National Penn Bancshares, Inc. Reports First Quarter 2015 Results

National Penn Bancshares, Inc. (Nasdaq: NPBC) reported net income of $26.7 million, or $0.19 per diluted share, for the first quarter of 2015, compared to $24.5 million or $0.17 per diluted share in the fourth quarter of 2014. Adjusted net income for the fourth quarter was $26.5 million, or $0.18 per diluted share. Reported net income for the first quarter of 2014 was $22.7 million or $0.16 per diluted share. Return on average assets for the first quarter of 2015 was 1.14%.

“We continued to implement capital management strategies during the quarter,” said Scott V. Fainor, president and CEO of National Penn. “The strength of our balance sheet and internal generation of capital allowed for the repurchase of another 5% of our outstanding shares. Since 2012, we have repurchased approximately 15% of our shares and our current authorization allows for an additional 3%* based on our current prices.” Mr. Fainor continued, “We remain committed to returning capital to our shareholders through a strong dividend and continued share repurchases.”

Net Interest Margin

Net interest income was $68.7 million for the first quarter of 2015, compared to $67.6 million for the fourth quarter of 2014, and the net interest margin was 3.36%, compared to 3.33% in the prior quarter. Earning asset yields and the cost of funding remained constant, despite the prolonged low interest rate environment. Excluding the impact of TF Financial, average loans increased by 3% on an annualized basis from the prior quarter while period end loans declined modestly. The increase in average loans was driven by growth in the commercial loan portfolio. Period end loans declined primarily due to the sale of classified loans acquired from TF Financial, increased consumer loan prepayment speeds, and seasonal impact.

Asset Quality

Non-performing loans were comparable to the prior quarter and classified loans declined 17% over the past year. The provision for loan losses was $1.0 million in the first quarter of 2015, compared to $3.5 million in the fourth quarter of 2014 which reflected the impact of a large commercial credit downgraded to non-performing.

Other Income and Operating Expenses

Non-interest income totaled $22.9 million in the first quarter of 2015, compared to $23.4 million in the fourth quarter of 2014. Customer interest rate swap and mortgage banking activity increased due to the interest rate environment, but were offset by lower wealth management income and seasonal declines in banking fees.

Expenses continue to be well-managed, as evidenced by an efficiency ratio of 57%. Reflective of a full quarter of TF Financial, operating expenses for the first quarter of 2015 totaled $54.6 million, compared to $51.8 million in the prior quarter. The cost reductions anticipated in the TF Financial transaction were fully realized and an ongoing focus on optimizing branch efficiencies continues.

Capital

At March 31, 2015, inclusive of the adoption of BASEL III, capital ratios remained strong. National Penn’s tier 1 common and tangible common equity to tangible assets ratios were 11.66% and 8.83%, respectively.

As previously announced, National Penn’s Board of Directors declared a second quarter dividend of eleven cents ($0.11) per common share to shareholders of record as of Monday, May 4, 2015, payable on Friday, May 15, 2015.

“During the quarter, Warburg Pincus divested its remaining ownership in National Penn in a secondary offering,” said Scott V. Fainor. “The transaction was well-received by the market and executed in an efficient manner. We value our relationship with Warburg Pincus and believe that it was mutually beneficial.”

*Based on one month average stock price through market close on April 16, 2015.

About National Penn Bancshares, Inc.:

National Penn Bancshares, Inc., with approximately $9.6 billion in assets, is a bank holding company headquartered in Allentown, Pennsylvania. National Penn Bank operates 127 branch offices throughout Pennsylvania, New Jersey and Maryland.

National Penn’s financial services affiliates are National Penn Wealth Management, N.A., including its National Penn Investors Trust Company division; Institutional Advisors LLC; and National Penn Insurance Services Group, Inc.

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.

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 U.S. generally accepted accounting principles (“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 adjusted return on average assets exclude the effects of certain gains and losses, adjusted for taxes when applicable. Adjusted net income and adjusted 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, 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. Additional risks, uncertainties and other factors relating to the acquisition of TF Financial Corporation include, but are not limited to: expected benefits may not materialize in the timeframe expected or at all, or may be more costly to achieve; the parties are unable to successfully implement integration strategies; and diversion of management time on merger-related issues. 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, 2014, 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.