News Column

National Penn Bancshares, Inc. Reports Fourth Quarter and Full Year 2013 Results

January 23, 2014

Quarterly adjusted net income 1 of $0.17 per share resulting in return on average assets 1 of 1.19% Fourth quarter 2013 reported net income of $0.15 per share including a non-recurring charge Full-year 2013 net interest margin of 3.51% compared to 3.50% for 2012 Operating expenses 1 increased less than 1% over the prior year First quarter 2014 cash dividend of $0.10 cents per common share declared BOYERTOWN, Pa. --(BUSINESS WIRE)-- National Penn Bancshares, Inc. (Nasdaq: NPBC) reported earnings per diluted share of $0.15 in the fourth quarter of 2013, inclusive of a restructuring charge. The restructuring charge related to previously announced expense reduction initiatives, including the rationalization of the branch franchise. Adjusted earnings 1 were $0.17 per diluted share, or $25.1 million , resulting in an adjusted return on average assets 1 of 1.19%. For 2013, reported earnings were $0.37 per diluted share, while adjusted earnings 1 were $98.1 million or $0.67 per diluted share, compared to $98.5 million or $0.66 per diluted share for 2012. The adjusted return on average assets 1 for 2013 was 1.18%. “The consistency of our financial performance with such a strong return on assets is a tribute to the efforts of our entire team,” said Scott V. Fainor, president and CEO of National Penn. “Our ability to maintain our net interest margin in a prolonged low interest rate environment, and our continued focus on asset quality and expense control distinguishes National Penn.” The net interest margin was 3.51% for 2013, compared to 3.50% for 2012. In the fourth quarter, the net interest margin was 3.51%, compared to 3.49% in the prior quarter. The restructuring of longer term debt in the first quarter of 2013 and continued focus on deposit pricing resulted in the cost of interest bearing liabilities declining to 0.59% for 2013 from 1.00% for 2012. This reduction in interest expense, coupled with commercial loan growth of 3.5% for the year, offset the impact of lower asset yields due to the current rate environment. Asset quality remained strong during the year with classified loans declining $27 million , or 12%, in the fourth quarter, and $70 million , or 27%, during 2013. Non-performing loans were less than 1% of total loans at December 31, 2013 and net loan charge-offs declined by approximately $4 million from the prior year. These trends supported a provision for loan losses of $5.3 million for 2013, compared to $8.0 million for 2012. The allowance for loan losses was 183% of non-performing loans and 1.81% of total loans at December 31, 2013 . Operating expenses 1 , excluding non-recurring items, increased by less than 1% year-over-year and declined by 3% during the fourth quarter of 2013 compared to the prior quarter. Operating expenses have been managed to a stable level over the last three years. Other income grew modestly as wealth management revenue increases were offset by declining mortgage banking income as refinance activity slowed during the year. At December 31, 2013 , the Company’s total risk based capital and tangible common equity 1 to tangible assets ratios were 16.63% and 10.31%, respectively. This strong capital base resulted in the Board of Directors authorizing the repurchase of up to 5% of the Company’s outstanding shares during 2014 and the declaration of a first quarter 2014 cash dividend of ten cents per common share, payable on February 14, 2014 to shareholders of record as of February 1, 2014 . The restructuring charge includes the consolidation of nine branch locations, the consolidation of administrative facilities including relocation to the new corporate headquarters, and reductions in staff. Scott V. Fainor stated, “I am optimistic that the loan growth we realized in the quarter provides momentum for 2014. The strength of National Penn’s balance sheet and the expense reduction initiatives provide us with a solid base from which to grow.” About National Penn Bancshares, Inc. : National Penn Bancshares, Inc. , with approximately $8.6 billion in assets, is a bank holding company based in Pennsylvania . Headquartered in Boyertown , National Penn Bank operates 120 branch offices comprising 119 branches in Pennsylvania and one branch in Maryland . National Penn’s financial services affiliates are National Penn Wealth Management, N.A. , including its National Penn Investors Trust Company division; National Penn Capital Advisors, Inc. ; Institutional Advisors LLC; and National Penn Insurance Services Group, Inc. , including its Higgins Insurance and Caruso Benefits Group divisions. National Penn Bancshares, Inc. common stock is traded on the Nasdaq Stock Market under the symbol “NPBC”. Please visit our Web site at www.nationalpennbancshares.com to see our regularly posted material information. 