| [X]                                                       | QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(D) OF                                                                                                                                                                                                                                                                                                       |
|-------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                          | THE      SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                                                                                                                                                       |
|                                                                          |                                                                                                                                                                                                                                                                                                                                                           |
| For      the quarterly period ended:   September 30,      2008 |
|                                                                          |                                                           OR |
| [   ]                                      | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(D) OF                                                                                                                                                                                                                                                                                                      |
|                                                                          | THE      SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                                                                                                                                                  |
|                                                                          |  For      the transition period from _________ to____________                                                                                                                                                                                                                                                                                             |

|                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 000-22537-01(Commission File      Number)                                                                  |
| NATIONAL      PENN BANCSHARES, INC.                                                                                                                                                                                                                                                                                                                                                                                                             |
| (Exact      Name of Registrant as Specified inCharter)                                                                                                                                                                                                                                                                                                                                                                                          |

|                                   Pennsylvania                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 23-2215075                             |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------|
|                         (State      or Other Jurisdiction of Incorporation)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | (IRS      Employer Identification No.) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                   |   |
|                              Philadelphia      and Reading Avenues,                               Boyertown,      PA                                 (Address of Principal Executive      Offices) | 19512                                  |
| (Zip      Code)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

| Registrant’s      telephone number, including area code: (800)      822-3321       |
|------------------------------------------------------------------------------------------|
|                                                                                     |
| (Former      Name or Former Address, if Changed Since Last Report):  N/A  |

|   | Large      accelerated filer þ | Accelerated      filer¨ | Non-accelerated      filer¨                               | Smaller      reporting company¨ |   |   |
|--------|------------------------------------------|------------------------------|----------------------------------------------------------------|--------------------------------------|--------|--------|
|   |                                     |                         |   (Do not check if a      smaller reporting company) |                                 |   |   |
|   |                                |                         |

| Class                                   | Outstanding at November 4,    2008       |
|-----------------------------------------|------------------------------------------|
| Common      Stock (no stated par value) | (No.)      Shares:  80,070,260 |

----

| Part I - Financial      Information.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | Page   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |
| Item      1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Financial      Statements                                                                                      |   |   | 3 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |
| Item      2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Management’s      Discussion and Analysis of                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Financial      Condition and Results of Operation                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   | 19 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |
| Item      3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Quantitative      and Qualitative Disclosures About                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Market      Risk                                                                                               |   |   | 33 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |
| Item      4.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Controls      and      Procedures                                                                              |   |   | 33 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |
| Part II - Other      Information.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |
| Item      1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Legal      Proceedings                                                                                         |   |   | 34 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |
| Item      1A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Risk      Factors                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   | 34 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |
| Item      2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Unregistered      Sales of Equity Securities                                                                                                                                                                                                                                                                                                                                                                                                                            |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | and      Use      of  Proceeds                                                                       |   |   | 39 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |
| Item      3.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Defaults      Upon Senior      Securities                                                                      |   |   | 39 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |
| Item      4.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Submission      of Matters to a Vote of                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Security      Holders                                                                                          |   |   | 39 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |
| Item      5.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Other      Information                                                                                         |   |   | 40 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |
| Item      6.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | Exhibits                                                                                                       |   |   | 40 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |
| Signatures                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 41     |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |   |   |   |
| Exhibits                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 42     |   |

----

|                                                                                             |   |  Unaudited    |      |   |              |   |
|--------------------------------------------------------------------------------------------------|--------|--------------------|-----------|--------|-------------------|--------|
|                                                                                             |   | September      30, |      |   | December      31, |   |
| (dollars      in thousands)                                                                      |   | 2008               |      |   | 2007              |   |
|                                                                                             |   |               |      |   |              |   |
| ASSETS                                                                                           |   |               |      |   |              |   |
| Cash      and due from banks                                                                     |   | $                  | 133,792   |   |              | $      | 104,292 |   |
| Interest-bearing      deposits with banks                                                        |   |               | 19,117    |   |              |   | 7,228 |   |
| Fed      funds sold                                                                              |   |               | 44,000    |   |              |   | - |   |
|     Total      cash and cash equivalents                                     |   |               | 196,909   |   |              |   | 111,520 |   |
|                                                                                             |   |               |      |   |              |   |   |   |
| Investment      securities held to maturity                                                      |   |               |      |   |              |   |   |   |
|        (Fair value approximates $305,164 and $243,218 for 2008 and 2007,      respectively) |   |               | 391,725   |   |              |   | 243,595 |   |
| Investment      securities available for sale, at fair value                                     |   |               | 1,587,852 |   |              |   | 1,137,426 |   |
| Loans      and leases held for sale                                                              |   |               | 5,317     |   |              |   | 3,823 |   |
| Loans      and leases, less allowance for loan and lease losses of $83,696 and      $54,897      |   |               |      |   |              |
|     for      2008 and 2007, respectively                                     |   |               | 6,118,608 |   |              |   | 3,816,533 |   |
| Premises      and equipment, net                                                                 |   |               | 106,968   |   |              |   | 61,214 |   |
| Premises      held for sale                                                                      |   |               | 3,890     |   |              |   | - |   |
| Accrued      interest receivable                                                                 |   |               | 39,065    |   |              |   | 26,430 |   |
| Bank      owned life insurance                                                                   |   |               | 192,594   |   |              |   | 102,407 |   |
| Goodwill                                                                                         |   |               | 546,270   |   |              |   | 261,552 |   |
| Other      intangible assets, net                                                                |   |               | 38,768    |   |              |   | 16,160 |   |
| Unconsolidated      investments under the equity method                                          |   |               | 11,470    |   |              |   | 11,490 |   |
| Other      assets                                                                                |   |               | 77,359    |   |              |   | 32,271 |   |
|           TOTAL ASSETS                                                       |   | $                  | 9,316,795 |   |              | $      | 5,824,421 |   |
|                                                                                             |   |               |      |   |              |   |   |   |
| LIABILITIES                                                                                      |   |               |      |   |              |   |   |   |
| Deposits                                                                                         |   |               |      |   |              |   |   |   |
| Non-interest      bearing deposits                                                               |   | $                  | 782,819   |   |              | $      | 522,716 |   |
| Interest      bearing deposits                                                                   |   |               | 5,437,824 |   |              |   | 3,423,447 |   |
| Total      deposits                                                                              |   |               | 6,220,643 |   |              |   | 3,946,163 |   |
|                                                                                             |   |               |      |   |              |   |   |   |
| Securities      sold under repurchase agreements and federal funds    purchased                  |   |               | 745,417   |   |              |   | 484,223 |   |
| Short-term      borrowings                                                                       |   |               | 113,998   |   |              |   | 12,800 |   |
| Long-term      borrowings                                                                        |   |               | 979,513   |   |              |   | 617,183 |   |
| Subordinated      debentures                                                                     |   |               |      |   |              |   |   |   |
|     ($57,186      and $62,676 at fair value for 2008 and 2007, respectively) |   |               | 134,507   |   |              |   | 139,997 |   |
| Accrued      interest payable and other liabilities                                              |   |               | 76,704    |   |              |   | 60,108 |   |
|           TOTAL LIABILITIES                                                  |   |               | 8,270,782 |   |              |   | 5,260,474 |   |
|                                                                                             |   |               |      |   |              |   |   |   |
| SHAREHOLDERS'      EQUITY                                                                        |   |               |      |   |              |   |   |   |
| Preferred      stock, no stated par value; authorized 1,000,000 shares, none      issued         |   |               | -         |   |              |   | - |   |
| Common      stock, no stated par value; authorized 100,000,000 shares, issued      and           |   |               |      |   |              |   |   |   |
| outstanding      2008 - 79,886,282; 2007 - 49,068,819;  net of shares      in          |   |               |      |   |              |   |   |   |
| Treasury:      2008 - 0; 2007 - 544,061                                                          |   |               | 980,894   |   |              |   | 491,011 |   |
| Retained      earnings                                                                           |   |               | 115,291   |   |              |   | 85,242 |   |
| Accumulated      other comprehensive loss                                                        |   |               | (50,172   | )      |              |   | (4,281 | ) |
| Treasury      stock                                                                              |   |               | -         |   |              |   | (8,025 | ) |
|           TOTAL SHAREHOLDERS' EQUITY                                         |   |               | 1,046,013 |   |              |   | 563,947 |   |
|                                                                                             |   |               |      |   |              |   |   |   |
|           TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         |   | $                  | 9,316,795 |   |              | $      | 5,824,421 |   |
|                                                                                             |   |               |      |   |              |   |   |   |
| The      accompanying notes are an integral part of these financial      statements.             |   |               |      |   |              |   |   |   |
|                                                                                             |   |               |      |   |              |   |   |   |
|                                                                                             |   |               |      |   |              |   |   |   |

