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Document and Entity Information
6 Months Ended
Jun. 30, 2014
Aug. 04, 2014
Entity Information [Line Items] ' '
Entity Registrant Name 'NATIONAL PENN BANCSHARES INC '
Entity Central Index Key '0000700733 '
Current Fiscal Year End Date '--12-31 '
Entity Well-known Seasoned Issuer 'Yes '
Entity Voluntary Filers 'No '
Entity Current Reporting Status 'Yes '
Entity Filer Category 'Large Accelerated Filer '
Entity Common Stock, Shares Outstanding ' 139,277,767
Document Fiscal Year Focus '2014 '
Document Fiscal Period Focus 'Q2 '
Document Type '10-Q '
Amendment Flag 'false '
Document Period End Date Jun 30, 2014 '
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UNAUDITED CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2014
Dec. 31, 2013
ASSETS ' '
Cash and due from banks $ 138,530 $ 102,241
Interest-earning deposits with banks 73,384 181,282
Total cash and cash equivalents 211,914 283,523
Investment securities available-for-sale, at fair value 1,463,479 1,894,107
Investment securities held-to-maturity (Fair value $918,176 and $452,202 for 2014 and 2013, respectively) 892,536 438,445
Other securities 64,494 63,746
Loans held-for-sale 2,275 4,951
Loans, net of allowance for loan losses of $89,848 and $96,367 for 2014 and 2013, respectively 5,313,908 5,236,901
Premises and equipment, net 110,972 96,232
Accrued interest receivable 26,953 27,130
Bank owned life insurance 150,237 147,869
Other real estate owned and other repossessed assets 1,758 1,278
Goodwill 258,279 258,279
Other intangible assets, net 5,476 6,854
Unconsolidated investments 8,205 8,713
Other assets 107,887 123,820
TOTAL ASSETS 8,618,373 8,591,848
LIABILITIES ' '
Non-interest bearing deposits 1,031,271 970,051
Interest bearing deposits 5,077,212 5,102,527
Total deposits 6,108,483 6,072,578
Customer repurchase agreements 587,686 551,736
Repurchase agreements 50,000 50,000
Federal Home Loan Bank advances 601,246 603,232
Subordinated debentures 77,321 77,321
Accrued interest payable and other liabilities 92,229 105,115
TOTAL LIABILITIES 7,516,965 7,459,982
SHAREHOLDERS' EQUITY ' '
Common stock, no stated par value; authorized 250,000,000 shares, issued: June 30, 2014 - 152,275,098; December 31, 2013 - 152,310,162 1,387,304 1,387,966
Accumulated deficit (154,909) (175,990)
Accumulated other loss (474) (21,157)
Treasury stock: June 30, 2014 - 13,034,780 shares; December 31, 2013 - 6,511,411 shares (130,513) (58,953)
TOTAL SHAREHOLDERS' EQUITY 1,101,408 1,131,866
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,618,373 $ 8,591,848
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UNAUDITED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Jun. 30, 2014
Dec. 31, 2013
ASSETS ' '
Investment securities held-to-maturity, Fair value $ 918,176 $ 452,202
Allowance for loan losses $ 89,848 $ 96,367
SHAREHOLDERS' EQUITY ' '
Common Stock, no par value (in dollars per share) $ 0 $ 0
Common stock, authorized (in shares) 250,000,000 250,000,000
Common stock, issued (in shares) 152,275,098 152,310,162
Treasury stock (in shares) 13,034,780 6,511,411
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UNAUDITED CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2014
Jun. 30, 2013
Jun. 30, 2014
Jun. 30, 2013
INTEREST INCOME ' ' ' '
Loans, including fees $ 52,476 $ 55,260 $ 105,058 $ 110,981
Investment securities ' ' ' '
Taxable 11,694 9,795 22,815 19,480
Tax-exempt 6,329 7,005 12,733 14,119
Deposits with banks 29 41 55 116
Total interest income 70,528 72,101 140,661 144,696
INTEREST EXPENSE ' ' ' '
Deposits 4,671 5,831 9,444 11,745
Customer repurchase agreements 400 460 793 958
Repurchase agreements 608 623 1,209 1,342
Short-term borrowings 1 0 1 41
Federal Home Loan Bank advances 1,369 1,383 2,917 3,717
Subordinated debentures 528 550 1,057 2,015
Total interest expense 7,577 8,847 15,421 19,818
Net interest income 62,951 63,254 125,240 124,878
Provision for loan losses 0 1,500 1,251 3,000
Net interest income after provision for loan losses 62,951 61,754 123,989 121,878
NON-INTEREST INCOME ' ' ' '
Wealth management 7,133 6,986 13,999 13,817
Service charges on deposit accounts 3,534 3,743 6,918 7,513
Insurance commissions and fees 3,209 3,326 6,806 6,593
Cash management and electronic banking fees 4,869 4,821 9,395 9,272
Mortgage banking 936 2,122 1,652 3,977
Bank owned life insurance 1,218 1,239 2,416 2,467
Earnings (losses) of unconsolidated investments (9) 6 (486) (8)
Gains on sale of non-performing loans 946 0 946 0
Other operating income 2,560 2,703 4,220 4,756
Net gains from fair value changes of subordinated debentures 0 0 0 2,111
Net gains on sales of investment securities 0 22 8 47
Total non-interest income 24,396 24,968 45,874 50,545
NON-INTEREST EXPENSE ' ' ' '
Salaries, wages and employee benefits 28,887 29,137 58,088 58,367
Premises and equipment 7,709 7,511 15,921 15,002
FDIC insurance 1,200 1,494 2,517 2,707
Other operating expenses 14,318 15,011 27,925 29,511
Loss on debt extinguishment 0 0 0 64,888
Total non-interest expense 52,114 53,153 104,451 170,475
Income before income taxes 35,233 33,569 65,412 1,948
Income tax expense (benefit) 9,034 8,550 16,503 (5,667)
Net income $ 26,199 $ 25,019 $ 48,909 $ 7,615
PER SHARE ' ' ' '
Basic earnings $ 0.19 $ 0.17 $ 0.35 $ 0.05
Diluted earnings $ 0.19 $ 0.17 $ 0.35 $ 0.05
Dividends paid in cash $ 0.1 $ 0.1 $ 0.2 $ 0.1
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UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2014
Jun. 30, 2013
Jun. 30, 2014
Jun. 30, 2013
Income before income taxes $ 35,233 $ 33,569 $ 65,412 $ 1,948
Other comprehensive income (loss), Net of tax amount ' ' 20,683 '
Before Tax Amount [Member] ' ' ' '
Income before income taxes 35,233 33,569 65,412 1,948
Unrealized holding gains (losses) arising during the period on investment securities, Before tax 7,418 (51,009) 31,716 (63,939)
Net gains (losses) on sales of investment securities realized in net income, Before tax 0 22 8 47
Unrealized gains (losses) on investment securities, Before tax 7,418 (51,031) 31,708 (63,986)
Pension Adjustment, Before tax 0 0 114 113
Other comprehensive income (loss), Before tax 7,418 (51,031) 31,822 (63,873)
