content: FORM 10-Q
  
                         SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C. 20549
  
  (Mark One)
  
             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                          SECURITIES EXCHANGE ACT OF 1934
  
  For the quarterly period ended:       September 30, 1999
                                  -------------------------------
  
  OR
  
            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
                          SECURITIES EXCHANGE ACT OF 1934
  
  For the transition period from: __________________  to  ____________________
  
  
  Commission file number: 000-10957
  
                           NATIONAL PENN BANCSHARES, INC.
               ------------------------------------------------------
               (Exact name of registrant as specified in its charter)
  
               Pennsylvania                                23-2215075
       ------------------------------                  -------------------
     (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                  Identification No.)
  
             Philadelphia and Reading Avenues, Boyertown, PA    19512
             --------------------------------------------------------
             (Address of principal executive offices)      (Zip Code)
  
                                   (610) 367-6001
             --------------------------------------------------------
                (Registrant's telephone number, including area code)
  
                                         N/A
             --------------------------------------------------------
                (Former name, former address and former fiscal year,
                            if changed since last report)
  
       Indicate  by check mark  whether the  Registrant  (1) has filed all reports
  required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
  1934  during  the  preceding  12 months  (or for such  shorter  period  that the
  Registrant was required to file such reports),  and (2) has been subject to such
  filing requirements for the past 90 days. Yes _X_   No __.
  
           Indicate  the  number of  shares  outstanding  of each of the  issuer's
  classes of common stock, as of the latest practicable date.
  
                 Class                           Outstanding at November 9, 1999
  
     Common Stock (no stated par value)            (No.)  16,886,816 Shares
  
                                 Page 1 of 17 pages
  <PAGE>
  
  
  TABLE OF CONTENTS
  
  Part I -  Financial Information.                                    Page
  
            Item 1. Financial Statements.............................. 3
  
            Item 2. Management's Discussion and Analysis of
                    Financial Condition and Results of Operation...... 8
  
            Item 3. Quantitative and Qualitative Disclosures about
                    Market Risk...................................... 15
  
  Part II - Other Information.
  
            Item 1. Legal Proceedings................................ 16
  
            Item 2. Changes in Securities............................ 16
  
            Item 3. Defaults Upon Senior Securities.................. 16
  
            Item 4. Submission of Matters to a Vote of
                    Security Holders................................. 16
  
            Item 5. Other Information................................ 16
  
            Item 6. Exhibits and Reports on Form 8-K................. 16
  
  Signature.......................................................... 17
  
                                         2
  <PAGE>
                           PART I - FINANCIAL INFORMATION
  
  Item 1.  Financial Statements
  <TABLE>
  <CAPTION>
  <S>                                                                       <C>              <C>
  NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
  CONSOLIDATED CONDENSED BALANCE SHEET                                       Sept. 30           Dec. 31
   (Dollars in thousands, except per share data)                               1999              1998
                                                                            (Unaudited)         (Note)
                                                                            -----------      -----------
  ASSETS
  Cash and due from banks                                                   $    59,244      $    55,024
  Interest bearing deposits in banks                                              1,748           10,777
  Federal funds sold                                                                 --               --
                                                                            -----------      -----------
      Total cash and cash equivalents                                            60,992           65,801
  Trading account securities                                                         --           21,589
  Investment securities available for sale                                      564,314          523,041
  Loans, less allowance for loan losses of $32,267 and
    $30,835 in 1999 and 1998 respectively                                     1,511,443        1,404,972
  Other assets                                                                  115,381          105,845
                                                                            -----------      -----------
      Total Assets                                                            2,252,130        2,121,248
                                                                            ===========      ===========
  
  LIABILITIES AND SHAREHOLDERS' EQUITY
  Non-interest bearing deposits                                             $   225,399      $   222,816
  Interest bearing deposits
    (Includes certificates of deposit in excess of $100,000 or greater:
    1999 - $156,518; 1998 - $145,047)                                         1,295,071        1,250,486
                                                                            -----------      -----------
      Total Deposits                                                          1,520,470        1,473,302
  Securities sold under repurchase agreements
    and federal funds purchased                                                 213,735          159,586
  Short-term borrowings                                                           7,589           19,132
  Long-term obligations                                                         298,081          248,627
  Guaranteed preferred beneficial interests in
     Company's subordinated debentures                                           40,250           40,250
  Accrued interest and other liabilities                                         20,950           21,577
                                                                            -----------      -----------
      Total Liabilities                                                       2,101,075        1,962,474
  Commitments and contingent liabilities                                             --               --
  Shareholders' equity
    Preferred stock, no stated par value;
      authorized 1,000,000 shares, none issued                                       --               --
    Common stock, no stated par value;
      authorized 62,500,000 shares; issued and outstanding
      1999 - 17,773,173; 1998 - 17,839,103; net of shares
      in Treasury: 1999 - 67,467; 1998 - 0                                      114,454          114,294
    Retained earnings                                                            43,759           34,927
    Accumulated other comprehensive income                                       (5,754)           9,553
    Treasury stock at cost                                                       (1,404)              --
                                                                            -----------      -----------
      Total Shareholders' Equity                                                151,055          158,774
                                                                            -----------      -----------
      Total Liabilities and Shareholders' Equity                            $ 2,252,130      $ 2,121,248
                                                                            ===========      ===========
  </TABLE>
  
  The accompanying notes are an integral part of these condensed financial
  statements.
  
  Note: The Balance Sheet at Dec. 31, 1998 has been derived from the audited
        financial  statements of the Company plus  additions  necessary to reflect
        the Company's  acquisition  of Elverson  National Bank which was accounted
        for under the pooling of interest method of accounting.
  
                                          3
  <PAGE>
  NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
  UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
  <TABLE>
  <CAPTION>
  <S>                                                     <C>           <C>           <C>            <C>
                                                             Three Months Ended           Nine Months Ended
  (Dollars in thousands, except per share data)                 September 30                September 30
                                                          ----------------------------------------------------
                                                             1999          1998          1999          1998
                                                          ---------     ---------     ---------      ---------
  INTEREST INCOME
  Loans including fees                                    $  33,528     $  31,783     $  97,037      $  93,437
  Deposits in banks                                              69           175           176            409
  Federal funds sold                                             10             7           170            171
  Trading account securities                                     --           315           196            518
  Investment securities                                       8,281         7,001        23,369         19,578
                                                          ---------     ---------     ---------      ---------
      Total interest income                                  41,888        39,281       120,948        114,113
                                                          ---------     ---------     ---------      ---------
  INTEREST EXPENSE
  Deposits                                                   13,945        13,329        41,178         39,777
  Federal funds purchased, borrowed funds and
    securities sold under repurchase agreements               7,154         6,489        19,250         16,647
                                                          ---------     ---------     ---------      ---------
      Total interest expense                                 21,099        19,818        60,428         56,424
                                                          ---------     ---------     ---------      ---------
      Net interest income                                    20,789        19,463        60,520         57,689
  Provision for loan losses                                   1,415         1,365         4,245          4,095
                                                          ---------     ---------     ---------      ---------
      Net interest income after provision
        for loan losses                                      19,374        18,098        56,275         53,594
                                                          ---------     ---------     ---------      ---------
  OTHER INCOME
  Trust income                                                1,019           828         2,912          2,420
  Service charges on deposit accounts                         1,511         1,321         4,201          3,803
  Net gains (losses) on sale of investment securities            --            64           213            828
  Mortgage banking income                                       259           244           689            571
  Trading revenue                                                --           328           (48)           513
  Other                                                       2,845         1,743         7,867          4,855
                                                          ---------     ---------     ---------      ---------
      Total other income                                      5,634         4,528        15,834         12,990
                                                          ---------     ---------     ---------      ---------
  OTHER EXPENSES
  Salaries, wages and employee benefits                       9,386         8,265        27,937         24,370
  Net premises and equipment                                  2,391         2,395         7,085          6,904
  Other operating                                             4,076         4,046        12,601         12,366
                                                          ---------     ---------     ---------      ---------
      Total other expenses                                   15,853        14,706        47,623         43,640
                                                          ---------     ---------     ---------      ---------
      Income before income taxes                              9,155         7,920        24,486         22,944
  Applicable income tax expense                               1,945         1,710         4,760          5,301
                                                          ---------     ---------     ---------      ---------
      Net income                                          $   7,210     $   6,210     $  19,726      $  17,643
                                                          =========     =========     =========      =========
  
  
  PER SHARE OF COMMON STOCK
  Net income per share - basic                            $    0.42     $    0.35     $    1.16      $    0.99
  Net income per share - diluted                               0.42          0.34          1.15           0.97
  Dividends paid in cash                                       0.19          0.15          0.59           0.42
  </TABLE>
  
  The accompanying notes are an integral part of these condensed financial
  statements.
  