----

|                                                                                             |   | Three Months Ended      September      30, |         |   |  Nine      Months Ended September      30, |   |
|--------------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------------|--------|-------------------------------------------------|--------|
| (dollars      in thousands, except per share data)                                               |   | 2008                                       |         |   | 2007                                            |   |   | 2008 |   |   | 2007 |   |
|                                                                                             |   |                                       |         |   |                                            |   |   |   |   |   |   |   |
| INTEREST      INCOME                                                                             |   |                                       |         |   |                                            |   |   |   |   |   |   |   |
| Loans      and leases, including fees                                                            |   | $                                          | 97,120       |   |                                            | $      | 69,401 |   |   | $ | 282,621 |   |   | $ | 201,926 |   |
| Investment      securities                                                                       |   |                                       |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
|        Taxable                                                                              |   |                                       | 14,617       |   |                                            |   | 9,793 |   |   |   | 44,072 |   |   |   | 28,985 |   |
|        Tax-exempt                                                                           |   |                                       | 8,913        |   |                                            |   | 6,479 |   |   |   | 23,364 |   |   |   | 17,894 |   |
| Federal      funds sold and deposits in banks                                                    |   |                                       | 67           |   |                                            |   | 54 |   |   |   | 566 |   |   |   | 166 |   |
| Total      interest income                                                                       |   |                                       | 120,717      |   |                                            |   | 85,727 |   |   |   | 350,623 |   |   |   | 248,971 |   |
| INTEREST      EXPENSE                                                                            |   |                                       |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                                         |   |                                       | 35,772       |   |                                            |   | 31,886 |   |   |   | 108,137 |   |   |   | 92,168 |   |
| Securities      sold under repurchase agreements and federal                                     |   |                                       |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
|    funds      purchased                                                           |   |                                       | 5,187        |   |                                            |   | 4,393 |   |   |   | 15,750 |   |   |   | 14,756 |   |
| Short-term      borrowings                                                                       |   |                                       | 89           |   |                                            |   | 66 |   |   |   | 130 |   |   |   | 144 |   |
| Long-term      borrowings                                                                        |   |                                       | 12,721       |   |                                            |   | 10,286 |   |   |   | 36,966 |   |   |   | 26,394 |   |
|        Total interest expense                                                               |   |                                       | 53,769       |   |                                            |   | 46,631 |   |   |   | 160,983 |   |   |   | 133,462 |   |
|             Net      interest income |   |                                       | 66,948       |   |                                            |   | 39,096 |   |   |   | 189,640 |   |   |   | 115,509 |   |
| Provision      for loan and lease losses                                                         |   |                                       | 6,876        |   |                                            |   | 1,420 |   |   |   | 13,997 |   |   |   | 4,032 |   |
| Net      interest income after provision for loan and lease losses                               |   |                                       | 60,072  |   |                                            |   | 37,676  |   |   |   | 175,643  |   |   |   | 111,477  |   |
| NON-INTEREST      INCOME                                                                         |   |                                       |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Wealth      management income                                                                    |   |                                       | 8,239        |   |                                            |   | 4,359 |   |   |   | 24,362 |   |   |   | 12,711 |   |
| Service      charges on deposit accounts                                                         |   |                                       | 6,880        |   |                                            |   | 4,461 |   |   |   | 18,465 |   |   |   | 12,873 |   |
| Bank      owned life insurance income                                                            |   |                                       | 1,702        |   |                                            |   | 1,102 |   |   |   | 5,124 |   |   |   | 4,490 |   |
| Other      operating income                                                                      |   |                                       | 1,826        |   |                                            |   | 2,049 |   |   |   | 7,167 |   |   |   | 5,876 |   |
| Net      gains from fair value changes                                                           |   |                                       | 7,641        |   |                                            |   | 1,188 |   |   |   | 5,490 |   |   |   | 1,214 |   |
| Net      gains on  investment securities                                               |   |                                       | 276          |   |                                            |   | 600 |   |   |   | 660 |   |   |   | 1,733 |   |
| Other      than temporary impairment investments                                                 |   |                                       | (20,000      | )      |                                            |   | - |   |   |   | (20,000 | ) |   |   | 0 |   |
| Mortgage      banking income                                                                     |   |                                       | 882          |   |                                            |   | 468 |   |   |   | 2,451 |   |   |   | 2,454 |   |
| Insurance      commissions and fees                                                              |   |                                       | 3,913        |   |                                            |   | 1,556 |   |   |   | 11,687 |   |   |   | 5,243 |   |
| Cash      management and electronic banking fees                                                 |   |                                       | 3,917        |   |                                            |   | 2,241 |   |   |   | 10,560 |   |   |   | 6,295 |   |
| Equity      in undistributed net earnings (loss) ofunconsolidated                           |   |                                       |         |   |                                            |   |   |   |
|    investments                                                                    |   |                                       | 1,574        |   |                                            |   | 226 |   |   |   | 2,996 |   |   |   | (147 | ) |
|             Total non-interest income                              |   |                                       | 16,850       |   |                                            |   | 18,250 |   |   |   | 68,962 |   |   |   | 52,742 |   |
| NON-INTEREST      EXPENSE                                                                        |   |                                       |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Salaries,      wages and employee benefits                                                       |   |                                       | 31,998       |   |                                            |   | 20,982 |   |   |   | 92,525 |   |   |   | 62,038 |   |
| Net      premises and equipment                                                                  |   |                                       | 8,416        |   |                                            |   | 4,867 |   |   |   | 25,442 |   |   |   | 14,786 |   |
| Advertising      and marketing expenses                                                          |   |                                       | 1,280        |   |                                            |   | 1,007 |   |   |   | 4,354 |   |   |   | 3,123 |   |
| Other      operating expenses                                                                    |   |                                       | 12,393       |   |                                            |   | 7,245 |   |   |   | 34,506 |   |   |   | 21,982 |   |
|             Total non-interest expense                             |   |                                       | 54,087       |   |                                            |   | 34,101 |   |   |   | 156,827 |   |   |   | 101,929 |   |
|                                                                                             |   |                                       |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Income      before income taxes                                                                  |   |                                       | 22,835       |   |                                            |   | 21,825 |   |   |   | 87,778 |   |   |   | 62,290 |   |
| Income      tax expense                                                                          |   |                                       | 3,607        |   |                                            |   | 5,018 |   |   |   | 19,743 |   |   |   | 13,766 |   |
|             NET INCOME                                             |   | $                                          | 19,228       |   |                                            | $      | 16,807 |   |   | $ | 68,035 |   |   | $ | 48,524 |   |
|                                                                                             |   |                                       |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| PER      SHARE OF COMMON STOCK                                                                   |   |                                       |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| Basic      earnings                                                                              |   | $                                          | 0.24         |   |                                            | $      | 0.34 |   |   | $ | 0.91 |   |   | $ | 0.98 |   |
| Diluted      earnings                                                                            |   | $                                          | 0.23         |   |                                            | $      | 0.34 |   |   | $ | 0.90 |   |   | $ | 0.97 |   |
| Dividends      paid in cash                                                                      |   | $                                          | 0.1700       |   |                                            | $      | 0.1626 |   |   | $ | 0.5100 |   |   | $ | 0.4879 |   |
|                                                                                             |   |                                       |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |   |                                       |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
| The      accompanying notes are an integral part of these financial      statements.             |   |
|                                                                                             |   |                                       |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |   |                                       |         |   |                                            |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                     |   |                                                        |       |    |               |                           |            |          |   |     | Accumulated |   |   |   |    |          |          |   |    |   |
|--------------------------------------------------------------------------|--------|-------------------------------------------------------------|------------|---------|--------------------|--------------------------------|-----------------|---------------|--------|----------|-------------|--------|--------|--------|---------|---------------|---------------|--------|---------|--------|
| NINE      MONTHS ENDED SEPTEMBER 30, 2008                                |   |                                                        |       |    |               |                           |            |          | Other  |     |        |   |   |   |    |          |          |   |    |
|                                                                     |   | Common                                                      |       |    | Retained           |                           |            | Comprehensive |   | Treasury |        |   |   |   |    | Comprehensive |          |
| (dollars      in thousands)                                              |   | Shares                                                      |       |    | Value              |                           |            | Earnings      |   |     | Loss        |   |   | Stock  |    |          | Total         |   |    | Income |   |
|                                                                     |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |
| Balance      at December 31, 2007, as previously reported                |   |                                                        | 49,068,819 |    |               | $                              | 491,011         |          |   | $        | 85,242      |   |   | $      | (4,281  | )             |          | $      | (8,025  | )      |   | $ | 563,947 |   |   |   |   |
|         Cumulative effect of adoption of EITF 06-4             |   |                                                        | -          |    |               |                           | -               |          |   |     | (2,112      | )      |   |   | -       |          |          |   | -       |   |   |   | (2,112 | ) |   |   |   |
| Balance      at December 31, 2007, as revised                            |   |                                                        | 49,068,819 |    |               |                           | 491,011         |          |   |     | 83,130      |   |   |   | (4,281  | )             |          |   | (8,025  | )      |   |   | 561,835 |   |   |   |   |
|         Net income                                             |   |                                                        | -          |    |               |                           | -               |          |   |     | 68,035      |   |   |   |    |          |          |   | -       |   |   |   | 68,035 |   |   | $ | 68,035 |   |
|         Cash dividends declared                                |   |                                                        | -          |    |               |                           | -               |          |   |     | (35,874     | )      |   |   |    |          |          |   | -       |   |   |   | (35,874 | ) |   |   |   |   |
|         Shares issued under share-based plans,                 |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|            net of excess tax benefits           |   |                                                        | 902,059    |    |               |                           | 5,676           |          |   |     | -           |   |   |   |    |          |          |   | 2,766   |   |   |   | 8,442 |   |   |   |   |   |
|         Share-based compensation                               |   |                                                        |       |    |               |                           | 1,491           |          |   |     |        |   |   |   |    |          |          |   | -       |   |   |   | 1,491 |   |   |   |   |   |
|         Shares issued for the acquisition of Christiana        |   |                                                        | 2,732,813  |    |               |                           | 43,839          |          |   |     |        |   |   |   |    |          |          |   | -       |   |   |   | 43,839 |   |   |   |   |   |
|         Shares issued for the acquisition of KNBT              |   |                                                        | 27,205,548 |    |               |                           | 438,877         |          |   |     |        |   |   |   |    |          |          |   | 5,623   |   |   |   | 444,500 |   |   |   |   |   |
|         Other comprehensive (loss), net of reclassification    |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |
|            adjustment and taxes                 |   |                                                        |       |    |               |                           | -               |          |   |     | -           |   |   |   | (45,891 | )             |          |   | -       |   |   |   | (45,891 | ) |   |   | (45,891 | ) |
|         Total comprehensive income                             |   |                                                        |       |    |               |                           | -               |          |   |     | -           |   |   |   |    |          |          |   | -       |   |   |   | - |   |   | $ | 22,144 |   |
|         Treasury shares purchased                              |   |                                                        | (22,957    | )       |               |                           |            |          |   |     |        |   |   |   |    |          |          |   | (364    | )      |   |   | (364 | ) |   |   |   |   |
| Balance      at September 30, 2008                                       |   |                                                        | 79,886,282 |    |               | $                              | 980,894         |          |   | $        | 115,291     |   |   | $      | (50,172 | )             |          | $      | (0      | )      |   | $ | 1,046,013 |   |   |   |   |   |
|                                                                     |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|                                                                     |   |   September      30, 2008                         |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |
|                                                                     |   | Before      Tax                                             |       |    | Tax      (expense) |                           | Net      of Tax |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |
|                                                                     |   |  Amount                                                |       |    |  Benefit      |                           |  Amount    |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |
|                                                                     |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
| Unrealized      (losses) on securities                                   |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|   Unrealized      holding (losses) arising during period       |   | $                                                           | (89,942    | )       |               | $                              | 31,480          |          |   | $        | (58,462     | )      |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|        Reclassification adjustment for losses                       |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|     realized      in net income                      |   |                                                        | (19,340    | )       |               |                           | 6,769           |          |   |     | (12,571     | )      |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
| Other      comprehensive (loss), net                                     |   | $                                                           | (70,602    | )       |               | $                              | 24,711          |          |   | $        | (45,891     | )      |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                                        |       |    |               |                           |            |          |   |     | Accumulated |   |   |   |    |          |          |   |    |   |   |   |   |   |
| NINE      MONTHS ENDED SEPTEMBER 30, 2007                                |   |                                                        |       |    |               |                           |            |          |   |     | Other       |   |   |   |    |          |          |   |    |   |   |   |   |   |
|                                                                     |   | Common                                                      |       |    | Retained           |                           |            | Comprehensive |   | Treasury |        |   |   |   |    |          | Comprehensive |   |
| (dollars      in thousands)                                              |   | Shares                                                      |       |    | Value              |                           |            | Earnings      |   |     | Loss        |   |   | Stock  |    |          | Total         |   |    | Income |   |
|                                                                     |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2006, as previously reported                |   |                                                        | 47,940,831 |    |               | $                              | 467,288         |          |   | $        | 77,665      |   |   | $      | 1,861   |          |          | $      | (3,945  | )      |   | $ | 542,869 |   |   |   |   |   |
|         Cumulative effect of adoption of FAS No. 159           |   |                                                        | -          |    |               |                           | -               |          |   |     | (1,732      | )      |   |   | -       |          |          |   | -       |   |   |   | (1,732 | ) |   |   |   |   |
| Balance      at December 31, 2006, as revised                            |   |                                                        | 47,940,831 |    |               |                           | 467,288         |          |   |     | 75,933      |   |   |   | 1,861   |          |          |   | (3,945  | )      |   |   | 541,137 |   |   |   |   |   |
|         Net income                                             |   |                                                        | -          |    |               |                           | -               |          |   |     | 48,524      |   |   |   | -       |          |          |   | -       |   |   |   | 48,524 |   |   | $ | 48,524 |   |
|    Cash      dividends declared                           |   |                                                        | -          |    |               |                           | -               |          |   |     | (24,180     | )      |   |   | -       |          |          |   | -       |   |   |   | (24,180 | ) |   |   |   |   |
|    3%      stock dividend                                 |   |                                                        | 1,444,263  |    |               |                           | 23,389          |          |   |     | (23,389     | )      |   |   | -       |          |          |   | -       |   |   |   | - |   |   |   |   |   |
|         Shares issued under share-based plans,                 |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|             net of excess tax benefits     |   |                                                        | 457,327    |    |               |                           | (1,766          | )             |   |     | -           |   |   |   | -       |          |          |   | 7,834   |   |   |   | 6,068 |   |   |   |   |   |
|         Share-based compensation                               |   |                                                        | -          |    |               |                           | 1,961           |          |   |     | -           |   |   |   | -       |          |          |   | -       |   |   |   | 1,961 |   |   |   |   |   |
|         Other comprehensive (loss), net of reclassification    |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |
|      adjustment      and taxes                  |   |                                                        | -          |    |               |                           | -               |          |   |     | -           |   |   |   | (8,319  | )             |          |   | -       |   |   |   | (8,319 | ) |   |   | (8,319 | ) |
|         Total comprehensive income                             |   |                                                        | -          |    |               |                           | -               |          |   |     | -           |   |   |   | -       |          |          |   | -       |   |   |   | - |   |   | $ | 40,205 |   |
|         Treasury shares purchased                              |   |                                                        | (691,907   | )       |               |                           | -               |          |   |     | -           |   |   |   | -       |          |          |   | (10,869 | )      |   |   | (10,869 | ) |   |   |   |   |
| Balance      at September 30, 2007                                       |   |                                                        | 49,150,514 |    |               | $                              | 490,872         |          |   | $        | 76,888      |   |   | $      | (6,458  | )             |          | $      | (6,980  | )      |   | $ | 554,322 |   |   |   |   |   |
|                                                                     |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|                                                                     |   |       September      30, 2007 |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |
|                                                                     |   | Before                                                      |       |    | Tax      (expense) |                           | Net      of Tax |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |
|                                                                     |   | Tax      Amount                                             |       | Benefit |               |          Amount |       |          |   |     |        |   |   |   |    |          |          |   |    |   |
| Unrealized      (losses) on securities                                   |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|   Unrealized      holding (losses) arising during period       |   | $                                                           | (11,065    | )       |               | $                              | 3,872           |          |   | $        | (7,193      | )      |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|        Reclassification adjustment for gains                        |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|       realized      in net income          |   |                                                        | 1,733      |    |               |                           | (607            | )             |   |     | 1,126       |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
| Other      comprehensive (loss), net                                     |   | $                                                           | (12,798    | )       |               | $                              | 4,479           |          |   | $        | (8,319      | )      |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
|                                                                     |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |   |   |   |   |   |   |   |
| ____________________________________________________                     |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |   |    |   |   |
| The      accompanying notes are an integral part of these    statements. |   |                                                        |       |    |               |                           |            |          |   |     |        |   |   |   |    |          |          |

