Document:

exh10-2.htm

    EXHIBIT
10.2

    NATIONAL PENN BANCSHARES,
INC.

    AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN  

     

    (As amended and restated, effective April 21,
2009)

    
       

       

    

    The following constitutes the
provisions of the Employee Stock Purchase Plan (the "Plan") of National Penn
Bancshares, Inc. (the "Company").

    

    1.           Purpose.  The
purpose of the Plan is to provide employees of the Company and its Subsidiaries
with an opportunity to purchase Common Stock of the Company.  It is
the Company's intention to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Code.  Accordingly, the provisions of
the Plan shall be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code.

    

    2.           Definitions.

    

    (a)           "Board" means the
Board of Directors of the Company.

    

    (b)           "Code" means the
Internal Revenue Code of 1986, as amended.

    

    (c)           "Common Stock" means
the Company's common stock, without par value.

    

    (d)           "Compensation" means
all regular straight-time gross earnings excluding payments for overtime,
incentive compensation, incentive payments, bonuses, commissions and other
compensation.  For Employees paid on a commissions only basis,
"straight-time gross earnings" means commissions paid.

    

    (e)           "Continuous Status as an
Employee" means the absence of any interruption or termination of service
as an Employee.  Continuous Status as an Employee shall not be
considered interrupted in the case of a leave of absence agreed to in writing by
the Company, provided that such leave is for a period of not more than 90 days
or re-employment upon the expiration of such leave is guaranteed by contract or
statute.

    

    (f)           "Contributions" means
all amounts credited to the account of a participant pursuant to the
Plan.

    

    (g)           "Employee" means any
person employed by the Company or one of its Subsidiaries, including any officer
of the Company or of one of its Subsidiaries.

    

    (h)           "Exchange Act" means
the Securities Exchange Act of 1934, as amended.

    

    (i)           "Offering Date" means
the first business day of each Offering Period of the Plan.

    

    (j)           "Offering Period"
means a period of three (3) months beginning on January 1, April 1, July 1 or
October 1 of each year.

    
      
         

      

      
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    (k)           "Purchase Date" means
the last day of each Offering Period of the Plan.

    

    (l)           "Subsidiary" means a
corporation of which not less than fifty percent (50%) of the voting shares are
held by the Company or a Subsidiary, whether or not such corporation now exists
or is hereafter organized or acquired by the Company or a
Subsidiary.

    

    3.           Eligibility.

    

    (a)           Any
person who has been continuously employed as an Employee for at least three (3)
months prior to the Offering Date of a given Offering Period shall be eligible
to participate in such Offering Period under the Plan, subject to the
requirements of Section 5(a) and the limitations imposed by Section 423(b) of
the Code.

    

    (b)           No
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any Subsidiary, or (ii) which permits his or her rights to
purchase stock under all employee stock purchase plans (described in Section 423
of the Code) of the Company and its Subsidiaries to accrue at a rate which
exceeds Twenty-Five Thousand Dollars ($25,000) of Fair Market Value (as defined
in Section 7(b) below) of such stock (determined at the time such option is
granted) for each calendar year in which such option is outstanding at any
time.

    

    4.           Offering
Periods.  The Plan shall be implemented by a series of Offering
Periods, with a new Offering Period commencing on January 1, April 1, July 1 and
October 1 of each year.  The Plan shall continue until terminated in
accordance with Section 19 hereof.

    

    5.           Participation.  An
eligible Employee may become a participant in the Plan by completing a
subscription agreement on the form provided by the Company and filing it with
the Company prior to the applicable Offering Date, unless a later time for
filing the subscription agreement is set by the Board for all eligible Employees
with respect to a given offering.  The subscription agreement shall
set forth the percentage of the participant's Compensation (which shall be not
less than one percent (1%) and not more than ten percent (10%)) to be paid as
Contributions pursuant to the Plan.

    

    6.           Method of Payment of
Contributions.

    

    (a)           The
participant shall elect to have payroll deductions made on each payday during an
Offering Period in an amount not less than one percent (1%) and not more than
ten percent (10%) of such participant's Compensation on each such payday;
provided that the aggregate of such payroll deductions during an Offering Period
shall not exceed ten percent (10%) of the participant's aggregate Compensation
during such Offering Period.  All payroll deductions made by a
participant shall be credited to his or her account under the Plan.  A
participant may not make any additional payments into such account.

    

    (b)           Payroll
deductions shall commence on the first payroll following the Offering Date and
shall end on the last payroll paid on or prior to the Purchase Date of the
offering to which the subscription agreement is applicable, unless sooner
terminated by the participant as provided in Section 10.

