaction. The merger is
expected to be completed in 1998, although no assurance can be given that it
will be completed. The Company has one other remaining 20% ownership interest in
a de novo bank.
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 1997, 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.
12
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There has been no material change in the Company's assessment of its
sensitivity to market risk since its presentation in the 1997 annual report on
Form 10-K filed with the SEC.
13
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None. See also Item 4 hereof.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The 1998 annual meeting (the "Meeting") of the shareholders of National
Penn Bancshares, Inc. (the "Registrant") was held on April 28, 1998. Notice of
the Meeting was mailed to shareholders of record on or about March 20, 1998,
together with proxy solicitation materials prepared in accordance with Section
14(a) of the Securities Exchange Act of 1934, as amended, and the regulations
promulgated thereunder.
The Meeting was held for the following purposes:
(1) to elect three Class II directors to hold office for three years
from the date of election and until their successors are elected and qualified;
and
(2) to act upon a proposal to amend the Registrant's Articles of
Incorporation to increase the number of authorized common shares to 50 million,
to eliminate "par value", and to reclassify all outstanding common shares as
shares without par value ("Proposal No. 2").
(3) to act upon a proposal to amend the Registrant's Articles of
Incorporation to increase the maximum number of directors of the Registrant to
15 persons and to permit a change in the number of directors at any time
("Proposal No. 3").
There was no solicitation in opposition to the nominees of the Board of
Directors for election to the Board of Directors and all such nominees were
elected. The number of votes cast for or withheld, as well as the number of
abstentions and broker non-votes, for each of the nominees for election to the
Board of Directors were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Abstentions and
Nominee For Withheld Broker Non-votes
Frederick H. Gaige 8,657,094 207,293 -0-
Lawrence T. Jilk, Jr. 8,692,698 171,689 -0-
C. Robert Roth 8,699,284 165,103 -0-
</TABLE>
There was no solicitation in opposition to Proposal No. 2, and Proposal
No. 2 was duly approved. The number of votes cast for or against, as well as the
number of abstentions and broker non-votes, for the proposal were as follows:
For Against Abstentions Broker Non-votes
6,676,852 316,837 248,570 -0-
14
<PAGE>
There was no solicitation in opposition to Proposal No. 3, and Proposal
No. 3 was duly approved. The number of votes cast for or against, as well as the
number of abstentions and broker non-votes, for the proposal were as follows:
For Against Abstentions Broker Non-votes
7,794,907 642,138 263,570 -0-
Item 5. Other Information.
On June 24, 1998, the Registrant's Board of Directors declared a
5-for-4 stock split of the Registrant's common shares, payable July 31, 1998 to
shareholders of record July 15, 1998, and declared a cash dividend of $.19 per
share payable August 17, 1998 to shareholders of record July 31, 1998.
On June 15, 1998, the Registrant's banking subsidiary, National Penn
Bank (the "Bank"), formed a new banking division, National Asian Bank, which
opened at a temporary location at 1349 West Cheltenham Avenue, Elkins Park,
Pennsylvania. The Registrant anticipates that the National Asian Bank Division
will be relocated to a permanent location in that general area in the near
future.
During second quarter 1998, the Bank's wholly-owned subsidiary, Link
Financial Services, Inc., received authorization from the Office of the
Comptroller of the Currency and from the Pennsylvania Department of Insurance to
engage in business as a life insurance agency. John J. Mikus, Jr. was named
Senior Vice President of the Bank and the Bank's Insurance Manager.
During second quarter 1998, the Registrant formed a new non-bank
subsidiary, Penn Securities, Inc. ("Penn"), a proposed de novo full service
securities brokerage firm. Gene C. Levengood was named Senior Vice President of
the Bank and President and Chief Executive Officer of Penn. The Registrant
anticipates that Penn, upon receipt of all necessary regulatory approvals, will
open for business in fourth quarter 1998.
The Registrant anticipates that the Bank will install one new automated
teller machine in a convenience store location during third quarter 1998.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 3.1 - Articles of Incorporation, as amended.
Exhibit 27 - Financial Data Schedule.
Exhibit 99 - Earnings Statement for 12 Months Ended
June 30, 1998.
(b) Reports on Form 8-K. The Registrant did not file any Reports on
Form 8-K during the quarterly period ended June 30, 1998. The Registrant filed a
Report on Form 8-K dated July 21, 1998 reporting, under Item 5, the execution of
an agreement for the acquisition of Elverson National Bank and recission of the
Registrant's stock repurchase program.
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: August 13, 1998 By /s/ Wayne R. Weidner
----------------------
Wayne R. Weidner, President
Dated: August 13, 1998 By /s/ Gary L. Rhoads
--------------------
Gary L. Rhoads, Principal
Financial Officer
ARTICLES OF INCORPORATION
OF
NATIONAL PENN BANCSHARES, INC.
(A Pennsylvania Business Corporation)
In compliance with the requirements of section 204 of the Business
Corporation Law, Act of May 5, 1933 (P.L. 364) (15 P.S. ss.1204) the
undersigned, desiring to be incorporated as a business corporation, hereby
certifies that:
FIRST. The name of the Corporation is National Penn Bancshares, Inc.
SECOND. The location and post office address of the initial registered
office of the Corporation in this Commonwealth is Philadelphia and Reading
Avenues, Boyertown, Pennsylvania 19512.
THIRD. The Corporation is incorporated under the Business Corporation Law
of the Commonwealth of Pennsylvania and shall have unlimited power to engage in
and do any lawful act concerning any or all lawful business for which
corporations may be incorporated under such Law.
FOURTH. The Corporation shall have perpetual existence.
FIFTH. The total number of shares of stock that the Corporation shall have
the authority to issue is Two Million (2,000,000) shares, all of one class
called Common Shares, each of which shall have the par value of $5.00.
SIXTH. The holder of each Common Share shall be entitled to one vote on
each matter on which shareholders of the Corporation are entitled to vote.
Shareholders shall not have the right to cumulative voting in the election of
directors.
SEVENTH. The name and post office address of the incorporator and the
number and class of shares subscribed by the incorporator is:
Number and Class
Name Address of Shares
David G. Nation 1100 PNB Building One Common Share,
Broad & Chestnut Sts. par value $5.00
Philadelphia, PA 19107
<PAGE>
IN TESTIMONY WHEREOF, the incorporator has signed and sealed these Articles
of Incorporation this 26th day of January, 1982.
/s/ David G. Nation (SEAL)
----------------------------
David G. Nation
<PAGE>
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
CERTIFICATE OF INCORPORATION
Office of the Secretary of the Commonwealth
To All to Whom These Presents Shall Come, Greeting:
Whereas, Under the provisions of the Laws of the Commonwealth, the Secretary of
the Commonwealth is authorized and required to issue a "Certificate of
Incorporation" evidencing the incorporation of an entity.
