National Penn Bancshares, Inc. Announces $125 Million Share Repurchase Plan and Reports Fourth Quarter and Full Year 2014 Results

National Penn Bancshares, Inc. (Nasdaq: NPBC) reported net income of $24.5 million, or $0.17 per diluted share, for the fourth quarter of 2014, compared to net income of $25.3 million or $0.18 per diluted share, in the prior quarter. Exclusive of non-recurring costs associated with the acquisition of TF Financial Corporation (“TF Financial”), adjusted net income for the quarter was $26.5 million, or $0.18 per share. Net income for the year was $98.7 million, or $0.70 per diluted share, while adjusted net income was $100.8 million, or $0.71 per share, compared to adjusted net income of $98.1 million, or $0.67 per diluted share, for 2013. Adjusted return on average assets, exclusive of non-recurring costs, remained strong at 1.14% and 1.16% for the fourth quarter and full year 2014, respectively.

National Penn also announced that its Board of Directors approved a 2015 common share repurchase plan of $125 million. The repurchase may be accomplished from time to time in various ways including open market purchases, accelerated share repurchases, or negotiated transactions. Share repurchases, and the amount and timing of any repurchases, will be dependent on factors including requirements of federal securities laws, the company’s capital position and needs, market conditions, and other capital management objectives and opportunities.

“The strength of our balance sheet and the strong earnings profile allow us to continue to return capital to our shareholders,” said Scott V. Fainor, president and CEO of National Penn. “This share repurchase plan, coupled with a 10% increase in the cash dividend paid in the fourth quarter, illustrate our commitment to enhancing shareholder value. We are pleased with our strong performance for the year and further encouraged by the positive momentum reflected by our second consecutive quarter of increased loan growth.”

Net Interest Margin and Loan Growth

Net interest income increased to $67.6 million in the fourth quarter from $64.2 million in the third quarter, benefitting from the acquisition of TF Financial on October 24, 2014 with assets of approximately $800 million. The net interest margin declined from 3.43% to 3.33%, primarily as a result of the holding company senior debt issuance late in the third quarter which further enhanced holding company liquidity for the share repurchase plan and other capital planning initiatives. Exclusive of loans acquired from TF Financial, total loans grew at an annualized rate of 6% in the fourth quarter, somewhat offsetting the impact of the prolonged low interest rate environment.

Asset Quality

Although asset quality metrics remain strong, non-performing loans increased in the quarter to $59.1 million from $42.9 million in the third quarter. Classified and criticized loans however, exclusive of TF Financial, declined by approximately $35 million in the fourth quarter. The increase in non-performing loans was primarily driven by one commercial credit which was downgraded from classified to non-performing. The provision for loan losses was increased to $3.5 million from $1.0 million in the prior quarter. A credit mark of 2.7% was recorded on the TF Financial loan portfolio of approximately $600 million.

Other Income and Operating Expenses

Other income in the quarter was enhanced by increased mortgage activity and the related gain on sale of these loans, and the impact of TF Financial.

Operating expenses were relatively comparable on a quarterly basis, totaling $51.8 million in the fourth quarter of 2014 and $52.2 million in the prior quarter, despite the increased expenses associated with TF Financial. The anticipated synergies were realized as the systems conversion was accomplished on an expedited basis. Reflective of year end results, operating expenses for the quarter also reflected reduced expense for incentive compensation.

Capital

National Penn’s Board of Directors declared a first quarter 2015 dividend of eleven cents ($0.11) per common share to shareholders of record as of Monday, February 2, 2015, payable on Tuesday, February 17, 2015. At December 31, 2014, and inclusive of the TF Financial acquisition, capital remained strong as National Penn’s tier 1 common and tangible common equity to tangible assets ratios were 12.82% and 9.30%, respectively.

“I appreciate the contributions of our team throughout 2014,” said Scott V. Fainor. “Due to their efforts, we achieved another year of consistent, high-level performance, reflected by our adjusted return on assets of 1.16%. Additionally, we accomplished many strategic initiatives, including the expedited closing and conversion of TF Financial, an increased rate of loan growth, and the enhancement of our holding company liquidity which position us well for 2015 and beyond.”

About National Penn Bancshares, Inc.:

National Penn Bancshares, Inc., with approximately $9.8 billion in assets, is a bank holding company headquartered in Allentown, Pennsylvania. National Penn Bank operates 127 branch offices comprising 119 branches in Pennsylvania, seven in New Jersey and one in 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, 2013, 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.