----

|                                                                                                  |   | Nine      Months Ended September 30, |     |
|-------------------------------------------------------------------------------------------------------|--------|--------------------------------------|----------|
| (dollars      in thousands)                                                                           |   | 2008                                 |     |   | 2007 |   |
|                                                                                                  |   |                                 |     |   |   |   |
| OPERATING      ACTIVITIES:                                                                            |   |                                 |     |   |   |   |
| Net      income                                                                                       |   | $                                    | 68,035   |   |   | $ | 48,524 |   |
| Adjustments      to reconcile net income to net cash provided by operating      activities:           |   |                                 |     |   |   |
| Provision      for loan and lease losses                                                              |   |                                 | 13,997   |   |   |   | 4,032 |   |
| Share-based      compensation expense                                                                 |   |                                 | 1,491    |   |   |   | 1,961 |   |
| Depreciation      and amortization                                                                    |   |                                 | 16,048   |   |   |   | 8,021 |   |
| Deferred      income tax (benefit) expense                                                            |   |                                 | (1,510   | ) |   |   | 354 |   |
| (Accretion)      amortization  of premiums and discounts on investment      securities, net |   |                                 | (1,877   | ) |   |   | 2,757 |   |
| Investment      securities gains, net                                                                 |   |                                 | (660     | ) |   |   | (1,733 | ) |
| Undistributed      net (earnings) losses of equity-method investments                                 |   |                                 | (2,996   | ) |   |   | 147 |   |
| Loans      originated for resale                                                                      |   |                                 | (93,746  | ) |   |   | (169,431 | ) |
| Proceeds      from sale of loans                                                                      |   |                                 | 95,289   |   |   |   | 144,942 |   |
| Gain      on sale of loans, net                                                                       |   |                                 | (1,543   | ) |   |   | (2,212 | ) |
| Gain      on sale of other real estate owned, net                                                     |   |                                 | -        |   |   |   | (274 | ) |
| Gain      on sale of bank building(s)                                                                 |   |                                 | -        |   |   |   | (170 | ) |
| Change      in fair value of subordinated debt                                                        |   |                                 | (5,490   | ) |   |   | (1,214 | ) |
| Loss      on recognition of impairment on security                                                    |   |                                 | 20,000   |   |   |   | - |   |
| Changes      in assets and liabilities:                                                               |   |                                 |     |   |   |   |   |   |
|     Increase  in      accrued interest receivable                       |   |                                 | (1,822   | ) |   |   | (1,604 | ) |
|      Decrease      in accrued interest payable                               |   |                                 | (7,601   | ) |   |   | (494 | ) |
|      Decrease      (increase)  in other assets                     |   |                                 | 3,249    |   |   |   | (5,648 | ) |
|  (Decrease)      increase in other liabilities                                                   |   |                                 | (23,463  | ) |   |   | 1,155 |   |
|       Net      cash provided by operating activities                    |   |                                 | 77,401   |   |   |   | 29,113 |   |
|                                                                                                  |   |                                 |     |   |   |   |   |   |
| CASH      FLOWS FROM INVESTING ACTIVITIES                                                             |   |                                 |     |   |   |   |   |   |
| Cash      equivalents received in excess of cash paid for business      acquired                      |   |                                 | 35,852   |   |   |   | - |   |
| Proceeds      from maturities of investment securities held to maturity                               |   |                                 | 11,145   |   |   |   | 7,905 |   |
| Purchase      of investment securities held to maturity                                               |   |                                 | -        |   |   |   | (1,653 | ) |
| Proceeds      from sales of investment securities available for sale                                  |   |                                 | 36,245   |   |   |   | 8,911 |   |
| Proceeds      from maturities of investment securities available forsale                              |   |                                 | 266,029  |   |   |   | 103,236 |   |
| Purchase      of investment securities available for sale                                             |   |                                 | (326,620 | ) |   |   | (263,127 | ) |
| Net      increase in loans and leases                                                                 |   |                                 | (364,400 | ) |   |   | (162,938 | ) |
| Purchases      of premises and equipment                                                              |   |                                 | (9,546   | ) |   |   | (10,457 | ) |
| Proceeds      from the sale of other real estate owned                                                |   |                                 | 865      |   |   |   | 1,879 |   |
| Proceeds      from sale of bank building(s)                                                           |   |                                 | 636      |   |   |   | 399 |   |
|       Net      cash used in investing activities                        |   |                                 | (349,794 | ) |   |   | (315,845 | ) |
|                                                                                                  |   |                                 |     |   |   |   |   |   |
| CASH      FLOWS FROM FINANCING ACTIVITIES                                                             |   |                                 |     |   |   |   |   |   |
| Net      increase in interest and non-interest bearing demand deposits      and                       |   |                                 |     |   |   |   |   |   |
|       savings      accounts                                             |   |                                 | 243,658  |   |   |   | 68,074 |   |
| Net      increase (decrease) in certificates of deposit                                               |   |                                 | (27,302  | ) |   |   | 34,116 |   |
| Net      increase in securities sold under agreements to repurchase and      federal             |   |                                 |     |   |   |
| funds      purchased                                                                                  |   |                                 | 150,849  |   |   |   | 37,395 |   |
| Net      increase (decrease) in short-term borrowings                                                 |   |                                 | 98,548   |   |   |   | (2,380 | ) |
| Proceeds      from new long-term borrowings                                                           |   |                                 | 150,000  |   |   |   | 400,000 |   |
| Repayments      of long-term borrowings                                                               |   |                                 | (226,130 | ) |   |   | (233,315 | ) |
| Shares      issued under share-based plans                                                            |   |                                 | 4,095    |   |   |   | 1,840 |   |
| Excess      tax benefits on share-based plans                                                         |   |                                 | 302      |   |   |   | 257 |   |
| Purchase      of Treasury stock                                                                       |   |                                 | (364     | ) |   |   | (6,899 | ) |
| Cash      dividends                                                                                   |   |                                 | (35,874  | ) |   |   | (24,180 | ) |
| Net      cash provided by or used in financing activities                                             |   |                                 | 357,782  |   |   |   | (274,908 | ) |
| Net      increase (decrease) in cash and cash equivalents                                             |   |                                 | 85,389   |   |   |   | (11,824 | ) |
| Cash      and cash equivalents at beginning of year                                                   |   |                                 | 111,520  |   |   |   | 111,203 |   |
| Cash      and cash equivalents at end of period                                                       |   | $                                    | 196,909  |   |   | $ | 99,379 |   |
|                                                                                                  |   |                                 |     |   |   |   |   |   |
|                                                                                                  |   |                                 |     |   |   |   |   |   |
| The      accompanying notes are an integral part of these financial      statements.                  |   |                                 |     |   |   |
|                                                                                                  |   |                                 |     |   |   |   |   |   |
|                                                                                                  |   |                                 |     |   |   |   |   |   |

----

----

|                        |                                  |                  | Balance      Sheet |
|-----------------------------|---------------------------------------|-----------------------|--------------------|
|                        |                                  |  Acquired        |               |
| (dollars      in thousands) |                                  | February      1, 2008 |               |
|                        |                                  |                  |               |   |
| Assets:                     |                                  |                  |               |
|                        | Cash      and cash equivalents        |                  | $                  | 44,831 |   |
|                        | Securities                            |                  |               | 666,064 |   |
|                        | Loans      net of loan loss allowance |                  |               | 1,831,367 |   |
|                        | Premises      and equipment           |                  |               | 45,851 |   |
|                        | Goodwill                              |                  |               | 248,644 |   |
|                        | Identifiable      Intangibles         |                  |               | 25,265 |   |
|                        | Deferred      Taxes                   |                  |               | 18,468 |   |
|                        | Other      assets                     |                  |               | 98,746 |   |
| Total      Assets           |                                  | $                     | 2,979,236          |   |
|                        |                                  |                  |               |   |   |
| Liabilities:                |                                  |                  |               |   |
|                        | Deposits                              |                  | $                  | 1,940,800 |   |
|                        | Borrowings                            |                  |               | 548,805 |   |
|                        | Other      Liabilities                |                  |               | 37,915 |   |
| Total      Liabilities      |                                  | $                     | 2,527,520          |   |
|                        |                                  |                  |               |   |   |
|                        |                                  |                  |               |   |   |
|                        | Net      assets acquired              |                  | $                  | 451,716 |   |
|                        |                                  |                  |               |   |   |

| (dollars      in thousands, except per share data) |   | Pro-forma               |    |   | Pro-forma                |   |
|----------------------------------------------------|--------|-------------------------|---------|--------|--------------------------|--------|
|                                               |   | September      30, 2008 |    |   | September      30, 2007* |   |
|                                               |   |                    |    |   |                     |   |
| Total      revenue                                 |   | $                       | 254,491 |   |                     | $      | 240,121 |   |
| Non-interest      expense                          |   |                    | 163,646 |   |                     |   | 161,373 |   |
| Pre      tax net income                            |   |                    | 90,845  |   |                     |   | 78,748 |   |
| Income      tax                                    |   |                    | 20,788  |   |                     |   | 19,466 |   |
|    Net      income                  |   | $                       | 70,057  |   |                     | $      | 59,282 |   |
|                                               |   |                    |    |   |                     |   |   |   |
| Pro      forma EPS:                                |   |                    |    |   |                     |   |   |   |
| Basic      EPS                                     |   | $                       | 0.90    |   |                     | $      | 0.78 |   |
| Diluted      EPS                                   |   | $                       | 0.89    |   |                     | $      | 0.77 |   |
|                                               |   |                    |    |   |                     |   |   |   |
| *Pro      forma results do not include Christiana. |   |                    |    |   |                     |
|                                               |   |                    |    |   |                     |   |   |   |