                                          4
  <PAGE>
  NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
  CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND
  COMPREHENSIVE INCOME
  <TABLE>
  <CAPTION>
  NINE  MONTHS ENDED September 30, 1999
    (Dollars in thousands)
                                                                           Accumulated
                                                               Additional     other
                                             Common Stock        Paid-in  conprehensive    Retained     Treasury       Comprehensive
                                           Shares     Par Value   Capital     income       earnings       stock            income
                                         ------------------------------------------------------------------------------------------
  <S>                                   <C>           <C>         <C>         <C>          <C>            <C>             <C>
  Balance at December 31, 1998           16,989,622    114,294        -        9,553        34,927             -
    Net income                                    -          -        -            -        19,726             -             19,726
    Cash dividends declared                       -          -        -            -       (10,894)            -
    Shares issued under stock-based
         plans                                4,676        693        -            -             -             -
    Other comprehensive income, net
        of reclassification adjustment
        and taxes                                 -          -        -      (15,307)            -                          (15,307)
                                         ------------------------------------------------------------------------------------------
  Total comprehensive income                      -          -        -            -             -             -            $ 4,419
                                         ------------------------------------------------------------------------------------------
   Effect of treasury stock transactions    (67,467)      (533)       -            -             -        (1,404)
  Balance at September 30, 1999          16,926,831   $114,454      $ -     $ (5,754)      $43,759      $ (1,404)
  </TABLE>
  <TABLE>
  <CAPTION>
  <S>                                                                          <C>                 <C>             <C>
                                                                                           September 30, 1999
                                                                             ----------------------------------------------
                                                                               Before              Tax            Net of
                                                                                tax              (expense)          tax
                                                                               amount             benefit          amount
                                                                             ----------------------------------------------
  Unrealized gains on securities
    Unrealized holding gains arising during period                             (23,762)            8,317           (15,445)
    Less: reclassification adjustment for gains realized in net income             213               (75)              138
                                                                             ----------------------------------------------
  Other comprehensive income, net                                              (23,549)            8,242           (15,307)
                                                                             ==============================================
  </TABLE>
  <TABLE>
  <CAPTION>
  NINE MONTHS ENDED SEPTEMBER 30, 1998
    (Dollars in thousands)
                                                                           Accumulated
                                                               Additional     other
                                             Common Stock        Paid-in  conprehensive    Retained     Treasury       Comprehensive
                                           Shares     Par Value   Capital     income       earnings       stock            income
                                         ------------------------------------------------------------------------------------------
  <S>                                   <C>           <C>         <C>         <C>          <C>            <C>             <C>
  Balance at December 31, 1997           17,080,328     25,620   96,657        7,648        22,431        (3,428)
    Net income                                    -          -        -            -        17,643             -             17,643
    Cash dividends declared                       -          -        -            -        (7,775)            -
    Shares issued under stock-based
         plans                                3,721         19        -            -             -             -
    Other comprehensive income, net
        of reclassification adjustment
        and taxes                                 -          -        -        3,865             -             -              3,865
                                         ------------------------------------------------------------------------------------------
  Total comprehensive income                      -          -        -            -             -             -           $ 21,508
                                         ------------------------------------------------------------------------------------------
  Conversion to no par value stock                -     95,436  (95,436)           -             -             -
     Par value adjustments related to
        pooling transaction                       -        (10)     329            -             -             -
    Effect of treasury stock transactions  (101,436)    (7,671)  (1,550)           -             -         3,428
                                         ------------------------------------------------------------------------------------------
  Balance at September 30, 1998          16,982,613  $ 113,394      $ -     $ 11,513       $32,299           $ -
  </TABLE>
  <TABLE>
  <CAPTION>
  <S>                                                                          <C>                 <C>             <C>
                                                                                           September 30, 1998
                                                                             ----------------------------------------------
                                                                               Before              Tax            Net of
                                                                                tax              (expense)          tax
                                                                               amount             benefit          amount
                                                                             ----------------------------------------------
  Unrealized gains on securities
    Unrealized holding gains arising during period                               5,118            (1,791)            3,327
    Less: reclassification adjustment for gains realized in net income             828              (290)              538
                                                                             ----------------------------------------------
  Other comprehensive income, net                                                5,946            (2,081)            3,865
                                                                             ==============================================
  </TABLE>
  The accompanying notes are an integral part of these statements.
  
                                          5
  <PAGE>
  NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
  UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
  <TABLE>
  <CAPTION>
  <S>                                                                          <C>            <C>
  
                                                                             Nine Months Ended September 30,
  (Dollars in thousands)
                                                                                  1999           1998
                                                                               ---------      ---------
  
  CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                                 $  19,726      $  17,643
    Adjustments to reconcile net income to net
        cash provided by (used in) operating activities
      Provision for loan and lease losses                                          4,245          4,095
      Depreciation and amortization                                                3,387          3,072
      Net (gains) losses on sale of securities and mortgages                        (143)          (330)
      Trading-related assets                                                      21,589        (21,522)
      Mortgage loans originated for resale                                       (46,658)       (40,083)
      Sale of mortgage loans originated for resale                                46,658         40,083
      Other                                                                       (2,234)        (8,855)
                                                                               ---------      ---------
  
        Net cash provided by (used in) operating activities                       46,570         (5,897)
  
  CASH FLOWS FROM INVESTING ACTIVITIES
    Proceeds from sales of investment securities - available for sale             16,511         49,997
    Proceeds from maturities of investment securities - available for sale        43,571         23,618
    Purchase of investment securities - available for sale                      (124,893)      (192,949)
    Proceeds from sales of loans                                                      --             --
    Net increase in loans                                                       (110,716)       (74,394)
    Purchases of premises & equipment                                             (2,942)        (1,613)
                                                                               ---------      ---------
  
        Net cash provided by (used in) investing activities                     (178,469)      (195,341)
  
  CASH FLOWS FROM FINANCING ACTIVITIES
    Increase (decrease) in:
      Deposits                                                                    47,168         42,951
      Repurchase agreements, fed funds & short-term borrowings                    42,606         92,289
      Long-term borrowings                                                        49,454         92,646
    (Increase) decrease in treasury stock                                         (1,404)         3,428
    Issuance of common stock under dividend reinvestment plan                        160         (8,883)
    Cash dividends                                                               (10,894)        (7,775)
                                                                               ---------      ---------
  
        Net cash provided by (used in) financing activities                      127,090        214,656
  
  Net increase (decrease) in cash and cash equivalents                            (4,809)        13,418
  
  Cash and cash equivalents at January 1                                          65,801         63,408
                                                                               ---------      ---------
  
  Cash and cash equivalents at September 30                                    $  60,992      $  76,826
                                                                               =========      =========
  </TABLE>
  
  
  The accompanying notes are an integral part of these condensed financial
  statements.
  
                                          6
  
  <PAGE>
  
  NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
  (UNAUDITED)
  
  
  1. The accompanying  unaudited  consolidated condensed financial statements have
  been prepared in accordance with generally  accepted  accounting  principles for
  interim  financial  information.  The financial  information  included herein is
  unaudited; however, such information reflects all adjustments (consisting solely
  of normal  recurring  adjustments)  which are,  in the  opinion  of  management,
  necessary  to a fair  statement  of the  results for the  interim  periods.  The
  financial  statements  include the balances of Elverson  National Bank which was
  acquired on January 4, 1999 in a transaction  accounted for under the pooling of
  interests method of accounting (see Note 3). For further  information,  refer to
  the  consolidated  financial  statements and footnotes  thereto  included in the
  Company's Annual Report on Form 10-K for the year ended December 31, 1998.
  
  2. The results of operations for the nine-month  period ended September 30, 1999
  are not necessarily indicative of the results to be expected for the full year.
  
  3.  The  Company's  banking  subsidiary,   National  Penn  Bank,  completed  the
  acquisition  of  Elverson  National  Bank on  January  4, 1999 in a  transaction
  accounted for as a pooling of interests,  which accordingly required restatement
  of the  financial  statements.  Under the  terms of the  merger,  each  share of
  Elverson  was  converted  into 1.46875  shares of the  Company's  common  stock,
  resulting in an issuance of 3,821,564  shares of the Company's  common stock. In
  addition,  outstanding  stock  options to purchase  Elverson  common  stock were
  converted into stock options to purchase  58,141 shares of the Company's  common
  stock,  with an  exercise  price of $12.98 to $15.74  per share.  All  financial
  information  presented  for current and prior  periods  includes  the results of
  Elverson National Bank.
  
  4. Per share data are based on the weighted average number of shares outstanding
  of  16,959,918  and  16,996,503  for 1999  and  1998,  respectively,  and on the
  weighted  average  number  of  diluted  shares  outstanding  of  17,222,235  and
  17,337,077  for 1999 and  1998,  respectively,  and are  computed  after  giving
  retroactive effect to a 5-for-4 stock split paid July 31, 1998.
  
  5. On  September  22, 1999,  the  Company's  Board of Directors  declared a cash
  dividend of $.20 per share  payable on November 17,  1999,  to  shareholders  of
  record on October  29,  1999.  On  October  27,  1999,  the  Company's  Board of
  Directors  declared  a 5% stock  dividend  payable  on  December  22,  1999,  to
  shareholders  of  record  on  December  6,  1999.  The  financial  and per share
  information has not been adjusted to reflect the 5% stock dividend.
  
  6. On July 28, 1999, the Company's Board of Directors authorized the repurchase,
  from  time to time,  of up to  850,000  shares of its  common  stock in the open
  market or in negotiated transactions, depending upon market conditions and other
  factors. No timetable has been set for the repurchases.  Repurchased shares will
  be used  for  general  corporate  purposes,  including  the  Company's  dividend
  reinvestment  plan, stock option plans,  employee stock purchase plan, and other
  stock-based  benefit plans.  As of September 30, 1999, a total of 142,959 shares
  have been repurchased at an aggregate cost of $3,230,296.
  