    
      
         

      

      
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    (c)           A
participant may discontinue his or her participation in the Plan as provided in
Section 10, or, on one occasion only during an Offering Period, may increase or
decrease the rate of his or her Contributions during such Offering Period,
without withdrawing from the Plan, by completing
and filing with the Company a new subscription agreement within the ten (10) day
period immediately preceding the beginning of any month during the Offering
Period.  The change in rate shall be effective as of the beginning of
the month following the date of filing of the new subscription agreement and
shall comply with the limits as provided in Section 6(a).

    

    (d)           To
the extent necessary to comply with Section 423(b)(8) of the Code and Section
3(b) herein, a participant's payroll deductions may be decreased to zero percent
(0%) at such time, during any Offering Period which is scheduled to end during
the current calendar year, that the aggregate of all payroll deductions
accumulated with respect to such Offering Period and any other Offering Period
ending within the same calendar year equals $25,000.  Payroll
deductions shall recommence at the rate provided in such participant's
subscription agreement at the beginning of the first Offering Period which is
scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10.

    

    7.           Grant of
Option.

    

    (a)           On
the Offering Date of each Offering Period, each eligible Employee participating
in such Offering Period shall be granted an option to purchase, on the Purchase
Date of such Offering Period, the number of shares of Common Stock determined by
dividing such Employee's Contributions accumulated prior to such Purchase Date
and retained in the participant's account as of the Purchase Date by ninety
percent (90%) of the Fair Market Value (as defined below) of a share of Common
Stock on the Purchase Date; provided, however, that the maximum number of shares
an Employee may purchase in any one calendar year shall be determined at the
Offering Date by dividing $25,000 by the Fair Market Value of a share of Common
Stock on the Offering Date, and provided further that such purchase shall be
subject to the limitations set forth in Sections 3(b) and 12
hereof.

    

    (b)           The
option price per share of the shares offered in a given Offering Period shall be
ninety percent (90%) of the Fair Market Value (as defined below) of a share of
Common Stock on the Purchase Date.  The “Fair Market Value” of a share
of Common Stock on a given date shall be determined as follows, unless a
different method of calculation is required by applicable law:

    

    (i)           Based
on the closing sale price of a share of Common Stock on the given date, as
reported on the GLOBAL SELECT MARKET tier of the Nasdaq Stock Market (“Nasdaq”)
(or on such other stock exchange on which the Common Stock may be
listed);

    

    (ii)           If
no closing sale price is reported on the given date, then based on the closing
sale price of a share of Common Stock on the last preceding date on which there
was a sale, as reported on Nasdaq (or on such other stock exchange on which the
Common Stock may be listed); or

    

    (iii)         
If the Common Stock is not listed on Nasdaq or on a stock exchange, by the Board
or the Committee (as defined in Section 13 below), as applicable, in its sole
discretion.

    
      
         

      

      
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    8.           Exercise of
Option.  Unless a participant withdraws from the Plan as
provided in Section 10, his or her option for the purchase of shares will be
exercised automatically on the Purchase Date of the Offering Period, and the
maximum number of full and fractional shares subject to option will be purchased
for him or her at the applicable option price with the accumulated Contributions
in his or her account.  The shares purchased upon exercise of an
option hereunder shall be deemed to be transferred to the participant on the
Purchase Date.  During his or her lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.

    

    9.           Stock Certificates; Cash
Balances; Dividend Reinvestment.

    

    (a)           Stock
certificates will not be issued to participants for shares purchased on the
Purchase Date.  Shares purchased for a participant on a Purchase Date
shall be held in an account for such participant under the Plan, and all rights
accruing to an owner of record of such shares (including voting rights) shall
belong to the participant for whose account such shares are held.  A
participant may file a written election with the Company to withdraw some or all
of the shares of Common Stock held in his or her account, in which case a stock
certificate will be issued to such participant for such withdrawn
shares.

    

    (b)           Each
participant in the Plan shall be deemed to have authorized the collection and
accumulation of all dividends paid on shares held in his or her account and the
application of such dividends to the purchase of additional full and fractional
shares of Common Stock as of the dividend payment date.  The purchase
price of shares of Common Stock pursuant to this Section 9(b) will be equal to
the Fair Market Value of such shares on such dividend payment date (without any
discount); provided, however, that the purchase price of shares of Common Stock
pursuant to this Section 9(b) will be equal to ninety percent (90%) of the Fair
Market Value of such shares on such dividend payment date for the period
commencing on October 22, 2008 and ending on the first to occur of (i) December
31, 2009 or (ii) the receipt by The Bank of New York Mellon after October 22,
2008 of Seventy-Five Million Dollars ($75,000,000) of aggregate voluntary cash
contributions in accordance with Section 6 of the Company’s Amended and Restated
Dividend Reinvestment and Stock Purchase Plan.