1 Statement Regarding Non-GAAP Financial Measures: This release, including the attached Financial Highlights and financial data tables, contains supplemental financial information determined by methods other than in accordance with Accounting Principles Generally Accepted in the United States of America (“GAAP”). National Penn’s management uses these non-GAAP measures in its analysis of National Penn’s performance. These measures should not be considered a substitute for GAAP basis measures nor should they be viewed as a substitute for operating results determined in accordance with GAAP. Management believes the presentation of the following non-GAAP financial measures, which exclude the impact of the specified items, provides useful supplemental information that is essential to a proper understanding of the financial results of National Penn. Tangible common equity excludes goodwill and intangible assets and preferred equity. Banking and financial institution regulators also exclude goodwill and intangible assets from shareholders’ equity when assessing the capital adequacy of a financial institution. Tangible common equity provides a method to assess the Company’s tangible capital trends. Tangible book value expresses tangible common equity on a per share basis. Tangible book value provides a method to assess the level of tangible net assets on a per share basis. Adjusted net income and return on average assets exclude the effects of certain gains and losses, adjusted for taxes when applicable. Adjusted net income and return on average assets provide methods to assess earnings performance by excluding items that management believes are not comparable among the periods presented. Efficiency ratio expresses operating expenses as a percentage of fully-taxable equivalent net interest income plus non-interest income. Operating expenses exclude items from non-interest expense that management believes are not comparable among the periods presented. Non-interest income is also adjusted to exclude items that management believes are not comparable among the periods presented. Efficiency ratio is used as a method for management to assess its operating expense level and to compare to financial institutions of varying sizes. Management believes the use of non-GAAP measures will help readers compare National Penn’s current results to those of prior periods as presented in the accompanying Financial Highlights and financial data tables. Cautionary Statement Regarding Forward-Looking Information: This release contains forward-looking information about National Penn Bancshares, Inc. that is intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,” “will,” “should,’’ “project,” ”could,” “plan," “goal,” “potential,” “pro forma,” “seek,” “intend,’’ or “anticipate" or the negative thereof or comparable terminology, and include discussions of strategy, financial projections, guidance and estimates (including their underlying assumptions), statements regarding plans, objectives, expectations or consequences of announced transactions, and statements about the future performance, operations, products and services of National Penn and its subsidiaries. National Penn cautions readers not to place undue reliance on these statements. National Penn’s business and operations are subject to a variety of risks, uncertainties and other factors. Consequently, actual results and experience may materially differ from those contained in any forward-looking statements. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the following: difficult conditions in the capital markets and the economy generally, regulatory requirements or other actions mandated by National Penn’s regulators, recent and ongoing changes to the state and federal regulatory schemes under which National Penn and other financial services companies operate (including the Dodd-Frank Act and regulations adopted or to be adopted to implement that Act), delayed improvement in the credit quality of loans, the effect of credit risk exposure, the ability to strategically manage our capital position and to raise capital, allowance for loan losses may prove inadequate, variations in interest rates, unanticipated costs from our corporate relocation plan, the geographic concentration of National Penn’s operations, declines in the value of National Penn’s assets and the effect of any resulting impairment charges, competition for personnel and from other financial institutions, interruptions or breaches of National Penn’s security systems, the development and maintenance of National Penn’s information technology, potential dilution of National Penn’s shareholders, the ability of National Penn and its subsidiaries to pay dividends, severe weather and natural disasters, and the nature and frequency of litigation and other similar proceedings to which National Penn may be a party . These risks and others are described in greater detail in National Penn’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 , as well as in National Penn’s Quarterly Reports on Form 10-Q and other documents filed by National Penn with the SEC after the date thereof. National Penn makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances occurring or existing after the date any forward-looking statement is made. Financial Update for National Penn Bancshares, Inc. (NPBC) for 12/31/2013 Unaudited, dollars in thousands except share and per share data As of 12/31/2013 9/30/2013 12/31/2012 SUMMARY BALANCE SHEET Total assets $ 8,582,213 $ 8,424,623 $ 8,529,522 Investment securities and other securities 2,381,475 2,364,681 2,334,739 Total loans 5,338,219 5,282,691 5,240,882 Deposits 6,072,578 6,435,456 5,935,565 Borrowings 1,282,289 761,506 1,344,324 Shareholders' equity 1,122,231 1,131,278 1,161,292 Tangible book value per common share (2) $ 5.88 $ 5.94 $ 6.15 Tangible common equity / tangible assets (2) 10.31 % 10.61 % 10.80 % Three Months Ended Twelve Months Ended 12/31/2013 9/30/2013 12/31/2012 12/31/2013 12/31/2012 EARNINGS Total interest income $ 72,085 $ 71,498 $ 77,174 $ 288,279 $ 316,828 Total interest expense 8,013 8,386 13,739 36,217 62,822 Net interest income 64,072 63,112 63,435 252,062 254,006 Provision for loan losses 1,000 1,250 2,000 5,250 8,000 Net interest income after provision for loan losses 63,072 61,862 61,435 246,812 246,006 Net (losses) gains from fair value changes of subordinated debentures - - (253 ) 2,111 683 Net gains (losses) on investment securities - 7 4 54 (273 ) Other non-interest income 22,714 24,801 24,755 95,902 95,558 Loss on debt extinguishment - - - 64,888 - Corporate reorganization expense 6,000 - - 6,000 - Other non-interest expense 51,833 53,603 52,262 211,023 210,310 Income before income taxes 27,953 33,067 33,679 62,968 131,664 Income tax expense 6,741 8,507 8,535 9,581 32,754 Net income $ 21,212 $ 24,560 $ 25,144 $ 53,387 $ 98,910 PERFORMANCE RATIOS Net interest margin 3.51 % 3.49 % 3.46 % 3.51 % 3.50 % Return on average assets 1.00 % 1.17 % 1.19 % 0.64 % 1.17 % Adjusted return on average assets (3) 1.19 % 1.17 % 1.19 % 1.18 % 1.17 % Return on average shareholders' equity 7.44 % 8.78 % 8.33 % 4.72 % 8.25 % Return on average tangible common equity (1) 9.73 % 11.55 % 10.74 % 6.18 % 10.66 % Adjusted return on average tangible common equity 11.51 % 11.55 % 10.81 % 11.36 % 10.62 % Efficiency ratio (4) 57.00 % 58.16 % 56.40 % 57.80 % 57.12 % PER SHARE Basic earnings $ 0.15 $ 0.17 $ 0.17 $ 0.37 $ 0.66 Diluted earnings 0.15 0.17 0.17 0.37 0.66 Dividends 0.10 0.10 0.20 (a) 0.30 (a) 0.41 (a) Average shares - basic 145,761,496 145,669,300 148,304,167 145,602,670 150,566,098 Average shares - diluted 146,244,467 146,124,821 148,610,097 146,044,058 150,859,995 (1) RECONCILIATION TABLES FOR NON-GAAP FINANCIAL MEASURES Three Months Ended Twelve Months Ended 12/31/2013 9/30/2013 12/31/2012 12/31/2013 12/31/2012 Return on average tangible common equity Return on average shareholders' equity 7.44 % 8.78 % 8.33 % 4.72 % 8.25 % Effect