Whereas, The stipulations and conditions of the Law have been fully complied
with by
NATIONAL PENN BANCSHARES, INC.
Therefore, Know Ye, That subject to the Constitution of this Commonwealth, and
under the authority of the Laws thereof, I do by these presents, which I have
caused to be sealed with the Great Seal of the Commonwealth, declare and certify
the creation, erection and incorporation of the above in deed and in law by the
name chosen hereinbefore specified.
Such corporation shall have and enjoy and shall be subject to all the
powers, duties, requirements, and restrictions, specified and enjoined in and by
the applicable laws of this Commonwealth.
Given under my Hand and the Great Seal of the
Commonwealth, at the City of Harrisburg, this 9th
day of January, in the year of our Lord one
thousand nine hundred and eighty-two and of the
Commonwealth the two hundred sixth.
/s/ William R. Davis
Secretary of the Commonwealth
<PAGE>
Applicant's Account No. _______________
DSCB:BCL-806 (Rev. 8-72)
Filing Fee: $40
AB-2
Articles of Amendment - Domestic Business Corporation
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
CORPORATION BUREAU
Filed this 12th day of
April, A.D. 1984,
Commonwealth of Pennsylvania
Department of State
/s/ William R. Davis
Secretary of the Commonwealth
In compliance with the requirements of section 806 of the Business
Corporation Law, act of May 5, 1933 (P.L. 364) (15 P.S. ss.1806), the
undersigned corporation, desiring to amend its Articles, does hereby certify
that:
1. The name of the corporation is:
National Penn Bancshares, Inc.
2. The location of its registered office in this Commonwealth is (the
Department of State is hereby authorized to correct the following statement
to conform to the records of the Department):
Philadelphia and Reading Avenues
(NUMBER) (STREET)
Boyertown Pennsylvania 19512
(CITY) (ZIP CODE)
3. The statute by or under which it was incorporated is:
Pennsylvania Business Corporation Law, Act of May 5, 1933, P.L. 364 (15 P.S.
ss.1001, et seq.)
4. The date of its incorporation is: January 28, 1982.
5. (Check, and if appropriate, complete one of the following):
[X] The meeting of the shareholders of the corporation at which the
amendment was adopted was held at the time and place and pursuant to the kind
and period of notice herein stated.
Time: The 10th day of April, 1984.
Place: Gilbertsville Fire Company, 1456 East Philadelphia Avenue,
Gilbertsville, PA
Kind and period of notice: Written notice was provided nineteen (l9) days
prior to the annual meeting at which the amendment was adopted by shareholders.
[__] The amendment was adopted by a consent in writing, setting forth the
action so taken, signed by all of the shareholders entitled to vote thereon and
filed with the Secretary of the corporation.
6. At the time of the action of shareholders:
(a) The total number of shares outstanding was:
852,174
(b) The number of shares entitled to vote was:
852,174
<PAGE>
7. In the action taken by the shareholders:
(a) The number of shares voted in favor of the amendment was:
670,372.3264
(b) The number of shares voted against the amendment was:
16,517.3157
8. The amendment adopted by the shareholders, set forth in full, is as
follows:
See Attachment "A"
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer and its corporate seal,
duly attested by another such officer, to be hereunto affixed this 10th day of
April, 1984.
NATIONAL PENN BANCSHARES, INC.
(NAME OF CORPORATION)
By: /s/ James K. Boyer
James K. Boyer
(Title: President)
Attest:
/s/ Sandra L. Spayd
Sandra L. Spayd
(Title: Secretary)
(CORPORATE SEAL)
INSTRUCTIONS FOR COMPLETION OF FORM:
A. Any necessary copies of Form DSCB:17.2 (Consent to Appropriation of Name)
or Form DSCB:17.3 (Consent to Use of Similar Name) shall accompany Articles
of Amendment effecting a change of name.
B. Any necessary governmental approvals shall accompany this form.
C. Where action is taken by partial written consent pursuant to the Articles,
the second alternate of Paragraph 5 should be modified accordingly.
D. If the shares of any class were entitled to vote as a class, the number of
shares of each class so entitled and the number of shares of all other
classes entitled to vote should be set forth in Paragraph 6(b).
E. If the shares of any class were entitled to vote as a class, the number of
shares of such class and the number of shares of all other classes voted
for and against such amendment respectively should be set forth in
Paragraphs 7(a) and 7(b).
F. BCL ss.807 (15 P.S. ss.1807) requires that the corporation shall advertise
its intention to file or the filing of Articles of Amendment. Proofs of
publication of such advertising should not be delivered to the Department,
but should be filed with the minutes of the corporation.
Page 2 of 4
<PAGE>
ATTACHMENT A
The Articles of Incorporation of National Penn Bancshares, Inc.,
Philadelphia and Reading Avenues, Boyertown, Pennsylvania 19512, are hereby
amended by adding a new ARTICLE EIGHTH to read as hereinafter set forth in full:
EIGHTH. The business and property of the Corporation will be
maintained and controlled by the Board of Directors and subject to
restrictions imposed by law, by the Articles of Incorporation or by the
By-laws, they may exercise all powers of the Corporation.
(a) The Board of Directors will consist of not less than eight
and not more than twelve directors, as determined by resolution of the
Board of Directors prior to each annual meeting of shareholders at
which directors are to be elected.
(b) At the 1984 annual meeting of shareholders and thereafter,
the directors will be divided into three classes: Class I, Class II
and Class III. Each Class shall be as nearly equal in number as
possible. If the number of Class I, Class II or Class III directors is
fixed for any term of office, it shall not be increased or decreased
during that term except by a majority vote of the Board of Directors.
In no case will a decrease in the number of directors shorten the term
of any incumbent director. The term of office of the initial Class I
directors will expire at the 1985 annual meeting of shareholders, the
term of office of the initial Class II directors will expire at the
1986 annual meeting of shareholders and the term of office of the
initial Class III directors will expire at the 1987 annual meeting of
shareholders. At each annual meeting of shareholders following such
initial classification and three-year election, the directors elected
to succeed those directors whose terms expire shall be identified as
being of the same Class and shall be elected for a three-year term of
office to expire at the third succeeding annual meeting of
shareholders and until their successors have been elected and
qualified.
(c) Any vacancy in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or
other cause, may be filled by the affirmative vote of a
Page 3 of 4
<PAGE>
majority of the remaining directors then in office, though less than a
quorum of the Board of Directors. Any director so elected by the Board
of Directors shall hold the office for a term expiring at the annual
meeting of shareholders at which the Class to which he has been
elected expires.