  7. The Company  identifies a loan as impaired  when it is probable that interest
  and principal will not be collected  according to the  contractual  terms of the
  loan  agreement.  The balance of impaired loans was $11,827,000 at September 30,
  1999, all of which are non-accrual loans. The allowance for loan loss associated
  with these  impaired  loans was  $2,545,000 at September  30, 1999.  The Company
  recognizes income on impaired loans under the cash basis when the loans are both
  current and the  collateral on the loan is  sufficient to cover the  outstanding
  obligation to the Company.  If these factors do not exist,  the Company will not
  recognize income on such loans.
  
                                         7
  <PAGE>
  
  Item 2.  Management's Discussion and Analysis of Financial Condition and
           Results of Operations
  
  
           The  following  discussion  and  analysis  is  intended  to  assist  in
  understanding  and evaluating  the major changes in the financial  condition and
  earnings  performance  of the  Company  with a primary  focus on an  analysis of
  operating results.
  
                                 FINANCIAL CONDITION
  
           Total assets increased to $2.252 billion, an increase of $130.9 million
  or 6.2% over the $2.121 billion at December 31, 1998. This increase is reflected
  primarily in the loan and investment categories, the result of the investment of
  deposits,  the Company's  primary  source of funds,  short-term  borrowings  and
  long-term borrowings.
  
           Total  cash and cash  equivalents  decreased  $4.8  million  or 7.3% at
  September  30,  1999 when  compared to  December  31,  1998.  The  decrease  was
  primarily in interest bearing deposits in banks.
  
           Loans  increased to $1.511  billion at September 30, 1999. The increase
  of $106.5 million or 7.6% compared to December 31, 1998 was primarily the result
  of the  investment of deposits and long-term  borrowings.  Loans  originated for
  immediate resale during the first nine months of 1999 amounted to $46.7 million.
  The  Company's  credit  quality  is  reflected  by the  annualized  ratio of net
  charge-offs to total loans of .24% through the third quarter of 1999 versus .30%
  for the year 1998, and the ratio of non-performing assets to total loans of .94%
  at  September  30,  1999 and 1.0% at December  31 1998.  Non-performing  assets,
  including non-accruals, loans 90 days past due and still accruing and other real
  estate owned, were $14.4 million at September 30, 1999 compared to $14.3 million
  at December 31, 1998. Of these  amounts,  non-accrual  loans  represented  $11.8
  million  and  $11.6  million  at  September  30,  1999 and  December  31,  1998,
  respectively.  Loans 90 days  past due and  still  accruing  interest  were $1.5
  million  and  $1.8  million  at  September  30,  1999  and  December  31,  1998,
  respectively. Other real estate owned was $1.1 million and $922,000 at September
  30, 1999 and December 31, 1998,  respectively.  The Company had no  restructured
  loans at September 30, 1999 or December 31, 1998.  The allowance for loan losses
  to  non-performing  assets  was  223.6% and  215.0% at  September  30,  1999 and
  December 31, 1998,  respectively.  As is evident from the above amounts relative
  to  non-performing  assets,  there  have  been no  significant  changes  between
  December  31, 1998 and  September  30,  1999.  The  Company  has no  significant
  exposure to energy and agricultural-related loans.
  
           Investments,  the  Company's  secondary use of funds,  increased  $41.3
  million  or 7.9% to $564.3  million  at  September  30,  1999 when  compared  to
  December  31,  1998.  The  increase  is due to  investment  purchases  of $124.9
  million,  primarily  in  municipal  securities,  which was  partially  offset by
  investment  sales  and  maturities  and  the  amortization  of   mortgage-backed
  securities.
  
           Trading  account  securities  decreased  from $21.6  million to zero at
  September  30,  1999 due to the sale of all these  securities.  The  Company has
  assessed  its  involvement  in trading  account  activities  and  decided  these
  activities do not meet with its strategic goals.
  
           As the primary source of funds, aggregate deposits of $1.520 billion at
  September  30, 1999  increased  $47.2  million or 3.2%  compared to December 31,
  1998.  The  increase  in  deposits  during  the  first  nine  months of 1999 was
  primarily in interest  bearing  deposits  which  increased  $44.6  million while
  non-interest bearing deposits increased $2.6 million. Certificates of deposit in
  excess of $100,000  increased  $11.5 million.  In addition to deposits,  earning
  assets are funded to some extent through  purchased funds and borrowings.  These
  include  securities sold under repurchase  agreements,  federal funds purchased,
  short-term borrowings,  long-term debt obligations, and subordinated debentures.
  In aggregate,  these funds  totaled  $559.7  million at September 30, 1999,  and
  $467.6 million at December 31, 1998. The increase of $92.1 million represents an
  increase in long-term obligations of $49.5 million and an increase in short-term
  
                                         8
  
  <PAGE>
  
  borrowings,  primarily  securities sold under repurchase  agreements and federal
  funds purchased of $42.6 million.
  
           Shareholders' equity decreased $7.7 million through September 30, 1999.
  This decrease was  principally  due to a decrease in earnings  retained due to a
  higher dividend payout ratio and a decrease in accumulated  other  comprehensive
  income.  Cash dividends paid during the first nine months of 1999 increased $2.5
  million  or 33.5%  compared  to the cash  dividends  paid  during the first nine
  months of 1998.  Earnings  retained  during the first  nine  months of 1999 were
  49.2% compared to 57.6% during the first nine months of 1998.
  
                                RESULTS OF OPERATIONS
  
           Net income for the quarter  ended  September 30, 1999 was $7.2 million,
  16.1% more than the $6.2 million  reported for the same period in 1998.  For the
  first nine months,  net income  reached  $19.7  million,  or 11.8% more than the
  $17.6  million  reported  for the  first  nine  months  of 1998.  The  Company's
  performance  has been and will continue to be in part influenced by the strength
  of the economy and conditions in the real estate market.
  
           Net interest income is the difference between interest income on assets
  and interest expense on liabilities.  Net interest income increased $1.3 million
  or 6.8% to $20.8 million  during the third quarter of 1999 from $19.5 million in
  1998. For the comparative nine month period,  net interest income increased $2.8
  million or 4.9% to $60.5  million  from $57.7  million in 1998.  The increase in
  interest  income for the first nine months is a result of  increased  investment
  income of $3.8 million and  increased  loan income of $3.6 million due to growth
  in loan  outstandings  and higher  rates on loans that was  partially  offset by
  growth in deposits and higher rates on deposits and  borrowings.  Interest  rate
  risk is a major concern in forecasting earnings potential. On November 18, 1998,
  the prime rate changed to 7.75%. From July 1, 1999 to August 24, 1999, the prime
  rate was 8.00%.  On August 25, 1999,  the prime rate changed to 8.25%.  Interest
  expense  during the first nine  months of 1999  increased  $4.0  million or 7.1%
  compared  to the prior  year's  first nine  months.  Despite  the  current  rate
  environment,   the  cost  of  attracting  and  holding  deposited  funds  is  an
  ever-increasing  expense in the banking  industry.  These increases are the real
  costs of deposit accumulation and retention,  including FDIC insurance costs and
  branch overhead  expenses.  Such costs are necessary for continued growth and to
  maintain and increase market share of available deposits.
  
           The  provision  for loan and lease  losses is  determined  by  periodic
  reviews of loan quality,  current economic conditions,  loss experience and loan
  growth.  Based on these  factors,  the  provision  for  loan  and  lease  losses
  increased  $150,000 for the nine month period ended  September 30, 1999 compared
  to the same period in 1998.  The  allowance  for loan and lease  losses of $32.3
  million at  September  30,  1999 and $30.8  million at  December  31,  1998 as a
  percentage  of total loans was 2.1% for both time  periods.  The  Company's  net
  charge-offs of $2,813,000 and $953,000  during the first nine months of 1999 and
  1998,  respectively,  continue to be comparable to those of the Company's peers,
  as reported in the Bank Holding Company Performance Report.
  
           Other income  increased  $1.1 million or 24.4% during the third quarter
  of 1999, as a result of increased other income of $1,102,000, which includes the
  investment in bank-owned  life  insurance,  increased  trust income of $191,000,
  increased service charges on deposit accounts of $190,000 and increased mortgage
  banking  income of $15,000.  This was partially  offset by a decrease in trading
  revenue  of  $328,000  and a  decrease  in  net  gains  (losses)  in  investment
  securities  of $64,000.  Year-to-date,  other income  increased  $2.8 million or
  21.9% as a result of increased  other income of $3.0  million,  increased  trust
  income of $492,000,  increased  service charges on deposit  accounts of $398,000
  and increased mortgage banking income of $118,000.  This was partially offset by
  decreases  in gains on sale of  investment  securities  of $615,000  and trading
  revenue of $561,000.  Other  expenses  increased $1.1 million or 7.8% during the
  quarter ended September 30, 1999 and increased $4.0 million or 9.1% for the nine
  month  period.  Of this  year-to-date  increase,  salaries,  wages and  benefits
  increased $3.6 million or 14.6%,
  
                                         9
  
  <PAGE>
  
  other  operating  expenses  increased  $235,000  or 1.9%  and net  premises  and
  equipment increased $181,000 or 2.6%.
  
           Income before income taxes increased $1.2 million or 15.6% in the third
  quarter of 1999 compared to the same time period in 1998. In comparing the first
  nine months of 1999 to 1998,  income before income taxes  increased $1.5 million
  or 6.7%.  Income taxes  increased  $235,000 for the quarter ended  September 30,
  1999 and decreased $541,000 for the nine month period.
  
