National Penn Bancshares, Inc. Reports Second Quarter 2013 Results

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National Penn Bancshares, Inc. Reports Second Quarter 2013 Results

  • Quarterly net income of $0.17 per diluted share
  • Adjusted net income1per diluted share increases 10% for the first six months of 2013
  • Quarterly return on assets increases to 1.21%
  • Net interest margin expands to 3.53% from 3.49% in the prior quarter
  • Strong asset quality sustained
  • Focus on operating expense management continues

BOYERTOWN, Pa.--(BUSINESS WIRE)-- National Penn Bancshares, Inc. (NAS: NPBC) reported net income of $25.0 million, or $0.17 per diluted share, for the second quarter of 2013. Net income increased 7%, or $0.01 per diluted share, compared to adjusted net income1 of $23.4 million, or $0.16 per diluted share exclusive of the first quarter 2013 debt extinguishment and retail trust preferred redemption. Year-to-date, adjusted earnings1 per diluted share increased 10% to $0.33 from $0.30 in the prior year period.

"The second quarter continued the trend of consistent, strong performance with a return on assets of 1.21%," said Scott V. Fainor, president and CEO of National Penn. "We managed to increase the net interest margin by the actions we took in the first quarter to reduce our non-deposit funding costs, and we remain disciplined in re-risking the balance sheet in this low growth environment."


Net interest margin increased during the quarter to 3.53% from 3.49%, primarily due to the benefit of the previously reported repayment of $400 million of longer-term borrowings and redemption of National Penn's 7.85% trust preferred securities. Total funding costs declined to 0.50% from 0.63%, and the cost of deposits further decreased to 0.38% during the quarter. Net interest margin for the first six months of 2013 was 3.51%, as compared to 3.52% in the prior year period. Stronger loan originations in the second quarter offset the impact of prepayments and refinance activity as commercial loans grew modestly by 2% on an annualized basis.

Other non-interest income increased to $24.9 million during the quarter from $23.4 million in the first quarter. Contributing to the improvement were increases in income from interest rate swaps, mortgage banking, and wealth management services. National Penn's focus on expense management continues to result in a stable level of operating expenses1. Operating expenses1 for the second quarter of 2013 were comparable to the first quarter after adjusting for the difference in payroll days in each period. The efficiency ratio1 was 58% for the first six months of 2013 with operating expenses1 increasing 1% compared to the prior year period.

Credit quality remains strong as annualized net loan charge-offs declined to 0.32% of average loans, and classified loans have declined 10% during 2013 and 22% since June 30, 2012. Indicative of the low-risk profile of National Penn's balance sheet, non-performing loans were 1.05% of total loans, and the allowance for loan loss coverage of non-performing loans was 189% at June 30, 2013. During the second quarter, the Company recorded a provision for loan losses of $1.5 million, equal to the provision in the first quarter of 2013.

National Penn's Board of Directors declared a third quarter 2013 cash dividend of ten cents per common share payable on August 16, 2013 to shareholders of record as of August 3, 2013. At June 30, 2013, the Company's tier 1 common and tangible common equity1 to tangible assets ratios remained strong at 14.25% and 10.55%, respectively.

Scott V. Fainor stated, "National Penn remains well-positioned to build upon our solid fundamentals and performance. As the economy continues to improve and the environment in which we operate evolves, we will continue to be proactive in appropriately leveraging the strength of our franchise."

About National Penn Bancshares, Inc.:

National Penn Bancshares, Inc., with approximately $8.3 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

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 assets exclude the effects of certain gains and losses, adjusted for taxes when applicable. Adjusted net income and returns 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.

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Financial Update for National Penn Bancshares, Inc. (NPBC) for 6/30/2013
   
Unaudited, dollars in thousands except share and per share data
As of
6/30/2013 3/31/2013  6/30/2012
SUMMARY BALANCE SHEET       
Total assets$8,316,585$8,323,777$8,395,864
Investment securities and other securities2,313,3582,333,5482,316,894
Total loans5,261,2965,249,7735,210,767
Deposits6,022,4636,184,0605,845,543
Borrowings1,089,199922,0921,298,477
Shareholders' equity1,115,7581,136,7981,199,760
Tangible book value per common share (2)$5.83$5.97$6.18
Tangible common equity / tangible assets (2)10.55%10.79%11.43%
 
Three Months EndedSix Months Ended
6/30/2013 3/31/2013  6/30/20126/30/2013  6/30/2012
EARNINGS           
Total interest income$72,101$72,595$79,896$144,696$161,310
Total interest expense 8,847   10,971    16,697  19,818    34,293 
Net interest income63,25461,62463,199124,878127,017
Provision for loan losses 1,500   1,500    2,000  3,000    4,000 
Net interest income after provision for loan losses61,75460,12461,199121,878123,017
Net gains (losses) from fair value changes of subordinated debentures-2,111(810)2,111835
Net gains (losses) on investment securities2225(277)47(277)
Other non-interest income24,94623,44121,54348,38744,139
Loss on debt extinguishment-64,888-64,888-
Other non-interest expense 53,153   52,434    52,269  105,587    104,709 
Income (loss) before income taxes33,569(31,621)29,3861,94863,005
Income tax expense (benefit) 8,550   (14,217)   6,938  (5,667)   15,255 
Net income (loss)$25,019  $(17,404)  $22,448 $7,615   $47,750 
 
PERFORMANCE RATIOS           
Net interest margin3.53%3.49%3.48%3.51%3.52%
Return on average assets1.21%NM1.07%0.18%1.14%
Adjusted return on average assets (3)1.21%1.14%1.09%1.17%1.13%
Return on average shareholders' equity8.82%NM7.50%1.35%8.03%
Return on average tangible common equity (1)11.53%NM9.69%1.76%10.40%
Adjusted return on average tangible common equity11.53%10.85%9.92%11.19%10.28%
Efficiency ratio (4)57.43%58.61%58.42%58.01%57.94%
 
PER SHARE           
Basic earnings$0.17$(0.12)$0.15$0.05$0.31
Diluted earnings0.17(0.12)0.150.050.31
Dividends0.10-(a)0.070.10(a)0.12
Average shares - basic145,580,155145,394,967151,732,402145,488,073151,915,974
Average shares - diluted145,997,009145,394,967152,011,995145,900,726152,202,155
             
 
(1) RECONCILIATION TABLES FOR NON-GAAP FINANCIAL MEASURESThree Months EndedSix Months Ended
6/30/2013 3/31/2013  6/30/20126/30/2013  6/30/2012
Return on average tangible common equity
Return on average shareholders' equity8.82%NM7.50%1.35%8.03%
Effect of goodwill and intangibles 2.71% NM  2.19% 0.41% 2.37%
Return on average tangible common equity 11.53% NM  9.69% 1.76% 10.40%
Average tangible equity
Average shareholders' equity$1,137,659$1,142,829$1,203,757$1,140,230$1,196,071
Average goodwill and intangibles (267,264) (268,336) (271,990) (267,797) (272,675)
Average total tangible common equity$870,395 $874,493 $931,767 $872,433 $923,396