LEHIGH VALLEY, Pa., Oct. 24, 2007 (PRIME NEWSWIRE) -- KNBT Bancorp, Inc. (Nasdaq:KNBT), the holding company for Keystone Nazareth Bank & Trust Company (the "Bank"), today reported net income of $4.1 million for the quarter ended September 30, 2007, compared to net income of $5.9 million for the quarter ended September 30, 2006. Diluted earnings per share for the third quarter were $0.16 compared to $0.22 for the third quarter of 2006.
Earnings for the third quarter were affected by $410,000 in merger expenses that relate to the pending KNBT/National Penn Bancshares, Inc. transaction. Also impacting net income for the quarter ended September 30, 2007 was a $100,000 charge to increase the deferred tax asset valuation allowance.
Highlights for the third quarter include: * Announcement of the agreement to enter into a strategic merger with National Penn Bancshares, Inc. * Loan growth of $197.8 million or 12.3% since December 31, 2006, 16.4% annualized. * Continued excellent credit quality in the loan portfolio with total non-performing assets decreasing to $4.9 million from $6.0 million at the beginning of the year. The allowance for loan losses increased to 1% of period end loans and amounted to a coverage ratio of 380% of total non-performing loans. * The repurchase of 671,017 shares of common stock during the third quarter at an average price per share of $13.57.
On September 7, 2007, KNBT Bancorp announced the signing of a definitive merger agreement with National Penn Bancshares ("National Penn"), Inc. pursuant to which KNBT will merge with and into National Penn in a stock for stock transaction. Under the terms of the merger agreement, each share of KNBT common stock will be exchanged for 1.03 shares of National Penn common stock.
Net income for the nine months ended September 30, 2007 equaled $11.6 million compared to $17.3 million for the same period in 2006. KNBT reported diluted earnings per share of $0.44 for the nine months ended September 30, 2007 compared to $0.63 for the nine months ended September 30, 2006.
KNBT had total assets of $2.9 billion at September 30, 2007. Loans grew $197.8 million or 12.3% to $1.8 billion at September 30, 2007 and asset quality remained excellent.
Net Interest Income and Net Interest Margin
Net interest income decreased by $207,000 to $17.3 million during the quarter compared to the quarter ended June 30, 2007. The net interest margin on a tax equivalent basis for the third quarter increased to 2.80% compared to 2.79% for the second quarter of 2007.
KNBT presents its net interest margin on a tax-equivalent basis because management believes that such presentation provides information that is more useful for a proper understanding of KNBT's operating results. These disclosures should neither be viewed as a substitute for operating results determined in accordance with generally accepted accounting principles ("GAAP") nor are they reasonably comparable to non-GAAP performance measures which may be presented by other companies. Without the adjustment for tax-free income, the net interest margin for the quarters ended September 30, 2007 and June 30, 2007 was 2.76% and 2.75%, respectively.
Provision for Loan Losses and Related Allowance for Loan Losses
The provision for loan losses for the quarter ended September 30, 2007 was $814,000 reflecting the continued growth of the loan portfolio, particularly in commercial loans, which have increased more than 17% since December 31, 2006.
At September 30, 2007, KNBT's total non-performing assets were $4.9 million compared to $6.0 million and $6.4 million at December 31, 2006 and September 30, 2006, respectively. In addition, at September 30, 2007, KNBT's allowance for loan losses was 380% of its total non-performing loans and 1.00% of its total loans.
Non-Interest Income and Non-Interest Expense
Non-interest income was $9.4 million for the quarter ended September 30, 2007, a decrease of $803,000 or 7.9% compared to the same period in 2006. The decline in non-interest income was primarily attributable to a decrease in securities gains of $1.4 million. Deposit service charges increased 10.7% or $263,000 and income from Wealth Management increased more than 17% or $364,000.
Non-interest expense was $19.8 million for the quarter ended September 30, 2007, an increase of $607,000 or 3.2% compared to the same period for 2006. Salaries and benefits expense was essentially flat from the third quarter of 2006. The major contributor to the increase in non-interest expense was merger related expenses totaling $410,000 consisting of professional fees. A reduction in net occupancy and equipment expense of $280,000 partially offset such increase.