                       LIQUIDITY AND INTEREST RATE SENSITIVITY
  
           The  primary  functions  of  asset/liability  management  are to assure
  adequate liquidity and maintain an appropriate balance between  interest-earning
  assets and  interest-bearing  liabilities.  Liquidity  management  involves  the
  ability  to meet the cash  flow  requirements  of  customers  who may be  either
  depositors  wanting  to  withdraw  funds or  borrowers  needing  assurance  that
  sufficient funds will be available to meet their credit needs. Funding affecting
  short-term  liquidity,  including  deposits,  repurchase  agreements,  fed funds
  purchased,  and  short-term  borrowings,  increased  $89.8 million from year end
  1998.  Long-term borrowings increased $49.5 million during the first nine months
  of 1999.
  
           The  goal  of  interest  rate   sensitivity   management  is  to  avoid
  fluctuating  net  interest  margins,  and to  enhance  consistent  growth of net
  interest income through periods of changing  interest rates. Such sensitivity is
  measured  as the  difference  in the  volume of assets  and  liabilities  in the
  existing portfolio that are subject to repricing in a future time period.
  
           The following table shows  separately the interest rate  sensitivity of
  each category of  interest-earning  assets and  interest-bearing  liabilities at
  September 30, 1999:
  
  <TABLE>
  <CAPTION>
                                                         Repricing Periods  (1) (2)
                                                    ---------------------------------
                                                        Three Months    One Year
                                        Within Three    Through One    Through Five      Over
                                           Months           Year          Years       Five Years
                                        --------------------------------------------------------
                                                              (In Thousands)
  <S>                                    <C>            <C>            <C>            <C>
  Assets
        Interest-bearing deposits
           at banks                      $   1,748      $      --      $      --      $      --
        Investment securities               72,855         56,851        183,285        251,323
        Trading account securities              --             --             --             --
        Loans and leases                   441,073        226,625        470,393        373,352
        Other assets                         3,561             --             --        171,064
                                         ---------      ---------      ---------      ---------
                                           519,237        283,476        653,678        795,739
                                         ---------      ---------      ---------      ---------
  Liabilities and equity
        Noninterest-bearing deposits       225,399             --             --             --
        Interest-bearing deposits          286,738        414,347        201,779        392,207
        Borrowed funds                     197,334         90,000        167,500         64,571
        Preferred securities                    --             --             --         40,250
        Other liabilities                       --             --             --         20,300
        Hedging instruments                 80,000        (30,000)       (50,000)            --
        Shareholders' equity                    --             --             --        151,055
                                         ---------      ---------      ---------      ---------
                                           789,471        474,347        319,279        669,033
                                         ---------      ---------      ---------      ---------
  Interest sensitivity gap                (270,234)      (190,871)       334,399        126,706
                                         ---------      ---------      ---------      ---------
  
  Cumulative interest rate
          sensitivity gap                ($270,234)     ($461,105)     ($126,706)     $      --
                                         =========      =========      =========      =========
  
                                         10
  
  <PAGE>
  
  <FN>
  (1) Adjustable rate loans are included in the period in which interest rates are
  next  scheduled to adjust rather than in the period in which they are due. Fixed
  rate loans are  included in the period in which they are  scheduled to be repaid
  and  are  adjusted  to  take  into  account  estimated  prepayments  based  upon
  assumptions  estimating  prepayments in the interest rate environment prevailing
  during the third  calendar  quarter of 1999. The table assumes  prepayments  and
  scheduled  principal   amortization  of  fixed-rate  loans  and  mortgage-backed
  securities  and  assumes  that   adjustable   rate  mortgages  will  reprice  at
  contractual repricing intervals.  There has been no adjustment for the impact of
  future commitments and loans in process.
  
  (2) Savings and NOW deposits are  scheduled  for  repricing  based on historical
  deposit decay rate analyses,  as well as historical  moving  averages of run-off
  for the  Company's  deposits in these  categories.  While  generally  subject to
  immediate  withdrawal,  management  considers a portion of these  accounts to be
  core deposits having  significantly  longer effective  maturities based upon the
  Company's  historical  retention  of such  deposits  in changing  interest  rate
  environments.  Specifically,  29.1% of these deposits are considered repriceable
  within three months and 70.9% are considered  repriceable in the over five years
  category.
  </FN>
  </TABLE>
  
           Interest   rate   sensitivity   is  a   function   of   the   repricing
  characteristics of the Company's assets and liabilities.  These  characteristics
  include  the  volume of assets  and  liabilities  repricing,  the  timing of the
  repricing,  and the relative  levels of  repricing.  Attempting  to minimize the
  interest  rate  sensitivity  gaps is a continual  challenge  in a changing  rate
  environment.  Based on the  Company's  gap  position as  reflected  in the above
  table,  current  accepted  theory would indicate that net interest  income would
  increase  in a falling  rate  environment  and would  decrease  in a rising rate
  environment.  An interest rate gap table does not,  however,  present a complete
  picture of the impact of interest  rate changes on net interest  income.  First,
  changes in the general level of interest  rates do not affect all  categories of
  assets and liabilities equally or simultaneously. Second, assets and liabilities
  which can contractually reprice within the same period may not, in fact, reprice
  at the same time or to the same extent.  Third,  the table  represents a one-day
  position; variations occur daily as the Company adjusts its interest sensitivity
  throughout the year. Fourth, assumptions must be made to construct such a table.
  For example,  non-interest  bearing  deposits are assigned a repricing  interval
  within  one year,  although  history  indicates  a  significant  amount of these
  deposits  will not move  into  interest  bearing  categories  regardless  of the
  general level of interest rates. Finally, the repricing distribution of interest
  sensitive assets may not be indicative of the liquidity of those assets.
  
           The Company anticipates  interest rates will move within a narrow range
  for the remainder of 1999,  with no clear  indication of  sustainable  rising or
  falling rates. Given this assumption, the Company's asset/liability strategy for
  1999 is to  maintain a negative  gap  (interest-bearing  liabilities  subject to
  repricing exceed interest-earning assets subject to repricing) for periods up to
  a year.  The impact of a sustained  interest  rate  environment  on net interest
  income is not expected to be significant to the Company's results of operations.
  Effective  monitoring of these interest  sensitivity gaps is the priority of the
  Company's asset/liability management committee.
  
                                  CAPITAL ADEQUACY
  
           The following table sets forth certain capital performance ratios:
  
                                                   Sept. 30,      Dec. 31,
                                                     1999           1998
                                                   ---------      --------
  CAPITAL PERFORMANCE
  Return on average assets (annualized)              1.23%           1.17%
  Return on average equity (annualized)             17.10           15.00
  Earnings retained                                 49.20           55.70
  Internal capital growth (annualized)               8.15            8.04
  
                                         11
  <PAGE>
  
  CAPITAL LEVELS
  
  <TABLE>
  <CAPTION>
                                         Tier 1 Capital to   Tier 1 Capital to Risk-  Total Capital to Risk-
                                       Average Assets Ratio   Weighted Assets Ratio   Weighted Assets Ratio
                                       --------------------   ---------------------   ---------------------
                                        Sept. 30,  Dec. 31,   Sept. 30,    Dec. 31,   Sept. 30,    Dec. 31,
                                          1999       1998       1999         1998        1999        1998
                                          ----       -----      -----       ------      ------      ------
  <S>                                     <C>        <C>        <C>         <C>         <C>         <C>
  The Company                             8.66%      8.77%      11.30%      12.21%      12.68%      13.51%
  National Penn Bank                      6.78%      6.80%       8.89%       9.52%      10.15%      10.78%
  "Well Capitalized" institution          5.00%      5.00%       6.00%       6.00%      10.00%      10.00%
      (under banking regulations)
  </TABLE>
  
  
           The Company's  capital  ratios above  compare  favorably to the minimum
  required amounts of Tier 1 and total capital to  "risk-weighted"  assets and the
  minimum Tier 1 leverage  ratio, as defined by banking  regulators.  At September
  30, 1999,  the Company was  required to have  minimum  Tier 1 and total  capital
  ratios of 4.0% and 8.0%,  respectively,  and a minimum Tier 1 leverage  ratio of
  3.0%. In order for the Company to be considered "well  capitalized",  as defined
  by banking regulators,  the Company must have Tier 1 and total capital ratios of
  6.0% and 10.0%,  respectively,  and a minimum Tier 1 leverage ratio of 5.0%. The
  Company  currently meets the criteria for a well  capitalized  institution,  and
  management believes that, under current  regulations,  the Company will continue
  to meet its minimum capital  requirements in the foreseeable future. At present,
  the Company has no commitments for significant capital expenditures.
  
           The Company is not under any agreement with regulatory  authorities nor
  is  the  Company  aware  of  any  current   recommendations  by  the  regulatory
  authorities  which,  if such  recommendations  were  implemented,  would  have a
  material effect on liquidity, capital resources or operations of the Company.
  
                                   FUTURE OUTLOOK
  
           The following is a Year 2000 readiness statement.
  
