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EX-32.2 - EXHIBIT 32.2 - NATIONAL PENN BANCSHARES INCexhibit322906certification.htm
EX-31.1 - EXHIBIT 31.1 - NATIONAL PENN BANCSHARES INCexhibit311302certification.htm
EX-31.2 - EXHIBIT 31.2 - NATIONAL PENN BANCSHARES INCexhibit312302certification.htm
EXCEL - IDEA: XBRL DOCUMENT - NATIONAL PENN BANCSHARES INCFinancial_Report.xls
EX-32.1 - EXHIBIT 32.1 - NATIONAL PENN BANCSHARES INCexhibit321906certification.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission File Number: 000-22537-01

NATIONAL PENN BANCSHARES, INC.
(Exact name of registrant as specified in charter)
Pennsylvania
23-2215075
(State or other jurisdiction of incorporation)
IRS Employer Identification No.
645 Hamilton Street, Suite 1100
Allentown, Pennsylvania 18101
(Address of principal executive offices) (Zip Code)

(800) 822-3321
Registrant’s telephone number, including area code

(Former name or former address, if changed since last report):  N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.         Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).        Yes ý No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer ý
 
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class
 
Outstanding at May 1, 2015
Common Stock, no stated par value
 
140,100,525



TABLE OF CONTENTS


2


 PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
Unaudited
 
 
 
March 31,
2015
 
December 31,
2014
ASSETS
 
 
 
Cash and due from banks
$
102,500

 
$
110,784

Interest-earning deposits with banks
131,166

 
303,055

Total cash and cash equivalents
233,666

 
413,839

 
 
 
 
Investment securities available-for-sale, at fair value
1,585,671

 
1,530,661

Investment securities held-to-maturity
 

 
 

(Fair value $916,468 and $949,935 for 2015 and 2014, respectively)
884,211

 
921,042

Other securities
67,288

 
67,512

Loans held-for-sale
11,239

 
4,178

Loans, net of allowance for loan losses of $89,729 and $90,675 for 2015 and 2014, respectively
6,030,476

 
6,051,604

Premises and equipment, net
113,217

 
116,414

Accrued interest receivable
30,018

 
29,491

Bank owned life insurance
198,123

 
171,775

Other real estate owned and other repossessed assets
5,474

 
4,867

Goodwill
302,940

 
302,244

Other intangible assets, net
7,985

 
8,757

Unconsolidated investments
8,101

 
8,124

Other assets
119,545

 
120,357

TOTAL ASSETS
$
9,597,954

 
$
9,750,865

 
 
 
 
LIABILITIES
 

 
 

Non-interest bearing deposits
$
1,142,192

 
$
1,085,158

Interest bearing deposits
5,555,070

 
5,644,587

Total deposits
6,697,262

 
6,729,745

 
 
 
 
Customer repurchase agreements
603,880

 
607,705

Federal Home Loan Bank advances
854,375

 
910,378

Senior long-term debt
125,000

 
125,000

Subordinated debentures
77,321

 
77,321

Accrued interest payable and other liabilities
109,021

 
112,077

TOTAL LIABILITIES
8,466,859

 
8,562,226

 
 
 
 
SHAREHOLDERS' EQUITY
 

 
 

Common stock, no stated par value; authorized 250,000,000 shares, issued: March 31, 2015 - 152,267,940; December 31, 2014 - 152,267,942
1,387,136

 
1,390,130

Accumulated deficit
(124,740
)
 
(135,246
)
Accumulated other comprehensive loss
(3,989
)
 
(10,991
)
Treasury stock: March 31, 2015 - 12,199,179 shares; December 31, 2014 - 5,131,856 shares
(127,312
)
 
(55,254
)
TOTAL SHAREHOLDERS' EQUITY
1,131,095

 
1,188,639

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
9,597,954

 
$
9,750,865

 
 
 
 
The accompanying notes are an integral part of these financial statements.
 