of goodwill and intangibles 2.29 % 2.77 % 2.41 % 1.46 % 2.41 % Return on average tangible common equity 9.73 % 11.55 % 10.74 % 6.18 % 10.66 % Average tangible equity Average shareholders' equity $ 1,130,839 $ 1,110,081 $ 1,200,514 $ 1,130,264 $ 1,198,948 Average goodwill and intangibles (265,516 ) (266,326 ) (269,495 ) (266,851 ) (271,384 ) Average tangible common equity $ 865,323 $ 843,755 $ 931,019 $ 863,413 $ 927,564 Adjusted net income reconciliation Net income $ 21,212 $ 24,560 $ 25,144 $ 53,387 $ 98,910 After tax unrealized fair value loss (gain) on subordinated debentures - - 164 (1,372 ) (444 ) After tax loss on debt extinguishment - - - 42,177 - After tax corporate reorganization expense 3,900 - - 3,900 - Adjusted net income $ 25,112 $ 24,560 $ 25,308 $ 98,092 $ 98,466 Earnings per share Net income $ 0.15 $ 0.17 $ 0.17 $ 0.37 $ 0.66 After tax unrealized fair value loss (gain) on subordinated debentures - - - (0.01 ) - After tax loss on debt extinguishment - - - 0.29 - After tax corporate reorganization expense 0.03 - - 0.03 - Adjusted net income $ 0.17 (b) $ 0.17 $ 0.17 $ 0.67 (b) $ 0.66 (a) In lieu of a first quarter 2013 cash dividend, the Company paid an additional dividend of $0.10 per share in the fourth quarter of 2012 (b) Difference in summation of quarterly and year-to-date adjusted net income due to rounding Financial Update for National Penn Bancshares, Inc. (NPBC) for 12/31/2013 Unaudited, dollars in thousands except share and per share data As of 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 BALANCE SHEET - ASSETS Cash and due from banks $ 102,241 $ 137,795 $ 118,575 $ 87,588 $ 145,688 Interest-earning deposits with banks 181,282 78,895 63,193 93,024 282,440 Total cash and cash equivalents 283,523 216,690 181,768 180,612 428,128 Investment securities available-for-sale, at fair value 1,879,284 1,875,676 1,799,831 1,813,348 1,802,213 Investment securities held-to-maturity 438,445 444,898 452,275 458,041 464,166 Other securities 63,746 44,107 61,252 62,159 68,360 Loans held-for-sale 4,951 2,752 12,289 14,934 14,330 Loans 5,333,268 5,279,939 5,249,007 5,234,839 5,226,552 Allowance for loan losses (96,367 ) (100,763 ) (104,533 ) (107,164 ) (110,955 ) Loans, net 5,236,901 5,179,176 5,144,474 5,127,675 5,115,597 Premises and equipment, net 96,232 93,871 94,673 95,592 96,334 Accrued interest receivable 27,130 27,831 28,453 29,524 28,526 Bank owned life insurance 147,869 146,906 145,670 144,452 143,242 Other real estate owned and other repossessed assets 1,278 1,569 1,899 2,729 3,029 Goodwill 258,279 258,279 258,279 258,279 258,279 Other intangible assets, net 6,854 7,656 8,470 9,533 10,614 Unconsolidated investments 8,713 9,177 8,673 9,354 11,347 Other assets 129,008 116,035 118,579 117,545 85,357 TOTAL ASSETS $ 8,582,213 $ 8,424,623 $ 8,316,585 $ 8,323,777 $ 8,529,522 BALANCE SHEET - LIABILITIES Non-interest bearing deposits $ 970,051 $ 1,026,546 $ 942,127 $ 919,783 $ 891,401 Interest bearing deposits 5,102,527 5,408,910 5,080,336 5,264,277 5,044,164 Total deposits 6,072,578 6,435,456 6,022,463 6,184,060 5,935,565 Customer repurchase agreements 551,736 521,779 547,736 549,894 560,065 Repurchase agreements 50,000 50,000 50,000 175,000 75,000 Short-term borrowings - - - - 100,000 Federal Home Loan Bank advances (c) 603,232 112,406 414,142 119,877 464,632 Subordinated debentures 77,321 77,321 77,321 77,321 144,627 Accrued interest payable and other liabilities 105,115 96,383 89,165 80,827 88,341 TOTAL LIABILITIES 7,459,982 7,293,345 7,200,827 7,186,979 7,368,230 BALANCE SHEET - SHAREHOLDERS' EQUITY Common stock 1,387,966 1,387,052 1,386,178 1,385,255 1,387,644 Accumulated deficit (175,990 ) (182,628 ) (192,623 ) (203,084 ) (185,680 ) Accumulated other comprehensive (loss) income (30,792 ) (13,504 ) (17,189 ) 15,981 24,329 Treasury stock (58,953 ) (59,642 ) (60,608 ) (61,354 ) (65,001 ) TOTAL SHAREHOLDERS' EQUITY 1,122,231 1,131,278 1,115,758 1,136,798 1,161,292 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,582,213 $ 8,424,623 $ 8,316,585 $ 8,323,777 $ 8,529,522 PER SHARE DATA Book value $ 7.70 $ 7.76 $ 7.66 $ 7.81 $ 8.00 Tangible book value (2) $ 5.88 $ 5.94 $ 5.83 $ 5.97 $ 6.15 Dividends - quarterly $ 0.10 $ 0.10 $ 0.10 $ - (a) $ 0.20 (a) Shares outstanding (end of period, net of treasury) 