Comprehensive income (loss), Before tax 42,651 (17,462) 97,234 (61,925)
Income Tax Expense (benefit) [Member] ' ' ' '
Net income, income tax expense (benefit) 9,034 8,550 16,503 (5,667)
Unrealized holding gains (losses) arising during the period on investment securities, Income tax expense (benefit) 2,596 (17,853) 11,102 (22,379)
Net gains (losses) on sales of investment securities realized in net income, Income tax expense (benefit) 0 8 3 16
Unrealized gains (losses) on investment securities, Income tax expense (benefit) 2,596 (17,861) 11,099 (22,395)
Pension Adjustment, Income tax expense (benefit) 0 0 40 40
Other comprehensive income (loss), Income tax expense (benefit) 2,596 (17,861) 11,139 (22,355)
Comprehensive income (loss), Tax expense (benefit) 11,630 (9,311) 27,642 (28,022)
Net of Tax Amount [Member] ' ' ' '
Net Income, Net of Tax Amount 26,199 25,019 48,909 7,615
Unrealized holding gains (losses) arising during the period on investment securities, Net of tax amount 4,822 (33,156) 20,614 (41,560)
Net gains (losses) on sales of investment securities realized in net income, Net of tax amount 0 14 5 31
Unrealized gains (losses) on investment securities, Net of tax amount 4,822 (33,170) 20,609 (41,591)
Pension Adjustment, Net of tax 0 0 74 73
Other comprehensive income (loss), Net of tax amount 4,822 (33,170) 20,683 (41,518)
Total comprehensive income (loss), Net of tax amount $ 31,021 $ (8,151) $ 69,592 $ (33,903)
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UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Treasury Stock [Member]
Balance at Dec. 31, 2013 $ 1,131,866 $ 1,387,966 $ (175,990) $ (21,157) $ (58,953)
Balance (in shares) at Dec. 31, 2013 ' 145,798,751 ' ' '
Comprehensive income: ' ' ' ' '
Net income 48,909 ' 48,909 ' '
Other comprehensive income, net of taxes 20,683 ' ' 20,683 '
Total comprehensive income 69,592 ' ' ' '
Cash dividends declared, common (27,828) ' (27,828) ' '
Shares issued under share-based plans, net of excess tax benefits 3,168 (662) ' ' 3,830
Shares issued under share-based plans, net of excess tax benefits (in shares) ' 441,567 ' ' '
Common stock repurchases (75,390) ' ' ' (75,390)
Common stock repurchases (in shares) ' (7,000,000) ' ' '
Balance at Jun. 30, 2014 $ 1,101,408 $ 1,387,304 $ (154,909) $ (474) $ (130,513)
Balance (in shares) at Jun. 30, 2014 ' 139,240,318 ' ' '
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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2014
Jun. 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES ' '
Net income $ 48,909 $ 7,615
Adjustments to reconcile net income to net cash provided by operating activities: ' '
Provision for loan losses 1,251 3,000
Depreciation and amortization 5,570 7,049
Amortization of premiums and discounts on investment securities, net (32) 1,759
Net gains from sales of investment securities (8) (47)
Decrease in fair value of subordinated debentures 0 (2,111)
Bank owned life insurance policy income (2,416) (2,467)
Share-based compensation expense 2,138 1,633
Unconsolidated investment distributions, net 508 2,674
Loans originated for resale (43,017) (113,623)
Proceeds from sale of loans originated for resale 46,963 118,858
Proceeds from sale of non-performing loans 3,046 0
Gains on sale of loans, net (1,270) (3,193)
Gains on sale of non-performing loans, net (946) 0
Losses (gains) on sale of other real estate owned, net 88 (168)
Gains on sale of buildings 0 (149)
Loss on debt extinguishment 0 64,888
Decrease in accrued interest receivable 177 73
Decrease in accrued interest payable (1,763) (2,204)
Decrease (increase) in other assets 5,521 (11,055)
(Decrease) increase in other liabilities (11,009) 3,096
Net cash provided by operating activities 53,710 75,628
CASH FLOWS FROM INVESTING ACTIVITIES ' '
Proceeds from maturities and repayments of investment securities held-to-maturity 34,550 11,741
Proceeds from maturities and repayments of investment securities available-for-sale 135,381 235,240
Proceeds from sale of investment securities available-for-sale 476 3,092
Purchase of investment securities available-for-sale (162,357) (301,499)
(Purchases of) proceeds from other securities (748) 7,108
Proceeds from sale of loans previously held for investment 943 1,181
Increase in loans (83,445) (33,343)
Purchases of premises and equipment (19,184) (3,092)
Proceeds from the sale of other real estate owned 629 1,584
Proceeds from sale of buildings 0 418
Net cash used in investing activities (93,755) (77,570)
CASH FLOWS FROM FINANCING ACTIVITIES ' '
Net increase in transaction and savings deposit accounts 135,860 168,870
Net decrease in time deposits (99,955) (81,972)
Net increase (decrease) in customer repurchase agreements 35,950 (12,329)
Decrease in short-term borrowings 0 (100,000)
Decrease in repurchase agreements 0 (25,000)
Net decrease in FHLB advances (1,734) (115,799)
Repayments of subordinated debentures 0 (65,206)
Proceeds from shares issued, share-based plans 1,553 1,513
Excess tax (expense) benefit on share-based plans (20) 63
Repurchase of common stock (75,390) 0
Cash dividends, common (27,828) (14,558)
Net cash used in by financing activities (31,564) (244,418)
Net decrease in cash and cash equivalents (71,609) (246,360)
Cash and cash equivalents at beginning of period 283,523 428,128
Cash and cash equivalents at end of period 211,914 181,768
Supplemental Cash Flow Information ' '
Interest 13,658 22,023
Income taxes $ 9,690 $ 1,551
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BASIS OF PRESENTATION
6 Months Ended
Jun. 30, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract] '
BASIS OF PRESENTATION '
BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions to Form 10-Q, and therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States ("GAAP"). However, all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation of these financial statements have been included.  These financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for National Penn Bancshares, Inc. (the “Company” or “National Penn”) for the year ended December 31, 2013, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 (the “Form 10-K”).  The results for the interim periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