 
 

3


NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
Three Months Ended March 31,
 
2015
 
2014
INTEREST INCOME
 
 
 
Loans, including fees
$
58,424

 
$
52,582

Investment securities
 
 
 
Taxable
12,512

 
11,121

Tax-exempt
6,120

 
6,404

Deposits with banks
38

 
26

Total interest income
77,094

 
70,133

INTEREST EXPENSE
 

 
 

Deposits
4,521

 
4,773

Customer repurchase agreements
405

 
393

Repurchase agreements

 
601

Federal Home Loan Bank advances
1,593

 
1,548

Senior long-term debt
1,366

 

Subordinated debentures
527

 
529

Total interest expense
8,412

 
7,844

Net interest income
68,682

 
62,289

Provision for loan losses
1,000

 
1,251

Net interest income after provision for loan losses
67,682

 
61,038

NON-INTEREST INCOME
 

 
 

Wealth management
6,650

 
6,866

Service charges on deposit accounts
3,307

 
3,384

Insurance commissions and fees
3,182

 
3,597

Cash management and electronic banking fees
4,714

 
4,526

Mortgage banking
1,374

 
716

Bank owned life insurance
1,374

 
1,198

Earnings (losses) of unconsolidated investments

 
(477
)
Other operating income
2,329

 
1,660

Net gains on sales of available-for-sale investment securities

 
8

Total non-interest income
22,930

 
21,478

NON-INTEREST EXPENSE
 

 
 

Salaries, wages and employee benefits
29,998

 
29,201

Premises and equipment
9,147

 
8,212

FDIC insurance
1,458

 
1,317

Other operating expenses
13,979

 
13,607

Total non-interest expense
54,582

 
52,337

Income before income taxes
36,030

 
30,179

Income tax expense
9,303

 
7,469

NET INCOME
$
26,727

 
$
22,710

PER SHARE
 

 
 

Basic earnings
$
0.19

 
$
0.16

Diluted earnings
$
0.19

 
$
0.16

Dividends paid in cash
$
0.11

 
$
0.10

 
 
 
 
The accompanying notes are an integral part of these financial statements.
 
 
 

4


NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
Three Months Ended March 31, 2015
(dollars in thousands)
Before
Tax
Amount
 
Income Tax
Expense (benefit)
 
Net of
Tax
Amount
Net income
$
36,030

 
$
9,303

 
$
26,727

 
 
 
 
 
 
Unrealized holding gains arising during the period on investment securities
10,573

 
3,701

 
6,872

Less net gains on sales of available-for-sale investment securities realized in net income

 

 

Unrealized gains on investment securities
10,573

 
3,701

 
6,872

 
 
 
 
 
 
Pension adjustments
200

 
70

 
130

Other comprehensive income
10,773

 
3,771

 
7,002

 
 
 
 
 
 
Total comprehensive income
$
46,803

 
$
13,074

 
$
33,729

 
 
 
 
 
 
 
Three Months Ended March 31, 2014
(dollars in thousands)
Before
Tax
Amount
 
Income Tax
Expense (benefit)
 
Net of
Tax
Amount
Net income
$
30,179

 
$
7,469

 
$
22,710

 
 
 
 
 
 
Unrealized holding gains arising during the period on investment securities
24,298

 
8,505

 
15,793

Less net gains on sales of available-for-sale investment securities realized in net income
8

 
3

 
5

Unrealized gains on investment securities
24,290

 
8,502

 
15,788

 
 
 
 
 
 
Pension adjustments
114

 
40

 
74

Other comprehensive income
24,404

 
8,542

 
15,862

 
 
 
 
 
 
Total comprehensive income
$
54,583

 
$
16,011

 
$
38,572

 
 
 
 
 
 
The accompanying notes are an integral part of these financial statements.