            The Company's Year 2000 initiative  began in 1996 with the creation of
  a "Year 2000 Compliance  Project team"  comprised of various Company  employees,
  including senior management.  The Year 2000 Project was divided into five phases
  -- Awareness, Assessment, Renovation, Validation, and Implementation. These five
  phases have all been completed.  All active ATM machines have been renovated and
  are now compliant.  The company has been actively  involved in the joint testing
  of electronic  payment and transfer  systems.  Actual costs for 1998 were within
  the budgeted amount of $300,000, which represented approximately 9% of the total
  information  technology  budget  for  1998.  The  amount  budgeted  for  1999 is
  $200,000,  which is approximately 12% of the total information technology budget
  for 1999.  However,  there can be no  guarantee  that  these  estimates  will be
  achieved and actual  results  could differ  materially  from those  anticipated.
  Specific factors that may cause such material  differences  include, but are not
  limited to, the  availability  and cost of personnel  trained in this area,  the
  ability  to  locate  and  correct  all  relevant  computer  codes,  and  similar
  uncertainties.  A business  impact  analysis has been  completed for the systems
  which  support  critical  functions.   The  Company  believes  the  most  likely
  worst-case  scenario to be a total or partial  failure to perform of one or more
  of the Company's material third-party business partners or providers of service,
  commodity,  or data,  which failure could have a material  adverse impact on the
  Company's  operations.  In an attempt to  mitigate  this risk,  the  Company has
  included  the  assessment  of these  partners  and  providers  in its Year  2000
  project.  The  assessment of the Year 2000 readiness of third parties upon which
  the Company depends for various services has been substantially  completed.  The
  Company will continue to monitor critical third parties throughout the remainder
  of 1999. However,  there can be no guarantee that the systems of other companies
  on which  Company's  systems rely will be timely  converted and would not have a
  material  adverse  effect on the  Company's  systems  and  operations.  No
  
                                         12
  
  <PAGE>
  
  major information  technology projects have been delayed as a result of the Year
  2000 Project.  In addition,  the Company's  audit  department  contracted for an
  independent  consultant to verify and validate the Company's  Year 2000 Project.
  No  major  recommendations  were  suggested  by the  independent  consultant  to
  mitigate exposures in the Company's Year 2000 Project plan.
  
           The following is a more detailed discussion of the Year 2000 Project:
  
           The Year 2000 Project has been in operation at the Company  since 1996.
  During this time the Company has been  operating  under a project plan reflected
  in many individual  documents such as the Microsoft Project charts,  binders for
  specific project areas, and the inventories which were created.
  
           For the  purposes of  consistency  with the  guidance of the  Company's
  regulatory agencies, the Company has structured the project in the standard five
  phases: Awareness, Assessment, Renovation, Validation, and Implementation.  None
  of these phases are purely consecutive chronologically.  For example, Awareness,
  the phase which was begun before the others, will most likely continue well into
  the first and second quarters of 2000.
  
           It is  important  to note that the Year  2000  Project  at the  Company
  includes  both  the  progression  from  1999 to 2000 and the  identification  of
  February 29, 2000 as a leap year day.
  
           The following is a more detailed description of each project phase.
  
  
  Awareness
           This phase began in 1996 with the assignment of project  managers.  The
  first  task was to review as much  information  as  possible  from user  groups,
  seminars,  periodicals,  and the  written  guidance  available  from  regulatory
  agencies.  The  project  managers  created a project  plan to address  Year 2000
  issues.
  
           To address  individual areas of  responsibility  in the project plan, a
  team was formed  composed  of various  representatives  of  National  Penn Bank,
  Investors Trust Company, and, beginning in 1998, Penn Securities,  Inc. The team
  has been charged  with guiding the Year 2000 efforts of the Company  through all
  project phases.
  
           The next step in the  Awareness  phase  was to  educate  the  Company's
  employees on Year 2000 issues.  This was accomplished  through periodic items in
  Company memos and through e-mail.  Year 2000 training was conducted for all bank
  officers.  In the  Spring  of 1998,  seminars  were  offered  for the  Company's
  business loan customers and lending staff.
  
           The  seminars  were one  component of the  Company's  effort to educate
  customers.  Another was a variety of statement stuffers concerning the Year 2000
  issue and specifically  providing  information on the Company's project plan and
  status.  In  September  1998,  a Year 2000  update  was  added to the  Company's
  internet  home page.  In  addition,  the  Company  has  participated  in various
  television programs and newspaper articles produced by the local media.
  
           The  Company  intends  to  continue  to use this  variety  of  channels
  (statement  stuffers,  letters,  seminars,  home page, and printed brochures) to
  attempt to provide  frequent  updates on the status of the Year 2000  project at
  the Company and all of its subsidiary organizations.
  
  Assessment
           The purpose of the  Assessment  phase is to inventory  all  potentially
  affected  software,  hardware,  equipment  (including  faxes,  ATMs,  hand  held
  calculators,  etc.), interfaces,  environmental systems, and third parties. Once
  this information was gathered,  it was organized to provide efficient  tracking.
  Letters
  
                                         13
  
  <PAGE>
  
  were  sent and web sites  visited  to  ascertain  the  compliance  status of the
  individual product or project at the particular organization.
  
           The Assessment  process went one step further with the investigation of
  the Year 2000 compliance  status of the Company's  largest  business  depositors
  (funds  providers),   large  commercial  loan  customers  (funds  takers),   and
  correspondent banks (capital market counterparties). The depositor investigation
  was done through a mailed survey to any business  account  holder with a balance
  of $100,000 or greater.  Commercial loan relationships with an aggregate balance
  greater than $300,000 were  individually  assessed by the lender.  The status of
  correspondent  banks has been tracked as part of the third-party  portion of the
  project.
  
           Year 2000 issues were  addressed  as part of the  acquisition  planning
  with Elverson in 1998.  After the acquisition was announced,  the teams began to
  share   information  by  the  project   leaders   participating   in  the  other
  institution's team meetings,  through data sharing, and through joint testing of
  common applications.
  
           In an effort to control the inventory of systems and applications after
  the assessment was completed, control points were reviewed. A policy was drafted
  requiring all new software  purchases to be certified Year 2000  compliant.  All
  hardware and  software  purchases  will be tested  before they are placed into a
  production  environment.  As all PC-based  hardware  and software are  installed
  through the Network Services group and all mainframe  applications are supported
  through Data  Processing,  two central  control  points are  established.  These
  groups are responsible  for the ongoing  monitoring of new software and hardware
  installation.  As an additional  control,  the MIS  department  must approve all
  requests for payment of hardware and software purchases.
  
  Renovation
           The  Renovation  phase  involves  upgrading or  replacing  hardware and
  software as  necessary.  Core systems have the highest  priority.  Other mission
  critical systems follow. Finally,  non-mission critical systems are addressed. A
  Remediation   Contingency  Plan  has  been  written  to  address  any  potential
  difficulties that may be encountered before December 31, 1999.
  
           The  Company  has  completed  renovation  efforts on  mission  critical
  systems.   The  Company   completed  the   replacement   of  the  two  remaining
  non-compliant, non-critical systems during the third quarter of 1999.
  
           Highlights of the Company's efforts to date include the installation of
  a new mainframe  system in January 1998. In May 1998, a new core banking  system
  was  installed.  In October and November 1998, all ATM machines were upgraded to
  compliant  releases of software  and the memory  necessary to process  them.  In
  December  1998,  the core  processing  system of  Investors  Trust  Company  was
  replaced,  including new hardware, software, and operating system. All have been
  thoroughly  tested by the users' group,  as discussed  herein in the  Validation
  phase.
  
  Validation
           The  Validation  phase of the project is guided by a written test plan.
  Testing of both  mission  critical  and  non-mission  critical  systems has been
  completed.
  
           The project  leader and the end users are jointly  responsible  for the
  individual  tests.  The project  leader  schedules the date and ensures that the
  testing environment is prepared.  He then meets with the end user to develop the
  testing  scripts and scenarios.  The project leader is responsible  for ensuring
  that the test adheres to the requirements of the Year 2000 testing plan. The end
  user is responsible for the data entry and system  operation during the test and
  for reviewing the results to verify that the test was successful.  When the test
  is completed and  documented,  both the end user and the project  leader sign to
  indicate its completion.
  
                                         14
  
  <PAGE>
  
           When a system is tested,  all interfaces and file transmissions will be
  tested at the same time whenever possible. As appropriate and feasible,  testing
  with third parties will also be completed.
  
           Initiatives to complete the  Validation  phase included the creation of
  an isolated PC network testing lab, the use of a secondary logical partition for
  validating  mainframe  applications  and interfaces,  user group testing for the
  core trust applications, and proxy testing by the network vendor for ATMs.
  
  Implementation
           Hardware and  software  certified to be compliant by the vendor will be
  thoroughly  tested  as  addressed  in the  Validation  phase.  Any  product  not
  currently in production must be tested and accepted by the end user before being
  placed  into a  production  environment.  After  a  system  is  certified  to be
  compliant,  no future releases or updates will be installed  unless first tested
  and confirmed to be compliant through the procedures discussed in the Validation
  phase. The control points for ensuring the future  installation of releases will
  continue to be the Network Services and Data Processing departments.
  
  Additional Project Efforts
           Throughout  the  remainder of 1999, a database is being  maintained  to
  track the compliance status of third parties with which the Company conducts its
  affairs.  This information will be reported to the project team and forwarded to
  executive management as necessary.
  
           A separate budget for Year 2000 expenses is being  maintained for 1999.
  The status of the budget will be reported periodically to executive management.
  
