National Penn Bancshares, Inc. Reports Third Quarter 2015 Results

National Penn Bancshares, Inc. (Nasdaq: NPBC) reported net income of $27.9 million, or $0.20 per diluted share, for the third quarter of 2015, compared to $27.2 million or $0.19 per diluted share in the second quarter of 2015. Net income for the three quarters ending September 30, 2015 was $81.8 million compared to $74.2 million in the prior year period, while earnings per diluted share of $0.58 through the three quarters of 2015 increased 9.4% from the comparable period last year. The third quarter of 2015 and year-to-date 2015 results include after-tax merger related expenses totaling $1.4 million or $0.01 per diluted share. Excluding the impact of merger-related expenses, return on average assets was 1.22% and return on average tangible common equity was 13.94%, for the third quarter of 2015.

“We are pleased with our continued strong and consistent financial performance, especially in this challenging interest rate environment,” said Scott V. Fainor, president and CEO of National Penn. “In addition, we are moving forward to obtain the necessary approvals for our merger with BB&T, and look forward to our affiliation with BB&T and the strength of our combined franchise.”

Net Interest Margin

Net interest income was $67.9 million for the third quarter of 2015, compared to $66.8 million last quarter. Our net interest margin of 3.25% for the third quarter of 2015 remained stable compared to 3.24% for the prior quarter. Total loan outstandings of $6.2 billion at September 30, 2015 were comparable to the end of the second quarter of 2015. The year-to-date loan growth was impacted by our continued strategy to sell long-term fixed rate residential mortgage loans.

Asset Quality

The strong trend in asset quality continued in the third quarter as non-performing loans decreased 5% from last quarter. The ratio of allowance for loan losses to non-performing loans increased to 186% at September 30, 2015, compared to 180% at the end of last quarter. Net charge-offs decreased to $2.7 million or 0.17% of average total loans (annualized) this quarter, compared to $5.9 million or 0.39% last quarter, as the second quarter reflects the resolution of a large non-performing commercial loan for which a specific loan loss reserve was recorded in the fourth quarter of last year. The provision for loan losses of $1.0 million for the third quarter was consistent with the prior quarter and commensurate with the strong credit quality profile of our loan portfolio.

Other Income and Operating Expenses

Despite fluctuations in the components of non-interest income during the quarter, total non-interest income aggregated to $25.0 million in the third quarter of 2015, compared to $24.7 million in the prior quarter.

Total non-interest expense of $54.2 million, for the third quarter of 2015, included merger-related costs of $1.8 million. Excluding the impact of merger-related costs, our efficiency ratio of 54% this quarter compared to 57% in the prior quarter.

Capital

At September 30, 2015, our capital ratios remained strong as common equity tier 1 and tangible common equity to tangible assets ratios were 12.27% and 9.15%.

As previously announced, National Penn’s Board of Directors declared a fourth quarter cash dividend of eleven cents ($0.11) per common share, to shareholders of record as of Monday, November 2, 2015, payable on Tuesday, November 17, 2015.

“Our consistent strong financial performance is a reflection of the continued efforts of all of our team members here at National Penn,” said Scott V. Fainor.

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 124 branch offices throughout Pennsylvania, New Jersey and Maryland.

National Penn’s financial services affiliates include 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: Risks, uncertainties and other factors relating to the merger of National Penn with and into BB&T Corporation, including the ability to obtain regulatory approvals and meet other closing conditions to the merger, including approval by National Penn shareholders, and delay in closing the merger, 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. 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.