5


NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(dollars in thousands, except share data)
Common
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income (Loss)
 
 
 
 
 
Shares
 
Value
 
 
 
Treasury
Stock
 
Total
Balance at December 31, 2014
147,136,084

 
$
1,390,130

 
$
(135,246
)
 
$
(10,991
)
 
$
(55,254
)
 
$
1,188,639

Comprehensive income:
 

 
 

 
 

 
 
 
 

 
 

Net income
 

 
 

 
26,727

 
 

 
 

 
26,727

Other comprehensive income, net of taxes
 

 
 

 
 

 
7,002

 
 

 
7,002

Total comprehensive income
 

 
 

 
 

 
 

 
 

 
33,729

 
 
 
 
 
 
 
 
 
 
 
 
Cash dividends declared, common
 
 
 
 
(16,221
)
 
 
 
 
 
(16,221
)
Shares issued under share-based plans, net of excess tax benefits
402,731

 
(2,994
)
 
 

 
 

 
4,458

 
1,464

Common shares repurchased under authorized repurchase plan
(7,470,054
)
 
 
 
 
 
 
 
(76,516
)
 
(76,516
)
Balance at March 31, 2015
140,068,761

 
$
1,387,136

 
$
(124,740
)
 
$
(3,989
)
 
$
(127,312
)
 
$
1,131,095

 
 
 

 
 

 
 

 
 

The accompanying notes are an integral part of these financial statements.
 
 
 
 
 
 
 
 


6


NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Three Months Ended March 31,
 
2015
 
2014
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
26,727

 
$
22,710

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Provision for loan losses
1,000

 
1,251

Depreciation and amortization
3,379

 
2,690

Amortization of premiums and discounts on investment securities, net
375

 
136

Net gains from sales of investment securities

 
(8
)
Bank owned life insurance policy income
(1,374
)
 
(1,198
)
Share-based compensation expense
1,204

 
1,014

Unconsolidated investment distributions, net
23

 
499

Loans originated for resale
(33,398
)
 
(19,618
)
Proceeds from sale of loans originated for resale
27,339

 
19,933

Gains on sale of loans, net
(1,002
)
 
(535
)
(Gains) losses of other real estate owned, net
(37
)
 
42

Changes in assets and liabilities:
 
 
 
Increase in accrued interest receivable
(527
)
 
(278
)
Decrease in accrued interest payable
(2,802
)
 
(1,263
)
Increase in other assets
(3,433
)
 
(604
)
Decrease in other liabilities
(846
)
 
(14,155
)
Net cash provided by operating activities
16,628

 
10,616

CASH FLOWS FROM INVESTING ACTIVITIES
 

 
 

Proceeds from maturities and repayments of investment securities held-to-maturity
37,326

 
8,164

Proceeds from maturities and repayments of investment securities available-for-sale
67,761

 
68,575

Proceeds from sale of investment securities available-for-sale

 
476

Purchase of investment securities available-for-sale
(113,068
)
 
(81,144
)
Proceeds from sale (purchases) of other securities
225

 
(14
)
Proceeds from sale of loans previously held for investment

 
815

Proceeds from sale of acquired credit impaired loans
9,620

 

Decrease (increase) in loans
9,637

 
(45,455
)
Net change in premises and equipment
624

 
(3,617
)
Proceeds from the sale of other real estate owned
217

 
82

Purchase of bank owned life insurance
(25,000
)
 

Net cash used in investing activities
(12,658
)
 
(52,118
)
CASH FLOWS FROM FINANCING ACTIVITIES
 

 
 

Net (decrease) increase in transaction and savings deposit accounts
(14,592
)
 
101,912

Net decrease in time deposits
(17,891
)
 
(35,066
)
Net (decrease) increase in customer repurchase agreements
(3,825
)
 
9,434

Net decrease in FHLB advances
(55,997
)
 
(45,648
)
Proceeds from shares issued, share-based plans
973

 
877

Excess tax benefit (expense) on share-based plans
(74
)
 
97

Common stock repurchases
(76,516
)
 
(75,390
)
Cash dividends, common
(16,221
)
 
(13,911
)
Net cash used in financing activities
(184,143
)
 
(57,695
)
Net decrease in cash and cash equivalents
(180,173
)
 
(99,197
)
Cash and cash equivalents at beginning of year
413,839

 
283,523

Cash and cash equivalents at end of period
$
233,666

 
$
184,326

 
 
 
 
The accompanying notes are an integral part of these financial statements.
 