    

    10.           Withdrawal; Termination of
Employment.

    

    (a)           A
participant may withdraw all, but not less than all, of the Contributions
credited to his or her account under the Plan at any time prior to the Purchase
Date of an Offering Period by giving written notice to the
Company.  All of such participant's Contributions credited to his or
her account will be paid to him or her promptly after receipt of such notice of
withdrawal, and his or her option for the current period will be automatically
terminated, and no further Contributions for the purchase of shares will be made
during the Offering Period.

    

    (b)           Upon
termination of a participant's Continuous Status as an Employee prior to the
Purchase Date of an Offering Period for any reason, including retirement or
death, the Contributions credited to his or her account prior to the Purchase
Date will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
automatically be terminated.

    
      
         

      

      
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    (c)           A
participant who withdraws from an Offering Period will not be eligible to
participate again in the Plan until the first anniversary of the Purchase Date
of the Offering Period during which such participant withdrew from the
Plan.  The Board or the Committee (as defined in Section 13 below) may
waive the non-participation period in its sole discretion.  A
participant's withdrawal from an Offering Period will not have any effect upon
his or her eligibility to participate in any similar plan which may hereafter be
adopted by the Company.

    

    11.           No
Interest.  No interest shall accrue on the Contributions of a
participant in the Plan.

    

    12.           Stock.

    

    (a)           The
maximum number of shares of Common Stock which shall be made available for sale
under the Plan shall be 1,000,000 shares, subject to adjustment upon changes in
capitalization of the Company as provided in Section 18.  If the total
number of shares which would otherwise be subject to options granted pursuant to
Section 7(a) hereof on the Offering Date of an Offering Period exceeds the
number of shares then available under the Plan (after deduction of all shares
for which options have been exercised or are then outstanding), the Company
shall make a pro rata allocation of the shares remaining available for option
grant in as uniform a manner as shall be practicable and as it shall determine
to be equitable.  Any amounts remaining in an Employee's account not
applied to the purchase of Common Stock pursuant to this Section 12 shall be
refunded on or promptly after the Purchase Date.  In such event, the
Company shall give written notice of such reduction of the number of shares
subject to the option to each Employee affected thereby and shall similarly
reduce the rate of Contributions, if necessary.

    

    (b)           No
participant will have any interest or voting rights in any shares covered by his
or her option until such option has been exercised.

    

    13.           Administration.  The
Board, or a committee named by the Board (the “Committee”), shall supervise and
administer the Plan and shall have full power to (i) adopt, amend and rescind
any rules deemed desirable and appropriate for the administration of the Plan
and not inconsistent with the Plan, (ii) construe and interpret the Plan, and
(iii) make all other determinations necessary or advisable for the
administration of the Plan.  The Board or the Committee may engage a
firm or entity to administer the Plan, subject to the Board's or the Committee's
control and authority.

    

    14.           Designation of
Beneficiary.

    

    (a)           A
participant may file with the Company a written designation of a beneficiary who
is to receive any shares and/or cash, if any, from the participant's account
under the Plan upon such participant's death.

    

    (b)           Such
designation of beneficiary may be changed by the participant at any time by
written notice.  Upon the death of a participant and in the absence of
a beneficiary validly designated under the Plan who is living at the time of
such participant's death, the Company shall deliver such shares and/or cash to
the executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its sole discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.

    
      
         

      

      
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    15.           Transferability.  Neither
Contributions credited to a participant's account nor any rights with regard to
the exercise of an option or to receive shares under the Plan may be assigned,
transferred, pledged or otherwise disposed of in any way (other than by will,
the laws of descent and distribution or as provided in Section 14 hereof) by the
participant.  Any such attempt at assignment, transfer, pledge or
other disposition shall be without effect, except that the Company may treat
such act as an election to withdraw funds in accordance with Section
10.

    

    16.           Use of
Funds.  All Contributions received or held by the Company under
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.

    

    17.           Reports.  Individual
accounts will be maintained for each participant in the
Plan.  Statements of account will be given to participating Employees
promptly following the Purchase Date, which statements will set forth the
amounts of Contributions, the per share purchase price, the number of shares
purchased and the remaining cash balance, if any.