The Company has prepared its accompanying consolidated financial statements in accordance with GAAP as applicable to the financial services industry.  The consolidated financial statements include the balances of the Company and its wholly owned subsidiary, National Penn Bank.  All material inter-company balances have been eliminated. References to the Company include all the Company’s subsidiaries unless otherwise noted.
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BUSINESS COMBINATIONS
6 Months Ended
Jun. 30, 2014
Business Combinations [Abstract] '
BUSINESS COMBINATIONS '
BUSINESS COMBINATION

On June 3, 2014, the Company entered into an Agreement and Plan of Merger with TF Financial Corporation (“TF Financial”), the parent company of 3rd Fed Bank, pursuant to which TF Financial will merge with and into the Company. As part of the transaction, 3rd Fed Bank will also merge with and into National Penn Bank. TF Financial operates 18 full service retail and commercial banking offices in Bucks and Philadelphia Counties in Pennsylvania, and Burlington, Mercer, and Ocean Counties in New Jersey.

Subject to the terms and conditions of the Agreement and Plan of Merger, upon consummation of the merger, each outstanding share of common stock of TF Financial will be automatically converted into and exchangeable for the right to receive either: (i) $42.00 in cash, or (ii) 4.22 shares of the Company’s common stock, with cash being paid in lieu of fractional shares. The Agreement and Plan of Merger provides that 60% of the outstanding shares of TF Financial common stock will be converted into stock consideration and 40% of the outstanding shares of TF Financial common stock will be converted into cash consideration. Each shareholder of TF Financial will be entitled to elect the number of shares of TF Financial common stock held by such shareholder that will be exchanged for the stock consideration or the cash consideration subject to proration in the event that a selected form of consideration is over-elected.
The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval of the merger by shareholders of TF Financial.
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EARNINGS PER SHARE
6 Months Ended
Jun. 30, 2014
Earnings Per Share [Abstract] '
EARNINGS PER SHARE '
EARNINGS PER SHARE

The components of the Company’s basic and diluted earnings per share are as follows:
(dollars in thousands, except share data)
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
Net income
$
26,199