145,798,751 145,723,276 145,608,945 145,551,796 145,163,585 (2) RECONCILIATION TABLE FOR NON-GAAP FINANCIAL MEASURES Total shareholders' equity $ 1,122,231 $ 1,131,278 $ 1,115,758 $ 1,136,798 $ 1,161,292 Goodwill and intangibles (265,133 ) (265,935 ) (266,749 ) (267,812 ) (268,893 ) Tangible common equity $ 857,098 $ 865,343 $ 849,009 $ 868,986 $ 892,399 Shares outstanding 145,798,751 145,723,276 145,608,945 145,551,796 145,163,585 Tangible book value per share $ 5.88 $ 5.94 $ 5.83 $ 5.97 $ 6.15 Total assets $ 8,582,213 $ 8,424,623 $ 8,316,585 $ 8,323,777 $ 8,529,522 Goodwill and intangibles (265,133 ) (265,935 ) (266,749 ) (267,812 ) (268,893 ) Tangible assets $ 8,317,080 $ 8,158,688 $ 8,049,836 $ 8,055,965 $ 8,260,629 Tangible common equity/tangible assets 10.31 % 10.61 % 10.55 % 10.79 % 10.80 % (3) RECONCILIATION TABLE FOR NON-GAAP FINANCIAL MEASURES Adjusted net income (1) $ 25,112 $ 24,560 $ 25,019 $ 23,401 $ 25,308 Average assets $ 8,384,990 $ 8,310,626 $ 8,326,499 $ 8,298,815 $ 8,440,642 Adjusted return on average assets (annualized) 1.19 % 1.17 % 1.21 % 1.14 % 1.19 % (c) Net of unamortized prepayment fees of $65.5 million at December 31, 2012 Financial Update for National Penn Bancshares, Inc. (NPBC) for 12/31/2013 Unaudited, dollars in thousands except share and per share data For the Quarter Ended For the Twelve Months Ended 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 12/31/2013 12/31/2012 INTEREST INCOME Loans, including fees $ 54,600 $ 54,577 $ 55,260 $ 55,721 $ 59,005 $ 220,158 $ 242,681 Investment securities Taxable 10,912 10,105 9,795 9,685 10,050 40,497 42,725 Tax-exempt 6,534 6,768 7,005 7,114 7,233 27,421 30,052 Deposits with banks 39 48 41 75 886 203 1,370 Total interest income 72,085 71,498 72,101 72,595 77,174 288,279 316,828 INTEREST EXPENSE Deposits 5,166 5,468 5,831 5,914 6,177 22,379 26,822 Customer repurchase agreements 407 440 460 498 510 1,805 2,116 Repurchase agreements 615 614 623 719 802 2,571 3,475 Short-term borrowings - - - 41 1 41 1 Federal Home Loan Bank advances 1,287 1,325 1,383 2,334 4,410 6,329 22,983 Subordinated debentures 538 539 550 1,465 1,839 3,092 7,425 Total interest expense 8,013 8,386 8,847 10,971 13,739 36,217 62,822 Net interest income 64,072 63,112 63,254 61,624 63,435 252,062 254,006 Provision for loan losses 1,000 1,250 1,500 1,500 2,000 5,250 8,000 Net interest income after provision for loan losses 63,072 61,862 61,754 60,124 61,435 246,812 246,006 NON-INTEREST INCOME Wealth management 6,609 6,883 6,986 6,831 6,224 27,309 24,629 Service charges on deposit accounts 3,827 3,894 3,743 3,770 4,140 15,234 15,863 Insurance commissions and fees 3,028 3,071 3,326 3,267 3,113 12,692 12,858 Cash management and electronic banking fees 4,782 4,860 4,821 4,451 4,761 18,914 18,514 Mortgage banking 902 1,621 2,122 1,855 2,498 6,500 7,640 Bank owned life insurance 1,389 1,260 1,239 1,228 1,326 5,116 5,109 Earnings (losses) of unconsolidated investments 57 661 6 (14 ) 138 710 1,487 Other operating income 2,120 2,551 2,703 2,053 2,555 9,427 9,458 Net gains (losses) from fair value changes of subordinated debentures - - - 2,111 (253 ) 2,111 683 Net gains (losses) on sales of investment securities - 7 22 25 4 54 (119 ) Impairment losses on investment securities: Impairment related losses on investment securities - - - - - - (154 ) Non credit-related losses on securities not expected to be sold recognized in other comprehensive income before tax - - - - - - - Net impairment losses on investment securities - - - - - - (154 ) Total non-interest income 22,714 24,808 24,968 25,577 24,506 98,067 95,968 NON-INTEREST EXPENSE Salaries, wages and employee benefits 30,998 31,704 31,247 30,873 30,789 124,822 124,959 Premises and equipment 7,721 7,724 7,511 7,491 7,396 30,447 28,824 FDIC insurance 1,356 1,404 1,494 1,213 1,162 5,467 4,896 Other operating expenses 11,758 12,771 12,901 12,857 12,915 50,287 51,631 Loss on debt extinguishment - - - 64,888 - 64,888 - Corporate reorganization expense 6,000 - - - - 6,000 - Total non-interest expense 57,833 53,603 53,153 117,322 52,262 281,911 210,310 Income (loss) before income taxes 27,953 33,067 33,569 (31,621 ) 33,679 62,968 131,664 Income tax expense (benefit) 6,741 8,507 8,550 (14,217 ) 8,535 9,581 32,754 NET INCOME (LOSS) $ 21,212 $ 24,560 $ 25,019 $ (17,404 ) $ 25,144 $ 53,387 $ 98,910 PER SHARE Basic earnings $ 0.15 $ 0.17 $ 0.17 $ (0.12 ) $ 0.17 $ 0.37 $ 0.66 Diluted earnings $ 0.15 $ 0.17 $ 0.17 $ (0.12 ) $ 0.17 $ 0.37 $ 0.66 Average shares - basic 145,761,496 145,669,300 145,580,155 145,394,967 148,304,167 145,602,670 150,566,098 Average shares - diluted 146,244,467 146,124,821 145,997,009 145,394,967 148,610,097 146,044,058 150,859,995 SUPPLEMENTAL DATA (annualized, average) Return on assets 1.00 % 1.17 % 1.21 % NM 1.19 % 0.64 % 1.17 % Adjusted return on assets (3) 1.19 % 1.17 % 1.21 % 1.14 % 1.19 % 1.18 % 1.17 % Return on shareholders' equity 7.44 % 8.78 % 8.82 % NM 8.33 % 4.72 % 8.25 % Return on tangible common equity (1) 9.73 % 11.55 % 11.53 % NM 10.74 % 6.18 % 10.66 % Adjusted return on tangible common equity 11.51 % 11.55 % 11.53 % 10.85 % 10.81 % 11.36 % 10.62 % Efficiency ratio (4) 57.00 % 58.16 % 57.43 % 58.61 % 56.40 % 57.80 % 57.12 % (4) RECONCILIATION TABLE FOR NON-GAAP FINANCIAL MEASURES Efficiency ratio calculation Non-interest expense $ 57,833 $ 53,603 $ 53,153 $ 117,322 $ 52,262 $ 281,911 $ 210,310 Less: Loss on debt extinguishment - - - 64,888 - 64,888 - Corporate reorganization expense 6,000 - - - - 6,000 - Operating expenses $ 51,833 $ 53,603 $ 53,153 $ 52,434 $ 52,262 $ 211,023 $ 210,310 Net interest income (taxable equivalent) $ 68,223 $ 67,371 $ 67,610 $ 66,015 $ 67,909 $ 269,219 $ 272,622 Non-interest income 22,714 24,808 24,968 25,577 24,506 98,067 95,968 Less: Net gains (losses) from fair value changes of subordinated debentures - - - 2,111 (253 ) 2,111 683 Net gains (losses) on investment securities - 7 22 25 4 54 (273 ) Adjusted revenue $ 90,937 $ 92,172 $ 92,556 $ 89,456 $ 92,664 $ 365,121 $ 368,180 Efficiency ratio 57.00 % 58.16 % 57.43 % 58.61 % 56.40 % 57.80 % 57.12 % "NM" - Denotes a value displayed as a percentage is not meaningful Financial Update for National Penn Bancshares, Inc. (NPBC) for 12/31/2013 Unaudited, dollars in thousands except share and per share data For the Quarter Ended For the Twelve Months Ended 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 12/31/2013 12/31/2012 CHARGE-OFFS Loan charge-offs $ 7,523 $ 5,774 $ 5,314 $ 6,382 $ 5,876 $ 24,993 $ 28,498 Recoveries on loans (2,127 ) (754 ) (1,183 ) (1,091 ) (1,289 ) (5,155 ) (4,813 ) Net loan charge-offs $ 5,396 $ 5,020 $ 4,131 $ 5,291 $ 4,587 $ 19,838 $ 23,685 Net loan charge-offs to average loans (annualized) 0.41 % 0.38 % 0.32 % 0.41 % 0.35 % 0.38 % 0.46 % NET CHARGE-OFF DETAIL Commercial and industrial loans $ 5,157 $ 3,059 $ 2,065 $ 1,869 $ 2,029 $ 12,150 $ 10,266 Commercial real estate-permanent (523 ) 909 396 282 301 1,064 3,310 Commercial real estate-construction (167 ) (29 ) 93 318 266 215 2,546 Total commercial real estate loans (690 ) 880 489 600 567 1,279 5,856 Residential mortgages 56 209 522 1,333 988 2,120 2,618 Home equity lines and loans 439 423 903 747 515 2,512 3,291 All other consumer loans 434 449 152 742 488 1,777 1,654 Total consumer loans 929 1,081 1,577 2,822 1,991 6,409 7,563 Net loans charged-off $ 5,396 $ 5,020 $ 4,131 $ 5,291 $ 4,587 $ 19,838 $ 23,685 As of 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 ASSET QUALITY AND OTHER DATA Non-accrual commercial and industrial loans $ 14,935 $ 23,101 $ 23,023 $ 23,323 $ 24,653 Non-accrual commercial real estate-permanent 4,258 3,760 5,129 5,489 2,984 Non-accrual commercial real estate-construction 12,128 5,345 5,666 6,067 5,446 Total non-accrual commercial real estate loans 16,386 9,105 10,795 11,556 8,430 Non-accrual residential mortgages 7,037 6,485 6,276 5,608 7,066 Non-accrual home equity lines and loans 4,787 4,403 4,339 4,364 3,692 All other non-accrual consumer loans 1,731 1,705 1,916 1,595 1,705 Total non-accrual consumer loans 13,555 12,593 12,531 11,567 12,463 Total non-accrual loans 44,876 44,799 46,349 46,446 45,546 Restructured loans 7,715 10,006 9,109 7,314 8,362 Total non-performing loans 52,591 54,805 55,458 53,760 53,908 Other real estate owned and repossessed assets 1,278 1,569 1,899 2,729 3,029 Total non-performing assets 53,869 56,374 57,357 56,489 56,937 Loans 90+ days past due & still accruing 3,466 2,608 2,023 2,324 2,027 Total non-performing assets and loans 90+ days past due $ 57,335 $ 58,982 $ 59,380 $ 58,813 $ 58,964 Allowance for loan losses $ 96,367 $ 100,763 $ 104,533 $ 107,164 $ 110,955 Allowance for loan losses/non-performing loans 183.2 % 183.9 % 188.5 % 199.3 % 205.8 % Allowance for loan losses/non-performing assets and loans 90+ days past due 168.1 % 170.8 % 176.0 % 182.2 % 188.2 % Allowance for loan losses/total loans 1.81 % 1.91 % 1.99 % 2.04 % 2.12 % Provision/charge-offs, net 18.5 % 24.9 % 36.3 % 28.4 % 43.6 % Classified loans $ 191,589 $ 218,615 $ 234,085 $ 242,560 $ 261,293 Classified loans/total loans 3.59 % 4.14 % 4.45 % 4.62 % 4.99 % Delinquent loans (d) $ 29,435 $ 22,550 $ 22,512 $ 24,110 $ 24,048 Delinquent loans/total loans 0.55 % 0.43 % 0.43 % 0.46 % 0.46 % REGULATORY CAPITAL DATA Tier 1 Capital $ 936,738 $ 938,040 $ 924,922 $ 927,397 $ 982,148 Tier 1 Leverage Ratio 11.57 % 11.67 % 11.56 % 11.63 % 12.16 % Tier 1 Ratio 15.38 % 15.63 % 15.51 % 15.41 % 16.54 % Total Capital $ 1,013,128 $ 1,013,371 $ 999,839 $ 1,002,999 $ 1,056,835 Total Capital Ratio 16.63 % 16.89 % 16.77 % 16.67 % 17.80 % Total Risk-Weighted Assets $ 6,091,183 $ 6,001,065 $ 5,963,754 $ 6,016,630 $ 5,938,708 (d) Includes loans 30-89 days past due and loans 90+ days past due and still accruing Financial Update for National Penn Bancshares, Inc. (NPBC) for 12/31/2013 Unaudited, dollars in thousands except share and per share data As of Earning Assets / Liabilities 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 Loan portfolio composition (regulatory): Commercial / industrial $ 796,797 $ 820,669 $ 861,494 $ 857,728 $ 868,135 Commercial real estate (e) 1,926,978 1,913,180 1,887,908 1,863,381 1,838,681 Residential mortgage 1,181,020 1,170,750 1,185,986 1,191,075 1,234,425 Real estate construction and land development 256,483 234,945 201,316 180,298 161,341 Home equity 794,709 786,835 778,521 776,166 782,717 Consumer 209,729 205,446 201,580 201,349 208,856 Other 172,503 150,866 144,491 179,776 146,727 Total 5,338,219 5,282,691 5,261,296 5,249,773 5,240,882 Investment securities and other securities 2,381,475 2,364,681 2,313,358 2,333,548 2,334,739 Other earning assets 181,282 78,895 63,193 93,024 282,440 Total earning assets (net of loan loss reserve) $ 7,804,609 $ 7,625,504 $ 7,533,314 $ 7,569,181 $ 7,747,106 (e) Includes owner occupied Loan portfolio composition (internal): Commercial & industrial Business purpose, real estate secured $ 885,135 $ 897,757 $ 901,205 $ 891,229 $ 886,160 Business purpose, not secured by real estate 939,121 935,857 976,281 1,000,141 977,875 Owner occupied commercial real estate Permanent 589,765 585,807 609,615 604,278 599,729 Construction / development 46,415 41,088 31,058 32,603 30,523 Leasing 228 392 630 1,128 1,568 Total commercial & industrial 2,460,664 2,460,901 2,518,789 2,529,379 2,495,855 Commercial real estate Non-owner occupied Permanent 994,838 964,510 919,080 898,519 907,760 Construction / development 198,334 181,683 153,172 145,324 125,878 Total commercial real estate 1,193,172 1,146,193 1,072,252 1,043,843 1,033,638 Total commercial 3,653,836 3,607,094 3,591,041 3,573,222 3,529,493 Consumer Residential mortgage (personal purpose) Permanent 643,506 642,696 640,745 649,522 666,274 Construction 8,719 9,443 7,076 6,009 5,498 Total residential mortgages 652,225 652,139 647,821 655,531 671,772 Home equity and direct installment 193,089 208,333 220,401 237,088 254,014 Home equity lines of credit 569,519 550,417 530,104 507,347 500,372 Total home equity 762,608 758,750 750,505 744,435 754,386 Private banking credit lines 99,859 98,714 98,865 99,154 103,806 Indirect vehicle and other 164,740 163,242 160,775 162,497 167,095 All other consumer 264,599 261,956 259,640 261,651 270,901 Total consumer 1,679,432 1,672,845 1,657,966 1,661,617 1,697,059 Loans 5,333,268 5,279,939 5,249,007 5,234,839 5,226,552 Loans held-for-sale 4,951 2,752 12,289 14,934 14,330 Total loans $ 5,338,219 $ 5,282,691 $ 5,261,296 $ 5,249,773 $ 5,240,882 Deposit composition: Savings $ 526,576 $ 518,430 $ 527,216 $ 520,223 $ 493,386 NOW accounts 1,655,425 1,958,116 1,545,659 1,471,185 1,472,985 Money market accounts 1,670,035 1,639,859 1,654,442 1,647,863 1,642,803 Time deposits less than $100k 896,700 925,118 963,238 991,380 1,017,925 Time deposits $100k or greater 353,791 367,387 389,781 633,626 417,065 Total interest bearing deposits 5,102,527 5,408,910 5,080,336 5,264,277 5,044,164 Non-interest