Glenn E. Moyer likes to tout what he calls the "new" National Penn Bancshares.
The Boyertown, Pa., company has completed two acquisitions in the past two months, for Christiana Bank and Trust in Greenville, Del., and KNBT Bancorp in Bethlehem, Pa., increasing its assets by more than half, to $8.9 billion, and nearly tripling its assets under management and administration, to $8.2 billion. It is now the fifth-largest banking company in the state.
But numbers aside, Mr. Moyer, National Penn's president and chief executive officer, said the deals transform the company by giving it well-established brands in wealthy markets in the Lehigh Valley and neighboring Delaware.
Mr. Moyer said he thinks so highly of the KNBT brand that National Penn intends to convert its own branches in Northampton and Lehigh counties to the new name, which he said is more recognizable in those markets. "We are not slash-and-burn," Mr. Moyer said. "It does not have to be the National Penn way or else."
National Penn now ranks in the top three for deposit market share in five Pennsylvania counties, Northampton, Lehigh, Berks, Chester, and Centre. In a mostly sluggish Pennsylvania economy, all five are growth areas with strong demographics, he said.
Bulking up in such markets was important to National Penn as it aims to maintain its streak of 30 consecutive years of higher earnings per share and dividends, Mr. Moyer said.
Richard D. Weiss, an analyst at Janney Montgomery Scott LLC who calls National Penn one of his "favorite" companies, said keeping the streak going in the midst of the state's intense competition is perhaps its biggest challenge.
Though the Pennsylvania economy is "not doing bad" in some areas, the state is overcrowded with banks, he said. "They kind of trip over each other's feet."
Mr. Weiss also said National Penn's provision for loan losses is likely to rise in coming quarters as it weathers the downturn affecting all banking companies.
But he said that he ultimately expects National Penn to keep doing well. "They always do better than you think they're going to do - and 30 years of it," he said.
Mr. Moyer said his company has a balanced strategy that includes organic growth and acquisitions. "We need to be good enough to do both," he said.
National Penn has bought 11 banks and thrifts in all, eight of them this decade. And it generally seeks out merger partners with "room to grow," not those looking for a retirement strategy, Mr. Moyer said.
After the KNBT purchase, National Penn installed Scott V. Fainor as its chief operating officer. Mr. Fainor, formerly KNBT's president and CEO, also became the president and CEO of National Penn Bank, titles that Mr. Moyer previously held.
Mr. Fainor said his thrift company was in the fourth year of a five-year plan to become more like a commercial bank. So the merger with National Penn seemed natural. "National Penn was already a high-performing commercial banking franchise," he said.
KNBT in return gave National Penn more "critical mass" in the Lehigh Valley and northeastern Pennsylvania in terms of branches and retail customers, Mr. Fainor said. National Penn has products and services that it can now market to KNBT's customer base — including Small Business Administration loans and international services.
"It's a perfect blend," he said of the two companies.
Matthew Schultheis, an analyst at Ferris Baker Watts Inc., pointed out that KNBT also gave National Penn a benefits planning business. "I think that's a great fit with what National Penn is doing," he said.
Besides retail customers, National Penn targets businesses, typically closely held ones, aiming to offer every service that might be needed, from cash management to employee benefits. It also courts the owners and executives with such services as wealth management.
"We take a holistic look at relationships," Mr. Moyer said. "That's what drives us."
The immediate challenge for National Penn, he said, will be ensuring that customer service remains the top priority, despite all the potentially distracting changes taking place.
"Our goal is 100% retention. In our model, we do not compensate for any loss of customers," Mr. Moyer said. "The mind-set is, not only are we going to fight for everyone we have but, if we lose one, we have to grow and get another one."
For all of its deals before the two most recent ones, National Penn's retention rate exceeds 95%, he said.
Though it is too early to take those measures for Christiana and KNBT, the indications so far are good, according to Mr. Moyer. The number of Christiana customers actually grew between the deal's announcement and its closing, he said.
The $143 million-asset Christiana, which specializes in wealth management, gave National Penn two branches in Delaware. Mr. Moyer said the state not only has attractive demographics but also offers legal and tax advantages that benefit customers seeking wealth management and trust services.
Owning a company there lets National Penn extend those advantages to its customers in other markets, which Mr. Moyer said should help fuel growth in wealth management.
Christiana also had $3.9 billion of assets under management and administration to add to National Penn's $2.9 billion and KNBT's $1.4 billion.
Higher fee income is a goal for National Penn, and the added heft in wealth management will help with that, Mr. Moyer said.
National Penn generated 31.9% of its revenue from fee income in 2007, and Mr. Moyer said that the share would have been 33.2% if the deals for KNBT and Christiana had closed by yearend.
That is the type of growth Mr. Moyer said his company prefers to focus on — rather than asset size. "It's not simply growth to be bigger," he said. "We want to continue to increase earnings per share. It's more that than we want to be some particular size in the future."