 
$
25,019

 
$
48,909

 
$
7,615

Calculation of shares
 

 
 

 
 
 
 
Weighted average basic shares
139,191,923

 
145,580,155

 
140,270,062

 
145,488,073

Dilutive effect of share-based compensation
528,057

 
416,854

 
522,502

 
412,653

Weighted average fully diluted shares
139,719,980

 
145,997,009

 
140,792,564

 
145,900,726

 
 
 
 
 
 
 
 
Earnings per share
 

 
 

 
 
 
 
Basic
$
0.19

 
$
0.17

 
$
0.35

 
$
0.05

Diluted
$
0.19

 
$
0.17

 
$
0.35

 
$
0.05


    
    
The following stock options were excluded from the computation of earnings per share as they were anti-dilutive:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
Stock options
2,066,948

 
3,721,383

 
2,075,173

 
3,735,483

Exercise price
 
 
 
 
 
 
 
Low
$
8.69

 
$
7.07

 
$
8.69

 
$
8.69

High
$
21.49

 
$
21.49

 
$
21.49

 
$
21.49

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INVESTMENT SECURITIES
6 Months Ended
Jun. 30, 2014
Investments, Debt and Equity Securities [Abstract] '
INVESTMENT SECURITIES '
INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, and fair values of the Company’s investment securities at June 30, 2014 are summarized as follows:
(dollars in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Available-for-Sale
 
 
 
 
 
 
 
U.S. Government agencies
$
1,000

 
$
10

 
$

 
$
1,010

State and municipal bonds
73,395

 
5,248

 
(111
)
 
78,532

Agency mortgage-backed securities/collateralized mortgage obligations
1,360,824

 
22,967

 
(12,718
)
 
1,371,073

Non-agency collateralized mortgage obligations
2,953

 
52

 

 
3,005

Corporate securities and other
4,109

 
508

 
(323
)
 
4,294

Marketable equity securities
3,583

 
1,983

 
(1
)
 
5,565

Total
$
1,445,864

 
$
30,768

 
$
(13,153
)
 
$
1,463,479

 
 
 
 
 
 
 
 
 
Carrying
Value
(b)
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Held-to-Maturity
 

 
 

 
 

 
 

State and municipal bonds
$
519,333

 
$
23,787

 
$
(110
)
 
$
543,010

Agency mortgage-backed securities/collateralized mortgage obligations
367,419

 
2,880

 
(925
)
 
369,374

Non-agency collateralized mortgage obligations
218

 
4

 

 
222

Corporate securities and other
5,566

 
8

 
(4
)
 
5,570

Total
$
892,536

 
$
26,679

 
$
(1,039
)
 
$
918,176

 
 
 
 
 
 
 
 
(b) For securities which were transferred from the available-for-sale category to held-to maturity, the carrying value of the transferred securities represents their fair value at the date of transfer adjusted for subsequent amortization.  The carrying value of all other held-to-maturity securities represents their amortized cost.

    
At March 31, 2014, 240 available-for-sale debt securities, with an amortized cost basis of $492 million, a net unrealized loss of $4.1 million and a fair value of $488 million, were reclassified as held-to-maturity.  Transfers of debt securities into the held-to-maturity category from the available-for-sale category are made at fair value at the date of transfer. The unrealized holding gain or loss at the date of transfer is retained in other comprehensive income and in the carrying value of the held-to-maturity securities. Such amounts are amortized over the remaining life of the security which will offset the effect on net interest income.

The amortized cost, gross unrealized gains and losses, and fair values of the Company’s investment securities at December 31, 2013 are summarized as follows:
(dollars in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Available-for-Sale
 

 
 

 
 

 
 

U.S. Government agencies
$
1,000

 
$

 
$
(10
)
 
$
990

State and municipal bonds
210,680

 
7,701

 
(3,670
)
 
214,711

Agency mortgage-backed securities/collateralized mortgage obligations
1,683,092

 
18,040

 
(41,952
)
 
1,659,180

Non-agency collateralized mortgage obligations
4,222

 
44

 
(8
)
 
4,258

Corporate securities and other
9,517

 
646

 
(495
)
 
9,668

Marketable equity securities
3,583

 
1,717

 

 
5,300

Total
$
1,912,094

 
$
28,148

 
$
(46,135
)
 
$
1,894,107

 
 
 
 
 
 
 
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Held-to-Maturity
 

 
 

 
 

 
 

State and municipal bonds
$
403,344

 
$
13,028

 
$
(895
)
 
$
415,477

Agency mortgage-backed securities/collateralized mortgage obligations
34,843

 
1,624

 

 
36,467

Non-agency collateralized mortgage obligations
258

 

 

 
258

Total
$
438,445

 
$
14,652

 
$
(895
)
 
$
452,202




Gains and losses from sales of investment securities are as follows:
(dollars in thousands)
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
Gains
$

 
$
22

 
$
8

 
$
47

Losses

 

 

 

Net gains (losses) from sales of investment securities
$

 
$
22

 
$
8

 
$
47



    

The following tables indicate the length of time individual securities have been in a continuous unrealized loss position at June 30, 2014 and December 31, 2013, respectively.
 