(d) Any director or the entire Board of Directors may be removed
from office at any time, with or without cause, but only by the
affirmative vote of the holders of at least two-thirds of all of the
outstanding shares of the Corporation entitled to vote for the
election of directors at a meeting of shareholders called for that
purpose.
(e) Notwithstanding anything contained in these Articles of
Incorporation to the contrary, the affirmative vote of the holders of
at least two-thirds of the outstanding shares of the Corporation then
entitled to be voted in an election of directors shall be required to
amend or repeal, or to adopt any provision inconsistent with, this
Article Eighth.
Page 4 of 4
<PAGE>
Commonwealth of Pennsylvania
Department of State
To All to Whom These Presents Shall Come, Greeting:
Whereas, In and by Article VIII of the Business Corporation Law, approved the
fifth day of May, Anno Domini one thousand nine hundred and thirty-three, P.L.
364, as amended, the Department of State is authorized and required to issue a
CERTIFICATE OF AMENDMENT
evidencing the amendment of the Articles of Incorporation of a business
corporation organized under or subject to the provisions of that Law, and
Whereas, The stipulations and conditions of that Law pertaining to the amendment
of Articles of Incorporation have been fully complied with by
NATIONAL PENN BANCSHARES, INC.
Therefore, Know Ye, That subject to the Constitution of this Commonwealth and
under the authority of the Business Corporation Law, I do by these presents,
which I have caused to be sealed with the Great Seal of the Commonwealth, extend
the rights and powers of the corporation named above, in accordance with the
terms and provisions of the Articles of Amendment presented by it to the
Department of State, with full power and authority to use and enjoy such rights
and powers, subject to all the provisions and restrictions of the Business
Corporation Law and all other applicable laws of this Commonwealth.
Given under my Hand and the Great Seal of the
Commonwealth, at the City of Harrisburg, this 12th
day of April in the year of our Lord one thousand
nine hundred and eighty-four and of the
Commonwealth the two hundred and eighth.
/s/ William R. Davis
Secretary of the Commonwealth
<PAGE>
Applicant's Account No. _______________
DSCB:BCL-806 (Rev. 8-72)
Filing Fee: $40
AB-2
Articles of Amendment - Domestic Business Corporation
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
CORPORATION BUREAU
Filed this 15th day
of April, A.D. 1986,
Commonwealth of Pennsylvania
Department of State
/s/ Robert A. Gleason, Jr.
Secretary of the Commonwealth
In compliance with the requirements of section 806 of the Business
Corporation Law, act of May 5, 1933 (P.L. 364) (15 P.S. ss.1806), the
undersigned corporation, desiring to amend its Articles, does hereby certify
that:
1. The name of the corporation is:
National Penn Bancshares, Inc.
2. The location of its registered office in this Commonwealth is (the
Department of State is hereby authorized to correct the following statement
to conform to the records of the Department):
Philadelphia and Reading Avenues
(NUMBER) (STREET)
Boyertown Pennsylvania 19512
(CITY) (ZIP CODE)
3. The statute by or under which it was incorporated is:
Pennsylvania Business Corporation Law, Act of May 5, 1933, P.L. 364, as
amended.
4. The date of its incorporation is: January 28, 1982.
5. (Check, and if appropriate, complete one of the following):
[x] The meeting of the shareholders of the corporation at which the
amendment was adopted was held at the time and place and pursuant to the kind
and period of notice herein stated.
Time: The 8th day of April, 1986.
Place: Gilbertsville Fire Company, Gilbertsville, PA
Kind and period of notice: Written notice of the meeting was mailed to
shareholders of the Company on or about March 14, 1986.
[__] The amendment was adopted by a consent in writing, setting forth the
action so taken, signed by all of the shareholders entitled to vote thereon and
filed with the Secretary of the corporation.
6. At the time of the action of shareholders:
(a) The total number of shares outstanding was:
1,046,072
(b) The number of shares entitled to vote was:
1,046,072
<PAGE>
7. In the action taken by the shareholders:
(a) The number of shares voted in favor of the amendment was:
See Exhibit "A" attached hereto.
(b) The number of shares voted against the amendment was:
See Exhibit "A" attached hereto.
8. The amendment adopted by the shareholders, set forth in full, is as
follows:
See Attachment "B" attached hereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer and its corporate seal,
duly attested by another such officer, to be hereunto affixed this 9th day of
April, 1986.
NATIONAL PENN BANCSHARES, INC.
(NAME OF CORPORATION)
By: /s/ James K. Boyer
President and Chief Executive
Officer
Attest:
/s/ Sandra L. Spayd
Secretary
(CORPORATE SEAL)
INSTRUCTIONS FOR COMPLETION OF FORM:
A. Any necessary copies of Form DSCB:17.2 (Consent to Appropriation of Name)
or Form DSCB:17.3 (Consent to Use of Similar Name) shall accompany Articles
of Amendment effecting a change of name.
B. Any necessary governmental approvals shall accompany this form.
C. Where action is taken by partial written consent pursuant to the Articles,
the second alternate of Paragraph 5 should be modified accordingly.
D. If the shares of any class were entitled to vote as a class, the number of
shares of each class so entitled and the number of shares of all other
classes entitled to vote should be set forth in Paragraph 6(b).
E. If the shares of any class were entitled to vote as a class, the number of
shares of such class and the number of shares of all other classes voted
for and against such amendment respectively should be set forth in
Paragraphs 7(a) and 7(b).
F. BCL ss.807 (15 P.S. ss.1807) requires that the corporation shall advertise
its intention to file or the filing of Articles of Amendment. Proofs of
publication of such advertising should not be delivered to the Department,
but should be filed with the minutes of the corporation.
<PAGE>
EXHIBIT "A"
1. The vote to adopt an amendment to ARTICLE FIFTH of the Company's
Articles of Incorporation was as follows:
828,022.2886 votes were cast in favor of the amendment and 22,706.1331
votes were cast against the amendment.
2. The vote to adopt an amendment to the Company's Articles of
Incorporation to add a new ARTICLE NINTH thereto was as follows:
816,677.7363 votes were cast in favor of the amendment and 33,989.7758
votes were cast against the amendment.
3. The votes to adopt an amendment to the Company's Articles of
Incorporation to add a new ARTICLE TENTH thereto was as follows:
822,747.4966 votes were cast in favor of the amendment and 26,954.3087
votes were cast against the amendment.
<PAGE>
EXHIBIT "B"
Article Fifth of the Company's Articles of Incorporation shall be amended
to read, in its entirety, as follows:
FIFTH. The total number of Common Shares that the Corporation shall have
authority to issue is 5,000,000 shares of the par value of $5.00 per share.