----

----

|   | 5.  EARNINGS      PER SHARE |
|--------|---------------------------------------|

|                                 |   |                                                                                                                                                 |    |   | Three      Months Ended September 30, |                                                                                                                                                                |
|--------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|---------|--------|---------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                 |   | 2008                                                                                                                                                 |    |   | 2007                                  |                                                                                                                                                                |
|                                 |   | Net                                                                                                                                                  |    |   | Average                               |                                                                                                                                                                |   |   |   |   | Net |   |   | Average |   |   |   |   |
| (dollars      in thousands,          |   | Income                                                                                                                                               |    |   | Shares                                |                                                                                                                                                                |   | Per      Share |   |   | Income |   |   | Shares |   |   | Per      Share |
| except      per share data)          |   | (numerator)                                                                                                                                          |    |   | (denominator)                         |                                                                                                                                                                |   | Amount |   |   | (numerator) |   |   | (denominator) |   |   | Amount |   |
|                                 |   |                                                                                                                                                 |    |   |                                  |                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      earnings per share        |   |                                                                                                                                                 |    |   |                                  |                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
|        Net income available to  |   |                                                                                                                                                 |    |   |                                  |                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
|        common stockholders      |   | $                                                                                                                                                    | 19,228  |   |                                  |                                                                                                                                                                | 79,742 |   |   | $ | 0.24 |   |   | $ | 16,807 |   |   |   | 49,147 |   |   | $ | 0.34 |   |
| Effect      of dilutive securities:  |   |                                                                                                                                                 |    |   |                                  |                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Options                  |   |                                                                                                                                                 | -  |   |                                  |                                                                                                                                                                | 754 |   |   |   | (0.01 | ) |   |   | - |   |   |   | 494 |   |   |   | -  |   |
| Diluted      earnings per share      |   |                                                                                                                                                 |    |   |                                  |                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Net income available to  |   |                                                                                                                                                 |    |   |                                  |                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        common stockholders      |   |                                                                                                                                                 |    |   |                                  |                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        plus assumed conversions |   | $                                                                                                                                                    | 19,228  |   |                                  |                                                                                                                                                                | 80,496 |   |   | $ | 0.23 |   |   | $ | 16,807 |   |   |   | 49,641 |   |   | $ | 0.34 |   |
|                                 |   |                                                                                                                                                 |    |   |                                  |                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 |   |                                                                                                                                                 |    |   |                                  |                            Nine Months Ended September 30, |   |   |
|                                 |   |                              2008 |    |   |                                  |                         2007                                              |   |   |
|                                 |   | Net                                                                                                                                                  |    |   | Average                               |                                                                                                                                                                |   |   |   |   |   | Net |   |   | Average |   |   |   |   |   |
|                                 |   | Income                                                                                                                                               |    |   | Shares                                |                                                                                                                                                                |   | Per      Share |   |   | Income |   |   | Shares |   |   | Per      Share |
|                                 |   | (numerator)                                                                                                                                          |    |   | (denominator)                         |                                                                                                                                                                |   | Amount |   |   | (numerator) |   |   | (denominator) |   |   | Amount |   |
| Basic      earnings per share        |   |                                                                                                                                                 |    |   |                                  |                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Net income available to  |   |                                                                                                                                                 |    |   |                                  |                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        common stockholders      |   | $                                                                                                                                                    | 68,035  |   |                                  |                                                                                                                                                                | 74,834 |   |   | $ | 0.91 |   |   | $ | 48,524 |   |   |   | 49,445 |   |   | $ | 0.98 |   |
| Effect      of dilutive securities:  |   |                                                                                                                                                 |    |   |                                  |                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Options                  |   |                                                                                                                                                 | -  |   |                                  |                                                                                                                                                                | 637 |   |   |   | (0.01 | ) |   |   | - |   |   |   | 609 |   |   |   | (0.01 | ) |
| Diluted      earnings per share      |   |                                                                                                                                                 |    |   |                                  |                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Net income available to  |   |                                                                                                                                                 |    |   |                                  |                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        common stockholders      |   |                                                                                                                                                 |    |   |                                  |                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        plus assumed conversions |   | $                                                                                                                                                    | 68,035  |   |                                  |                                                                                                                                                                | 75,471 |   |   | $ | 0.90 |   |   | $ | 48,524 |   |   |   | 50,054 |   |   | $ | 0.97 |   |
|                                 |   |                                                                                                                                                 |    |   |                                  |                                                                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                            |   | As      of and for the Nine Months Ended |      |
|---------------------------------|--------|------------------------------------------|-----------|
|                            |   | September      30, 2008                  |      |
|                            |   | Community                                |      |   |   |   |   |   |   |
| (dollars      in thousands)     |   | Banking                                  |      |   | Other |   |   | Consolidated |   |
|                            |   |                                     |      |   |   |   |   |   |   |
| Total      assets               |   | $                                        | 9,240,770 |   |   | $ | 76,025 |   |   | $ | 9,316,795 |   |
| Total      deposits             |   |                                     | 6,220,643 |   |   |   | - |   |   |   | 6,220,643 |   |
| Net      interest income (loss) |   |                                     | 193,028   |   |   |   | (3,388 | ) |   |   | 189,640 |   |
| Total      non-interest income  |   |                                     | 31,066    |   |   |   | 37,896 |   |   |   | 68,962 |   |
| Total      non-interest expense |   |                                     | 129,420   |   |   |   | 27,407 |   |   |   | 156,827 |   |
| Net      income                 |   |                                     | 63,728    |   |   |   | 4,307 |   |   |   | 68,035 |   |
|                            |   |                                     |      |   |   |   |   |   |   |   |   |   |
|                            |   | As      of and for the Nine Months Ended |      |
|                            |   | September      30, 2007                  |
|                            |   | Community                                |      |   |   |   |   |   |   |   |   |
| (dollars      in thousands)     |   | Banking                                  |      |   | Other |   |   | Consolidated |   |
| Total      assets               |   | $                                        | 5,018,843 |   |   | $ | 745,088 |   |   | $ | 5,763,931 |   |
| Total      deposits             |   |                                     | 3,927,823 |   |   |   | 0 |   |   |   | 3,927,823 |   |
| Net      interest income (loss) |   |                                     | 120,581   |   |   |   | (5,072 | ) |   |   | 115,509 |   |
| Total      non-interest income  |   |                                     | 32,816    |   |   |   | 19,926 |   |   |   | 52,742 |   |
| Total      non-interest expense |   |                                     | 83,866    |   |   |   | 18,063 |   |   |   | 101,929 |   |
| Net      income (loss)          |   |                                     | 50,706    |   |   |   | (2,182 | ) |   |   | 48,524 |   |
|                            |   |                                     |      |   |   |   |   |   |   |   |   |   |

----

|                                              |   | September      30, |       |
|---------------------------------------------------|--------|--------------------|------------|
| (dollars      in thousands)                       |   | 2008               |       |   | 2007 |   |
|                                              |   |               |       |   |   |   |
| Service      cost                                 |   | $                  | 1,255,005  |   |   | $ | 1,202,760 |   |
| Interest      cost                                |   |               | 1,367,274  |   |   |   | 1,161,612 |   |
| Expected      return on plan assets               |   |               | (2,065,239 | ) |   |   | (1,733,490 | ) |
| Amortization      of prior service cost           |   |               | (386,877   | ) |   |   | (386,877 | ) |
| Amortization      of unrecognized net actual loss |   |               | 167,199    |   |   |   | 334,461 |   |
| Net      periodic benefit cost                    |   | $                  | 337,362    |   |   | $ | 578,466 |   |
|                                              |   |               |       |   |   |   |   |   |

----

----

|                                         |   | As      of September 30, 2008 |    |   | As      of December 31, 2007 |    |
|----------------------------------------------|--------|-------------------------------|---------|--------|------------------------------|---------|
|                                         |   |                          |    |   | Estimated                    |    |   | Weighted-Average |   |   |   |   |   | Estimated |   |
|                                         |   | Notional                      |    |   | Fair                         |    |   | Years      to |   |   | Receive |   |   | Pay |   |   | Notional |   |   | Fair |   |
| (dollars      in thousands)                  |   | Amount                        |    |   | Value                        |    |   | Maturity |   |   | Rate |   |   | Rate |   |   | Amount |   |   | Value |   |
|                                         |   |                          |    |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      rate swap agreements:          |   |                          |    |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Pay fixed/receive variable swaps |   | $                             | 241,096 |   |                         |  $ | (7,496 | ) |   |   | 5.91 |   |   |   | 5.82 | % |   |   | 5.98 | % |   | $ | 130,342 |   |   | $ | (6,660 | ) |
|        Pay variable/receive fixed       |   |                          | 241,096 |   |                         |    | 7,496 |   |   |   | 5.91 |   |   |   | 5.98 | % |   |   | 5.82 | % |   |   | 130,342 |   |   |   | 6,660 |   |
| Total      swaps                             |   | $                             | 482,192 |   |                         | $       | - |   |   |   | 5.91 |   |   |   | 5.90 | % |   |   | 5.90 | % |   | $ | 260,684 |   |   | $ | - |   |
|                                         |   |                          |    |   |                         |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

|                                          |   | Quoted      Prices    |   |   | Significant    |    |      |           |   |    |               |   |
|-----------------------------------------------|--------|-----------------------|--------|--------|----------------|---------|-----------|----------------|--------|---------|--------------------|--------|
|                                          |   | in      Active        |   |   | Other          |    |      | Significant    |   |    | Balance            |   |
|                                          |   | Markets      for      |   |   | Observable     |    |      | Unobservable   |   |    | as      of         |   |
|                                          |   | Identical      Assets |   |   | Inputs         |    |      | Inputs         |   |    | September      30, |   |
|                                          |   | (Level      1)        |   |   | (Level      2) |    |      | (Level      3) |   |    | 2008               |   |
| (dollars      in thousands)                   |   |                  |   |   |           |    |      |           |   |    |               |   |
| Assets                                        |   |                  |   |   |           |    |      |           |   |    |               |   |
| Investment      securities available for sale |   |  $               | 9,900  |   |           |  $ | 1,502,216 |           |   |  $ | 75,736             |   |   |  $ | 1,587,852 |   |
| Interest      rate locks                      |   |                  | -      |   |           |    | 17        |           |   |    | -                  |   |   |   | 17 |   |
| Interest      rate swap agreements            |   |                  | -      |   |           |    | 7,496     |           |   |    | -                  |   |   |   | 7,496 |   |
|                                          |   |                  |   |   |           |    |      |           |   |    |               |   |   |   |   |   |
| Liabilities                                   |   |                  |   |   |           |    |      |           |   |    |               |   |   |   |   |   |
| Subordinated      debt                        |   | $                     | 57,186 |   |           | $       | -         |           |   | $       | -                  |   |   | $ | 57,186 |   |
| Interest      rate swap agreements            |   |                  | -      |   |           |    | 7,496     |           |   |    | -                  |   |   |   | 7,496 |   |
|                                          |   |                  |   |   |           |    |      |           |   |    |               |   |   |   |   |   |

| (dollars      in thousands)                           |   | Investment      Securities |     |
|-------------------------------------------------------|--------|----------------------------|----------|
|                                                  |   | Available      for Sale    |     |
| Assets                                                |   |                       |     |
| Beginning      balance December 31, 2007              |   | $                          | 194,047  |   |
| Total      gains/(losses) - (realized/unrealized):    |   |
|   Included      in earnings                 |   |                       | -        |   |
|   Included      in other comprehensive loss |   |                       | (26,991  | ) |
| Purchases,      issuances, and settlements            |   |                       | 3,147    |   |
| Transfer      into level 3 from KNBT and              |   |                       |     |   |
|      Christiana              |   |                       | 44,813   |   |
| Transfer      out to held to maturity                 |   |                       | (139,280 | ) |
| Ending      balance September 30, 2008                |   | $                          | 75,736   |   |
|                                                  |   |                       |     |   |

