Executives at National Penn Bancshares in Allentown, Pa., are staring up at the $10 billion ceiling and they would prefer not to break it organically.

The $9.6 billion-asset National Penn bought the $846 million-asset TF Financial in October, paying $142 million for the Newtown, Pa. company. Management is now on the prowl for a bigger deal. When banks reach $10 billion in assets, they have to perform stress testing and are subjected to caps on interchange rates, among other things.

"We believe we have to go over that $10 billion mark in a meaningful way," Chief Financial Officer Michael Hughes said during a conference call to discuss quarterly results. "I would tend to agree that any acquisition we do would have to be $1 billion or greater."

The company would even entertain a merger with a similar-sized bank. "I think the economics of those are compelling, but they're difficult to get done," Hughes said.

National Penn is sitting on a pile of excess capital totaling up to $400 million. Acquisitions have long been part of the company's strategy for deploying capital, and it is looking for partners in Pennsylvania, Maryland, Delaware and New Jersey, Chief Executive Scott Fainor said.

National Penn Bank, the company's 141-year-old banking unit, has 127 branches in Pennsylvania, Maryland and New Jersey. "We know there are a lot of opportunities within those markets and in contiguous states," Fainor said.

National Penn is a relative newcomer to New Jersey, obtaining seven branches in the state from the TF Financial deal.

National Penn's first-quarter profit rose 18% from a year earlier, to $26.7 million. Net loans grew 14%, to roughly $6 billion, though much of that growth came from TF Financial. National Penn is has also been willing to shrink its balance sheet since closing the deal; total assets fell 1.6% at March 31 compared to the end of last year.

National Penn already has much of the infrastructure needed to comply with the Dodd-Frank Act, and an in-house committee is studying any additional steps that might be required, Hughes said.

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