    

    18.           Adjustments Upon Changes in
Capitalization; Corporate Transactions.

    

    (a)           Subject
to any required action by the shareholders of the Company, the number of shares
of Common Stock covered by each option under the Plan which has not yet been
exercised and the number of shares of Common Stock which have been authorized
for issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves"), as well as the price per share of Common Stock
covered by each option under the Plan which has not yet been exercised, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock affected without
receipt of consideration by the Company.

    

    (b)           Upon
a proposed dissolution or liquidation of the Company, the Offering Period will
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board.

    

    (c)           Upon
a sale of all or substantially all of the assets of the Company or the merger of
the Company with or into another corporation, each option under the Plan shall
be assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Purchase Date (the "New Purchase Date").  If the Board
shortens the Offering Period then in progress in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify
each participant in writing, at least ten (10) days prior to the New Purchase
Date, that the Purchase Date for his or her option has been changed to the New
Purchase Date and that his or her option will be exercised automatically on the
New Purchase Date, unless prior to such date he or she has withdrawn from the
Offering Period as provided in Section 10.  For purposes of this
Section 18, an option granted under the Plan shall be deemed to be assumed if,
following the sale of assets or merger, the option confers the right to
purchase, for each share of option stock subject to the option immediately prior
to the sale of assets or merger, the consideration (whether stock, cash or other
securities or property) received in the sale of assets or merger by holders of
Common Stock for each share of Common Stock held on the effective date of the
transaction (and if such holders

    
      
         

      

      
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    were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); provided,
however, that if such

    consideration
received in the sale of assets or merger was not solely common stock of the
successor corporation or its parent (as defined in Section 424(e) of the Code),
the Board may, with the consent of the successor corporation and the
participant, provide for the consideration to be received upon exercise of the
option to be solely common stock of the successor corporation or its parent,
equal in Fair Market Value to the per share consideration received by holders of
Common Stock in the sale of assets or merger.

    

    (d)           The
Board may, if it so determines in the exercise of its sole discretion, also make
provision for adjusting the Reserves, as well as the price per share of Common
Stock covered by each outstanding option, if the Company effects one or more
reorganizations, recapitalizations, rights offerings or other increases or
reductions of shares of its outstanding Common Stock, or if the Company is
consolidated with or merged into any other corporation.

    

    19.           Amendment or
Termination.

    

    (a)           The
Board may at any time terminate or amend the Plan.  Except as provided
in Section 18, no such termination may affect options previously granted, nor
may an amendment make any change in any option theretofore granted which
adversely affects the rights of any participant.  In addition, to the
extent, if any, necessary to comply with Section 423 of the Code (or any
successor provision) or any other applicable law or regulation, the Company
shall obtain shareholder approval in such a manner and to such a degree as so
required.

    

    (b)           Without
shareholder consent and without regard to whether any participant rights may be
considered to have been adversely affected, the Board (or the Committee) shall
be entitled to permit payroll withholding in excess of the amount designated by
a participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from such participant's
Compensation, and establish such other limitations or procedures as the Board
(or the Committee) determines in its sole discretion advisable which are
consistent with the Plan.

    

    20.           Notices.  All
subscription agreements, designations, notices or other communications by a
participant to the Company under or in connection with the Plan shall be deemed
to have been duly given when received in the form specified by the Company at
the location, or by the person, designated by the Company for the receipt
thereof.

    

    21.           Conditions Upon Issuance of
Shares.

    

    (a)           Shares
shall not be issued with respect to an option unless the exercise of such option
and the issuance and delivery of such shares pursuant thereto shall comply with
all applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of Nasdaq or any
stock exchange upon which the shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

    
      
         

      

      
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    (b)           As
a condition to the exercise of an option, the Company may require the person
exercising such option to represent and warrant at the time of any such exercise
that the shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
applicable provisions of law.

    

    22.           Effective Date; Term of
Plan.  The Plan was originally approved by the Board on
December 18, 1996 and approved by the shareholders of the Company on April 22,
1997.  The Plan, as amended and restated herein effective April 21,
2009, shall continue in effect for a term through June 30, 2017, unless sooner
terminated under Section 19.

    

    23.           Section
16.  With respect to persons subject to Section 16 of the
Exchange Act, this Plan is intended to be a "tax-conditioned plan" within the
meaning of Rule 16b-3(c) and to otherwise comply with all applicable conditions
of Rule 16b-3 (or any successor rule) under the Exchange
Act.  Accordingly, the provisions of the Plan shall be construed in a
manner consistent with the requirements of Rule 16b-3(c).