----

| (Dollars      in Thousands)    |   | Quoted      Prices in Active Markets for Identical Assets (Level    1) |   |   | Significant      Other Observable Inputs (Level 2) |   |   | Significant      Unobservable Inputs(Level      3) |   |   | Balance      as of September 30, 2008 |   |
|-------------------------------------|--------|-----------------------------------------------------------------------------|--------|--------|----------------------------------------------------|--------|--------|----------------------------------------------------|--------|--------|---------------------------------------|--------|
| Assets                              |   |                                                                        |   |   |                                               |   |   |                                               |   |   |                                  |   |
| Loans      and leases held for sale |   | $                                                                           | 5,317  |   |                                               | $      | -      |                                               |   | $      | -                                     |   |   | $ | 5,317 |   |
| Impaired      loans, net            |   |                                                                        | -      |   |                                               |   | -      |                                               |   |   | 22,426                                |   |   |   | 22,426 |   |
| Interest      rate locks            |   |                                                                        | -      |   |                                               |   | 17     |                                               |   |   | -                                     |   |   |   | 17 |   |

----

| ·     | Trust Preferred      Pools/Collateralized Debt Obligations – During the second quarter      of 2008, CDO investments were reclassified from Available-For-Sale to      Held-To-Maturity.  This demonstrates the Company’s intent to      hold these investments to maturity.  The reclassification of      these investments had no impact on capital ratios at September 30,      2008.  The Company’s unrealized loss in this category is related      to general market conditions and the resultant lack of liquidity in the      market.  The severity of the impairments in relation to the      carrying amounts of the individual investments is consistent with market      developments.  The Company’s analysis for each investment      performed at the CUSIP level, shows that the credit quality of the      individual bonds ranges from good to deteriorating.  Credit risk      does exist and an individual issuer in a pool could default which could      affect the ultimate collectibility of contractual      amounts.  Management has reviewed, and will continue to review,      possible other-than-temporary impairment of its portfolio in the context      of the guidance provided by FSP FAS 115-1 and FAS 124-1.  Should      an other-than temporary impairment charge be necessary, the Company      anticipates that this would occur on a pool-by-pool basis and therefore      the charges would be spread over time.  As of the filing date of      this 10-Q, management concluded, as a result of its review, that      other-than-temporary impairment did not exist due to the continuing      performance or the collateral structure of the individual investments and      the Company’s ability and intent to hold these investments to recovery of      fair value, which may be maturity.  Ultimately, the quality of      these Trust Preferred Pools/CDO investments will depend on the financial      strength of the individual banks and insurance companies who issued debt      into these pools, coupled with the protections afforded to the rated class      holders within the structure of eachpool. |
|--------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·          | Equities – The      Company’s portfolio of common stock investments consists of      mid-Atlantic-based banks and banking companies which were purchased as      long-term investments.  The unrealized loss in this category is      due to general market conditions for financial stocks, which is a sector      that is currently out of favor in the capital markets.  The      severity of the impairment in relation to the carrying amounts of the      individual investments is consistent with market      developments.  Management has evaluated the recovery period and      determined that the investment’s value will be recovered in that period;      it does not consider these long-term investments to be      other-than-temporarily impaired at September 30,  2008. |
|--------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·     | All Other      Investments – The unrealized losses in all other Company      investments is primarily caused by the movement of interest      rates.  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.  Because the Company has the ability and intent      to hold these investments until a recovery of fair value, which may be      maturity, the Company does not consider those investments to be      other-than-temporarily impaired at September 30,  2008. |
|--------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| `                           |   | Nine      Months Ended September 30 |    |
|-----------------------------|--------|-------------------------------------|---------|
| (dollars      in thousands) |   | 2008                                |    |   | 2007 |   |
| Interest                    |   | $                                   | 168,584 |   |   | $ | 140,730 |   |
| Taxes                       |   |                                | 18,500  |   |   |   | 12,537 |   |
|                        |   |                                |    |   |   |   |   |   |

----

| (dollars      in thousands)                                    |   | Nine      Months Ended September 30, |    |
|----------------------------------------------------------------|--------|--------------------------------------|---------|
|                                                           |   | 2008                                 |    |   | 2007 |   |
| Transfers      of loans to other real estate                   |   | $                                    | 1,744   |   |   | $ | 626 |   |
| Transfers      of loans to investments in securitizations      |   |                                 | -       |   |   |   | 26,800 |   |
| Other      than temporary impairment investments               |   |                                 | 20,000  |   |   |   | - |   |
| Transfer      of investment securities from available-for-sale |   |                                 |    |   |   |   |   |   |
| to      held-to maturity                                       |   |                                 | 139,280 |   |   |   | - |   |
| Non-cash      share based compensation plan transactions       |   |                                 | 2,478   |   |   |   | 3,980 |   |

|                                                                  |   | Nine      Months Ended September 30, |       |
|-----------------------------------------------------------------------|--------|--------------------------------------|------------|
| (dollars      in thousands)                                           |   | 2008                                 |       |   | 2007 |   |
| Details      of acquisition:                                          |   |                                 |       |   |   |   |
|   Fair      value of assets acquired                        |   | $                                    | 3,160,697  |   |   |   | - |   |
|   Fair      value of liabilities assumed                    |   |                                 | (2,664,059 | ) |   |   | - |   |
|   Stock      issued for acquisitions                        |   |                                 | (484,574   | ) |   |   | - |   |
|   Cash      paid for acquisitions                           |   |                                 | 12,064     |   |   |   | - |   |
|   Cash      and cash equivalents acquired with acquisitions |   |                                 | 47,916     |   |   |   | - |   |
|   Cash      equivalents received in excess of cash          |   |                                 |       |   |   |   |  |   |
|      paid      for businesses acquired       |   | $                                    | 35,852     |   |   |   | - |   |
|                                                                  |   |                                 |       |   |   |   |   |   |

----

|                                                         |   | Three      Months Ended |   |
|--------------------------------------------------------------|--------|-------------------------|--------|
| (dollars      in thousands)                                  |   | September      30, 2008 |   |
| Net      Income                                              |   | $                       | 19,228 |   |
| After      tax unrealized fair market value gain on NPB      |   |                    |   |   |
|    Capital      Trust II Preferred Securities |   |                    | (4,967 | ) |
| After      tax other than temporary impairment charge        |   |                    |   |   |
|    on      synthetic CDO investment           |   |                    | 13,000 |   |
| Core      net income                                         |   | $                       | 27,261 |   |
|                                                         |   |                    |   |   |
| Diluted      earnings per share                              |   | $                       | 0.23   |   |
| After      tax unrealized fair market value gain on NPB      |   |                    |   |   |
|    Capital      Trust II Preferred Securities |   |                    | (0.06  | ) |
| After      tax other than temporary impairment charge        |   |                    |   |   |
|    on      synthetic CDO investment           |   |                    | 0.17   |   |
| Core      diluted earnings per share                         |   | $                       | 0.34   |   |
|                                                         |   |                    |   |   |

|                                                |   | September      30, |     |
|-----------------------------------------------------|--------|--------------------|----------|
| (dollars      in thousands, percentages annualized) |   | 2008               |     |   | 2007 |   |
| Return      on average shareholders' equity         |   |               | 9.34     | % |   |   | 11.94 | % |
| Effect      of goodwill and intangibles             |   |               | 11.28    | % |   |   | 12.78 | % |
| Return      on average tangible equity              |   |               | 20.62    | % |   |   | 24.72 | % |
|                                                |   |               |     |   |   |   |   |   |
| Average      tangible equity excludes acquisition   |   |               |     |   |   |   |   |   |
| related      average goodwill and intangibles:      |   |               |     |   |   |   |   |   |
|   Average      shareholders' equity       |   | $                  | 973,495  |   |   | $ | 543,218 |   |
|   Average      goodwill and intangibles   |   |               | (532,771 | ) |   |   | (280,795 | ) |
|   Average      tangible equity            |   | $                  | 440,724  |   |   | $ | 262,423 |   |
|                                                |   |               |     |   |   |   |   |   |

----

| ·   | allowance      for loan and lease losses; |
|--------------------|-------------------------------------------|

| ·   | goodwill      impairment; |
|--------------------|---------------------------|

| ·   | deferred      tax assets, liabilities, and uncertain tax  positions; |
|--------------------|----------------------------------------------------------------------|

| ·   | share-based      compensation; |
|--------------------|--------------------------------|

| ·   | fair      value measurements, including assessment of other than temporary      impairment; and |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | business      combinations. |
|--------------------|-----------------------------|

----

|                                                                                                              |   | Nine      Months Ended September 30, |      |   |
|-------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|-----------|--------|
|                                                                                                              |   | 2008                                 |      |   | 2007 |   |   |
|                                                                                                              |   |                                 |      |   | Interest |   |   | Average |   |   |   |   |   |   | Interest |   |   |  Average |   |   |  |   |
|                                                                                                              |   | Average                              |      |   | Income/ |   |   | Yield/ |   |   | Average |   |   |   | Income/ |   |   |  Yield/ |   |   |  |   |
| (dollars      in thousands)                                                                                       |   | Balance                              |      |   | Expense |   |   | Rate |   |   | Balance |   |   |   | Expense |   |   |  Rate |   |   |  |   |
| Interest-earning      assets                                                                                      |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      bearing balances with banks                                                                         |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         and federal funds sold                                                                          |   | $                                    | 24,345    |   |   | $ | 576 |   |   |   | 3.16 | % |   | $ | 7,103 |   |   |   | $ | 166 |   |   |  3.12 |  % |   |   |   |   |
| Investment      securities*                                                                                       |   |                                 | 1,908,169 |   |   |   | 79,784 |   |   |   | 5.59 | % |   |   | 1,310,588 |   |   |   |   | 56,515 |   |   |  5.77 |  % |   |   |   |   |
| Total      loans and leases*                                                                                      |   |                                 | 5,829,145 |   |   |   | 285,341 |   |   |   | 6.54 | % |   |   | 3,698,998 |  ² |   |   |   | 203,882 |  3 |   |  7.37 |  % |   |   |   |   |
| Total      earnings assets                                                                                        |   | $                                    | 7,761,659 |   |   | $ | 365,701 |   |   |   | 6.29 | % |   | $ | 5,016,689 |   |   |   | $ | 260,563 |   |   |  6.94 |  % |   |   |   |   |
|                                                                                                              |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing      liabilities                                                                                 |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      bearing deposits                                                                                    |   | $                                    | 5,111,137 |   |   | $ | 108,137 |   |   |   | 2.83 | % |   | $ | 3,300,202 |   |   |   | $ | 92,168 |   |   |   | 3.73 |  % |   |   |   |   |
| Short-term      borrowings                                                                                        |   |                                 | 713,452   |   |   |   | 15,750 |   |   |   | 2.96 | % |   |   | 478,797 |   |   |   |   | 14,900 |   |   |   | 4.16 | % |   |   |   |   |
| Long-term      borrowings                                                                                         |   |                                 | 1,121,623 |   |   |   | 37,096 |   |   |   | 4.41 | % |   |   | 677,227 |   |   |   |   | 26,394 |   |   |   | 5.21 |  % |   |   |   |   |
| Total      interest-bearing liabilities                                                                           |   | $                                    | 6,946,212 |   |   | $ | 160,983 |   |   |   | 3.10 | % |   | $ | 4,456,226 |   |   |   | $ | 133,462 |   |   |   | 4.00 |  % |   |   |   |   |
|                                                                                                              |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| INTEREST      RATE MARGIN**                                                                                       |   |                                 |      |   |   | $ | 204,718 |   |   |   | 3.52 | % |   |   |   |   |   |   | $ | 127,101 |   |   |   | 3.39 |  % |   |   |   |   |
|    Tax      equivalent interest                                                                    |   |                                 |      |   |   |   | (15,078 | ) |   |   | -0.26 | % |   |   |   |   |   |   |   | (11,592 | ) |   |   | -0.31 |  % |   |   |   |   |
|    Net      interest income                                                                        |   |                                 |      |   |   | $ | 189,640 |   |   |   | 3.26 | % |   |   |   |   |   |   | $ | 115,509 |   |   |   | 3.08 |  % |   |   |   |   |
|                                                                                                              |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| *Full      taxable equivalent basis, using a 35% effective tax rate.                                              |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Represents      the difference between interest earned and interest paid, divided by total      earning assets. |   |                                 |      |   |   |   |   |   |   |
| ²Loans      outstanding, net of unearned income, include non-accruing      loans.                            |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ³Fee      income included.                                                                                   |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                              |   |                                 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                       |   | Nine Months      Ended       |    |
|------------------------------------------------------------|--------|-----------------------------------|---------|
| (dollars      in thousands)                                |   | September      30, 2008 over 2007 |    |
| Increase      (decrease) due to:                           |   | Volume                            |    |   | Rate |   |   | Total |   |
| Interest      Income:                                      |   |                              |    |   |   |   |   |   |   |
| Interest      bearing deposits in banks and fed funds sold |   | $                                 | 403     |   |   | $ | 7 |   |   | $ | 410 |   |
| Investment      securities                                 |   |                              | 25,769  |   |   |   | (2,500 | ) |   |   | 23,269 |   |
| Total      loans and leases                                |   |                              | 117,410 |   |   |   | (35,951 | ) |   |   | 81,459 |   |
| Total      interest income                                 |   | $                                 | 143,582 |   |   | $ | (38,444 | ) |   | $ | 105,138 |   |
| Interest      Expense:                                     |   |                              |    |   |   |   |   |   |   |   |   |   |
| Interest      bearing deposits                             |   | $                                 | 50,564  |   |   | $ | (34,597 | ) |   | $ | 15,967 |   |
| Short-term      borrowings                                 |   |                              | 7,302   |   |   |   | (6,396 | ) |   |   | 906 |   |
| Long-term      borrowings                                  |   |                              | 17,320  |   |   |   | (6,672 | ) |   |   | 10,648 |   |
| Total      interest expense                                |   | $                                 | 75,186  |   |   | $ | (47,665 | ) |   | $ | 27,521 |   |
| Increase  in      net interest income            |   | $                                 | 68,396  |   |   | $ | 9,221 |   |   | $ | 77,617 |   |
|                                                       |   |                              |    |   |   |   |   |   |   |   |   |   |
|                                                       |   |                              |    |   |   |   |   |   |   |   |   |   |