           Contingency  plans have been written for all mission  critical and high
  priority  non-mission  critical  systems.  As the plans are completed,  they are
  reviewed  and  edited.  Additionally,  the  testing  of  these  plans  has  been
  completed.
  
           Although the Company believes that the program outlined above should be
  adequate  to address  the Year 2000  issue,  there can be no  assurance  to that
  effect.
  
           This report contains  forward-looking  statements  concerning earnings,
  asset quality,  Year 2000  compliance  and other future  events.  Actual results
  could differ materially due to, among other things,  the risks and uncertainties
  discussed  herein  and in Exhibit  99 to the  Company's  Report on Form 10-K for
  1998,  which is incorporated  herein by reference.  Readers are cautioned not to
  place undue reliance on these statements.  The Company  undertakes no obligation
  to publicly release or update any of these statements.
  
  Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
           There has been no material  change in the  Company's  assessment of its
  sensitivity to market risk since its  presentation  in the 1998 annual report on
  Form 10-K filed with the SEC.
  
                                         15
  <PAGE>
  
                             PART II - OTHER INFORMATION
  
  Item 1.  Legal Proceedings.
  
           None.
  
  Item 2.  Changes in Securities.
  
           As  previously  reported in a Report on Form 8-K dated August 21, 1999,
  National Penn Bancshares, Inc. (the "Registrant") amended its Shareholder Rights
  Plan to extend the term of the Rights (as defined therein) to August 22, 2009.
  
  Item 3.  Defaults Upon Senior Securities.
  
           None.
  
  Item 4.  Submission of Matters to Vote of Security Holders.
  
           None.
  
  Item 5.  Other Information.
  
           On September 17, 1999, the Registrant's  banking  subsidiary,  National
  Penn Bank (the  "Bank"),  formed and  organized a new  wholly-owned  subsidiary,
  National Penn Mortgage Company ("NPMC"). NPMC is engaged in the mortgage lending
  business,  including  the  sub-prime  and agency and  alternative  A residential
  mortgage loan business.
  
           On September 22, 1999, the Registrant's  Board of Directors  declared a
  cash dividend of $.20 per share payable on November 17, 1999, to shareholders of
  record on October 29, 1999.
  
           On October 27, 1999, the Registrant's  Board of Directors declared a 5%
  stock  dividend  payable on December 22, 1999, to  shareholders  of record as of
  December 6, 1999.
  
           In October  1999,  the Bank  closed two  supermarket  branches  and the
  automated teller machines (ATMs) at those locations.
  
           As previously reported in its Report on Form 10-Q for the quarter ended
  June 30, 1999, the Registrant's Board of Directors  approved,  in July 1999, the
  repurchase of up to 850,000  shares of its common stock in the open market or in
  negotiated  transactions.  As of September  30, 1999, a total of 142,959  shares
  have been repurchased at an aggregate cost of $3,230,296.
  
  Item 6.  Exhibits and Reports on Form 8-K.
  
           (a)      Exhibits.
  
                    Exhibit 27 - Financial Data Schedule.
  
           (b)  Reports  on Form 8-K.  The  Registrant  filed a Report on Form 8-K
  dated August 21, 1999,  reporting under Item 5 the amendment of the Registrant's
  Shareholder Rights Plan to extend the term of the Rights (as defined therein) to
  August 22, 2009. The Report did not contain any financial statements.
  
  
                                         16
  <PAGE>
                                     SIGNATURES
  
  
           Pursuant to the  requirements of Section 13 of the Securities  Exchange
  Act of 1934, the Registrant has caused this report to be signed on its behalf by
  the undersigned thereunto duly authorized.
  
                                          NATIONAL PENN BANCSHARES, INC.
                                                    (Registrant)
  
  Dated:   November 12, 1999              By /s/  Wayne R. Weidner
                                             -------------------------------------
                                             Wayne R. Weidner, President
  
  Dated:   November 12, 1999              By /s/  Gary L. Rhoads
                                             -------------------------------------
                                             Gary L. Rhoads, Principal
                                             Financial Officer
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 67459}]
metadata_filer: {"company-data": {"conformed-name": "NATIONAL PENN BANCSHARES INC", "cik": "0000700733", "assigned-sic": "6021", "irs-number": "232215075", "state-of-incorporation": "PA", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-10957", "film-number": "99752682"}, "business-address": {"street1": "PHILADELPHIA AND READING AVE", "street2": "PO 547", "city": "BOYERTOWN", "state": "PA", "zip": "19512", "phone": "2153676001"}, "mail-address": {"street1": "POST OFFICE BOX 547", "street2": "POST OFFICE BOX 547", "city": "BOYERTOWN", "state": "PA", "zip": "19512"}}
text: FORM 10-Q
  
                         SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C. 20549
  
  (Mark One)
  
             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                          SECURITIES EXCHANGE ACT OF 1934
  
  For the quarterly period ended:       September 30, 1999
                                  -------------------------------
  
  OR
  
            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
                          SECURITIES EXCHANGE ACT OF 1934
  
  For the transition period from: __________________  to  ____________________
  
  Commission file number: 000-10957
  
                           NATIONAL PENN BANCSHARES, INC.
               ------------------------------------------------------
               (Exact name of registrant as specified in its charter)
  
               Pennsylvania                                23-2215075
       ------------------------------                  -------------------
     (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                  Identification No.)
  
             Philadelphia and Reading Avenues, Boyertown, PA    19512
             --------------------------------------------------------
             (Address of principal executive offices)      (Zip Code)
  
                                   (610) 367-6001
             --------------------------------------------------------
                (Registrant's telephone number, including area code)
  
                                         N/A
             --------------------------------------------------------
                (Former name, former address and former fiscal year,
                            if changed since last report)
  
       Indicate  by check mark  whether the  Registrant  (1) has filed all reports
  required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
  1934  during  the  preceding  12 months  (or for such  shorter  period  that the
  Registrant was required to file such reports),  and (2) has been subject to such
  filing requirements for the past 90 days. Yes _X_   No __.
  
           Indicate  the  number of  shares  outstanding  of each of the  issuer's
  classes of common stock, as of the latest practicable date.
  
                 Class                           Outstanding at November 9, 1999
  
     Common Stock (no stated par value)            (No.)  16,886,816 Shares
  
                                 Page 1 of 17 pages
  TABLE OF CONTENTS
  
  Part I -  Financial Information.                                    Page
  
            Item 1. Financial Statements.............................. 3
  
            Item 2. Management's Discussion and Analysis of
                    Financial Condition and Results of Operation...... 8
  
            Item 3. Quantitative and Qualitative Disclosures about
                    Market Risk...................................... 15
  
  Part II - Other Information.
  
            Item 1. Legal Proceedings................................ 16
  
            Item 2. Changes in Securities............................ 16
  
            Item 3. Defaults Upon Senior Securities.................. 16
  
            Item 4. Submission of Matters to a Vote of
                    Security Holders................................. 16
  
            Item 5. Other Information................................ 16
  
            Item 6. Exhibits and Reports on Form 8-K................. 16
  
  Signature.......................................................... 17
  
                                         2
  PART I - FINANCIAL INFORMATION
  
  Item 1.  Financial Statements
  NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
  CONSOLIDATED CONDENSED BALANCE SHEET                                       Sept. 30           Dec. 31
   (Dollars in thousands, except per share data)                               1999              1998
                                                                            (Unaudited)         (Note)
                                                                            -----------      -----------
  ASSETS
  Cash and due from banks                                                   $    59,244      $    55,024
  Interest bearing deposits in banks                                              1,748           10,777
  Federal funds sold                                                                 --               --
                                                                            -----------      -----------
      Total cash and cash equivalents                                            60,992           65,801
  Trading account securities                                                         --           21,589
  Investment securities available for sale                                      564,314          523,041
  Loans, less allowance for loan losses of $32,267 and
    $30,835 in 1999 and 1998 respectively                                     1,511,443        1,404,972
  Other assets                                                                  115,381          105,845
                                                                            -----------      -----------
      Total Assets                                                            2,252,130        2,121,248
                                                                            ===========      ===========
  
  LIABILITIES AND SHAREHOLDERS' EQUITY
  Non-interest bearing deposits                                             $   225,399      $   222,816
  Interest bearing deposits
    (Includes certificates of deposit in excess of $100,000 or greater:
    1999 - $156,518; 1998 - $145,047)                                         1,295,071        1,250,486
                                                                            -----------      -----------
      Total Deposits                                                          1,520,470        1,473,302
  Securities sold under repurchase agreements
    and federal funds purchased                                                 213,735          159,586
  Short-term borrowings                                                           7,589           19,132
  Long-term obligations                                                         298,081          248,627
  Guaranteed preferred beneficial interests in
     Company's subordinated debentures                                           40,250           40,250
  Accrued interest and other liabilities                                         20,950           21,577
                                                                            -----------      -----------
      Total Liabilities                                                       2,101,075        1,962,474
  Commitments and contingent liabilities                                             --               --
  Shareholders' equity
    Preferred stock, no stated par value;
      authorized 1,000,000 shares, none issued                                       --               --
    Common stock, no stated par value;
      authorized 62,500,000 shares; issued and outstanding
      1999 - 17,773,173; 1998 - 17,839,103; net of shares
      in Treasury: 1999 - 67,467; 1998 - 0                                      114,454          114,294
    Retained earnings                                                            43,759           34,927
    Accumulated other comprehensive income                                       (5,754)           9,553
    Treasury stock at cost                                                       (1,404)              --
                                                                            -----------      -----------
      Total Shareholders' Equity                                                151,055          158,774
                                                                            -----------      -----------
      Total Liabilities and Shareholders' Equity                            $ 2,252,130      $ 2,121,248
                                                                            ===========      ===========
  The accompanying notes are an integral part of these condensed financial
  statements.
  