 
 

7


NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
SUPPLEMENTAL CASH FLOW DISCLOSURES
 
The Company considers cash and due from banks and interest earning deposits with banks to be cash equivalents for the purposes of reporting cash flows. Cash paid for interest and income taxes is as follows:
(dollars in thousands)
Three Months Ended March 31,
 
2015
 
2014
Interest
$
11,214

 
$
6,581

Income taxes
6,034

 
5,028

 


8

NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements

1.  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, 2014, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (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, 2015.

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.
 
2.  BUSINESS COMBINATION

On October 24, 2014, the Company completed its acquisition of TF Financial Corporation ("TF Financial"), a savings and loan holding company, and its wholly-owned subsidiary, 3rd Fed Bank. Headquartered in Newtown, Pennsylvania, TF Financial operated eighteen branch offices in Pennsylvania and New Jersey and had acquisition date estimated fair values of approximately $801 million of assets, which included $595 million of loans, and $658 million of deposits. The assets and liabilities of TF Financial were recorded on National Penn's consolidated balance sheet at their preliminary estimated fair values as of October 24, 2014, the acquisition date, and TF Financial's results of operations have been included in the Company's consolidated statements of income and comprehensive income since that date.

The acquisition was valued at approximately $136 million, consisting of $58.4 million in cash and the issuance of 8,030,953 shares of the Company's common stock valued at $77.3 million, in exchange for 1,903,139 shares of TF Financial common stock.

Based on a preliminary purchase price allocation, the Company recorded $44 million in goodwill and $4.8 million in core deposit intangibles as a result of the acquisition. The amount of goodwill recorded reflects the excess purchase price over the estimated fair value of the net assets acquired. Based upon further review of the purchased credit-impaired ("PCI") loan portfolio, the Company recorded an additional $0.7 million in goodwill during the three months ended March 31, 2015 . None of the goodwill is deductible for income tax purposes. Refer to Footnote 5 within this section for additional information related to the acquired loan portfolio.

3.  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 March 31,
 
2015
 
2014
Net income
$
26,727

 
$
22,710

Calculation of shares
 

 
 

Weighted average basic shares
142,911,230

 
141,360,180

Dilutive effect of share-based compensation
602,190

 
516,886

Weighted average fully diluted shares
143,513,420

 
141,877,066

 
 
 
 
Earnings per share
 

 
 

Basic
$
0.19

 
$
0.16

Diluted
$
0.19

 
$
0.16


9

NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements

3.  EARNINGS PER SHARE - Continued

The following stock options were excluded from the computation of earnings per share as they were anti-dilutive:
 
Three Months Ended March 31,
 
2015
 
2014
Stock options
1,746,196

 
3,213,261

Exercise price
 
 
 
Low
$
8.69

 
$
8.69

High
$
21.49

 
$
21.49



4.  INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, and fair values of the Company’s investment securities at March 31, 2015 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

 
$
5

 
$

 
$
1,005

State and municipal bonds
63,758

 
4,496

 
(55
)
 
68,199

Agency mortgage-backed securities/collateralized mortgage obligations
1,486,708

 
25,098

 
(5,586
)
 
1,506,220

Corporate securities and other
4,109

 
538

 
(333
)
 
4,314

Marketable equity securities
3,583

 
2,450

 
(100
)
 
5,933

Total
$
1,559,158

 
$
32,587

 
$
(6,074
)
 
$
1,585,671

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

 
 

 
 

 
 

U.S. Government agencies
$
3,874

 
$
109

 
$

 
$
3,983

State and municipal bonds
532,287

 
25,679

 
(125
)
 
557,841

Agency mortgage-backed securities/collateralized mortgage obligations
346,604

 
6,873

 
(296
)
 
353,181

Corporate securities and other
1,446

 
17

 

 
1,463

Total
$
884,211

 
$
32,678

 
$
(421
)
 
$
916,468

 
 
 
 
 
 
 
 
(a) 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.
    
