Dear Shareholders and Friends:
We are pleased to report continued strong operating profitability during
the Third Quarter of 1998! Our Net Income for the Quarter was $920,000, or $.35
per share. This represents a 15% increase when compared to Net Income of
$797,000, or $.31 per share, for the same quarter last year. For the first nine
months of 1998, Net Income was $2,525,000, or $.97 per share. This represents a
21% increase when compared to Net Income of $2,086,000, or $.81 per share,
reported for the same period last year.
These increases in Net Income are especially gratifying to report in light
of the exceptional efforts our Employees are putting forth as we strive to
continue our highly personalized customer service while we are working through
the preparation phase of our previously announced pending merger with National
Penn Bancshares, Inc. Overall, we are making good progress in preparing for the
merger in a way that is as seamless as possible for all our stakeholders.
With regard to the pending merger, we are pleased to report that we have
received regulatory approval. We are now in the process of preparing for the
Special Meeting of Shareholders that will be held at the Holiday Inn,
Morgantown, Pennsylvania on December 14, 1998 at 2:00 p.m. A Proxy
Statement/Prospectus and Proxy Card were recently mailed to each Shareholder
with the request that the Proxy Card be returned to the Bank as soon as
possible. The fixed exchange ratio for each outstanding share of Elverson
National Bank Common Stock (other than any dissenting shares) is 1.46875 shares
of National Penn Bancshares, Inc. Common Stock. As discussed in the Proxy
Statement/Prospectus, the Bank's Board of Directors has unanimously determined
that the merger is in the best interests of the Bank and its Shareholders.
Accordingly, the Board has unanimously approved the merger and unanimously
recommends that you vote in favor of the merger at the Special Meeting. You are
urged to read the Proxy Statement/Prospectus in its entirety before making a
decision as to how to vote on the merger.
On behalf of the Board of Directors, I want to thank our Customers, our
Employees and our Shareholders for their many years of loyalty, dedication and
support. While we need to acknowledge the period of change through which we are
currently passing, we need to also focus on the many new opportunities that this
change will afford us to serve our customers and prospects more fully. Thank
you, in advance, for your ongoing support!
Glenn E. Moyer
President/Chief Executive Officer
ELVERSON NATIONAL BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME(Unaudited)
September 30, 1998 and 1997 Three Months Ended Nine Months Ended
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(Dollars In Thousands, Except Per Share Data) 1998 1997 1998 1997
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Interest Income
Loans receivable, including fees $ 4,415 $ 4,504 $ 13,378 $ 13,091
Securities 1,080 567 2,734 1,761
Deposits with banks 127 36 313 88
Federal funds sold and bankers acceptance notes 2 90 142 165
---------- ---------- ---------- ----------
Total interest income 5,624 5,197 16,567 15,105
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Interest Expense
Deposits 2,361 2,057 6,855 5,926
Securities sold under agreements to repurchase 81 125 268 422
Borrowed funds 24 2 39 6
---------- ---------- ---------- ----------
Total interest expense 2,466 2,184 7,162 6,354
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Net Interest Income 3,158 3,013 9,405 8,751
Provision for loan losses 165 212 495 730
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Net Interest Income After
Provision for Loan Losses 2,993 2,801 8,910 8,021
---------- ---------- ---------- ----------
Other Income
Service charges on deposit accounts 224 199 597 567
Net realized gains on sale of securities 9 15 17 17
Mortgage banking activities 153 71 365 198
Other 69 56 236 240
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Total other income 455 341 1,215 1,022
---------- ---------- ---------- ----------
Other Expenses
Salaries and employee benefits 1,256 1,093 3,750 3,221
Occupancy 190 180 570 563
Equipment 208 173 627 522
Other 583 569 1,815 1,805
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Total other expenses 2,237 2,015 6,762 6,111
---------- ---------- ---------- ----------
Income Before Income Taxes 1,211 1,127 3,363 2,932
Federal income taxes 291 330 838 846
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Net Income $ 920 $ 797 $ 2,525 $ 2,086
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Per Share of Common Stock:
Basic and diluted earnings $ 0.35 $ 0.31 $ 0.97 $ 0.81
Cash dividend $ 0.06 $ 0.043 $ 0.18 $ 0.129
Average Common Shares Outstanding 2,597,995 2,573,565 2,591,528 2,565,387
ELVERSON NATIONAL BANK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30
(Dollars In Thousands, Except Per Share Data) 1998 1997
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ASSETS
Cash and due from banks $ 8,839 $ 9,298
Interest bearing deposits with banks 22,478 1,054
Federal funds sold 0 2,600
Bankers acceptance notes 0 1,872
Securities available for sale 71,939 20,097
Securities held to maturity 10,643 19,643
Loans receivable, net of allowance for loan losses
of: 1998 $3,572; 1997 $3,613 190,749 198,775
Premises and equipment, net 4,608 4,441
Other real estate owned 371 472
Accrued interest receivable 2,019 1,423
Other assets 1,892 1,550
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Total Assets $313,538 $261,225
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LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits:
Non-interest bearing $ 41,840 $ 37,522
Interest bearing 217,613 189,593
-------- --------
Total deposits 259,453 227,115
Securities sold under agreements to repurchase 8,317 7,250
Borrowed funds 15,188 191
Accrued interest payable 978 887
Other liabilities 1,017 797
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Total Liabilities 284,953 236,240
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Stockholders' Equity
Common stock, par value $1.25 per share;
4,000,000 shares authorized;
issued and outstanding shares:
1998 2,597,995; 1997 2,456,594 3,248 3,071
Surplus 17,600 14,442
Retained earnings 7,160 7,384
Net unrealized appreciation on securities available
for sale, net of taxes 577 88
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Total Stockholders' Equity 28,585 24,985
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Total Liabilities and Stockholders' Equity $313,538 $261,225
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