June 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollars in thousands)
 
 
Less than 12 months
 
12 months or longer
 
Total
 
No. of Securities
 
Fair
Value
 
Unrealized Losses
 
Fair
Value
 
Unrealized Losses
 
Fair
Value
 
Unrealized Losses
State and municipal bonds
39
 
$
12,089

 
$
(97
)
 
$
11,249

 
$
(124
)
 
$
23,338

 
$
(221
)
Agency mortgage-backed securities/collateralized mortgage obligations
147
 
303,975

 
(2,001
)
 
354,603

 
(11,642
)
 
658,578

 
(13,643
)
Corporate securities and other
4
 
1,011

 
(3
)
 
4,115

 
(324
)
 
5,126

 
(327
)
Total debt securities
190
 
317,075

 
(2,101
)
 
369,967

 
(12,090
)
 
687,042

 
(14,191
)
Marketable equity securities
1
 
50

 
(1
)
 

 

 
50

 
(1
)
Total
191
 
$
317,125

 
$
(2,102
)
 
$
369,967

 
$
(12,090
)
 
$
687,092

 
$
(14,192
)

    
December 31, 2013
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollars in thousands)
 
 
Less than 12 months
 
12 months or longer
 
Total
 
No. of Securities
 
Fair
Value
 
Unrealized Losses
 
Fair
Value
 
Unrealized Losses
 
Fair
Value
 
Unrealized Losses
U.S. Government agencies
1
 
$
990

 
$
(10
)
 
$

 
$

 
$
990

 
$
(10
)
State and municipal bonds
145
 
76,402

 
(2,282
)
 
20,708

 
(2,283
)
 
97,110

 
(4,565
)
Agency mortgage-backed securities/collateralized mortgage obligations
241
 
953,423

 
(33,990
)
 
115,815

 
(7,962
)
 
1,069,238

 
(41,952
)
Non-agency collateralized mortgage obligations
5
 
820

 
(8
)
 

 

 
820

 
(8
)
Corporate securities and other
5
 
1,966

 
(35
)
 
2,708

 
(460
)
 
4,674

 
(495
)
Total
397
 
$
1,033,601

 
$
(36,325
)
 
$
139,231

 
$
(10,705
)
 
$
1,172,832

 
$
(47,030
)


    
The fair value of investment securities pledged as collateral are presented below:
(dollars in thousands)
June 30, 2014
 
December 31, 2013
Deposits
$
967,407

 
$
966,751

Repurchase agreements
687,021

 
650,627

Other
76,631

 
81,408

Total
$
1,731,059

 
$
1,698,786


    

The specified values of investment securities, by contractual maturity, at June 30, 2014 are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
Available-for-Sale
 
Held-to-Maturity
(dollars in thousands)
Amortized
Cost
 
Fair
Value
 
Carrying
Value
 
Fair
Value
Due in one year or less
$
5,301

 
$
5,346

 
$

 
$

Due after one through five years
51,495

 
55,590

 
8,356

 
8,512

Due after five through ten years
146,205

 
152,547

 
173,434

 
181,036

Due after ten years
1,239,280

 
1,244,431

 
710,746

 
728,628

Marketable equity securities
3,583

 
5,565

 

 

Total
$
1,445,864

 
$
1,463,479

 
$
892,536

 
$
918,176


 
Evaluation of Impairment of Securities

The Company did not record any other-than-temporary impairment ("OTTI") losses for the three and six months ended June 30, 2014 and 2013.

As of June 30, 2014 and December 31, 2013, accumulated other comprehensive income did not include any impairment related charges for the non-credit-related components of OTTI.     

The majority of the investment portfolio is comprised of U.S. Government Agency securities (mortgage-backed and collateralized mortgage obligations) and state and municipal bonds. For the investment securities in an unrealized loss position, the Company has concluded, based on its analysis, that the unrealized losses are primarily caused by the movement of interest rates, and the contractual terms of these investments do not permit the issuer to settle the securities at a price less than the par value of the investment.

At June 30, 2014, gross unrealized losses totaled $14.2 million, and the gross unrealized losses of securities in an unrealized loss position for twelve months or longer totaled $12.1 million, of which $11.6 million is attributable to agency mortgage-backed securities and $0.5 million attributable to state and municipal securities and other.  The Company evaluates a variety of factors in concluding whether securities are other-than-temporarily impaired.  These factors include, but are not limited to, the type and purpose of the bond, the underlying rating of the bond issuer, and the presence of credit enhancements (i.e. state guarantees, municipal bond insurance, collateral requirements, etc.). As a result of its review and considering the attributes of the individual securities, the Company concluded that the securities were not other-than-temporarily impaired.

Because the Company does not intend to sell these investments and it is not more likely than not it will be required to sell these investments before a recovery of carrying value, which may be maturity, the Company does not consider the securities in an unrealized loss position for twelve months or longer to be other-than-temporarily impaired.

