National Penn Bancshares, Inc. Reports Second Quarter
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National Penn Bancshares, Inc. (Nasdaq:NPBC) reported adjusted net income of $9.8 million or $0.08 per diluted common share for the second quarter of 2010 compared to adjusted net income of $4.0 million or $0.03 per diluted common share for the first quarter 2010.
Adjusted net income excludes the impact of the previously announced charges related to the pending sale of Christiana Bank & Trust Company (Christiana) and the redemption of separate account bank-owned life insurance (BOLI) which resulted in a goodwill impairment charge of $8.3 million and increase in income tax expense of $8.1 million, respectively.
Including the impact of these two items, the second quarter resulted in a net loss available to common shareholders of $5.5 million or $0.04 per diluted common share compared to income of $1.9 million or $0.02 per diluted common share for the first quarter of 2010.
“We continue to deliver strong fundamental performance with improved adjusted net income and an expanding net interest margin. Asset quality improved during the quarter with a decline in classified and non-performing
loans, which resulted in a reduced loan loss provision,” commented Scott Fainor, President and CEO of National Penn. “We remain focused on maximizing long-term shareholder value and have taken steps during the second quarter with the announced sale of Christiana and redemption of the separate account BOLI. We expect these transactions to result in improved capital ratios, increased holding company liquidity, and increased future earnings when completed.”
Loan quality trends improved during the quarter as classified loans declined by 3.7% and non-performing assets declined by 11.9%. These trends increased the loan loss reserve coverage from 128% to 155% of non-performing loans. Non-performing assets trended downward due to the decrease in non-performing loans and totaled $108.2 million at June 30, 2010 as compared to $122.8 million at March 31, 2010.
The provision for loan losses declined to $25.0 million in the second quarter from $32.5 million in the first quarter. The allowance for loan and lease losses remained relatively unchanged from the prior quarter and totaled $154.0 million at June 30, 2010.
Net interest margin expanded to 3.50% for the second quarter from 3.44% in the first quarter of 2010 as a result of improvements in deposit mix and sustained discipline for deposit pricing. Operating expenses remained well
controlled in the quarter as the efficiency ratio remained stable at 57.7% and fee-based income, which includes wealth management, service charges on deposits, insurance commissions and fees, and cash management and electronic banking fees, provided a stable contribution to earnings at $20.9 million for the second quarter compared to $20.4 million for the first quarter of 2010.
During the second quarter National Penn continued to assist borrowers though its voluntary mortgage loan modification program. Also during the second quarter, National Penn made loans to new and existing customers of
approximately $225 million. Despite some signs of economic recovery, average loans declined during the quarter by $129 million which National Penn believes demonstrates the reluctance of businesses and consumers to borrow.
National Penn’s Board of Directors approved a third quarter cash dividend of $0.01 per share, payable on August 17, 2010 to shareholders of record on August 7, 2010, consistent with the $0.01 per share paid in the previous quarter
“The current environment continues to be challenging, and our goal remains enhancing long-term shareholder value. We continue to execute on our short-term and long-term initiatives to improve earnings, manage risk, and maintain the strength of our balance sheet. I am proud of the contribution of all of our employees in achieving the second quarter results in a difficult economic environment,” said Mr. Fainor.
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