NATIONAL PENN BANCSHARES, INC.
July 21, 1998
Dear Shareholder:
We are pleased to announce we have executed a definitive agreement for
National Penn Bancshares to acquire Elverson National Bank. Elverson is a $300
million bank headquartered in Elverson, Pennsylvania, and operates nine offices
in Chester, Berks, and Lancaster Counties.
The terms of the Agreement call for the tax-free exchange of 1.175 shares
of National Penn common stock for each share of Elverson common stock. Based on
the $33.625 per share closing price of National Penn common stock on July 17,
1998, the value per share of Elverson National Bank is $39.51. This price
equates to 30.10 times Elverson's estimated trailing twelve months earnings, and
a multiple of 3.77 times Elverson's tangible book value as of June 30, 1998.
The exchange ratio is subject to adjustment if the price of National Penn
Bancshares common stock declines to less than $30.38 as calculated by the 20 day
average of its stock price during a period ending 31 days prior to Elverson's
shareholder meeting to approve the transaction. In that event, the ratio would
adjust to a ratio of 1.2 shares for each Elverson share. Should a decline exceed
20%, Elverson would have the right to terminate the transaction if that decline
also was 5% more than the decline in an index of stock prices of a group of
comparable regional bank holding companies over the same time period, unless
National Penn Bancshares chooses to increase the exchange ratio to 1.25 shares
for each Elverson share. A decline in National Penn's stock price in excess of
25% would permit Elverson to terminate the transaction.
As of June 30, 1998, Elverson had 2,597,995 million shares of Common Stock
outstanding and options for approximately 44,424 additional shares.
As we previously announced, a 5-for-4 split of National Penn Bancshares
common stock is currently pending and will be completed on July 31. Upon its
completion, the Agreement provides for proportionate adjustment of all the
exchange ratio provisions so as to preserve the same economic terms as at
present.
Upon completion of the merger, Elverson will operate as a division of
National Penn Bank. Elverson's present directors will be appointed to the
divisional board of directors. Two members of the Elverson Board will be
mutually selected to become directors of National Penn Bancshares and National
Penn Bank. Elverson's president and CEO, Glenn E. Moyer, will become president
of the
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Elverson National Bank Division and President of the Berks County and Montgomery
County regions of National Penn Bank. He will also be an Executive Vice
President of National Penn Bank with additional corporate responsibilities.
National Penn Bancshares will have assets of $2 billion following the
acquisition which is subject to regulatory approval, as well as approval of
shareholders of Elverson and National Penn. Elverson's directors, who
beneficially own approximately 21% of the outstanding shares of Elverson common
stock, have agreed to vote their shares for approval; likewise, National Penn's
directors, who beneficially own approximately 10% of the outstanding shares of
National Penn's common stock, have agreed to vote their shares for approval. We
anticipate the transaction will close in either the fourth quarter of 1998 or
the first quarter of 1999. The transaction will be accounted for as a pooling of
interests and is expected to be accretive to National Penn earnings in the
second year. As with any earnings estimate there are factors that could cause
the actual results to differ materially, such as the factors discussed in
National Penn's 8-K filing with the SEC.
Effective immediately, we have rescinded our existing authorization to buy
back National Penn stock which authorized the repurchase of up to 530,000 shares
(or 662,500 shares when adjusted for the stock split). During 1998, National
Penn repurchased approximately 233,267 shares under the authorization (or
approximately 291,584 on a post-split basis).
The addition of Elverson is highly complementary to National Penn's
existing franchise and will provide an excellent opportunity to increase our
market share in Chester County, southern Berks County and eastern Lancaster
County. Elverson's longevity in Chester County and deep-seated commitment to
customer's needs is a natural fit with National Penn Bank's philosophy. National
Penn's existing Chester County retail delivery system (excluding Phoenixville),
as well as its commercial lending office, will be combined with and marketed as
Elverson National Bank, a division of National Penn Bank. We have been serving
the Chester County market for over 10 years with a full-service loan office and
several branch offices. Chester County continues to be a fast-growing, very
appealing region and this acquisition will enable us to aggressively expand our
market presence.
According to Elverson's President, Glenn E. Moyer, "the affiliation with
National Penn offers us an expanded opportunity to enhance our product
offerings, services, and delivery channels to both current and prospective
customers. Positioning Elverson as a division of National Penn Bank will provide
our customers with the continued benefit of a community bank philosophy, which
has made us an outstanding performer. The expanded services and products
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available through this affiliation will enable us to increase the expansion of
our customer base in many respects. The increased level of total resources of
the merged companies will enable the Elverson franchise to better service small
and large business customers, as well as individual consumers by adding
electronic banking services, trust services and commercial cash management
products. We have gained an excellent reputation for our willingness to serve
the local community with competitive products while contributing to enhancing
the quality of life in the markets we service."
We view this affiliation as an excellent strategic fit for your bank.
Although the price we are paying is high, the resulting combination should bode
well for our successful and profitable growth in Chester County.
You will be asked to vote on this acquisition later this year. Prior to
such vote, you will receive a proxy statement outlining in detail the entire
transaction. At that time, we would ask that you give this proposal your utmost
attention.
/s/ Lawrence T. Jilk, Jr. /s/ Wayne R. Weidner
LAWRENCE T. JILK, Jr. WAYNE R. WEIDNER
Chairman President