    

10

NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements

4.  INVESTMENT SECURITIES - Continued

The amortized cost, gross unrealized gains and losses, and fair values of the Company’s investment securities at December 31, 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

 
$
7

 
$

 
$
1,007

State and municipal bonds
63,674

 
4,488

 
(82
)
 
68,080

Agency mortgage-backed securities/collateralized mortgage obligations
1,442,102

 
19,234

 
(9,875
)
 
1,451,461

Corporate securities and other
4,109

 
600

 
(348
)
 
4,361

Marketable equity securities
3,583

 
2,169

 

 
5,752

Total
$
1,514,468

 
$
26,498

 
$
(10,305
)
 
$
1,530,661

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

 
 

 
 

 
 

U.S. Government agencies
$
3,869

 
$
55

 
$

 
$
3,924

State and municipal bonds
551,627

 
24,480

 
(63
)
 
576,044

Agency mortgage-backed securities/collateralized mortgage obligations
364,100

 
5,098

 
(694
)
 
368,504

Corporate securities and other
1,446

 
21

 
(4
)
 
1,463

Total
$
921,042

 
$
29,654

 
$
(761
)
 
$
949,935

 
 
 
 
 
 
 
 
(a) 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.


Gains and losses from sales of available-for-sale investment securities are as follows:
(dollars in thousands)
Three Months Ended March 31,
 
2015
 
2014
Gains
$

 
$
8

Losses

 

Net gains from sales of available-for-sale investment securities
$

 
$
8


    

11

NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements

4.  INVESTMENT SECURITIES - Continued

The following tables indicate the length of time individual securities have been in a continuous unrealized loss position at March 31, 2015 and December 31, 2014, respectively.
 
March 31, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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
34
 
$
14,858

 
$
(102
)
 
$
8,747

 
$
(78
)
 
$
23,605

 
$
(180
)
Agency mortgage-backed securities/collateralized mortgage obligations
97
 
159,959

 
(492
)
 
264,535

 
(5,390
)
 
424,494

 
(5,882
)
Corporate securities and other
2
 

 

 
1,165

 
(333
)
 
1,165

 
(333
)
Total debt securities
133
 
174,817

 
(594
)
 
274,447

 
(5,801
)
 
449,264

 
(6,395
)
Marketable equity securities
1
 
296

 
(100
)
 

 

 
296

 
(100
)
Total
134
 
$
175,113

 
$
(694
)
 
$
274,447

 
$
(5,801
)
 
$
449,560

 
$
(6,495
)

    
December 31, 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
29
 
$
9,166

 
$
(47
)
 
$
10,572

 
$
(98
)
 
$
19,738

 
$
(145
)
Agency mortgage-backed securities/collateralized mortgage obligations
123
 
250,975

 
(1,763
)
 
296,419

 
(8,806
)
 
547,394

 
(10,569
)
Corporate securities and other
3
 
1,010

 
(4
)
 
1,150

 
(348
)
 
2,160

 
(352
)
Total
155
 
$
261,151

 
$
(1,814
)
 
$
308,141

 
$
(9,252
)
 
$
569,292

 
$
(11,066
)

    
The fair value of investment securities pledged as collateral are presented below:
(dollars in thousands)
March 31, 2015
 
December 31, 2014
Deposits
$
879,364

 
$
1,038,073

Customer repurchase agreements
654,798

 
662,737

Other
72,933

 
75,939

Total
$
1,607,095

 
$
1,776,749

    

12

NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements

4.  INVESTMENT SECURITIES - Continued

The specified values of investment securities, by contractual maturity, at March 31, 2015 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
$
5,336

 
$
5,477

 
$
719

 
$
727

Due after one through five years
58,177

 
62,734

 
16,558

 
16,735

Due after five through ten years
164,010

 
170,764

 
242,562

 
253,180

Due after ten years
1,328,052

 
1,340,763

 
624,372

 
645,826

Marketable equity securities
3,583

 
5,933

 

 

Total
$
1,559,158

 
$
1,585,671

 
$
884,211

 
$
916,468

 
Evaluation of Impairment of Securities

The Company did not record any other-than-temporary impairment ("OTTI") losses for the three months ended March 31, 2015 and 2014.