Other securities on the Company’s consolidated balance sheet totaled $64.5 million and $63.7 million as of June 30, 2014 and December 31, 2013, respectively. The balance includes Federal Loan Home Bank ("FHLB") of Pittsburgh stock and Federal Reserve Bank stock. These securities lack a market, and as such they are carried at par/cost since their fair value is not readily determinable. The Company evaluates, and will continue to evaluate, these securities for impairment each reporting period and has concluded the carrying value of these securities is not impaired. During 2014, the Company purchased an additional $0.7 million, net, of capital stock from the FHLB of Pittsburgh at par/cost. Also, during 2014 and 2013 the Company received and recorded dividends on its FHLB stock.
------=_NextPart_a51d21b7_bf2b_468b_a597_8e0a55b4cb4b Content-Location: file:///C:/a51d21b7_bf2b_468b_a597_8e0a55b4cb4b/Worksheets/Sheet12.html Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset="us-ascii"
LOANS
6 Months Ended
Jun. 30, 2014
Loans and Leases Receivable Disclosure [Abstract] '
LOANS '
LOANS

The following table presents loan classifications:
June 30, 2014
Performing
 
 
 
 
(dollars in thousands)
Pass Rated
 
Special Mention
 
Classified
 
Non-Performing
 
Total
Commercial and industrial
$
2,337,733

 
$
51,455

 
$
89,930

 
$
9,875

 
$
2,488,993

 
 
 
 
 
 
 
 
 
 
CRE - permanent
1,005,776

 
5,221

 
26,597

 
5,334

 
1,042,928

CRE - construction
163,495

 
2,371

 
6,966

 
9,674

 
182,506

Commercial real estate
1,169,271

 
7,592

 
33,563

 
15,008

 
1,225,434

 
 
 
 
 
 
 
 
 
 
Residential mortgages
644,323

 

 
651

 
12,476

 
657,450

Home equity
759,594

 

 
140

 
4,382

 
764,116

All other consumer
260,178

 

 
5,840

 
1,745

 
267,763

Consumer
1,664,095

 

 
6,631

 
18,603

 
1,689,329

 
 
 
 
 
 
 
 
 
 
Loans
$
5,171,099

 
$
59,047

 
$
130,124

 
$
43,486

 
$
5,403,756

 
 
 
 
 
 
 
 
 
 
Percent of loans
95.70
%
 
1.09
%
 
2.41
%
 
0.80
%
 
100.00
%
 
 
 
 
 
 
 
 
 
 
December 31, 2013
Performing
 
 

 
 

(dollars in thousands)
Pass Rated
 
Special Mention
 
Classified
 
Non-Performing
 
Total
Commercial and industrial
$
2,327,344

 
$
38,873

 
$
79,179

 
$
15,268

 
$
2,460,664

 
 
 
 
 
 
 
 
 
 
CRE - permanent
944,589

 
9,191

 
36,272

 
4,786

 
994,838

CRE - construction
167,710

 
2,962

 
15,534

 
12,128

 
198,334

Commercial real estate
1,112,299

 
12,153

 
51,806

 
16,914

 
1,193,172

 
 
 
 
 
 
 
 
 
 
Residential mortgages
636,829

 

 
2,243

 
13,153

 
652,225

Home equity
757,064

 

 
137

 
5,407

 
762,608

All other consumer
256,957

 
160

 
5,633

 
1,849

 
264,599

Consumer
1,650,850

 
160

 
8,013

 
20,409

 
1,679,432

 
 
 
 
 
 
 
 
 
 
Loans
$
5,090,493

 
$
51,186

 
$
138,998

 
$
52,591

 
$
5,333,268

 
 
 
 
 
 
 
 
 
 
Percent of loans
95.45
%
 
0.96
%
 
2.60
%
 
0.99
%
 
100.00
%
 
 
 
 
 
 
 
 
 
 


The following table presents the details for past due loans: 
June 30, 2014
Past Due and Still Accruing
 
Accruing Current Balances
 
Non-Accrual Balances (d)
 
Total Balances
(dollars in thousands)
30-59 Days
 
60-89 Days
 
90 Days or More (c)
 
Total
 
 
 
Commercial and industrial
$
2,018

 
$

 
$

 
$
2,018

 
$
2,477,334

 
$
9,641

 
$
2,488,993

 
 
 
 
 
 
 
 
 
 
 
 
 
 
CRE - permanent
671

 
86

 

 
757

 
1,037,360

 
4,811

 
1,042,928

CRE - construction

 
154

 

 
154

 
172,678

 
9,674

 
182,506

Commercial real estate
671

 
240

 

 
911

 
1,210,038

 
14,485

 
1,225,434

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages
3,811

 
1,073

 
607

 
5,491

 
645,694

 
6,265

 
657,450

Home equity
3,408

 
703

 
140

 
4,251

 
756,234

 
3,631

 
764,116

All other consumer
2,426

 
869

 
1,350

 
4,645

 
261,623

 
1,495

 
267,763

Consumer
9,645

 
2,645

 
2,097

 
14,387

 
1,663,551

 
11,391

 
1,689,329

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans
$
12,334

 
$
2,885

 
$
2,097

 
$
17,316

 
$
5,350,923

 
$
35,517

 
$
5,403,756

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percent of loans
0.23
%
 
0.05
%
 
0.04
%
 
0.32
%
 
 