----

| ·  | General      economic conditions;                                                                                                 |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------|
| ·  | Trends      in charge-offs for each loan type;                                                                                    |
| ·  | The      level of nonperforming assets, including loans over 90 days delinquent and      impaired loans;                          |
| ·  | A      review of portfolio concentration of any type, either customer, industry      loan type, collateral or riskgrade;      and |
| ·  | Levels      of criticized loans.                                                                                                  |

| (dollars      in thousands)                                                                         |   | 9/30/2008* |   |   | 6/30/2008* |   |   | 3/31/2008 * |   |   | 12/31/2007 |   |
|-----------------------------------------------------------------------------------------------------|--------|------------|--------|--------|------------|--------|--------|-------------|--------|--------|------------|--------|
|                                                                                                |   |       |   |   |       |   |   |        |   |   |       |   |
| Specific      reserves                                                                              |   | $          | 3,764  |   |       | $      | 3,068  |        |   | $      | 2,310      |   |   | $ | 613 |   |
| Allocated      reserves                                                                             |   |       | 65,844 |   |       |   | 75,368 |        |   |   | 78,708     |   |   |   | 54,162 |   |
| Unallocated      reserves                                                                           |   |       | 14,088 |   |       |   | 3,206  |        |   |   | 613        |   |   |   | 122 |   |
|                                                                                                |   | $          | 83,696 |   |       | $      | 81,642 |        |   | $      | 81,631     |   |   | $ | 54,897 |   |
|                                                                                                |   |       |   |   |       |   |   |        |   |   |       |   |   |   |   |   |
| *      Includes Christiana and KNBT. Both were acquired during the first      quarter of 2008. |   |

| (dollars      in thousands)                                                                         |   | 9/30/2008* |      |   | 6/30/2008* |   |      | 3/31/2008 * |   |    | 12/31/2007 |   |
|-----------------------------------------------------------------------------------------------------|--------|------------|-----------|--------|------------|--------|-----------|-------------|--------|---------|------------|--------|
|                                                                                                |   |       |      |   |       |   |      |        |   |    |       |   |
| Nonperforming      loans                                                                            |   | $          | 28,741    |   |       | $      | 21,783    |        |   | $       | 23,818     |   |   | $ | 15,285 |   |
| Nonperforming      loans to total loans                                                             |   |       | 0.46      | %      |       |   | 0.36      | %           |   |    | 0.40       | %      |   |   | 0.39 | % |
| Delinquent      loans                                                                               |   | $          | 19,525    |   |       | $      | 20,264    |        |   |  $ | 20,790     |   |   |  $ | 7,041 |   |
| Delinquent      loans to total loans                                                                |   |       | 0.31      | %      |       |   | 0.33      | %           |   |    | 0.35       | %      |   |   | 0.18 | % |
| Classified      loans                                                                               |   | $          | 167,049   |   |       | $      | 110,184   |        |   |  $ | 104,730    |   |   |  $ | 68,970 |   |
| Classified      loans to total loans                                                                |   |       | 2.69      | %      |       |   | 1.80      | %           |   |    | 1.74       | %      |   |   | 1.78 | % |
| Tier      1 capital and ALLL                                                                        |   | $          | 727,881   |   |       | $      | 723,865   |        |   |  $ | 704,218    |   |   |  $ | 454,063 |   |
| Classified      loans to tier 1 capital and ALLL                                                    |   |       | 22.95     | %      |       |   | 15.22     | %           |   |    | 14.87      | %      |   |   | 15.19 | % |
| Total      loans                                                                                    |   | $          | 6,207,621 |   |       | $      | 6,133,598 |        |   | $       | 6,012,864  |   |   | $ | 3,875,253 |   |
|                                                                                                |   |       |      |   |       |   |      |        |   |    |       |   |   |   |   |   |
| *      Includes Christiana and KNBT. Both were acquired during the first      quarter of 2008. |   |
|                                                                                                |   |       |      |   |       |   |      |        |   |    |       |   |   |   |   |   |

----

----

| ·   | Our      Syndicated Commercial portfolio has no loss experience to      date.  Given the typical highly leveraged financial position of      the borrowers, it is probable some losses will occur going      forward. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Real      Estate portfolio, particularly Residential tract      development.  Given the continued declines in residential      housing market, it’s probable that we will experience credit performance      problems in this portfolio as established interest reserves are exhausted      and collateral values decline. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Consumer      portfolio, specifically our Home Equity portfolio.  As home      prices decline the collateral coverage we have for our junior lien      position credits will decline so our loss experience is likely to      increase. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                            |   | September      30, |      |   | December      31, |   |
|---------------------------------------------------------------------------------|--------|--------------------|-----------|--------|-------------------|--------|
| (dollars      in thousands)                                                     |   | 2008               |      |   | 2007              |   |
| Restructured      loans                                                         |   | $                  | 628       |   |              | $      | - |   |
| Non-accrual      loans and leases                                               |   |               | 25,562    |   |              |   | 15,198 |   |
| Loans      and leases past due 90 or more days as to interest or      principal |   |               | 2,551     |   |              |   | 87 |   |
| Total      nonperforming loans and leases                                       |   | $                  | 28,741    |   |              | $      | 15,285 |   |
| Other      real estate owned                                                    |   |               | 1,623     |   |              |   | - |   |
| Total      nonperforming assets                                                 |   | $                  | 30,364    |   |              | $      | 15,285 |   |
|                                                                            |   |               |      |   |              |   |   |   |
| Total      loans and leases, including loans held for sale                      |   | $                  | 6,207,621 |   |              | $      | 3,875,253 |   |
| Average      total loans and leases                                             |   | $                  | 5,829,145 |   |              | $      | 3,825,406 |   |
| Allowance      for loan and lease losses                                        |   | $                  | 83,696    |   |              | $      | 54,897 |   |
|                                                                            |   |               |      |   |              |   |   |   |
| Allowance      for loan and lease losses to:                                    |   |               |      |   |              |   |   |   |
| Nonperforming      assets                                                       |   |               | 275.64    | %      |              |   | 359.20 | % |
| Total      loans and leases                                                     |   |               | 1.35      | %      |              |   | 1.42 | % |
| Average      total loans and leases                                             |   |               | 1.44      | %      |              |   | 1.44 | % |
|                                                                            |   |               |      |   |              |   |   |   |

|                                     |   | For      Nine Months Ended |   |   | For      Three Months Ended |   |
|------------------------------------------|--------|----------------------------|--------|--------|-----------------------------|--------|
| (dollars      in thousands)              |   | September      30,         |   |   | September      30,          |   |
|                                     |   | 2008                       |   |   | 2007                        |   |   | 2008 |   |   | 2007 |   |
| Net      charge-offs                     |   | $                          | 11,083 |   |                        | $      | 6,045 |   |   | $ | 4,822 |   |   | $ | 2,130 |   |
|                                     |   |                       |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Net      charge-offs (annualized) to:    |   |                       |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Total      loans and leases              |   |                       | 0.24   | %      |                        |   | 0.21 | % |   |   | 0.31 | % |   |   | 0.22 | % |
| Average      total loans and leases      |   |                       | 0.25   | %      |                        |   | 0.22 | % |   |   | 0.32 | % |   |   | 0.23 | % |
| Allowance      for loan and lease losses |   |                       | 17.66  | %      |                        |   | 14.36 | % |   |   | 23.04 | % |   |   | 15.13 | % |