bearing deposits 970,051 1,026,546 942,127 919,783 891,401 Total deposits $ 6,072,578 $ 6,435,456 $ 6,022,463 $ 6,184,060 $ 5,935,565 Financial Update for National Penn Bancshares, Inc. (NPBC) for 12/31/2013 Unaudited, dollars in thousands except share and per share data Quarterly, as of Twelve Months, as of 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 12/31/2013 12/31/2012 Avg Bal Yield Avg Bal Yield Avg Bal Yield Avg Bal Yield Avg Bal Yield Avg Bal Yield Avg Bal Yield Total loans* $ 5,256,841 4.17 % $ 5,229,366 4.19 % $ 5,244,930 4.27 % $ 5,223,015 4.37 % $ 5,206,227 4.55 % $ 5,238,606 4.25 % $ 5,193,376 4.72 % Investment securities* 2,375,732 3.50 % 2,316,066 3.51 % 2,334,594 3.53 % 2,325,225 3.60 % 2,323,243 3.63 % 2,337,983 3.54 % 2,317,591 3.84 % Interest earning deposits 89,530 0.17 % 102,581 0.19 % 94,788 0.17 % 119,834 0.25 % 276,078 1.28 % 101,603 0.20 % 285,956 0.48 % Total earning assets 7,722,103 3.92 % 7,648,013 3.93 % 7,674,312 4.00 % 7,668,074 4.07 % 7,805,548 4.16 % 7,678,192 3.98 % 7,796,923 4.30 % Total assets 8,384,990 8,310,626 8,326,499 8,298,815 8,440,642 8,330,415 8,424,322 Savings 524,647 0.10 % 524,178 0.11 % 525,494 0.11 % 505,513 0.11 % 488,195 0.11 % 520,022 0.10 % 486,160 0.12 % NOW accounts 1,873,519 0.14 % 1,732,394 0.14 % 1,543,649 0.14 % 1,439,387 0.14 % 1,463,488 0.14 % 1,648,660 0.14 % 1,362,573 0.15 % Money market accounts 1,649,960 0.23 % 1,655,133 0.27 % 1,646,691 0.29 % 1,645,838 0.30 % 1,630,449 0.30 % 1,650,376 0.27 % 1,649,152 0.35 % Time deposits 1,273,664 1.07 % 1,312,810 1.09 % 1,464,421 1.08 % 1,507,667 1.10 % 1,454,415 1.17 % 1,388,789 1.08 % 1,490,965 1.24 % Total interest bearing deposits 5,321,790 0.39 % 5,224,515 0.42 % 5,180,255 0.45 % 5,098,405 0.47 % 5,036,547 0.49 % 5,207,847 0.43 % 4,988,850 0.54 % Non-interest bearing deposits 984,037 963,625 913,311 876,700 886,858 933,849 882,140 Total deposits 6,305,827 0.33 % 6,188,140 0.35 % 6,093,566 0.38 % 5,975,105 0.40 % 5,923,405 0.41 % 6,141,696 0.36 % 5,870,990 0.46 % Customer repurchase agreements 529,541 0.30 % 518,569 0.34 % 523,585 0.35 % 547,706 0.37 % 551,334 0.37 % 529,770 0.34 % 533,325 0.40 % Repurchase agreements 50,000 4.87 % 50,000 4.87 % 63,736 3.92 % 135,454 2.15 % 75,000 4.25 % 74,496 3.45 % 80,820 4.30 % Short-term borrowings 54 0.00 % - 0.00 % - 0.00 % 39,200 0.42 % 1,087 0.37 % 9,680 0.42 % 342 0.29 % Federal Home Loan Bank advances (c) 190,670 2.68 % 277,101 1.90 % 348,814 1.59 % 262,067 3.61 % 463,397 3.79 % 269,488 2.35 % 537,569 4.28 % Subordinated debentures 77,321 2.76 % 77,321 2.77 % 77,321 2.85 % 125,207 4.75 % 144,377 5.07 % 89,128 3.47 % 144,451 5.14 % Total deposits and borrowings 7,153,413 0.44 % 7,111,131 0.47 % 7,107,022 0.50 % 7,084,739 0.63 % 7,158,600 0.76 % 7,114,258 0.51 % 7,167,497 0.88 % Total interest bearing liabilities $ 6,169,376 0.52 % $ 6,147,506 0.54 % $ 6,193,711 0.57 % $ 6,208,039 0.72 % $ 6,271,742 0.87 % $ 6,180,409 0.59 % $ 6,285,357 1.00 % Net interest margin (FTE) 3.51 % 3.49 % 3.53 % 3.49 % 3.46 % 3.51 % 3.50 % Wealth assets under management $ 2,504,717 $ 2,388,991 $ 2,285,199 $ 2,328,042 $ 2,256,319 *Fully taxable equivalent ("FTE") basis, using a 35% effective tax rate Financial Update for National Penn Bancshares, Inc. (NPBC) for 12/31/2013 Unaudited STATES OF OPERATION AND BANKING OFFICES BY STATE (LATEST AVAILABLE DATA) Quarterly, as of 12/31/2013 9/30/2013 6/30/2013 3/31/2013 12/31/2012 PA Total number of retail branch offices 119 119 119 118 119 Total number of insured subsidiaries (Bank & Thrift subsidiaries) 1 1 1 1 1 Total number of ATMs 124 124 124 124 124 MD Total number of retail branch offices 1 1 1 1 1 Total number of insured subsidiaries (Bank & Thrift subsidiaries) - - - - - Total number of ATMs 1 1 1 1 1 TOTAL Total number of retail branch offices 120 120 120 119 120 Total number of insured subsidiaries (Bank & Thrift subsidiaries) 1 1 1 1 1 Total number of ATMs 125 125 125 125 125 EOP employees (full-time equivalent) 1,631 1,632 1,666 1,657 1,648 Media Contact: Jacklyn Bingaman , Marketing 610-369-6002 jacklyn.bingaman@nationalpenn.com or Investor Contact : Michelle H. Debkowski , Investor Relations 484-709-3316 michelle.debkowski@nationalpenn.com Source: National Penn Bancshares, Inc.


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