    

    24.           Captions.  All
section captions in this Plan are for convenience of reference
only.

    

    

    
      
         

      

      
        18formexh10-1.htm

    EXHIBIT
10.1

    

    Glenn
E. Moyer – Prepared Remarks

    Annual
Meeting of Shareholders

    April
21, 2009

    

    1.
Welcome/Review of Year/Profitability

    

    Welcome
everyone.  First, I would like to acknowledge the work of our board of
directors. Boards of Public Companies have a daunting responsibility in the best
of times; their role in the face of today’s market realities is even more
significant.  We appreciate their ongoing support and
dedication.  I can assure you that, though you may not always agree
with every decision that is made, our Board and Committee meetings are always
robust in discussion that is clearly focused on the success for our shareholders
over the longer term.

    

    Let me
then begin my remarks by saying to those of you we have enjoyed seeing at these
events over the years, that given these unprecedented times, my comments will
focus on those issues we believe are of most critical interest to our
shareholders.

    

    From an
economic perspective, the recent rebound in the stock market, a less downbeat
than feared earnings season so far, and a few better than expected readings in
the economic numbers have raised hopes that we can now see the light at the end
of the tunnel.  We certainly hope so.  Our concern however, is that
much of the recent improvement merely marks a shift in the rate of deceleration
in economic activity.  That still marks an improvement, but it does not
change our view that the recession and its effects will drag on at least through
this year and into 2010.  We take this view into consideration as we
formulate our actions for the coming year and beyond.  At the heart of
the issue is the increases that continue in the unemployment rate both
nationally and regionally.  Until this rate finds a top and begins to
improve in this region, we, and many other community banking companies, will
continue to see earnings and capital remain under pressure.  We wish
our outlook could be rosier, but unfortunately that’s our most realistic
perspective presently.

    

    With that
as a current perspective, let me highlight the steps we took last year to
achieve the most significant growth in our history.

    

     (Acquisitions)

    

    The
acquisitions of Christiana Bank & Trust Company and KNBT Bancorp, both
completed in early 2008, helped us grow from $ 5.8 billion in financial assets
at the end of 2007 to $9.1 billion on March 31, 2008. The mergers also
positioned National Penn as the fifth largest bank holding company headquartered
in Pennsylvania.  We recently moved up in ranking to number four, with
Banco Santander’s acquisition of Sovereign Bancorp.  Today we hold
$9.4 billion in financial assets.

     

     

    
      
        
        

      

      
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    In
integrating KNBT, the larger of our new partners, we exceeded our $26.2 million
expense-reduction goals and retained in excess of 95 percent of those customers
who joined us. This is very unusual in the banking industry and is indicative of
a smooth transition and customers who are satisfied with the change. The
expense-reduction goals are part of our successful focus on cost control, which
has resulted in a significant improvement in our efficiency ratio.

    

    (Profitability/CDO
Discussion)

    

    National
Penn has continued to be focused on prudent financial management. As a result,
our Company was profitable for the 2008 year. Nevertheless, our fourth quarter
2008 results were negatively impacted by several items. They related primarily
to the deteriorating economy, giving credence to our stated belief that we would
not be immune to the problems in the regional, national and world
markets.

    

    The first
item was a non-cash, other-than-temporary impairment charge on collateralized
debt obligations – or CDOs – in pooled trust preferred
securities.  Although investment grade and quality rated when we
invested in them in 2006-2007, these CDOs, as well as a synthetic CDO reported
in an earlier quarter, were negatively affected by market
conditions.

    

    The
second item impacting fourth quarter earnings was a deterioration of credit
quality, which I will address later in my comments.

    

    Capital/Liquidity/Asset
Quality

    

    National
Penn has a long history of consistent earnings growth with solid credit
quality.  This has been our primary focus.  Our earnings
growth strategy has included leveraging capital and liquidity.  This
proved to be a successful strategy for us in the past.

    

    In the
current environment, however, it is necessary for us to be intensely focused on
building capital and liquidity, as well as on maintaining our solid credit
quality, relative to peers.  Therefore, I’ll spend the bulk of my time
today addressing those three factors.

    

    (Capital)

    

    At
December 31, 2008, National Penn was in compliance with all applicable
regulatory capital requirements.  National Penn and our primary banks,
National Penn Bank and Christiana Bank and Trust, are considered “well
capitalized” as defined by banking regulators.

    

    While our
strategic use of capital to acquire quality partners has leveraged our capital
ratios in the past, our latest and most significant merger with KNBT was
immediately accretive to both earnings and capital.  We understand the
need for retaining and replenishing capital to support shareholder value for the
longer-term.

    
      
         

      

      
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    In the
context of the current environment, our strategy continues to shift from
leveraging our capital to achieving and preserving capital levels that support
our current business operations and facilitate future growth.

