National Penn Bancshares (NPBC) in Boyertown, Pa., has completed restructuring $400 million of fixed-rate borrowings with the Federal Home Loan Bank of Pittsburgh to reduce interest expense and expand its net interest margin.
The restructured borrowings carried a weighted-average fixed rate of interest of 4.59% and had a weighted-average remaining maturity of five years, the company said in a regulatory filing. The new borrowings mature in September 2019 and are callable, at the option of National Penn, during the first and second quarters of 2013.
National Penn said it expects that the restructuring will reduce its current annual interest expense by roughly $5 million and improve its margin by about 10 basis points. In July, the company reported second-quarter interest expense of $16.7 million and a 3.48% margin.
The transaction "reduces the company's asset sensitive position, which management believes is prudent considering the Federal Reserve's guidance for a prolonged low interest rate environment," the filing said. National Penn "will remain asset sensitive in various interest rate simulations, and, as a result, net interest income would increase from rising interest rates," the $8.4 billion-asset company said in the filing.