About KNBT Bancorp, Inc.
KNBT Bancorp, Inc. is the parent bank holding company for Keystone Nazareth Bank & Trust Company. Keystone Nazareth Bank & Trust Company is a Pennsylvania-chartered savings bank headquartered in Bethlehem, Pennsylvania with 56 branch offices in Lehigh, Northampton, Carbon, Monroe, Luzerne and Schuylkill Counties, Pennsylvania.
Website: www.knbt.com
The information contained in this press release may contain forward-looking statements (as defined in the Securities Exchange Act of 1934 and the regulations thereunder) which are not historical facts or as to KNBT's management's intentions, plans, beliefs, expectations or opinions or with respect to the operation of KNBT or its subsidiaries. These statements include, but are not limited to, financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of KNBT and its management, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) economic and competitive conditions which could affect the volume and type of loan originations, deposit flows and real estate values; (2) the levels of non-interest income and expense and the amount of loan losses; (3) competitive pressure among depository institutions increases significantly; (4) changes in the interest rate environment may reduce interest margins; (5) general economic conditions, either nationally or in the markets in which KNBT is doing business, are less favorable than expected; (6) mergers may result in significant charges to income, may not produce revenue enhancements or cost savings at levels or within time frames originally anticipated and may result in unforeseen integration difficulties; (7) disruptions may occur from the announced merger with National Penn and may create difficulties in maintaining relationships with customers and employees; (8) the failure to obtain shareholder or regulatory approval of the pending merger with National Penn; (9) legislation or changes in regulatory requirements adversely affect the business in which KNBT is engaged; and other factors discussed in the documents filed by KNBT with the Securities and Exchange Commission ("SEC") from time to time. Copies of these documents may be obtained from KNBT upon request and without charge (except for the exhibits thereto) or can be accessed at the website maintained by the SEC at http://www.sec.gov. KNBT undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.
Additional Information about the KNBT/National Penn Transaction:
National Penn has filed a registration statement on Form S-4 in connection with the merger with KNBT, and National Penn and KNBT intend to mail a joint proxy statement/prospectus to their respective shareholders in connection with the transaction. Shareholders and investors are urged to read the joint proxy statement/prospectus when it becomes available, because it will contain important information about KNBT, National Penn and the transaction. You may obtain a free copy of the joint proxy statement/prospectus (when it is available) as well as other filings containing information about KNBT and National Penn at the SEC's web site at www.sec.gov. A free copy of the joint proxy statement/prospectus, and the filings with the SEC that will be incorporated by reference in the joint proxy statement/prospectus, may also be obtained from National Penn or KNBT, by directing the request to either of the following persons:
Mr. Eugene Sobol Ms. Sandra L. Spayd Senior Executive Vice President & Corporate Secretary Chief Financial Officer National Penn Bancshares, Inc. KNBT Bancorp, Inc. Philadelphia and Reading Avenues 90 Highland Avenue Boyertown, PA 19512 Bethlehem, PA 18017 (610) 369-6202 (610) 807-5888
KNBT, National Penn and their respective executive officers and directors may be deemed to be participants in the solicitation of proxies from the shareholders of KNBT and National Penn in favor of the transaction. Information regarding the interests of the executive officers and directors of KNBT and National Penn in the transaction will be included in the joint proxy statement/prospectus.
KNBT Bancorp, Inc.