    

    (Receipt
of CPP Funds)

    

    With that
in mind, in December we, like many other healthy, well capitalized banks, were
approved to receive a preferred stock investment under the Treasury Department’s
Capital Purchase Program.

    

    The $150
million dollars that we received on December 12th
provides capital to supplement our regulatory capital ratios.  It also
provides capital for lending and other growth opportunities we see in this
market due to challenges facing some of our larger competitors.

    

    From the
beginning, our view of the Capital Purchase Program investment has been that it
is a timely, cost-effective bridge to improve regulatory capital
levels.  However, we have not viewed this as a longer-term capital
building strategy.  Therefore, our plan is to make a prudent,
objective decision as to the appropriate time to repay this
capital.

    

    (Dividend
Reinvestment Plan)

    

    While
receipt of the Capital Purchase Program funds improved our regulatory capital
ratios, we also recognize the need to improve our tangible common equity, which
stood at 5.00% of tangible assets at year-end 2008.  In this regard,
in November we enhanced the Company’s dividend reinvestment and stock purchase
plan to provide a 10% discount on dividends reinvested as well as new cash
purchases made under the plan.

    

    In
addition, optional cash contributions were increased from a maximum of $10,000
per month to $50,000 per month.

    

    Initial
results have been very encouraging.  For the first six months
following these enhancements, optional cash contributions totaled $25.5 million
and the average monthly contribution totaled approximately $4 million.  Previously, the average
monthly cash contribution totaled approximately $35,000.

    

    We are
pleased by these early results and are fulfilling these purchases by using
authorized but un-issued shares of our common stock.  This morning we
announced a further enhancement to our Dividend Reinvestment and Stock Purchase
program that substantially increases the maximum amount of voluntary monthly
cash purchases to $250,000.  We have details of this enhancement in
the form of a handout we will provide you as you leave the meeting
today.

    

    Another
initiative to improve our tangible common equity ratio is to moderate the total
asset growth of our company.  Our primary focus here is through the
investment portfolio. We are only replacing investment portfolio maturities to
support our corporate cash management and public deposit purposes.

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (Loans)

    

    In the
loan area, we are focusing on loans that will allow us to achieve our price
targets, thereby moderating growth in that manner.  As a result of
this strategy, we have already seen improvement in our loan pricing on new loan
production.

    

    (Considering
Common Equity Offering)

    

    Dependent
upon market conditions and the progress we make otherwise, we would also
consider a common equity offering to build tangible common equity.  We
have a universal shelf registration in place, and with our proposal to increase
our authorized shares, we can proceed without delay if so desired.

    

    Prior to
selling additional shares of our common stock, especially at today’s price, it
is prudent for us to first evaluate the payment level of our cash
dividend.  In doing so, we consider factors such as the historical
dividend payout ratio, regulatory limitations on the payment of cash dividends,
and our need to sustain strong capital levels while facing the challenges in the
current economic environment.

    

    (Dividend
Decision)

    

    Our Board
of Directors thoroughly evaluated these factors and earlier this morning
approved a second quarter 2009 cash dividend in the amount of 5 cents per
share.  This compares to 17 cents per share paid in the first quarter
of 2009.  We believe that this is the appropriate cash dividend level,
given all the factors that we considered.  Our Board understands, both
personally and professionally, that reducing our cash dividend is an important
matter for our shareholders, based on our long history of increased dividend
payments.  While it was a difficult decision, this will preserve
approximately $40 million of capital annually to support the Company’s tangible
common equity levels.

    

    The Board
will continue to evaluate the cash dividend on a quarterly basis going forward,
considering all of the relevant factors at that time.  We appreciate
your support and understanding of this difficult decision.

    

    (Goal
in Funds Management)

     

    Our
overarching goal in funds management is to generate reasonably priced deposits
while maintaining our core deposit positions and overall liquidity to support
loan growth.

    

    Our
liquidity position today is strong, as evidenced by our ability to repay
approximately $200 million of term debt since December 2008.  In
addition, we currently have more than $200 million of excess liquidity on
hand.  This position is the result of the funds that we received from
the Capital Purchase Program as well as brisk deposit growth.  This
improved liquidity position has allowed us to reduce operating leverage and
therefore reduce the overall liquidity risk of the Company.

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    
 

    (Loan
Portfolio)

    

    Growth in
checking and money market account deposits is a major strategic focus for our
Company in 2009.  Our efforts have been supported by increased FDIC
insurance limits, customer funds redeployed from the equity market to the safety
of a bank deposit account, as well as our effective marketing
efforts.

    

    At the
present time, we are comfortable with our strong liquidity position, and we
believe that we have more than ample sources of funding to cover our anticipated
asset growth.