  Note: The Balance Sheet at Dec. 31, 1998 has been derived from the audited
        financial  statements of the Company plus  additions  necessary to reflect
        the Company's  acquisition  of Elverson  National Bank which was accounted
        for under the pooling of interest method of accounting.
  
                                          3
  NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
  UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
  Three Months Ended           Nine Months Ended
  (Dollars in thousands, except per share data)                 September 30                September 30
                                                          ----------------------------------------------------
                                                             1999          1998          1999          1998
                                                          ---------     ---------     ---------      ---------
  INTEREST INCOME
  Loans including fees                                    $  33,528     $  31,783     $  97,037      $  93,437
  Deposits in banks                                              69           175           176            409
  Federal funds sold                                             10             7           170            171
  Trading account securities                                     --           315           196            518
  Investment securities                                       8,281         7,001        23,369         19,578
                                                          ---------     ---------     ---------      ---------
      Total interest income                                  41,888        39,281       120,948        114,113
                                                          ---------     ---------     ---------      ---------
  INTEREST EXPENSE
  Deposits                                                   13,945        13,329        41,178         39,777
  Federal funds purchased, borrowed funds and
    securities sold under repurchase agreements               7,154         6,489        19,250         16,647
                                                          ---------     ---------     ---------      ---------
      Total interest expense                                 21,099        19,818        60,428         56,424
                                                          ---------     ---------     ---------      ---------
      Net interest income                                    20,789        19,463        60,520         57,689
  Provision for loan losses                                   1,415         1,365         4,245          4,095
                                                          ---------     ---------     ---------      ---------
      Net interest income after provision
        for loan losses                                      19,374        18,098        56,275         53,594
                                                          ---------     ---------     ---------      ---------
  OTHER INCOME
  Trust income                                                1,019           828         2,912          2,420
  Service charges on deposit accounts                         1,511         1,321         4,201          3,803
  Net gains (losses) on sale of investment securities            --            64           213            828
  Mortgage banking income                                       259           244           689            571
  Trading revenue                                                --           328           (48)           513
  Other                                                       2,845         1,743         7,867          4,855
                                                          ---------     ---------     ---------      ---------
      Total other income                                      5,634         4,528        15,834         12,990
                                                          ---------     ---------     ---------      ---------
  OTHER EXPENSES
  Salaries, wages and employee benefits                       9,386         8,265        27,937         24,370
  Net premises and equipment                                  2,391         2,395         7,085          6,904
  Other operating                                             4,076         4,046        12,601         12,366
                                                          ---------     ---------     ---------      ---------
      Total other expenses                                   15,853        14,706        47,623         43,640
                                                          ---------     ---------     ---------      ---------
      Income before income taxes                              9,155         7,920        24,486         22,944
  Applicable income tax expense                               1,945         1,710         4,760          5,301
                                                          ---------     ---------     ---------      ---------
      Net income                                          $   7,210     $   6,210     $  19,726      $  17,643
                                                          =========     =========     =========      =========
  
  PER SHARE OF COMMON STOCK
  Net income per share - basic                            $    0.42     $    0.35     $    1.16      $    0.99
  Net income per share - diluted                               0.42          0.34          1.15           0.97
  Dividends paid in cash                                       0.19          0.15          0.59           0.42
  The accompanying notes are an integral part of these condensed financial
  statements.
  
                                          4
  NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
  CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND
  COMPREHENSIVE INCOME
  NINE  MONTHS ENDED September 30, 1999
    (Dollars in thousands)
                                                                           Accumulated
                                                               Additional     other
                                             Common Stock        Paid-in  conprehensive    Retained     Treasury       Comprehensive
                                           Shares     Par Value   Capital     income       earnings       stock            income
                                         ------------------------------------------------------------------------------------------
  Balance at December 31, 1998           16,989,622    114,294        -        9,553        34,927             -
    Net income                                    -          -        -            -        19,726             -             19,726
    Cash dividends declared                       -          -        -            -       (10,894)            -
    Shares issued under stock-based
         plans                                4,676        693        -            -             -             -
    Other comprehensive income, net
        of reclassification adjustment
        and taxes                                 -          -        -      (15,307)            -                          (15,307)
                                         ------------------------------------------------------------------------------------------
  Total comprehensive income                      -          -        -            -             -             -            $ 4,419
                                         ------------------------------------------------------------------------------------------
   Effect of treasury stock transactions    (67,467)      (533)       -            -             -        (1,404)
  Balance at September 30, 1999          16,926,831   $114,454      $ -     $ (5,754)      $43,759      $ (1,404)
  September 30, 1999
                                                                             ----------------------------------------------
                                                                               Before              Tax            Net of
                                                                                tax              (expense)          tax
                                                                               amount             benefit          amount
                                                                             ----------------------------------------------
  Unrealized gains on securities
    Unrealized holding gains arising during period                             (23,762)            8,317           (15,445)
    Less: reclassification adjustment for gains realized in net income             213               (75)              138
                                                                             ----------------------------------------------
  Other comprehensive income, net                                              (23,549)            8,242           (15,307)
                                                                             ==============================================
  NINE MONTHS ENDED SEPTEMBER 30, 1998
    (Dollars in thousands)
                                                                           Accumulated
                                                               Additional     other
                                             Common Stock        Paid-in  conprehensive    Retained     Treasury       Comprehensive
                                           Shares     Par Value   Capital     income       earnings       stock            income
                                         ------------------------------------------------------------------------------------------
  Balance at December 31, 1997           17,080,328     25,620   96,657        7,648        22,431        (3,428)
    Net income                                    -          -        -            -        17,643             -             17,643
    Cash dividends declared                       -          -        -            -        (7,775)            -
    Shares issued under stock-based
         plans                                3,721         19        -            -             -             -
    Other comprehensive income, net
        of reclassification adjustment
        and taxes                                 -          -        -        3,865             -             -              3,865
                                         ------------------------------------------------------------------------------------------
  Total comprehensive income                      -          -        -            -             -             -           $ 21,508
                                         ------------------------------------------------------------------------------------------
  Conversion to no par value stock                -     95,436  (95,436)           -             -             -
     Par value adjustments related to
        pooling transaction                       -        (10)     329            -             -             -
    Effect of treasury stock transactions  (101,436)    (7,671)  (1,550)           -             -         3,428
                                         ------------------------------------------------------------------------------------------
  Balance at September 30, 1998          16,982,613  $ 113,394      $ -     $ 11,513       $32,299           $ -
  September 30, 1998
                                                                             ----------------------------------------------
                                                                               Before              Tax            Net of
                                                                                tax              (expense)          tax
                                                                               amount             benefit          amount
                                                                             ----------------------------------------------
  Unrealized gains on securities
    Unrealized holding gains arising during period                               5,118            (1,791)            3,327
    Less: reclassification adjustment for gains realized in net income             828              (290)              538
                                                                             ----------------------------------------------
  Other comprehensive income, net                                                5,946            (2,081)            3,865
                                                                             ==============================================
  The accompanying notes are an integral part of these statements.
  
                                          5
  NATIONAL PENN BANCSHARES, INC. AND SUBSIDIARIES
  UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
  Nine Months Ended September 30,
  (Dollars in thousands)
                                                                                  1999           1998
                                                                               ---------      ---------
  
  CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                                 $  19,726      $  17,643
    Adjustments to reconcile net income to net
        cash provided by (used in) operating activities
      Provision for loan and lease losses                                          4,245          4,095
      Depreciation and amortization                                                3,387          3,072
      Net (gains) losses on sale of securities and mortgages                        (143)          (330)
      Trading-related assets                                                      21,589        (21,522)
      Mortgage loans originated for resale                                       (46,658)       (40,083)
      Sale of mortgage loans originated for resale                                46,658         40,083
      Other                                                                       (2,234)        (8,855)
                                                                               ---------      ---------
  
        Net cash provided by (used in) operating activities                       46,570         (5,897)
  
  CASH FLOWS FROM INVESTING ACTIVITIES
    Proceeds from sales of investment securities - available for sale             16,511         49,997
    Proceeds from maturities of investment securities - available for sale        43,571         23,618
    Purchase of investment securities - available for sale                      (124,893)      (192,949)
    Proceeds from sales of loans                                                      --             --
    Net increase in loans                                                       (110,716)       (74,394)
    Purchases of premises & equipment                                             (2,942)        (1,613)
                                                                               ---------      ---------
  
        Net cash provided by (used in) investing activities                     (178,469)      (195,341)
  
  CASH FLOWS FROM FINANCING ACTIVITIES
    Increase (decrease) in:
      Deposits                                                                    47,168         42,951
      Repurchase agreements, fed funds & short-term borrowings                    42,606         92,289
      Long-term borrowings                                                        49,454         92,646
    (Increase) decrease in treasury stock                                         (1,404)         3,428
    Issuance of common stock under dividend reinvestment plan                        160         (8,883)
    Cash dividends                                                               (10,894)        (7,775)
                                                                               ---------      ---------
  
        Net cash provided by (used in) financing activities                      127,090        214,656
  
  Net increase (decrease) in cash and cash equivalents                            (4,809)        13,418
  
  Cash and cash equivalents at January 1                                          65,801         63,408
                                                                               ---------      ---------
  
  Cash and cash equivalents at September 30                                    $  60,992      $  76,826
                                                                               =========      =========
  The accompanying notes are an integral part of these condensed financial
  statements.
  