As of March 31, 2015 and December 31, 2014, 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 March 31, 2015, gross unrealized losses totaled $6.5 million, and the gross unrealized losses of securities in an unrealized loss position for twelve months or longer totaled $5.8 million, of which $5.4 million is attributable to agency mortgage-backed securities and $0.4 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 $67.3 million and $67.5 million as of March 31, 2015 and December 31, 2014, 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 2015, the FHLB of Pittsburgh repurchased an additional $0.2 million, net, of capital stock from the Company at par/cost. Also, during 2015 and 2014 the Company received and recorded dividends on its FHLB stock.

13

NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements

5.  LOANS

The following table summarizes loans outstanding, net of unearned income:
March 31, 2015
 
(dollars in thousands)
Originated Loans
 
Acquired Loans
 
Total
Commercial and industrial
$
2,605,127

 
$
50,248

 
$
2,655,375

 
 
 
 
 
 
CRE - permanent
1,104,979

 
121,868

 
1,226,847

CRE - construction
161,962

 
7,309

 
169,271

Commercial real estate
1,266,941

 
129,177

 
1,396,118

 
 
 
 
 
 
Residential mortgages
644,978

 
239,968

 
884,946

Home equity
778,917

 
122,354

 
901,271

All other consumer
282,364

 
131

 
282,495

Consumer
1,706,259

 
362,453

 
2,068,712

 
 
 
 
 
 
Loans
$
5,578,327

 
$
541,878

 
$
6,120,205


December 31, 2014
 
(dollars in thousands)
Originated Loans
 
Acquired Loans
 
Total
Commercial and industrial
$
2,548,438

 
$
51,429

 
$
2,599,867

 
 
 
 
 
 
CRE - permanent
1,092,006

 
137,312

 
1,229,318

CRE - construction
196,554

 
6,988

 
203,542

Commercial real estate
1,288,560

 
144,300

 
1,432,860

 
 
 
 
 
 
Residential mortgages
654,617

 
253,740

 
908,357

Home equity
783,248

 
130,582

 
913,830

All other consumer
287,224

 
141

 
287,365

Consumer
1,725,089

 
384,463

 
2,109,552

 
 
 
 
 
 
Loans
$
5,562,087

 
$
580,192

 
$
6,142,279


The carrying amount of acquired loans at March 31, 2015 totaled $542 million. The carrying value of acquired, non-impaired loans was $540 million as of March 31, 2015, inclusive of a net fair value adjustment of $4.6 million, which will be accreted to interest income over the remaining life of the related portfolio. At March 31, 2015, the carrying value of loans acquired with deteriorated credit quality, or purchased credit-impaired ("PCI") loans, was $1.6 million, inclusive of a $1.4 million fair value adjustment. PCI loans are accounted for in accordance with ASC 310-30. The Company continues to evaluate the credit performance of the PCI loan portfolio and its potential resolution, which may include individual and/or bulk loan settlements.