A new Article Ninth shall be added to the Company's Articles of
Incorporation which reads, in its entirety, as follows:
NINTH. The total number of shares of preferred stock that the Corporation shall
have authority to issue is 1,000,000 shares, without par value. The preferred
stock may be issued from time to time as a class without series, or if so
determined by the Board of Directors of the Corporation, either in whole or in
part in one or more series. There is hereby expressly granted to and vested in
the Board of Directors of the Corporation authority to fix and determine (except
as fixed and determined herein), by resolution, the voting powers, full or
limited, or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights, if any, and the qualifications,
limitations or restrictions thereof, if any, including specifically, but not
limited to, the dividend rights, conversion rights, redemption rights and
liquidation preferences, if any, of any wholly unissued series of preferred
stock (or the entire class of preferred stock if none of such shares have been
issued), the number of shares constituting any such series and the terms and
conditions of the issue thereof. Prior to the issuance of any shares of
preferred stock, a statement setting forth a copy of each such resolution or
resolutions and the number of shares of preferred stock of each such class or
series shall be executed and filed in accordance with the Pennsylvania Business
Corporation Law. Unless otherwise provided in any such resolution or
resolutions, the number of shares of capital stock of any such class or series
so set forth in such resolution or resolutions may thereafter be increased or
decreased (but not below the number of shares then outstanding), by a statement
likewise executed and filed setting forth a statement that a specified increase
or decrease therein had been authorized and directed by a resolution or
resolutions likewise adopted by the Board of Directors of the Corporation. In
case the number of such shares shall be decreased, the number of shares so
specified in the statement shall resume the status they had prior to the
adoption of the first resolution or resolutions.
<PAGE>
A new Article Tenth shall be added to the Company's Articles of
Incorporation, which reads, in its entirety, as follows:
TENTH. Except as set forth below, the affirmative vote of shareholders entitled
to cast at least 80% of the votes which all shareholders of the Corporation are
entitled to cast shall be required to approve any of the following:
(a) any merger or consolidation of the Corporation with or into any
other corporation;
(b) any share exchange in which a corporation, person or entity
acquires the issued or outstanding shares of capital stock of the
Corporation pursuant to a vote of shareholders;
(c) any sale, lease, exchange or other transfer of all, or
substantially all, of the assets of the Corporation to any other
corporation, person, or entity; or
(d) any transaction similar to, or having similar effect as, any of
the foregoing transactions,
if, in any such case, as of the record date for the determination of
shareholders entitled to notice thereof and to vote thereon, such other
corporation, person or entity is the beneficial owner, directly or indirectly,
of shares of capital stock entitled to cast more than 5% of the votes which all
shareholders of the Corporation are then entitled to cast (an "Interested
Shareholder").
If any of the transactions identified above in this Article Tenth is with a
corporation, person or entity that is not an Interested Shareholder, then the
affirmative vote of shareholders entitled to cast at least a majority of the
votes which all shareholders of the Corporation are entitled to cast shall be
required to approve any of such transactions.
The Board of Directors of the Corporation shall have the power and duty to
determine, for purposes of this Article Tenth, on the basis of information known
to the Board, if and when such other corporation, person or entity is an
Interested Shareholder and if any transaction is similar to, or has a similar
effect as, any of the transactions identified above in this Article Tenth. Any
such determination shall be conclusive and binding for all purposes of this
Article Tenth. The provisions of this Article Tenth shall not apply to any
transaction which is approved in advance by a majority
<PAGE>
of the members of the Board of Directors of the Corporation who are not
affiliated with the Interested Shareholder, at a meeting duly called and held.
Notwithstanding anything contained in these Articles of Incorporation to
the contrary, the affirmative vote of shareholders entitled to cast at least 80%
of the votes which all shareholders of the Corporation are entitled to cast
thereon shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article Tenth.
<PAGE>
Commonwealth of Pennsylvania
Department of State
To All to Whom These Presents Shall Come, Greeting:
Whereas, In and by Article VIII of the Business Corporation Law, approved the
fifth day of May, Anno Domini one thousand nine hundred and thirty-three, P.L.
364, as amended, the Department of State is authorized and required to issue a
CERTIFICATE OF AMENDMENT
evidencing the amendment of the Articles of Incorporation of a business
corporation organized under or subject to the provisions of that Law, and
Whereas, The stipulations and conditions of that Law pertaining to the amendment
of Articles of Incorporation have been fully complied with by
NATIONAL PENN BANCSHARES, INC.
Therefore, Know Ye, That subject to the Constitution of this Commonwealth and
under the authority of the Business Corporation Law, I do by these presents,
which I have caused to be sealed with the Great Seal of the Commonwealth, extend
the rights and powers of the corporation named above, in accordance with the
terms and provisions of the Articles of Amendment presented by it to the
Department of State, with full power and authority to use and enjoy such rights
and powers, subject to all the provisions and restrictions of the Business
Corporation Law and all other applicable laws of this Commonwealth.
Given under my Hand and the Great Seal of the
Commonwealth, at the City of Harrisburg, this 15th
day of April in the year of our Lord one thousand
nine hundred and eighty-six and of the
Commonwealth the two hundred and tenth.
/s/ Robert A. Gleason, Jr.
Secretary of the Commonwealth
<PAGE>
Applicant's Account No. _______________
DSCB:BCL-806 (Rev. 8-72)
Filing Fee: $40
AB-2
Articles of Amendment - Domestic Business Corporation
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
CORPORATION BUREAU
Filed this 13th day of May, A.D. 1988,
Commonwealth of Pennsylvania
Department of State
/s/ James J. Haggerty
Secretary of the Commonwealth
In compliance with the requirements of section 806 of the Business
Corporation Law, act of May 5, 1933 (P.L. 364) (15 P.S. ss.1806), the
undersigned corporation, desiring to amend its Articles, does hereby certify
that:
1. The name of the corporation is: National Penn Bancshares, Inc.
2. The location of its registered office in this Commonwealth is (the
Department of State is hereby authorized to correct the following statement
to conform to the records of the Department):
Philadelphia and Reading Avenues
(NUMBER) (STREET)
Boyertown Pennsylvania 19512
(CITY) (ZIP CODE)
3. The statute by or under which it was incorporated is:
Pennsylvania Business Corporation Law, Act of May 5, 1933, P.L. 364 (15
P.S. ss.1001, et seq.)
4. The date of its incorporation is: January 28, 1982.
5. (Check, and if appropriate, complete one of the following):
[x] The meeting of the shareholders of the corporation at which the
amendment was adopted was held at the time and place and pursuant to the kind
and period of notice herein stated.
Time: The 26th day of April, 1988.