----

----

| ·   | Loans      to individuals to finance the purchase of personal assets or activities      were $958.0 million or 15.5% of totalloans. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Residential      mortgage loans for the purchase or financing of an individual’s private      residence were $1.06 billion or 17.1% of total loans.   The      Company’s residential mortgage loan portfolio consists substantially of      “prime/agency” loans, which are based on 80% of appraised value and are      made to borrowers with average or better credit ratings.  The      Company did not originate loans considered “Alt A” or “Sub-prime” during      the quarter ended September 30, 2008.  For the nine months ended      September 30, 2008, Alt A loans represented 1.4% of the total dollars of      originations in that period.  Alt A loans are those to borrowers      who generally have average or better credit scores, and have reduced      documentation.  The Company sold Alt A loans and Sub-prime      loans, if any, to investors in the secondary market, subject to recourse      claims for a period of time for defaults related to borrower payments      and/or Company representations.  Recourse claims year-to-date      September 30, 2008 were not material to the Company’s financial position      or results of operations.  The Company did not experience a      notable increase in recourse claims during this period.  KNBT      had purchased a portfolio of residential mortgages prior to the merger,      which contained some Alt A loans.  Approximately 4.7% of the      Company’s residential mortgage portfolio consists of these purchased Alt A      loans. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Commercial      loans were $4.19 billion or 67.4% of the total loan      portfolio.  This category includes commercial real estate,      commercial construction and commercial and industrial    loans. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                                                                                                  |   |   Repricing      Periods |             |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|------------------|
|                                                                                                                                  |   | At      September 30, 2008         |             |
|                                                                                                                                  |   |                               |             |   | More      than |   |   | More      than |   |   |   |   |   |   |   |
|                                                                                                                                  |   | 3      Months                      |             |   | 3      Months |   |   | 1      Year |   |   | More      than |   |   |   |   |
| (dollars      in thousands)                                                                                                           |   | or      Less                       |             |   | to      1 year |   |   | to      5 Years |   |   | 5      Years |   |   | Total |   |
| Interest-earning      assets:                                                                                                         |   |                               |             |   |   |   |   |   |   |   |   |   |   |   |   |
|        Federal funds sold                                                                                                        |   | $                                  | 44,000           |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 44,000 |   |
|        Investment securities                                                                                                     |   |                               | 360,712          |   |   |   | 219,405 |   |   |   | 593,855 |   |   |   | 981,427 |   |   |   | 2,155,399 |   |
|        Loans and Leases (1)                                                                                                      |   |                               | 2,335,051        |   |   |   | 892,686 |   |   |   | 2,182,612 |   |   |   | 780,684 |   |   |   | 6,191,033 |   |
|           Total interest-earning assets                                                                           |   | $                                  | 2,739,763        |   |   | $ | 1,112,091 |   |   | $ | 2,776,467 |   |   | $ | 1,762,111 |   |   | $ | 8,390,432 |   |
|           Cumulative total interest-                                                                              |   |                               |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           earning assets                                                                                          |   | $                                  | 2,739,763        |   |   | $ | 3,851,854 |   |   | $ | 6,628,321 |   |   | $ | 8,390,432 |   |   | $ | 8,390,432 |   |
| Interest      bearing liabilities:                                                                                                    |   |                               |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Interest bearing deposits                                                                                                 |   | $                                  | 3,642,971        |   |   | $ | 1,436,901 |   |   | $ | 279,500 |   |   | $ | 1,945 |   |   | $ | 5,361,317 |   |
|        Borrowed funds                                                                                                            |   |                               | 734,440          |   |   |   | 138,205 |   |   |   | 799,217 |   |   |   | 160,245 |   |   |   | 1,832,107 |   |
|        Subordinated debt                                                                                                         |   |                               | 134,507          |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 134,507 |   |
|           Total interest-bearing                                                                                  |   |                               |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           liabilities                                                                                             |   | $                                  | 4,511,918        |   |   | $ | 1,575,106 |   |   | $ | 1,078,717 |   |   | $ | 162,190 |   |   | $ | 7,327,931 |   |
|           Cumulative total interest-                                                                              |   |                               |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           bearing liabilities                                                                                     |   | $                                  | 4,511,918        |   |   | $ | 6,087,024 |   |   | $ | 7,165,741 |   |   | $ | 7,327,931 |   |   | $ | 7,327,931 |   |
| Interest-earning      assets                                                                                                          |   |                               |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        less interest bearing liabilities                                                                                         |   | $                                  |  (1,772,155 |  ) |   | $ | (463,015 | ) |   | $ | 1,697,750 |   |   | $ | 1,599,921 |   |   | $ | 1,062,501  |   |
| Cumulative      interest-rate                                                                                                         |   |                               |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        sensitivity gap                                                                                                           |   | $                                  | (1,772,155       | ) |   | $ | (2,235,170 | ) |   | $ | (537,420 | ) |   | $ | 1,062,501 |   |   |   |   |   |
|                                                                                                                                  |   |                               |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)      Adjustable rate loans are included in the period in which interest rates      are next scheduled to adjust rather than in    |   |
| the      period in which they are due. Fixed rate loans are included in the      period in which they are scheduled to be repaid |   |
| and      are adjusted to take into account estimated prepayments based upon      assumptions estimating the expected                  |   |
| prepayments      in the interest rate environment prevailing during the third calendar      quarter of 2008. The table assumes   |   |
| prepayments      and scheduled principal amortization of fixed rate loans and      mortgage-backed securities, and                    |   |
| assumes      that adjustable-rate mortgages will reprice at contractual repricing      intervals. There has been no adjustment   |   |
| for      the impact of future commitments and loans in process.                                                                       |   |                               |             |   |   |   |   |   |   |   |   |   |   |

----

| (dollars      in thousands)       |   |   |      |   |                                           |   |
|-----------------------------------|--------|--------|-----------|--------|------------------------------------------------|--------|
|                              |   |   |      |   | %      Change                                  |
| MVPE                              |   |   |      |   | from        |
| Change      in Interest Rate      |   | Amount |      |   | Base      Case                                 |
| Rate      Scenario                |   |   |      |   |                                           |   |
| +      300 basis point rate shock |   | $      | 761,354   |   |                                           |   | -24.53 | % |
| +      200 basis point rate shock |   |   | 852,672   |   |                                           |   | -15.48 | % |
| +      100 basis point rate shock |   |   | 937,216   |   |                                           |   | -7.10 | % |
| Static      - base case           |   |   | 1,008,816 |   |                                           |   | 0.00 | % |
| -      100 basis point rate shock |   |   | 1,041,728 |   |                                           |   | 3.26 | % |
| -      200 basis point rate shock |   |   | 1,037,304 |   |                                           |   | 2.82 | % |
| -      300 basis point rate shock |   |   | 1,009,058 |   |                                           |   | 0.02 | % |

| (dollars      in thousands) |       |   |                    |   |    |                    |   |   |
|-----------------------------|------------|--------|-------------------------|--------|---------|-------------------------|--------|--------|
|                        |       |   | September      30, 2008 |   |    | September      30, 2007 |   |
| Change      in              |       |   | Change      in          |   |    | Change      in          |   |   | Change      in |   |   | Change      in |   |
| Interest      Rates         |       |   | Net      Income         |   |    | Net      Income         |   |   | Net      Income |   |   | Net      Income |   |
| (in      basis points)      |       |   |                    |   |    |                    |   |   |   |   |   |   |   |
|                        | +      300 |   |                    | $      | (11,412 | )                       |   |   | -9.14 | % |   | $ | (6,655 | ) |   |   | -9.48 | % |
|                        | +      200 |   |                    |   | (6,060  | )                       |   |   | -4.85 | % |   |   | (3,653 | ) |   |   | -5.20 | % |
|                        | +      100 |   |                    |   | (2,063  | )                       |   |   | -1.65 | % |   |   | (1,595 | ) |   |   | -2.27 | % |
|                        | -      100 |   |                    |   | (2,667  | )                       |   |   | -2.14 | % |   |   | 2,904 |   |   |   | 4.14 | % |
|                        | -      200 |   |                    |   | (10,778 | )                       |   |   | -8.63 | % |   |   | 5,175 |   |   |   | 7.37 | % |
|                        | -      300 |   |                    |   | (21,254 | )                       |   |   | -17.03 | % |   |   | 6,955 |   |   |   | 9.91 | % |
|                        |       |   |                    |   |    |                    |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                           |   |   |      |   | Payments      Due by Period: |   |
|----------------------------------------------------------------|--------|--------|-----------|--------|------------------------------|--------|
|                                                           |   |   |      |   |                         |   |   | After      one |   |   | After      three |   |   |   |   |
|                                                           |   |   |      |   | Less      Than               |   |   | year      to |   |   | years      to |   |   | More      Than |   |
| (dollars      in thousands)                                    |   | Total  |      |   | One      Year                |   |   | three      years |   |   | five      years |   |   | 5      Years |   |
|                                                           |   |   |      |   |                         |   |   |   |   |   |   |   |   |   |   |
| Minimum      annual rentals or non-cancelable operating leases |   | $      | 40,727    |   |                         | $      | 6,191 |   |   | $ | 9,849 |   |   | $ | 6,549 |   |   | $ | 18,138 |   |
| Remaining      contractual maturities of time deposits         |   |   |      |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loan      commitments                                          |   |   | 1,830,772 |   |                         |   | 1,050,518 |   |   |   | 203,712 |   |   |   | 36,448 |   |   |   | 540,094 |   |
| Long-term      borrowed funds                                  |   |   | 979,513   |   |                         |   | 143,270 |   |   |   | 209,594 |   |   |   | 106,406 |   |   |   | 520,243 |   |
| Guaranteed      preferred beneficial interests in Company's    |   |   |      |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   subordinated      debentures                       |   |   | 134,507   |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   | 134,507 |   |
| Letters      of credit                                         |   |   | 188,677   |   |                         |   | 137,126 |   |   |   | 41,192 |   |   |   | 10,359 |   |   |   | - |   |
|   Total                                              |   | $      | 3,174,196 |   |                         | $      | 1,337,105 |   |   | $ | 464,347 |   |   | $ | 159,762 |   |   | $ | 1,212,982 |   |
|                                                           |   |   |      |   |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                         |   | Tier      1 Capital to    |   |   | Tier      1 Capital to Risk- |   |   | Total Capital      to Risk- |   |
|----------------------------------------------|--------|---------------------------|--------|--------|------------------------------|--------|--------|----------------------------------|--------|
|                                         |   | Average      Assets Ratio |   |   | Weighted      Assets Ratio   |   |   | Weighted      Assets Ratio       |   |
|                                         |   | Sept.      30,            |   |   | Dec.      31,                |   |   | Sept.      30,                   |   |   | Dec.      31, |   |   | Sept.      30, |   |   | Dec.      31, |   |
|                                         |   | 2008                      |   |   | 2007                         |   |   | 2008                             |   |   | 2007 |   |   | 2008 |   |   | 2007 |   |
|                                         |   |                      |   |   |                         |   |   |                             |   |   |   |   |   |   |   |   |   |   |
| The      Company                             |   |                      | 7.43   | %      |                         |   | 7.76   | %                                |   |   | 9.34 | % |   |   | 9.54 | % |   |   | 10.56 | % |   |   | 10.81 | % |
| National      Penn Bank                      |   |                      | 7.45   | %      |                         |   | 7.29   | %                                |   |   | 9.44 | % |   |   | 8.99 | % |   |   | 10.65 | % |   |   | 10.22 | % |
| Christiana                                   |   |                      | 9.97   | %      |                         |   | 13.77  | %                                |   |   | 11.83 | % |   |   | 14.72 | % |   |   | 13.09 | % |   |   | 15.97 | % |
| "Well      Capitalized" institution          |   |                      | 5.00   | %      |                         |   | 5.00   | %                                |   |   | 6.00 | % |   |   | 6.00 | % |   |   | 10.00 | % |   |   | 10.00 | % |
|   (under      banking regulations) |   |                      |   |   |                         |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| ·   | the      preferred stock issued to the U.S. Treasury (“Treasury Preferred Stock”)      would pay 5% dividends for the first five years, and then 9% dividends      thereafter; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | in      connection with the purchase of preferred stock, the U.S. Treasury will      receive warrants entitling the U.S. Treasury to buy the participating      institution’s common stock with a market price equal to 15% of the      Treasury Preferred Stock; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the      Treasury Preferred Stock may not be redeemed for a period of three years,      except with proceeds from high-quality private  capital; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the      consent of the U.S. Treasury will be required to increase common dividends      per share or any share repurchases, with limited exceptions, during the      first three years, unless the Treasury Preferred Stock has been redeemed      or transferred to third parties;and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | participating      companies must adopt the U.S Treasury’s standards for executive      compensation and corporate governance for the period during which the U.S.      Treasury holds the equity issued under the TARP Capital Purchase      Program. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | The      general economy and local market conditions will likely result in modest      deposit and loan growth in the low to mid single-digit percentages during      the remainder of 2008. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Earnings      growth remains difficult in light of the pressure on interest margin due      to current and anticipated interest rate levels and the competitive      environment, as well as increasing credit quality      pressures.  Management seeks to increase net interest income      principally through increased volume, including volume from mergers and      acquisitions, to increase non-interest income, especially revenues from      insurance and wealth management activities, and to contain      costs. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      Company, like many of its peers, continues to be concerned about current      and near term uncertain economic conditions, especially in the real estate      market, and their effect on its overall credit  quality. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Management      has the opportunity to raise new capital in a cost-effective manner and is      assessing whether to apply for the U. S. Treasury’s Capital Purchase      Program.  This would provide resources for growth      opportunities.  For further information, see Footnote 4 and      “Recent Developments.” |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Declinesin asset values may result in impairment charges and adversely impact the valueof our investments