    

    Our loan
portfolio at December 31, 2008 was $6.3 billion. The portfolio is fairly
balanced between commercial and industrial loans, commercial real estate, and
consumer loans.  We are focused on maintaining our momentum of quality
loan growth throughout our market area.

    

    (Non-Performing
Assets)

    

    Our
non-performing assets as a percentage of total assets was 0.39% at December 31,
2008.  Total net charge-offs for 2008 were 0.49% of average loans
outstanding.

    

    It is
important to note that National Penn’s non-performing assets and charge-offs
have not been a result of a consumer loan or residential mortgage issue, nor
have they reflected any repercussions from subprime exposure.  Rather,
throughout 2008, they were consistent with the trends in our rapidly
deteriorating economy.

    

    While our
non-performing assets and net charge-offs as of December 31, 2008 were elevated
from our historically low levels, our measures were better than
peers.  Nevertheless, and consistent with our view of the continuing
downward trend in the economy, we anticipate continuing pressure in the market
on our loan quality ratios.

    

    (Mortgage
Modification Program)

    

    While our
levels of problem loans in the residential loan portfolio were relatively small,
we are proactively developing a mortgage modification program to provide
assistance to homeowners under the guidelines established by the government
agencies’ Streamlined Mortgage Modification program.

    

    (2009
Expectations)

    

    All of
our banking teams are aware of the continuing impact of the economic slowdown on
our customers, and we are continuing to monitor our loan portfolio’s risk
exposure diligently. As previously stated, the economy continues to slow, and we
have seen an increasing impact on our customers and their ability to service
their loans.

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    Consequently,
we expect to experience elevated levels of loan loss provisions, non-performing
assets, and net charge-offs throughout 2009 and potentially into
2010.  Likewise, we may experience additional non-cash impairments in
our investment portfolio, although we would expect the level of impairments to
be lower than in 2008.

    

    (Internal
Controls/Risk Management Program)

     

    National
Penn recently launched a major program to enhance the risk management practices
of the Company.  This initiative was prompted by a number factors, most
significantly, a changing economic landscape and recognition of the weaknesses
in our operations that we disclosed in our year-end 2008 financial report. In
addition, we see a renewed focus on risk assessment, verification of
controls, and transparency of reporting. All of these activities are
increasingly demanded and rewarded by the market, investors, customers and
regulators. 

     

    The Risk
Management program is a comprehensive effort designed to produce continuous
review and verification throughout our entire organization. Our goal is to
create a self-improving, ongoing risk and control assessment process that
engages all levels of staff, management and the Board.  The program is
being led by Sandra Bodnyk, who has been named chief risk
officer.  Sandy, a 35-year financial services professional who joined
us through the KNBT merger, has more than 10 years of executive experience in
risk management at large financial organizations. She is supported by a group of
internal department heads, as well as by an independent consultant, who provides
additional experience, independence and skill to this critical
effort. 

     

    National
Penn teams are already at work examining all of our processes and procedures
with the goal of implementing improvements, where necessary.  The Risk
Management program will include the prudent use of existing and new resources
and will balance risk, customer service, efficiency and
profitability.

    

    (Positioning
for the Future/Reorganization)

    

    National
Penn also is working to create a more focused integration of our business
segments – namely, banking, insurance, investments and trust.

    

    Traditionally,
community banking companies have operated a business model based on
“margin”.  That is, where profitability was largely a function of the
difference between interest rates paid to the bank by
borrowers on their loans and interest rates paid by the bank to its
customers on their deposits.

    

    As
interest rate spreads have narrowed over the years, it has become increasingly
important for companies like National Penn to develop revenue streams that are
not dependent on interest rates.

    

    For us,
this has meant evolving into a full-service financial services company. In
addition to offering banking services, this means providing insurance,
investment and trust products and services.

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    As these
non-banking businesses have become increasingly important to us, we are now
moving to a reorganized corporate structure in which these businesses will be
more effectively organized, managed and governed.

    

    (Insurance)

    

    For
example, in regard to our three insurance-related companies we intend to change
the name of National Penn Insurance Agency to “National Penn Insurance Services
Group, Inc.”  National Penn Insurance Services Group will serve as the
parent organization for the Higgins Insurance division. Caruso Benefits Group,
our employee benefits consulting firm, will remain a separate subsidiary of
National Penn Insurance Services Group, Inc.

    

    The plan
- to create an organizational structure that recognizes the rising importance of
our non-banking segments - will provide the National Penn Board of Directors
with improved oversight of these increasingly important business
operations.  In addition to including these groups under the new Risk
Management program, we intend to include on the boards of the Wealth Segment and
the Insurance Services Segment persons who are non-employee directors of
National Penn Bancshares.