Place: Gilbertsville Fire Company, 1456 East Philadelphia Avenue,
Gilbertsville, PA
Kind and period of notice: Written notice was mailed to shareholders of the
Company on or about March 25, 1988.
[__] The amendment was adopted by a consent in writing, setting forth the
action so taken, signed by all of the shareholders entitled to vote thereon and
filed with the Secretary of the corporation.
6. At the time of the action of shareholders:
(a) The total number of shares outstanding was:
2,385,294
(b) The number of shares entitled to vote was:
2,385,294
<PAGE>
7. In the action taken by the shareholders:
(a) The number of shares voted in favor of the amendment was:
1,638,158.9860
(b) The number of shares voted against the amendment was:
21,164.3338
8. The amendment adopted by the shareholders, set forth in full, is as
follows:
Article Fifth of the Company's Articles of Incorporation shall be amended
to read, in its entirety, as follows:
FIFTH. The total number of Common Shares that the Corporation shall have
authority to issue is 10,000,000 shares of the par value of $5.00 per share.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer and its corporate seal,
duly attested by another such officer, to be hereunto affixed this 10th day of
May, 1988.
NATIONAL PENN BANCSHARES, INC.
(NAME OF CORPORATION)
By: /s/ James K. Boyer
Chairman and Chief
Executive Officer
Attest:
/s/ Sandra L. Spayd
Secretary
(CORPORATE SEAL)
INSTRUCTIONS FOR COMPLETION OF FORM:
A. Any necessary copies of Form DSCB:17.2 (Consent to Appropriation of Name)
or Form DSCB:17.3 (Consent to Use of Similar Name) shall accompany Articles
of Amendment effecting a change of name.
B. Any necessary governmental approvals shall accompany this form.
C. Where action is taken by partial written consent pursuant to the Articles,
the second alternate of Paragraph 5 should be modified accordingly.
D. If the shares of any class were entitled to vote as a class, the number of
shares of each class so entitled and the number of shares of all other
classes entitled to vote should be set forth in Paragraph 6(b).
E. If the shares of any class were entitled to vote as a class, the number of
shares of such class and the number of shares of all other classes voted
for and against such amendment respectively should be set forth in
Paragraphs 7(a) and 7(b).
F. BCL ss.807 (15 P.S. ss.1807) requires that the corporation shall advertise
its intention to file or the filing of Articles of Amendment. Proofs of
publication of such advertising should not be delivered to the Department,
but should be filed with the minutes of the corporation.
<PAGE>
Commonwealth of Pennsylvania
Department of State
To All to Whom These Presents Shall Come, Greeting:
Whereas, In and by Article VIII of the Business Corporation Law, approved the
fifth day of May, Anno Domini one thousand nine hundred and thirty-three, P.L.
364, as amended, the Department of State is authorized and required to issue a
CERTIFICATE OF AMENDMENT
evidencing the amendment of the Articles of Incorporation of a business
corporation organized under or subject to the provisions of that Law, and
Whereas, The stipulations and conditions of that Law pertaining to the amendment
of Articles of Incorporation have been fully complied with by
NATIONAL PENN BANCSHARES, INC.
Therefore, Know Ye, That subject to the Constitution of this Commonwealth and
under the authority of the Business Corporation Law, I do by these presents,
which I have caused to be sealed with the Great Seal of the Commonwealth, extend
the rights and powers of the corporation named above, in accordance with the
terms and provisions of the Articles of Amendment presented by it to the
Department of State, with full power and authority to use and enjoy such rights
and powers, subject to all the provisions and restrictions of the Business
Corporation Law and all other applicable laws of this Commonwealth.
Given under my Hand and the Great Seal of the
Commonwealth, at the City of Harrisburg, this 13th
day of May in the year of our Lord one thousand
nine hundred and eighty-eight and of the
Commonwealth the two hundred and twelfth.
/s/ James J. Haggerty
Secretary of the Commonwealth
<PAGE>
Applicant's Account No. _______________
DSCB:BCL-602 (Rev. 8-72)
Filing Fee: $40
AB-2
Statement Affecting Class or Series of Shares - Domestic Business Corporation
COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF STATE
CORPORATION BUREAU
Filed this 21st day of September,
A.D. 1989,
Commonwealth of Pennsylvania,
Department of State
/s/ Christopher A. Lewis
Acting Secretary of the Commonwealth
In compliance with the requirements of section 602 of the Business
Corporation Law, act of May 5, 1933 (P.L. 364) (15 P.S. ss.1602), the
undersigned corporation, desiring to state the voting rights, designations,
preferences, qualifications, privileges, limitations, options, conversion
rights, and other special rights, if any, of a class or series of a class of its
shares, hereby certifies that:
1. The name of the corporation is:
National Penn Bancshares, Inc.
2. (Check and complete one of the following):
[__] The resolution establishing and designating the class or series of
shares and fixing and determining the relative rights and preferences thereof
set forth in full, is as follows:
[x] The resolution establishing and designating the class or series of
shares and fixing and determining the relative rights and preferences thereof is
set forth in full in Exhibit A attached hereto and made a part hereof.
3. The aggregate number of shares of such class or series established and
designated by (a) such resolution, (b) all prior statements, if any, filed under
the Business Corporation Law with respect thereto, and (c) any other provision
of the Articles is 35,000 shares.
4. (Check and complete one of the following):
[x] The resolution was adopted by the Board of Directors of the corporation
at a duly called meeting held on the 23rd day of August, 1989.
<PAGE>
[__] The resolution was adopted by a consent or consents in writing dated
the _________________ day of __________, 19____, signed by all of the Directors
of the corporation and filed with the Secretary of the corporation.
IN TESTIMONY WHEREOF, the undersigned corporation has caused this statement
to be signed by a duly authorized officer and its corporate seal, duly attested
by another such officer, to be hereunto affixed this 10th day of September,
1989.
NATIONAL PENN BANCSHARES, INC.
(NAME OF CORPORATION)
By: /s/ James K. Boyer
(Title: Chairman and Chief
Executive Officer)
Attest:
/s/ Sandra L. Spayd
(Title: Secretary)
(CORPORATE SEAL)
<PAGE>
Exhibit A
TERMS OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
NATIONAL PENN BANCSHARES, INC.