Consolidated Statements of Income
(unaudited)
For the Three Months Ended
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
2007 2007 2007 2006 2006
---------- ---------- ---------- ---------- ----------
(in thousands except per share data)
Interest
income $ 37,835 $ 37,693 $ 37,042 $ 37,719 $ 37,769
Interest
expense 20,540 20,191 19,741 20,087 19,794
---------- ---------- ---------- ---------- ----------
Net interest
income 17,295 17,502 17,301 17,632 17,975
Provision
for loan
losses 813 645 -- 1,014 365
---------- ---------- ---------- ---------- ----------
Net interest
income after
provision
for loan
losses 16,482 16,857 17,301 16,618 17,610
Non-interest
income:
Deposit
service
charges 2,719 2,688 2,465 2,430 2,456
Securities
gains
(losses) 1 (2,159) 536 6 1,440
Gain on
sale of
branches -- -- -- 3,502 --
Wealth
management
income 2,425 2,366 2,374 2,213 2,061
Bank-owned
life
insurance 889 872 861 884 835
Insurance
group
income 2,157 2,442 2,290 2,137 2,146
Other 1,179 867 1,176 1,197 1,235
---------- ---------- ---------- ---------- ----------
Total
non-interest
income 9,370 7,076 9,702 12,369 10,173
Non-interest
expense:
Salaries,
wages and
employee
benefits 11,296 11,260 11,215 11,173 11,265
Net
occupancy
and
equipment
expense 2,891 2,979 2,977 2,898 3,171
Other 5,623 6,012 4,781 5,716 4,767
---------- ---------- ---------- ---------- ----------
Total
non-interest
expense 19,810 20,251 18,973 19,787 19,203
---------- ---------- ---------- ---------- ----------
Income
before
income
taxes 6,042 3,682 8,030 9,200 8,580
Income tax
expense 1,939 1,670 2,544 2,894 2,669
---------- ---------- ---------- ---------- ----------
Net income $ 4,103 $ 2,012 $ 5,486 $ 6,306 $ 5,911
========== ========== ========== ========== ==========
Per Common
Share Data
---------------------------------------------------------------------
Weighted
average
common
shares
- diluted 25,696,471 26,390,254 26,586,047 26,578,083 26,540,660
Weighted
average
common
shares
- basic 25,520,303 26,237,836 26,311,289 26,303,917 26,355,973
Net income
per share
- diluted $ 0.16 $ 0.08 $ 0.21 $ 0.24 $ 0.22
Net income
per share
- basic $ 0.16 $ 0.08 $ 0.21 $ 0.24 $ 0.22
Book value $ 13.81 $ 13.55 $ 13.76 $ 13.52 $ 13.29
Tangible
book
value $ 8.51 $ 8.37 $ 8.72 $ 8.52 $ 8.26
KNBT Bancorp, Inc.
Asset Quality
(unaudited)
At Period End or
For the Three Months Ended
Sept. June Mar. Dec. Sept.
30, 30, 31, 31, 30,
2007 2007 2007 2006 2006
-------- -------- -------- -------- --------
(dollars in thousands)
Non-accruing loans $ 4,131 $ 4,245 $ 4,280 $ 4,869 $ 5,467
Accruing loans 90 days
or more past due 632 852 391 1,058 775
-------- -------- -------- -------- --------
Total non-performing
loans 4,763 5,097 4,671 5,927 6,242
Other real estate owned 119 126 77 32 205
-------- -------- -------- -------- --------
Total non-performing
assets $ 4,882 $ 5,223 $ 4,748 $ 5,959 $ 6,447
======== ======== ======== ======= ========
Total non-performing loans
as a percentage
of loans, net 0.26% 0.29% 0.27% 0.37% 0.40%
Total non-performing loans
as a percentage
of total assets 0.17% 0.18% 0.16% 0.20% 0.21%
Total non-performing
assets as a percentage
of total assets 0.17% 0.18% 0.16% 0.21% 0.22%
Allowance for loan
losses, beginning
of period $17,313 $16,667 $17,044 $16,630 $16,600
Provision for loan losses 814 645 -- 1,014 365
Total charge offs (336) (430) (449) (705) (413)
Recoveries on loans
previously
charged-off 327 431 72 105 78
-------- -------- -------- -------- --------
Net loans charged off (9) 1 (377) (600) (335)
-------- -------- -------- -------- --------
Allowance for loan
losses, at period end $18,118 $17,313 $16,667 $17,044 $16,630
======== ======== ======== ======= ========
Allowance for loan losses
at period end to:
Average net loans 1.02% 1.00% 1.02% 1.07% 1.06%
Total loans at period end 1.00% 0.98% 0.97% 1.05% 1.05%
Non-performing loans 380.39% 339.67% 356.82% 287.57% 266.42%
KNBT Bancorp, Inc.