 
0.66
%
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
Past Due and Still Accruing
 
Accruing Current Balances
 
Non-Accrual Balances (d)
 
Total Balances
(dollars in thousands)
30-59 Days
 
60-89 Days
 
90 Days or More (c)
 
Total
 
 
 
Commercial and industrial
$
3,362

 
$
1,520

 
$
11

 
$
4,893

 
$
2,440,836

 
$
14,935

 
$
2,460,664

 
 
 
 
 
 
 
 
 
 
 
 
 
 
CRE - permanent
6,191

 
181

 

 
6,372

 
984,208

 
4,258

 
994,838

CRE - construction
373

 

 

 
373

 
185,833

 
12,128

 
198,334

Commercial real estate
6,564

 
181

 

 
6,745

 
1,170,041

 
16,386

 
1,193,172

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages
4,509

 
774

 
2,197

 
7,480

 
637,708

 
7,037

 
652,225

Home equity
4,383

 
1,101

 
140

 
5,624

 
752,197

 
4,787

 
762,608

All other consumer
2,761

 
814

 
1,118

 
4,693

 
258,175

 
1,731

 
264,599

Consumer
11,653

 
2,689

 
3,455

 
17,797

 
1,648,080

 
13,555

 
1,679,432

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans
$
21,579

 
$
4,390

 
$
3,466

 
$
29,435

 
$
5,258,957

 
$
44,876

 
$
5,333,268

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percent of loans
0.40
%
 
0.08
%
 
0.07
%
 
0.55
%
 
 

 
0.84
%
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(c) Loans 90 days or more past due remain on accrual status if they are well secured and collection of all principal and interest is probable.
(d) At June 30, 2014, non-accrual balances included troubled debt restructurings of $5.4 million commercial real estate, $6.0 million of commercial and industrial, and $3.8 million of consumer loans. At December 31, 2013, non-accrual balances included troubled debt restructurings of $6.5 million of commercial real estate, $7.7 million of commercial and industrial, and $3.0 million of consumer loans.


Changes in the allowance for loan losses by loan portfolio are as follows:
June 30, 2014
 
 
 
 
 
 
 
 
 
(dollars in thousands)
 
 
 

 
 

 
 

 
 

Three Months Ended
Commercial and Industrial
 
Commercial Real Estate
 
Consumer
 
Unallocated
 
Total
Allowance for loan losses:
 
 
 

 
 

 
 

 
 

Beginning balance
$
40,697

 
$
20,197

 
$
21,864

 
$
10,494

 
$
93,252

Charge-offs
(2,892
)
 
(800
)
 
(1,433
)
 

 
(5,125
)
Recoveries
843

 
111

 
767

 

 
1,721

Provision
(570
)
 
(945
)
 
372

 
1,143

 

Ending balance
$
38,078

 
$
18,563

 
$
21,570

 
$
11,637

 
$
89,848

 
 
 
 
 
 
 
 
 
 
Six Months Ended
Commercial and Industrial
 
Commercial Real Estate
 
Consumer
 
Unallocated
 
Total
Allowance for loan losses:
 
 
 

 
 

 
 

 
 

Beginning balance
$
41,288

 
$
22,653

 
$
21,478

 
$
10,948

 
$
96,367

Charge-offs
(4,227
)
 
(1,327
)
 
(4,589
)
 

 
(10,143
)
Recoveries
1,028

 
185

 
1,160

 

 
2,373

Provision
(11
)
 
(2,948
)
 
3,521

 
689

 
1,251

Ending balance
$
38,078

 
$
18,563

 
$
21,570

 
$
11,637

 
$
89,848

Allowance for loan losses:
 
 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
342

 
$
2,180

 
$
1,828

 
$

 
$
4,350

Collectively evaluated for impairment
37,736

 
16,383

 
19,742

 
11,637

 
85,498

Total allowance for loan losses
$
38,078

 
$
18,563

 
$
21,570

 
$
11,637

 
$
89,848

Loans:
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
9,875

 
$
17,794

 
$
18,646

 
$

 
$
46,315

Collectively evaluated for impairment
2,479,118

 
1,207,640

 
1,670,683

 

 
5,357,441

Loans
$
2,488,993

 
$
1,225,434

 
$
1,689,329

 
$

 
$
5,403,756























    
Changes in the allowance for loan losses by loan portfolio are as follows:

June 30, 2013
 
 
 
 
 
 
 
 
 
(dollars in thousands)
 
 
 
 
 
 
 
 
 
Three Months Ended
Commercial and Industrial
 
Commercial Real Estate
 
Consumer
 
Unallocated
 
Total
Allowance for loan losses:
 
 
 

 
 

 
 

 
 

Beginning balance
$
47,399

 
$
26,545

 
$
22,318

 
$
10,902

 
$
107,164

Charge-offs
(2,435
)
 
(707
)
 
(2,172
)
 

 
(5,314
)
Recoveries
370

 
218

 
595

 

 
1,183

Provision
1,952

 
(1,585
)
 
1,695

 
(562
)
 
1,500

Ending balance
$
47,286

 
$
24,471

 
$
22,436

 
$
10,340

 
$
104,533

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
Commercial and Industrial
 
Commercial Real Estate
 
Consumer
 
Unallocated
 
Total
Allowance for loan losses:
 