RESOLVED that, pursuant to the authority vested in the Board of Directors
of the Corporation by the Articles of Incorporation, the Board of Directors does
hereby provide for the issue of a series of Preferred Stock, without par value,
of the Corporation, to be designated "Series A Junior Participating Preferred
Stock" (hereinafter referred to as the "Series A Preferred Stock" or "this
Series"), initially consisting of 35,000 shares, and to the extent that the
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions of the Series A Preferred Stock are
not stated and expressed in the Articles of Incorporation, does hereby fix and
herein state and express such designations, powers, preferences and relative and
other special rights and the qualifications, limitations and restrictions
thereof, as follows (all terms used herein which are defined in the Articles of
Incorporation shall be deemed to have the meanings provided therein):
1. Designation and Amount. The designation of the series of Preferred Stock
created by this resolution shall be 'Series A Junior Participating Preferred
Stock' and the number of shares constituting such Series is Thirty-Five Thousand
(35,000). Such number of shares may be increased or decreased by resolution of
the Board of Directors; provided, that no decrease shall reduce the number of
shares of Series A Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities of the Corporation convertible into shares of this
Series.
2. Dividends.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the
shares of this Series with respect to dividends, the holders of shares of
this Series shall be entitled to receive, when and as declared by the Board
of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on April 1, July 1, October 1, and January 1 of
each year (each such date
<PAGE>
being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of this Series, in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $10.00 or
(b) subject to the provision for adjustment hereinafter set forth, 100
times the aggregate per share amount of all cash dividends, and 100 times
the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in Common Shares or a
subdivision of the outstanding Common Shares (by reclassification or
otherwise), declared on the Common Shares since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of
a share of this Series. In the event the Company shall at any time after
August 23, 1989 (the "Rights Declaration Date") declare any dividend on the
Common Shares payable in Common Shares, subdivide the outstanding Common
Shares, or combine the outstanding Common Shares into a smaller number of
shares, then in each such case the amount to which holders of shares of
this Series were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of Common Shares outstanding
immediately after such event and the denominator of which is the number of
Common Shares that were outstanding immediately prior to such event.
(B) The Company shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (A) of this Section immediately
after it declares a dividend or distribution on the Common Shares (other
than a dividend payable in Common Shares); provided that, in the event no
dividend or distribution shall have been declared on the Common Shares
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share
on Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of this Series, unless the
date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or unless the
date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of this Series
A-2
<PAGE>
entitled to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued
but unpaid dividends shall not bear interest. Dividends paid on the shares
of this Series in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on
a share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of holders
of shares of this Series entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than days
prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Preferred Stock shall
have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the shareholders of the
Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Shares payable in Common Shares, or effect a
subdivision or combination or consolidation of the outstanding Common
Shares (by reclassification or otherwise than by payment of a dividend in
Common Shares) into a greater or lesser number of Common Shares, then in
each such case the number of votes per share to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the numerator
of which is the number of Common Shares outstanding immediately after such
event and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other resolutions
creating a series of Preferred Stock or any similar stock, or by law, the
holders of shares of Series A Preferred Stock and the holders of Common
Shares and any other capital stock of the Corporation having general voting
rights shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Shares as set forth herein) for taking any
corporate action.
A-3
<PAGE>
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such junior stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for
A-4
<PAGE>
consideration any shares of stock of the Corporation unless the Corporation
could, under paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein, in the Articles of
Incorporation, or in any other resolutions creating a series of Preferred Stock
or any similar stock or as otherwise required by law.
6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (A)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received $100.00 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of Common Shares, or (B) to the holders of
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except
distributions made ratably on the Series A Preferred Stock and all such parity
stock in proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up. In the event the
Corporation shall at any time declare or pay any dividend on the Common Shares
payable in Common Shares, or effect a subdivision or combination or
consolidation of the outstanding Common Shares (by reclassification or otherwise
than by payment of a dividend in Common Shares) into a greater or lesser number
of Common Shares, then in each such case the aggregate amount to which holders
of shares of Series A Preferred Stock were entitled immediately prior to such
event under the proviso in clause (A) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of Common Shares outstanding immediately after such event and the
denominator of which is the number of Common Shares that were outstanding
immediately prior to such event.
A-5
<PAGE>
7. Consolidation, Merger, Etc. In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the Common
Shares are exchanged for or changed into other stock or securities, cash and/or
any other property, then in any such case each share of Series A Preferred Stock
shall at the same time be similarly exchanged or changed into an amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
Common Share is changed or exchanged. In the event the Corporation shall at any
time declare or pay any dividend on the Common Shares payable in Common Shares,
or effect a subdivision or combination or consolidation of the outstanding
Common Shares (by reclassification or otherwise than by payment of a dividend in
Common Shares) into a greater or lesser number of Common Shares, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
Common Shares outstanding immediately after such event and the denominator of
which is the number of Common Shares that were outstanding immediately prior to
such event.
8. No Redemption. The shares of Series A Preferred Stock shall not be
redeemable.
9. Rank. The Series A Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Corporation's Preferred Stock.
10. Amendment. The Articles of Incorporation of the Corporation shall not
be amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
A-6
<PAGE>
Microfilm Number _________________
Entity Number 748548
Filed with the Department of State on September 23, 1992
/s/
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 89)
In compliance with the requirements of 15 Pa.C.S. ss.1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: NATIONAL PENN BANCSHARES, INC.
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) commercial registered office provider and the county of
venue is (the Department is hereby authorized to correct the following
address to conform to the records of the Department):
(a) Philadelphia and Reading Avenues, Boyertown, Pennsylvania 19512, Berks
Number and Street City State Zip County
(b) _________________________________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The statute by or under which it was incorporated is: Act of May 5, 1933,
P.L. 364, as amended.
4. The original date of its incorporation is: January 28, 1982
5. (Check, and if appropriate complete, one of the following):
[_] The amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
[x] The amendment shall be effective on: October 1, 1992
6. (Check one of the following):
[_] The amendment was adopted by the shareholders pursuant to 15 Pa.C.S.
ss.1914(a) and (b).
[x] The amendment was adopted by the board of directors pursuant to 15
Pa.C.S. ss.1914(c).
7. (Check, and if appropriate complete, one of the following):
[_] The amendment adopted by the corporation, set forth in full, is as
follows:
[x] The amendment adopted by the corporation as set forth in full in
Exhibit A, attached hereto and made a part hereof.
<PAGE>
8. (Check if the amendment restates the Articles):
[_] The restated Articles of Incorporation supersede the original Articles
and all amendments thereto.
IN TESTIMONY WHEREOF the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer thereof this 22nd day of
September, 1992.
NATIONAL PENN BANCSHARES, INC.
(Name of Corporation)
BY: /s/ Lawrence T. Jilk, Jr.
(Signature)
TITLE: President and Chief
Executive Officer
<PAGE>
EXHIBIT A
Article Fifth of the Company's Articles of Incorporation is amended to read
as follows:
FIFTH. The total number of Common Shares that the Corporation shall have
authority to issue is 20,000,000 shares of the par value of $2.50 per
share.