----

----

----

|    | • | National      Penn’s branding and marketing initiatives may not be effective in building      name recognition and customer awareness of National Penn’s products and      services.  In particular, the continued use of non-National Penn      brands (names, signs or logos) may be counterproductive to National Penn’s      overall branding and marketing strategy.            |
|--------------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         | • | National      Penn may be unable to differentiate itself from its competitors by a      higher level of customer service, as intended by its business strategy and      other marketing initiatives.                                                                                                                                                                                                             |
|         | • | Expansion      of National Penn’s product and service offerings may take longer, and may      meet with more effective competitive resistance from others already      offering such products and services, than expected.                                                                                                                                                                                 |
|         | • | New      product development by new and existing competitors may be more effective,      and take place more quickly, than expected.                                                                                                                                                                                                                                                                             |
|         | • | Geographic      expansion may be more difficult, take longer, and present more operational      and management risks and challenges, than expected.                                                                                                                                                                                                                                                              |
|    | • | Business      development in newly entered geographic areas, including those entered by      mergers and acquisitions such as the Christiana and KNBT acquisitions, may      be more difficult, and take longer, than expected.                                                                                                                                                                                  |
|         | • | National      Penn may be less effective in cross-selling its various products and      services, and in utilizing web-based and other alternative delivery      systems, than expected.                                                                                                                                                                                                                         |
|         | • | Projected      business increases following completed transactions, new product      development, geographic expansion, and productivity and investment      initiatives may be lower than expected, and recovery of associated costs      may take longer than expected.                                                                                                                                        |
|         | • | National      Penn may be unable to attract, motivate, and/or retain key executives and      other key personnel due to intense competition for such persons or      otherwise.                                                                                                                                                                                                                                  |
|         | • | Growth      and profitability of National Penn’s non-interest income or fee income may      be less than expected.                                                                                                                                                                                                                                                                                         |
|         | • | General      economic or business conditions, either nationally or in the regions in      which National Penn does business, may deteriorate or be less favorable      than expected, resulting in, among other things, a deterioration in credit      quality, a reduced demand for credit, or a decision by National Penn to      reevaluate staffing levels or to divest one or more lines of      business.  |
|         | • | Expected      synergies and cost savings from mergers and acquisitions, including the      Christiana and KNBT acquisitions, may not be fully realized or realized as      quickly as expected.                                                                                                                                                                                                                  |

----

|         | • | Revenues      and loan growth following mergers and acquisitions, including the      Christiana and KNBT acquisitions, may be less than expected.                                                                                                                                                                                                                                                                                                                                                                                |
|--------------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         | • | Loan      losses, deposit attrition, operating costs, customer and key employee      losses, and business disruption following mergers and acquisitions,      including the Christiana and KNBT acquisitions, may be greater than      expected.                                                                                                                                                                                                                                                                                 |
|         | • | Business      opportunities and strategies potentially available to National Penn after      mergers and acquisitions, including the Christiana and KNBT acquisitions,      may not be successfully or fully acted upon.                                                                                                                                                                                                                                                                                                         |
|         | • | Costs,      difficulties or delays related to the integration of businesses or systems      of acquired companies, including Christiana, KNBT, and their respective      subsidiaries, with National Penn’s business or systems may be greater than      expected.                                                                                                                                                                                                                                                         |
|         | • | Technological      changes, including systems conversions and integration, may be more      difficult to make or more expensive than expected or present unanticipated      operational issues.                                                                                                                                                                                                                                                                                                                                  |
|         | • | Changes      made by third party software vendors in products utilized by National      Penn, including product upgrades, replacements, and withdrawal of support      for prior products,  may necessitate unscheduled product      revisions by National Penn and related unbudgeted      expenditures.                                                                                                                                                                                                              |
|         | • | Maintaining      information security, and dealing with any breach of information security,      whether by National Penn or by a third party, may be more difficult and      expensive than expected and may present operational or reputation      risks.                                                                                                                                                                                                                                                                      |
|    | • | Legislation      or regulatory changes, including without limitation, changes in laws or      regulations on competition, industry consolidation, development of      competing financial products and services, changes in accounting rules and      practices, changes in or additional customer privacy and data protection      requirements, and intensified regulatory scrutiny of National Penn and the      financial services industry in general, may adversely affect National      Penn’s costs and business.  |
|         | • | Market      volatility may continue in the securities markets, with an adverse effect      on National Penn’s securities and asset managementactivities.                                                                                                                                                                                                                                                                                                                                                                   |
|         | • | In      the current environment of increased investor activism, including hedge      fund investment policies and practices, shareholder concerns or actions      due to stock price changes of financial service companies may require      increased management/board attention, efforts and commitments, deferring      or decreasing the focus on business development and      operations.                                                                                                                                  |
|         | • | A      downward movement in real estate values and sales could adversely affect      National Penn’s asset quality and earnings.                                                                                                                                                                                                                                                                                                                                                                                           |
|         | • | The      current stresses in the financial markets may inhibit the ability to      access the capital markets or obtain financing on favorable      terms.                                                                                                                                                                                                                                                                                                                                                                       |
|         | • | Still      evolving criteria may preclude the Company’s ability to participate in the      U.S. Treasury’s Capital Purchase Program.                                                                                                                                                                                                                                                                                                                                                                                 |
|         | • | Increases      in defaults by borrowers and other delinquencies could result in increased      provisions for credit losses and related expenses.                                                                                                                                                                                                                                                                                                                                                                                |
|         | • | Declines      in the market value of investment securities that are considered to be      other-than-temporary may negatively impact earnings and regulatory capital      levels.                                                                                                                                                                                                                                                                                                                                                |
|         | • | Changes      in accounting standards, policies, estimates, or procedures may impact      financial condition or results of operations.                                                                                                                                                                                                                                                                                                                                                                                           |
|         | • | Repurchase      obligations with respect to real estate mortgages sold in the secondary      market could adversely affect National Penn’s earnings.                                                                                                                                                                                                                                                                                                                                                                       |

----

|   | • | Changes      in consumer spending and savings habits could adversely affect National      Penn’s business.                                                                                                                                                  |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Negative      publicity with respect to any National Penn product or service, employee,      director or other associated individual or entity whether legally      justified or not, could adversely affect National Penn’s reputation and      business.  |
|   | • | Various      domestic or international military or terrorist activities or conflicts      may have a negative impact on National Penn’s business as well as the      foregoing and other risks.                                                             |
|   | • | National      Penn may be unable to successfully manage the foregoing and other risks      and to achieve its current short-term and long-term business plans and      objectives.                                                                                |

|                                                                                                                                              |   |              |   |    |            |   |                     | Total      Number of  |                  | Maximum      Number     |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|---------|-----------------|--------|--------------------------|-----------------------|-----------------------|-------------------------|
|                                                                                                                                              |   |              |   |    |            |   |                     | Shares      Purchased |                  | of      Shares that may |
|                                                                                                                                              |   | Total      Number |   | Average |            |   | as      Part of Publicly |                  | yet      be Purchased |
|                                                                                                                                              |   | of Shares    |   |    | Price      Paid |   | Announced      Plans     |                  | Under      the Plans  |
|                                                                                                                                              |   | Purchased         |   | Share   |            |   | or      Programs         |                  |                  | or      Programs        |   |
| Period                                                                                                                                            |   |              |   |    |            |   |                     |                  |                  |                    |   |   |
| July      1, 2008 through July 31, 2008                                                                                                           |   |              | -      |    |            |   | N/A                      |                  |                  |                    | - |   |   |   | 627,427 |   |
|                                                                                                                                              |   |              |   |    |            |   |                     |                  |                  |                    |   |   |   |   |   |   |
| August      1, 2008 through August 31, 2008                                                                                                       |   |              | -      |    |            |   | N/A                      |                  |                  |                    | - |   |   |   | 627,427 |   |
|                                                                                                                                              |   |              |   |    |            |   |                     |                  |                  |                    |   |   |   |   |   |   |
| September      1, 2008 through September 30, 2008                                                                                                 |   |              | -      |    |            |   | N/A                      |                  |                  |                    | - |   |   |   | 627,427 |   |
|                                                                                                                                              |   |              |   |    |            |   |                     |                  |                  |                    |   |   |   |   |   |   |
| 1. Transactions      are reported as of settlement dates.                                                                                    |   |              |   |    |            |   |                     |                  |                  |
| 2. National      Penn's current stock repurchase program was approved by its Board of      Directors and announced on December 22, 2005.     |
| 3. The      number of shares approved for repurchase under National Penn's current      stock repurchase programs is 2,121,800.              |
| 4. National      Penn's current stock repurchase plan has no expiration    date.                                                             |   |              |   |    |            |
| 5. No      National Penn stock repurchase plan or program expired during the period      covered by the table.                               |
| 6. National      Penn has no stock repurchase plan or program that it has determined to      terminate prior to expiration or under which it |
|          does not intend to make further purchases.                                                                                |   |              |   |    |            |   |                     |                  |                  |                    |   |   |   |
|                                                                                                                                              |   |              |   |    |            |   |                     |                  |                  |                    |   |   |   |   |   |   |

----

| 3.1    | Articles      of Incorporation, as amended, of National Penn Bancshares, Inc.      (Incorporated by reference to Exhibit 3.1 to National Penn’s Quarterly      Report on Form 10-Q for the quarter ended June 30, 2004, as filed on      August 5, 2004.)                                                |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                           |
| 3.2    | Articles      of Amendment of National Penn Bancshares, Inc. dated April 25, 2007      (Incorporated by reference to Exhibit 3.1 to National Penn’s Report on      Form 8-K dated April 25, 2007, as filed on April 25,  2007.)                                                                          |
|   |                                                                                                                                                                                                                                                                                                           |
| 3.3    | Bylaws,      as amended, of National Penn Bancshares, Inc. (Incorporated by reference      to Exhibit 3.1 to National Penn’s Report on Form 8-K      dated  February 28, 2007, as filed on March 1,      2007.)                                                                                |
|   |                                                                                                                                                                                                                                                                                                           |
| 4.1    | Form      of Loan Agreement between National Penn Investment Company, as Lender, and      National Penn Bancshares, Inc., as Borrower.  (Incorporated by      reference to Exhibit 4.1 to National Penn’s Report on Form 8-K dated      December 19, 2007, as filed on January 2, 2008.)  |
| 4.2    | Form      of Revolving Credit Note, executed by National Penn Bancshares, Inc.      (Incorporated by reference to Exhibit 4.2 to National Penn’s Report on      Form 8-K dated December 19, 2007, as filed on January 2,      2008.)                                                                     |
|   |                                                                                                                                                                                                                                                                                                           |
| 4.3    | Credit      Agreement dated as of March 28, 2008, between National Penn Bancshares,      Inc. and KeyBank National Association.  (Incorporated by      reference to Exhibit 4.1 to National Penn’s Report on Form 8-K dated March      28, 2008, and filed on March 31, 2008.)                 |
|   |                                                                                                                                                                                                                                                                                                           |
| 4.4    | Form      of Revolving Credit Note, executed by National Penn Bancshares, Inc.      (Incorporated by reference to Exhibit 4.2 to National Penn’s Report on      Form 8-K dated March 28, 2008, and filed on March 31,    2008.)                                                                          |
|   |                                                                                                                                                                                                                                                                                                           |
| 31.1   | Certification      of President and Chief Executive Officer of National Penn Bancshares,      Inc., pursuant to Commission Rule 13a-14(a) and Section 302 of the      Sarbanes-Oxley Act of 2002.                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                           |
| 31.2   | Certification      of Treasurer and Chief Financial Officer of National Penn Bancshares,      Inc.,pursuant to Commission Rule 13a-14(a) and Section 302 of the      Sarbanes-Oxley Act of 2002.                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                           |
| 32.1   | Certification      of President and Chief Executive Officer of National Penn Bancshares,      Inc., pursuant to Commission Rule 13a-14(b) and 18 U.S.C. Section 1350, as      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of      2002.  (Furnished, not filed.)                       |
|   |                                                                                                                                                                                                                                                                                                           |
| 32.2   | Certification      of  Treasurer and Chief Financial Officer of National Penn      Bancshares, Inc., pursuant to Commission Rule 13a-14(b) and 18 U.S.C.      Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act      of 2002.  (Furnished, notfiled.)             |

----

----