(unaudited)
For the Three Months Ended
Balances Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(Period End) 2007 2007 2007 2006 2006
---------------------------------------------------------------------
(dollars in thousands)
Assets $2,873,476 $2,888,789 $2,906,829 $2,898,827 $2,926,763
-------------- --------- --------- -------- --------- ---------
Total earning
assets 2,501,526 2,525,322 2,547,350 2,535,197 2,556,670
Investment
securities 698,428 738,282 801,739 923,110 946,593
Net loans 1,800,896 1,755,290 1,704,772 1,603,122 1,574,022
Commercial 704,614 663,021 619,992 600,058 559,054
Mortgage 584,784 583,583 580,704 507,919 499,877
Consumer 529,616 525,999 520,743 512,189 531,721
Less:
Allowance
for loan
loss (18,118) (17,313) (16,667) (17,044) (16,630)
Loans held
for sale 900 1,362 605 1,994 2,264
Other earning
assets 1,302 30,388 40,234 6,971 33,791
Goodwill and
other
intangible
assets 133,944 134,901 132,995 132,866 134,243
---------------------------------------------------------------------
Total deposits 1,922,600 1,980,251 1,940,125 1,907,547 1,888,636
Non-interest
bearing
deposits 188,250 206,327 200,351 206,972 197,612
Interest-bearing
checking 222,957 241,543 247,396 241,567 232,775
Money market 562,158 619,322 572,736 532,824 452,196
Savings 188,387 205,144 211,944 214,949 230,157
Certificates
of deposit 641,467 589,084 588,634 593,079 653,602
IRA & Keogh 119,381 118,831 119,064 118,156 122,294
---------------------------------------------------------------------
Other borrowings 173,563 104,269 78,103 45,296 46,513
Subordinated debt 15,464 15,515 38,286 38,406 38,525
Federal Home
Loan Bank
advances 367,025 399,314 457,992 519,161 568,861
Shareholders'
equity 349,704 352,274 361,603 356,026 349,715
For the Three Months Ended
Balances Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(Daily Average) 2007 2007 2007 2006 2006
---------------------------------------------------------------------
(dollars in thousands)
Assets $2,858,261 $2,892,074 $2,877,115 $2,917,925 $2,964,750
-------------- --------- --------- --------- --------- ---------
Total earning
assets 2,503,218 2,544,847 2,527,087 2,560,145 2,605,410
Investment
securities 719,560 745,363 887,402 920,940 1,013,377
Net loans 1,776,934 1,728,825 1,630,587 1,588,064 1,563,182
Commercial 682,405 642,638 604,757 571,102 547,357
Mortgage 585,656 580,735 534,165 506,344 506,735
Consumer 526,517 522,333 508,687 527,281 525,707
Less:
Allowance
for loan
loss (17,644) (16,881) (17,022) (16,662) (16,617)
Loans held
for sale 631 1,399 1,944 1,880 29
Other earning
assets 6,093 69,260 7,154 49,261 28,823
Goodwill and
other
intangible
assets 134,520 133,582 132,635 133,811 134,757
---------------------------------------------------------------------
Total deposits 1,911,730 1,946,206 1,890,473 1,894,407 1,899,642
Non-interest
bearing
accounts 191,170 195,409 189,911 196,362 195,523
Interest-bearing
checking 229,284 239,374 234,132 234,670 236,346
Money market 549,837 596,137 541,947 494,093 448,266
Savings 197,106 209,224 212,175 223,941 239,887
Certificates of
deposit 625,339 587,087 593,596 624,009 657,002
IRA & Keogh 118,994 118,975 118,712 121,332 122,618
---------------------------------------------------------------------
Other borrowings 165,157 79,492 58,657 58,760 52,827
Subordinated debt 15,483 31,919 38,358 38,474 38,585
Federal Home
Loan Bank
advances 384,870 440,220 495,139 539,100 594,691
Shareholders'
equity 348,999 360,550 358,811 353,777 344,380
KNBT Bancorp, Inc.