Upon such change becoming effective, each Common Share of the Company
issued at the time such change becomes effective (including shares then held by
the Company) shall be changed into two shares of par value of $2.50 each, all of
one class, and no change shall be made in connection therewith in the amount of
the capital accounts of the Company.
<PAGE>
Microfilm Number 9753-694
Entity Number 748548
Filed with the Department of State on July 10, 1997
/s/ Yvette Kane
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. ss.1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: NATIONAL PENN BANCSHARES, INC.
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) PHILADELPHIA AND READING AVENUES BOYERTOWN PA 19512 BERKS
Number and Street City State Zip County
(b) c/o:______________________________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The statute by or under which it was incorporated is: ACT OF MAY 5, 1933,
P.L. 364, AS AMENDED.
4. The date of its incorporation is: JANUARY 28, 1982
5. (Check, and if appropriate complete, one of the following):
[_] The amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
[x] The amendment shall be effective on: July 15, 1997 at 12:00 A.M.
6. (Check one of the following):
[_] The amendment was adopted by the shareholders (or members) pursuant to
15 Pa.C.S. ss.1914(a) and (b).
[x] The amendment was adopted by the board of directors pursuant to 15
Pa.C.S. ss.1914(c).
7. (Check, and if appropriate complete, one of the following):
[_] The amendment adopted by the corporation, set forth in full, is as
follows:
[x] The amendment adopted by the corporation is set forth in full in
Exhibit A attached hereto and made a part hereof.
<PAGE>
8. Check if the amendment restates the Articles):
[_] The restated Articles of Incorporation supersede the original Articles
and all amendments thereto.
IN TESTIMONY WHEREOF the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer thereof this ____ day of
July, 1997.
NATIONAL PENN BANCSHARES, INC.
(Name of Corporation)
BY: /s/ Wayne R. Weidner
(Signature)
TITLE: Executive Vice President
<PAGE>
EXHIBIT A
Article Fifth of the Company's Articles of Incorporation is amended to read
as follows:
FIFTH. The total number of Common Shares that the Corporation shall have
authority to issue is 20,666,667 shares of the par value of $1.875 per
share.
Upon such change becoming effective, every three Common Shares of the
Company issued at the time such change becomes effective (including shares then
held by the Company) shall be changed into four shares of par value of $1.875
each, all of one class, and no change shall be made in connection therewith in
the amount of the capital accounts of the Company.
<PAGE>
Microfilm Number 9760-286
Entity Number 748548
Filed with the Department of State on August 7, 1997
/s/ Yvette Kane
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. ss.1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: NATIONAL PENN BANCSHARES, INC.
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) PHILADELPHIA AND READING AVENUES BOYERTOWN PA 19512 BERKS
Number and Street City State Zip County
(b) c/o:______________________________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The statute by or under which it was incorporated is: ACT OF MAY 5, 1933,
P.L. 364, AS AMENDED.
4. The date of its incorporation is: JANUARY 28, 1982
5. (Check, and if appropriate complete, one of the following):
[x] The amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
[ ] The amendment shall be effective on: ___________ at __________.
Date Hour
6. (Check one of the following):
[_] The amendment was adopted by the shareholders (or members) pursuant to
15 Pa.C.S. ss.1914(a) and (b).
[x] The amendment was adopted by the board of directors pursuant to 15
Pa.C.S. ss.1914(c).
7. (Check, and if appropriate complete, one of the following):
[_] The amendment adopted by the corporation, set forth in full, is as
follows:
[x] The amendment adopted by the corporation is set forth in full in
Exhibit A attached hereto and made a part hereof.
<PAGE>
8. Check if the amendment restates the Articles):
[_] The restated Articles of Incorporation supersede the original Articles
and all amendments thereto.
IN TESTIMONY WHEREOF the undersigned corporation has caused these Articles
of Amendment to be signed by a duly authorized officer thereof this 31st day of
July, 1997.
NATIONAL PENN BANCSHARES, INC.
(Name of Corporation)
BY: /s/ Wayne R. Weidner
(Signature)
TITLE: Executive Vice President
<PAGE>
EXHIBIT A
Article Fifth of the Company's Articles of Incorporation is amended to read
as follows:
FIFTH. The total number of Common Shares that the Corporation shall have
authority to issue is 26,666,667 shares of the par value of $1.875 per
share.
Upon such change becoming effective, every three Common Shares of the
Company issued at the time such change becomes effective (including shares then
held by the Company) shall be changed into four shares of par value of $1.875
each, all of one class, and no change shall be made in connection therewith in
the amount of the capital accounts of the Company.
<PAGE>
Microfilm Number 9849-1607 Filed with the Department of State on June 30 1998
Entity Number 748548 /s/ Yvette Kane
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. ss. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: NATIONAL PENN BANCSHARES, INC.
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) PHILADELPHIA AND READING AVENUES BOYERTOWN PA 19512 BERKS
----------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o: N/A
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The statute by or under which it was incorporated is:
ACT OF MAY 5, 1933, P.L. 364, AS AMENDED
4. The date of its incorporation is: JANUARY 28, 1982
--------------------------
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
The amendment shall be effective on: at
------ -------------- -----------
Date Hour
6. (Check one of the following):
X The amendment was adopted by the shareholders (or members) pursuant
to 15 Pa.C.S.ss.1914(a) and (b).
__ The amendment was adopted by the board of directors pursuant to
15 Pa.C.S. ss. 1914(c).
7. (Check, and if appropriate complete, one of the following):
__ The amendment adopted by the corporation, set forth in full, is as
follows:
X The amendment adopted by the corporation is set forth in full
in Exhibit A attached hereto and made a part hereof.
<PAGE>
DSCB:15-1915 (Rev 90)-2 9849-1608
8. (Check if the amendment restates the Articles):
The restated Articles of Incorporation supersede the original
Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this
25th day of JUNE, 1998.
NATIONAL PENN BANCSHARES, INC.
(Name of Corporation)
BY: /s/ Wayne R. Weidner
(Signature)
TITLE: President
<PAGE>
EXHIBIT "A"
Article Fifth of the Company's Articles of Incorporation is amended to
read as follows:
FIFTH. The total number of Common Shares that the
Corporation shall have authority to issue is 50,000,000
without par value.
Upon such change becoming effective, every Common Share of the Company
issued at the time such change becomes effective (including shares then held by
the Company) shall be changed into one Common Share without par value.
<PAGE>
Microfilm Number 9850-198 Filed with the Department of State on Jun 30 1998
Entity Number 748548 /s/ Yvette Kane
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. ss. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: NATIONAL PENN BANCSHARES, INC.