    

14

NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements

5.  LOANS - Continued

The following tables present classifications for originated loans:
March 31, 2015
Performing
 
 
 
 
(dollars in thousands)
Pass Rated
 
Special Mention
 
Classified
 
Non-Performing
 
Total
Commercial and industrial
$
2,494,993

 
$
24,407

 
$
64,265

 
$
21,462

 
$
2,605,127

 
 
 
 
 
 
 
 
 
 
CRE - permanent
1,080,444

 
5,573

 
11,667

 
7,295

 
1,104,979

CRE - construction
149,795

 
688

 
3,275

 
8,204

 
161,962

Commercial real estate
1,230,239

 
6,261

 
14,942

 
15,499

 
1,266,941

 
 
 
 
 
 
 
 
 
 
Residential mortgages
629,385

 

 
878

 
14,715

 
644,978

Home equity
773,355

 

 
632

 
4,930

 
778,917

All other consumer
276,795

 

 
3,980

 
1,589

 
282,364

Consumer
1,679,535

 

 
5,490

 
21,234

 
1,706,259

 
 
 
 
 
 
 
 
 
 
Originated loans
$
5,404,767

 
$
30,668

 
$
84,697

 
$
58,195

 
$
5,578,327

 
 
 
 
 
 
 
 
 
 
Percent of originated loans
96.89
%
 
0.55
%
 
1.52
%
 
1.04
%
 
100.00
%
 
 
 
 
 
 
 
 
 
 
December 31, 2014
Performing
 
 

 
 

(dollars in thousands)
Pass Rated
 
Special Mention
 
Classified
 
Non-Performing
 
Total
Commercial and industrial
$
2,431,251

 
$
24,129

 
$
70,765

 
$
22,293

 
$
2,548,438

 
 
 
 
 
 
 
 
 
 
CRE - permanent
1,065,916

 
4,351

 
13,307

 
8,432

 
1,092,006

CRE - construction
182,554

 
701

 
5,186

 
8,113

 
196,554

Commercial real estate
1,248,470

 
5,052

 
18,493

 
16,545

 
1,288,560

 
 
 
 
 
 
 
 
 
 
Residential mortgages
640,344

 

 
314

 
13,959

 
654,617

Home equity
778,611

 

 
335

 
4,302

 
783,248

All other consumer
280,975

 

 
4,256

 
1,993

 
287,224

Consumer
1,699,930

 

 
4,905

 
20,254

 
1,725,089

 
 
 
 
 
 
 
 
 
 
Originated loans
$
5,379,651

 
$
29,181

 
$
94,163

 
$
59,092

 
$
5,562,087

 
 
 
 
 
 
 
 
 
 
Percent of originated loans
96.73
%
 
0.52
%
 
1.69
%
 
1.06
%
 
100.00
%
 
 
 
 
 
 
 
 
 
 

    

15

NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements

5.  LOANS - Continued

The following tables present classifications for acquired loans:
March 31, 2015
Performing
 
 
 
 
(dollars in thousands)
Pass Rated
 
Special Mention
 
Classified
 
PCI
 
Total
Commercial and industrial
$
49,649

 
$
599

 
$

 
$

 
$
50,248

 
 
 
 
 
 
 
 
 
 
CRE - permanent
120,219

 

 

 
1,649

 
121,868

CRE - construction
7,309

 

 

 

 
7,309

Commercial real estate
127,528

 

 

 
1,649

 
129,177

 
 
 
 
 
 
 
 
 
 
Residential mortgages
239,928

 

 
40

 

 
239,968

Home equity
122,328

 

 
26

 

 
122,354

All other consumer
131

 

 

 

 
131

Consumer
362,387

 

 
66

 

 
362,453

 
 
 
 
 
 
 
 
 
 
Acquired loans
$
539,564

 
$
599

 
$
66

 
$
1,649

 
$
541,878

 
 
 
 
 
 
 
 
 
 
Percent of acquired loans
99.58
%
 
0.11
%
 
0.01
%
 
0.30
%
 
100.00
%

December 31, 2014
Performing
 
 
 
 
(dollars in thousands)
Pass Rated
 
Special Mention
 
Classified
 
PCI
 
Total
Commercial and industrial
$
49,091

 
$
697

 
$
418

 
$
1,223

 
$
51,429

 
 
 
 
 
 
 
 
 
 
CRE - permanent
122,952

 
7,840

 
1,409

 
5,111

 
137,312

CRE - construction
6,931

 

 