 
 

 
 

 
 

 
 

Beginning balance
$
46,151

 
$
29,295

 
$
23,101

 
$
12,408

 
$
110,955

Charge-offs
(4,749
)
 
(1,466
)
 
(5,481
)
 

 
(11,696
)
Recoveries
815

 
377

 
1,082

 

 
2,274

Provision
5,069

 
(3,735
)
 
3,734

 
(2,068
)
 
3,000

Ending balance
$
47,286

 
$
24,471

 
$
22,436

 
$
10,340

 
$
104,533

Allowance for loan losses:
 
 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
6,649

 
$
693

 
$
1,637

 
$

 
$
8,979

Collectively evaluated for impairment
40,637

 
23,778

 
20,799

 
10,340

 
95,554

Total allowance for loan losses
$
47,286

 
$
24,471

 
$
22,436

 
$
10,340

 
$
104,533

Loans:
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
29,272

 
$
17,370

 
$
18,586

 
$

 
$
65,228

Collectively evaluated for impairment
2,489,517

 
1,054,882

 
1,639,380

 

 
5,183,779

Loans
$
2,518,789

 
$
1,072,252

 
$
1,657,966

 
$

 
$
5,249,007



The Company did not have any loans acquired with deteriorated credit quality.

Impaired loan details are as follows:
June 30, 2014
Recorded Investment
 
 
 
 
 
 
(dollars in thousands)
With Related Allowance
 
Without Related Allowance
 
Total
 
Life-to-date Charge-offs
 
Total Unpaid Balances
 
Related Allowance
Commercial and industrial
$
1,029

 
$
8,846

 
$
9,875

 
$
7,406

 
$
17,281

 
$
342

 
 
 
 
 
 
 
 
 
 
 
 
CRE - permanent
5,438

 
2,682

 
8,120

 
7,110

 
15,230

 
1,489

CRE - construction
7,456

 
2,218

 
9,674

 
3,985

 
13,659

 
691

Commercial real estate
12,894

 
4,900

 
17,794

 
11,095

 
28,889

 
2,180

 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages
5,846

 
6,673

 
12,519

 
370

 
12,889

 
1,524

Home equity
727

 
3,655

 
4,382

 
396

 
4,778

 
252

All other consumer
250

 
1,495

 
1,745

 
61

 
1,806

 
52

Consumer
6,823

 
11,823

 
18,646

 
827

 
19,473

 
1,828

 
 
 
 
 
 
 
 
 
 
 
 
Total
$
20,746

 
$
25,569

 
$
46,315

 
$
19,328

 
$
65,643

 
$
4,350

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
Recorded Investment
 
 
 
 

 
 

(dollars in thousands)
With Related Allowance
 
Without Related Allowance
 
Total
 
Life-to-date Charge-offs
 
Total Unpaid Balances
 
Related Allowance
Commercial and industrial
$
8,457

 
$
6,811

 
$
15,268

 
$
5,599

 
$
20,867

 
$
3,997

 
 
 
 
 
 
 
 
 
 
 
 
CRE - permanent
5,995

 
3,872

 
9,867

 
6,441

 
16,308

 
1,073

CRE - construction
9,729

 
2,399

 
12,128

 
6,633

 
18,761

 
1,414

Commercial real estate
15,724

 
6,271

 
21,995

 
13,074

 
35,069

 
2,487

 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages
6,088

 
7,109

 
13,197

 
800

 
13,997

 
1,589

Home equity
609

 
4,798

 
5,407

 
515

 
5,922

 
203

All other consumer
118

 
1,731

 
1,849

 
61

 
1,910

 
28

Consumer
6,815

 
13,638

 
20,453

 
1,376

 
21,829

 
1,820

 
 
 
 
 
 
 
 
 
 
 
 
Total
$
30,996

 
$
26,720

 
$
57,716

 
$
20,049

 
$
77,765

 
$
8,304

 
 
 
 
 
 
 
 
 
 
 
 
 



The following table presents additional details related to the Company's impaired loans. Interest income recognized for the three and six months ended June 30, 2014 and 2013 primarily represents amounts earned on restructured loans which are performing according to their modified terms.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2014
 
2013
 
2014
 
2013
(dollars in thousands)
Average Recorded
Investment
 
Interest Income
Recognized
 
Average Recorded
Investment
 
Interest Income
Recognized
 
Average Recorded
Investment
 
Interest Income
Recognized
 
Average Recorded
Investment
 
Interest Income
Recognized
Commercial and industrial
$
11,685

 
$
6

 
$
27,371

 
$
21

 
$
13,176

 
$
12

 
$
26,450

 
$
39

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CRE - permanent
7,181

 
6

 
10,529

 

 
7,841

 
12

 
9,650

 
23

CRE - construction
9,929

 

 
7,289

 
18

 
10,242

 

 
7,192

 
37

Commercial real estate
17,110

 
6

 
17,818

 
18

 
18,083

 
12

 
16,842

 
60

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages
13,048

 
33

 
10,576

 
24

 
13,491

 
67