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) PHILADELPHIA AND READING AVENUES BOYERTOWN PA 19512 BERKS
----------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o: N/A
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The statute by or under which it was incorporated is:
ACT OF MAY 5, 1933, P.L. 364, AS AMENDED
4. The date of its incorporation is: JANUARY 28, 1982
--------------------------
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
The amendment shall be effective on: at
------ -------------- -----------
Date Hour
6. (Check one of the following):
X The amendment was adopted by the shareholders (or members) pursuant
to 15 Pa.C.S.ss.1914(a) and (b).
The amendment was adopted by the board of directors pursuant to
15 Pa.C.S. ss. 1914(c).
7. (Check, and if appropriate complete, one of the following):
The amendment adopted by the corporation, set forth in full, is as
follows:
X The amendment adopted by the corporation is set forth in full in
Exhibit A attached hereto and made a part hereof.
<PAGE>
DSCB:15-1915 (Rev 90)-2 9850-199
8. (Check if the amendment restates the Articles):
The restated Articles of Incorporation supersede the original
Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this
25th day of JUNE, 1998.
NATIONAL PENN BANCSHARES, INC.
(Name of Corporation)
BY:/s/ Wayne R. Weidner
(Signature)
TITLE: President
<PAGE>
EXHIBIT "A"
Article Eighth, Paragraph (a), of the Company's Articles of
Incorporation, is amended to read as follows:
(a) The Board of Directors will consist of not less than eight
and not more than fifteen directors, as determined from time to time by
resolution of the Board of Directors.
<PAGE>
Microfilm Number 9852-546 Filed with the Department of State on Jul 14 1998
Entity Number 748548 /s/ Yvette Kane
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. ss. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: NATIONAL PENN BANCSHARES, INC.
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) PHILADELPHIA AND READING AVENUES BOYERTOWN PA 19512 BERKS
----------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o: N/A
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The statute by or under which it was incorporated is:
ACT OF MAY 5, 1933, P.L. 364, AS AMENDED
4. The date of its incorporation is: JANUARY 28, 1982
--------------------------
5. (Check, and if appropriate complete, one of the following):
The amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
X The amendment shall be effective on: JULY 15, 1998 at 12:00 A.M.
------ -------------- -----------
Date Hour
6. (Check one of the following):
The amendment was adopted by the shareholders (or members) pursuant
to 15 Pa.C.S. ss. 1914(a) and (b).
X The amendment was adopted by the board of directors pursuant to
15 Pa.C.S. ss. 1914(c).
7. (Check, and if appropriate complete, one of the following):
The amendment adopted by the corporation, set forth in full, is as
follows:
X The amendment adopted by the corporation is set forth in full in
Exhibit A attached hereto and made a part hereof.
<PAGE>
DSCB:15-1915 (Rev 90)-2
8. (Check if the amendment restates the Articles):
The restated Articles of Incorporation supersede the original
Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this
30th day of JUNE, 1998.
NATIONAL PENN BANCSHARES, INC.
(Name of Corporation)
BY: /s/ Wayne R. Weidner
(Signature)
TITLE: President
<PAGE>
EXHIBIT A
Article Fifth of the Company's Articles of Incorporation is amended to
read as follows:
FIFTH. The total number of Common Shares that the
Corporation shall have authority to issue is 62,500,000
shares without par value.
Upon such change becoming effective, every four Common Shares of the
Company issued at the time such change becomes effective (including shares then
held by the Company) shall be changed into five shares without par value, all of
one class, and no change shall be made in connection therewith in the amount of
the capital accounts of the Company.
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000700733
<NAME> NATIONAL PENN BANCSHARES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 43,218
<INT-BEARING-DEPOSITS> 1,567
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 20,388
<INVESTMENTS-HELD-FOR-SALE> 406,222
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 406,222
<LOANS> 1,168,274
<ALLOWANCE> 27,142
<TOTAL-ASSETS> 1,699,705
<DEPOSITS> 1,129,611
<SHORT-TERM> 140,787
<LIABILITIES-OTHER> 15,084
<LONG-TERM> 290,710
100,198
0
<COMMON> 0
<OTHER-SE> 23,315
<TOTAL-LIABILITIES-AND-EQUITY> 1,699,705
<INTEREST-LOAN> 52,691
<INTEREST-INVEST> 10,923
<INTEREST-OTHER> 275
<INTEREST-TOTAL> 63,889
<INTEREST-DEPOSIT> 21,954
<INTEREST-EXPENSE> 31,910
<INTEREST-INCOME-NET> 31,979
<LOAN-LOSSES> 2,400
<SECURITIES-GAINS> 444
<EXPENSE-OTHER> 24,409
<INCOME-PRETAX> 12,872
<INCOME-PRE-EXTRAORDINARY> 9,828
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,828
<EPS-PRIMARY> .74
<EPS-DILUTED> .73
<YIELD-ACTUAL> 4.35
<LOANS-NON> 5,518
<LOANS-PAST> 2,281
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 25,121
<CHARGE-OFFS> 1,517
<RECOVERIES> 1,138
<ALLOWANCE-CLOSE> 27,142
<ALLOWANCE-DOMESTIC> 25,067
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,075
</TABLE>
EXHIBIT 99
NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
EARNINGS STATEMENT
As Required by the Underwriting Agreement for NPB Capital Trust Preferred
Securities
<TABLE>
<CAPTION>
Twelve Months Ended
(Dollars in thousands, except per share data) June 30
------------------------
1998 1997
-------- --------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $105,129 $ 96,794
Deposits in banks 98 75
Federal funds sold 116 100
Trading assets 203 --
Investment securities 20,339 15,034
-------- --------
Total interest income 125,885 112,003
-------- --------
INTEREST EXPENSE
Deposits 43,424 36,705
Federal funds purchased, borrowed funds and
securities sold under repurchase agreements 17,786 12,210
-------- --------
Total interest expense 61,210 48,915
-------- --------
Net interest income 64,675 63,088
Provision for loan losses 4,575 4,350
-------- --------
Net interest income after provision
for loan losses 60,100 58,738
-------- --------
OTHER INCOME
Trust and investment management income 3,007 2,473
Service charges on deposit accounts 4,208 3,833
Net gains (losses) on sale of securities and mortgages 935 1,121
Trading revenue 185 --
Other 5,520 3,559
-------- --------
Total other income 13,855 10,986
-------- --------
OTHER EXPENSES
Salaries, wages and employee benefits 26,787 24,639
Net premises and equipment 7,407 7,190
Other operating 14,070 12,224
-------- --------
Total other expenses 48,264 44,053
-------- --------
Income before income taxes 25,691 25,671
Applicable income tax expense 6,166 7,938
-------- --------
Net income $ 19,525 $ 17,733
======== ========
PER SHARE OF COMMON STOCK
Net income per share - basic $ 1.85 $ 1.65
Net income per share - diluted 1.80 1.64
</TABLE>