 
57

 
6,988

Commercial real estate
129,883

 
7,840

 
1,409

 
5,168

 
144,300

 
 
 
 
 
 
 
 
 
 
Residential mortgages
252,454

 

 
31

 
1,255

 
253,740

Home equity
130,552

 

 
30

 

 
130,582

All other consumer
141

 

 

 

 
141

Consumer
383,147

 

 
61

 
1,255

 
384,463

 
 
 
 
 
 
 
 
 
 
Acquired loans
$
562,121

 
$
8,537

 
$
1,888

 
$
7,646

 
$
580,192

 
 
 
 
 
 
 
 
 
 
Percent of acquired loans
96.88
%
 
1.47
%
 
0.33
%
 
1.32
%
 
100.00
%


16

NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements

5.  LOANS - Continued

The following table presents the details for past due loans: 
March 31, 2015
Past Due and Still Accruing
 
Accruing Current Balances
 
 
 
Non-Accrual Balances (c)
 
Total Balances
(dollars in thousands)
30-59 Days
 
60-89 Days
 
90 Days or More (b)
 
Total
 
 
PCI Loans
 
 
Commercial and industrial
$
1,705

 
$
268

 
$

 
$
1,973

 
$
2,632,295

 
$

 
$
21,107

 
$
2,655,375

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CRE - permanent
848

 

 

 
848

 
1,217,569

 
1,649

 
6,781

 
1,226,847

CRE - construction

 

 

 

 
161,067

 

 
8,204

 
169,271

Commercial real estate
848

 

 

 
848

 
1,378,636

 
1,649

 
14,985

 
1,396,118

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages
2,342

 
444

 
425

 
3,211

 
873,409

 

 
8,326

 
884,946

Home equity
3,613

 
1,401

 
658

 
5,672

 
891,837

 

 
3,762

 
901,271

All other consumer
2,368

 
749

 
1,147

 
4,264

 
276,773

 

 
1,458

 
282,495

Consumer
8,323

 
2,594

 
2,230

 
13,147

 
2,042,019

 

 
13,546

 
2,068,712

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans
$
10,876

 
$
2,862

 
$
2,230

 
$
15,968

 
$
6,052,950

 
$
1,649

 
$
49,638

 
$
6,120,205

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percent of loans
0.18
%
 
0.05
%
 
0.04
%
 
0.26
%
 
 

 
0.03
%
 
0.81
%
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
Past Due and Still Accruing
 
Accruing Current Balances
 
 
 
Non-Accrual Balances (c)
 
Total Balances
(dollars in thousands)
30-59 Days
 
60-89 Days
 
90 Days or More (b)
 
Total
 
 
PCI Loans
 
 
Commercial and industrial
$
738

 
$
369

 
$
137

 
$
1,244

 
$
2,575,469

 
$
1,223

 
$
21,931

 
$
2,599,867

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CRE - permanent
2,052

 
286

 
57

 
2,395

 
1,213,897

 
5,111

 
7,915

 
1,229,318

CRE - construction
425

 

 

 
425

 
194,947

 
57

 
8,113

 
203,542

Commercial real estate
2,477

 
286

 
57

 
2,820

 
1,408,844

 
5,168

 
16,028

 
1,432,860

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages
6,013

 
1,363

 
304

 
7,680

 
891,716

 
1,255

 
7,706

 
908,357

Home equity
4,596

 
579

 
365

 
5,540

 
904,864

 

 
3,426

 
913,830

All other consumer
3,039

 
657

 
1,320

 
5,016

 
280,603

 

 
1,746

 
287,365

Consumer
13,648

 
2,599

 
1,989

 
18,236

 
2,077,183

 
1,255

 
12,878

 
2,109,552

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans
$
16,863

 
$
3,254

 
$
2,183

 
$
22,300

 
$
6,061,496

 
$
7,646

 
$
50,837

 
$
6,142,279

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percent of loans
0.27
%
 
0.05
%
 
0.04
%
 
0.36
%