    

    We are
currently working through the regulatory approval process for these changes and,
subject to approval, expect to complete this reorganization some time this
summer.

    

    (Helping
Customers with Resolution to Save Programs)

    

    As to the
impact of today’s economy on our business, despite the many negatives, the
downturn has presented some important opportunities for healthy,
community-focused financial institutions like National Penn.

    

    First, at
a time when customers value stability and a local presence, some of our large
competitors are exiting the market or giving no assurances that their current
franchise will remain the same.

    

    Second,
the economy’s impact on people’s life savings is making Americans more aware of
their need to cut spending and put away whatever they can in order to rebuild
their nest egg.

    

    National
Penn is assisting them in this effort with what we call our “resolution to save”
marketing campaigns.  The campaigns are designed to remind customers
that we can help them meet their savings goals through a variety of
products.

    

    Our major
focus is on a product called ValuePlus checking, which
provides a variety of value-added services such as identity theft protection,
cash rebates for shopping and complimentary companion
airfare.  Perhaps you have seen our ads and billboards promoting this
account!  By design, they cut through the clutter of competitors’
advertising by featuring eye-catching graphics and a SuperHero
theme.

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    If you
haven’t seen the campaign, we call your attention to some information we have
made available to you at this meeting.  Maybe you should become a
ValuePlus checking
customer – just ask any of us for assistance!

    

    We also
have begun a deposit promotion called Straight2Savings, which is an easy way
for customers to put aside money regularly and automatically.

    

    We see
these programs as a way to remind customers that we are a relationship-driven
organization dedicated to helping them improve their financial situation in
these difficult times.

    

    (NPITC/Mutual
Fund)

    

    We are
pleased to announce that we have formed a new investment advisory firm,
Institutional Advisors LLC.  While the structure as a stand alone company
is new, the firm has been an operating unit of National Penn Investors Trust
Company for several years.  The staff includes 14 investment
professionals with a very successful record of managing investments for
corporate, institutional and personal clients of National Penn Investors Trust
Company. 

    

    Terry
Morris heads up the equity portion of the investment team that has been
especially successful investing in large US company stocks.  National
Penn designed a new, publicly-available Mutual Fund that employs this strategy
called “Institutional Advisors LargeCap Fund” – ticker
IALFX.   By partnering with an existing mutual fund family called
Conestoga Funds, we found a cost-effective way to enter this new line of
business. The fund became operational on April 1st, with
Institutional Advisors, our new subsidiary, as its investment
manager.   Following a brief period of operational development, it
will be actively marketed in the late summer timeframe.  We are very
hopeful that this will result in a significant source of fee income in the
future and produce strong returns for our clients who choose to participate in
the fund.

    

    (Looking
Ahead -  National Penn Favorably Positioned)

    

    In
conclusion, I hope you will agree that this has been an unprecedented year for
businesses and individuals.  I have said to our employees that, with
the speed of change in the financial services industry, we should be living in
“dog years” instead of human years.

    

    What is
the future of our industry? One theory, which we believe has considerable merit,
divides financial services companies into three groups:

    

    First, those that
will merely survive

    Second, those that
will preserve their businesses

    And third, those that
will eventually thrive by taking advantages of opportunities during and coming
out of the downturn.

    

    We at
National Penn see ourselves in both the 2nd and
3rd
categories, which we believe is a healthy position.  We are preserving
and improving our business, while seeking out opportunities that will help us
achieve longer-term growth.  This plan includes pursuing a course of
cost containment, risk management improvement and the acquisition of profitable
customers from competitors who are no longer community-based banks.

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    
 

    We will
conduct business as we always have: by helping customers safely grow deposits,
by lending to creditworthy borrowers and by continuing our legacy as a
community-focused institution dedicated to providing value to all of our
constituents.

    

    These are
difficult times for all of us.  We, like you, are disappointed in our
performance in the second half of 2008.   We want to assure you
that as we move further into 2009, we will continue to keep our focus on
liquidity, asset quality, and on  preserving and building
capital.

    

    As you
may be aware, we will release our 1st quarter
2009 performance report on April 29. While we had hoped to release earnings on
April 22, we recognized that we needed more time to determine how recent changes
in Financial Accounting Standards Board rules will impact our financial
statements.   As always we invite you to participate in our
earnings Webcast, and we will send you a detailed quarterly report soon after
the earnings release.

    

    Thank you
for your attention, and I’ll now turn the podium back to Wayne.

    

    

    
      
         

      

      
        13

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