(unaudited)
For the Three Months Ended
Sept. June Mar. Dec. Sept.
30, 30, 31, 31, 30,
Ratios 2007 2007 2007 2006 2006
---------------------------------------------------------------------
Return on
average equity 4.70% 2.23% 6.12% 7.13% 6.87%
Return on average
tangible equity (1) 7.70% 3.62% 9.68% 11.40% 11.11%
Return on average
assets 0.57% 0.28% 0.76% 0.86% 0.80%
Net interest margin 2.80% 2.79% 2.77% 2.78% 2.79%
Efficiency ratio 72.37% 80.13% 68.56% 64.52% 66.70%
Shareholders' equity
to total assets 12.17% 12.19% 12.44% 12.28% 11.95%
Tangible equity to
total assets 7.50% 7.53% 7.89% 7.74% 7.42%
---------------------
(1) Reconciliation
Table for Non-GAAP
Financial Measures
Return on average
equity 4.70% 2.23% 6.12% 7.13% 6.87%
Effect of goodwill and
intangibles 3.00% 1.39% 3.56% 4.27% 4.24%
--------- --------- --------- --------- ---------
Return on average
tangible equity 7.70% 3.62% 9.68% 11.40% 11.11%
========= ========= ========= ========= =========
Average tangible
equity excludes
acquisition related
average goodwill
and intangibles:
Average equity $348,999 $360,550 $358,811 $353,777 $344,380
Average goodwill
and intangibles (135,829) (138,247) (132,052) (132,565) (131,478)
--------- --------- --------- --------- ---------
Average tangible
equity $213,170 $222,303 $226,759 $221,212 $212,902
======== ========== ========= ========= =========
KNBT Bancorp, Inc.
Consolidated Statements of Income
(unaudited)
Three Months Ended Nine Months Ended
-------------------- -----------------
Sept. 30, Sept. 30,
2007 2006 2007 2006
-------- -------- -------- --------
(in thousands, except per share data)
Interest income $ 37,835 $ 37,769 $112,570 $110,702
Interest expense 20,540 19,794 60,472 55,470
-------- -------- -------- --------
Net interest income 17,295 17,975 52,098 55,232
Provision for loan losses 813 365 1,458 2,315
-------- -------- -------- --------
Net interest income after
provision for loan losses 16,482 17,610 50,640 52,917
Non-interest income:
Deposit service charges 2,719 2,456 7,872 6,982
Securities gains (losses) 1 1,440 (1,622) 3,175
Gain on extinguishment
of debt -- -- -- 1,179
Wealth management income 2,425 2,061 7,165 6,283
Bank-owned life insurance 889 835 2,622 2,390
Insurance group income 2,157 2,146 6,889 6,465
Other income 1,179 1,235 3,222 3,228
-------- -------- -------- --------
Total non-interest income 9,370 10,173 26,148 29,702
Non-interest expense:
Salaries, wages and
employee benefits 11,296 11,265 33,771 33,086
Net occupancy and
equipment expense 2,891 3,171 8,847 9,399
Other expenses 5,623 4,767 16,416 15,632
-------- -------- -------- --------
Total non-interest expense 19,810 19,203 59,034 58,117
-------- -------- -------- --------
Income before income taxes 6,042 8,580 17,754 24,502
Income tax expense 1,939 2,669 6,153 7,205
-------- -------- -------- --------
Net income $ 4,103 $ 5,911 $ 11,601 $ 17,297
======== ======== ======== ========
Net income per share- diluted $ 0.16 $ 0.22 $ 0.44 $ 0.63
Net income per share- basic $ 0.16 $ 0.22 $ 0.45 $ 0.63