                                          6
  NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
  (UNAUDITED)
  
  1. The accompanying  unaudited  consolidated condensed financial statements have
  been prepared in accordance with generally  accepted  accounting  principles for
  interim  financial  information.  The financial  information  included herein is
  unaudited; however, such information reflects all adjustments (consisting solely
  of normal  recurring  adjustments)  which are,  in the  opinion  of  management,
  necessary  to a fair  statement  of the  results for the  interim  periods.  The
  financial  statements  include the balances of Elverson  National Bank which was
  acquired on January 4, 1999 in a transaction  accounted for under the pooling of
  interests method of accounting (see Note 3). For further  information,  refer to
  the  consolidated  financial  statements and footnotes  thereto  included in the
  Company's Annual Report on Form 10-K for the year ended December 31, 1998.
  
  2. The results of operations for the nine-month  period ended September 30, 1999
  are not necessarily indicative of the results to be expected for the full year.
  
  3.  The  Company's  banking  subsidiary,   National  Penn  Bank,  completed  the
  acquisition  of  Elverson  National  Bank on  January  4, 1999 in a  transaction
  accounted for as a pooling of interests,  which accordingly required restatement
  of the  financial  statements.  Under the  terms of the  merger,  each  share of
  Elverson  was  converted  into 1.46875  shares of the  Company's  common  stock,
  resulting in an issuance of 3,821,564  shares of the Company's  common stock. In
  addition,  outstanding  stock  options to purchase  Elverson  common  stock were
  converted into stock options to purchase  58,141 shares of the Company's  common
  stock,  with an  exercise  price of $12.98 to $15.74  per share.  All  financial
  information  presented  for current and prior  periods  includes  the results of
  Elverson National Bank.
  
  4. Per share data are based on the weighted average number of shares outstanding
  of  16,959,918  and  16,996,503  for 1999  and  1998,  respectively,  and on the
  weighted  average  number  of  diluted  shares  outstanding  of  17,222,235  and
  17,337,077  for 1999 and  1998,  respectively,  and are  computed  after  giving
  retroactive effect to a 5-for-4 stock split paid July 31, 1998.
  
  5. On  September  22, 1999,  the  Company's  Board of Directors  declared a cash
  dividend of $.20 per share  payable on November 17,  1999,  to  shareholders  of
  record on October  29,  1999.  On  October  27,  1999,  the  Company's  Board of
  Directors  declared  a 5% stock  dividend  payable  on  December  22,  1999,  to
  shareholders  of  record  on  December  6,  1999.  The  financial  and per share
  information has not been adjusted to reflect the 5% stock dividend.
  
  6. On July 28, 1999, the Company's Board of Directors authorized the repurchase,
  from  time to time,  of up to  850,000  shares of its  common  stock in the open
  market or in negotiated transactions, depending upon market conditions and other
  factors. No timetable has been set for the repurchases.  Repurchased shares will
  be used  for  general  corporate  purposes,  including  the  Company's  dividend
  reinvestment  plan, stock option plans,  employee stock purchase plan, and other
  stock-based  benefit plans.  As of September 30, 1999, a total of 142,959 shares
  have been repurchased at an aggregate cost of $3,230,296.
  
  7. The Company  identifies a loan as impaired  when it is probable that interest
  and principal will not be collected  according to the  contractual  terms of the
  loan  agreement.  The balance of impaired loans was $11,827,000 at September 30,
  1999, all of which are non-accrual loans. The allowance for loan loss associated
  with these  impaired  loans was  $2,545,000 at September  30, 1999.  The Company
  recognizes income on impaired loans under the cash basis when the loans are both
  current and the  collateral on the loan is  sufficient to cover the  outstanding
  obligation to the Company.  If these factors do not exist,  the Company will not
  recognize income on such loans.
  
                                         7
  Item 2.  Management's Discussion and Analysis of Financial Condition and
           Results of Operations
  
           The  following  discussion  and  analysis  is  intended  to  assist  in
  understanding  and evaluating  the major changes in the financial  condition and
  earnings  performance  of the  Company  with a primary  focus on an  analysis of
  operating results.
  
                                 FINANCIAL CONDITION
  
           Total assets increased to $2.252 billion, an increase of $130.9 million
  or 6.2% over the $2.121 billion at December 31, 1998. This increase is reflected
  primarily in the loan and investment categories, the result of the investment of
  deposits,  the Company's  primary  source of funds,  short-term  borrowings  and
  long-term borrowings.
  
           Total  cash and cash  equivalents  decreased  $4.8  million  or 7.3% at
  September  30,  1999 when  compared to  December  31,  1998.  The  decrease  was
  primarily in interest bearing deposits in banks.
  
           Loans  increased to $1.511  billion at September 30, 1999. The increase
  of $106.5 million or 7.6% compared to December 31, 1998 was primarily the result
  of the  investment of deposits and long-term  borrowings.  Loans  originated for
  immediate resale during the first nine months of 1999 amounted to $46.7 million.
  The  Company's  credit  quality  is  reflected  by the  annualized  ratio of net
  charge-offs to total loans of .24% through the third quarter of 1999 versus .30%
  for the year 1998, and the ratio of non-performing assets to total loans of .94%
  at  September  30,  1999 and 1.0% at December  31 1998.  Non-performing  assets,
  including non-accruals, loans 90 days past due and still accruing and other real
  estate owned, were $14.4 million at September 30, 1999 compared to $14.3 million
  at December 31, 1998. Of these  amounts,  non-accrual  loans  represented  $11.8
  million  and  $11.6  million  at  September  30,  1999 and  December  31,  1998,
  respectively.  Loans 90 days  past due and  still  accruing  interest  were $1.5
  million  and  $1.8  million  at  September  30,  1999  and  December  31,  1998,
  respectively. Other real estate owned was $1.1 million and $922,000 at September
  30, 1999 and December 31, 1998,  respectively.  The Company had no  restructured
  loans at September 30, 1999 or December 31, 1998.  The allowance for loan losses
  to  non-performing  assets  was  223.6% and  215.0% at  September  30,  1999 and
  December 31, 1998,  respectively.  As is evident from the above amounts relative
  to  non-performing  assets,  there  have  been no  significant  changes  between
  December  31, 1998 and  September  30,  1999.  The  Company  has no  significant
  exposure to energy and agricultural-related loans.
  
           Investments,  the  Company's  secondary use of funds,  increased  $41.3
  million  or 7.9% to $564.3  million  at  September  30,  1999 when  compared  to
  December  31,  1998.  The  increase  is due to  investment  purchases  of $124.9
  million,  primarily  in  municipal  securities,  which was  partially  offset by
  investment  sales  and  maturities  and  the  amortization  of   mortgage-backed
  securities.
  
           Trading  account  securities  decreased  from $21.6  million to zero at
  September  30,  1999 due to the sale of all these  securities.  The  Company has
  assessed  its  involvement  in trading  account  activities  and  decided  these
  activities do not meet with its strategic goals.
  
           As the primary source of funds, aggregate deposits of $1.520 billion at
  September  30, 1999  increased  $47.2  million or 3.2%  compared to December 31,
  1998.  The  increase  in  deposits  during  the  first  nine  months of 1999 was
  primarily in interest  bearing  deposits  which  increased  $44.6  million while
  non-interest bearing deposits increased $2.6 million. Certificates of deposit in
  excess of $100,000  increased  $11.5 million.  In addition to deposits,  earning
  assets are funded to some extent through  purchased funds and borrowings.  These
  include  securities sold under repurchase  agreements,  federal funds purchased,
  short-term borrowings,  long-term debt obligations, and subordinated debentures.
  In aggregate,  these funds  totaled  $559.7  million at September 30, 1999,  and
  $467.6 million at December 31, 1998. The increase of $92.1 million represents an
  increase in long-term obligations of $49.5 million and an increase in short-term
  
                                         8
  borrowings,  primarily  securities sold under repurchase  agreements and federal
  funds purchased of $42.6 million.
  
           Shareholders' equity decreased $7.7 million through September 30, 1999.
  This decrease was  principally  due to a decrease in earnings  retained due to a
  higher dividend payout ratio and a decrease in accumulated  other  comprehensive
  income.  Cash dividends paid during the first nine months of 1999 increased $2.5
  million  or 33.5%  compared  to the cash  dividends  paid  during the first nine
  months of 1998.  Earnings  retained  during the first  nine  months of 1999 were
  49.2% compared to 57.6% during the first nine months of 1998.
  
                                RESULTS OF OPERATIONS
  
           Net income for the quarter  ended  September 30, 1999 was $7.2 million,
  16.1% more than the $6.2 million  reported for the same period in 1998.  For the
  first nine months,  net income  reached  $19.7  million,  or 11.8% more than the
  $17.6  million  reported  for the  first  nine  months  of 1998.  The  Company's
  performance  has been and will continue to be in part influenced by the strength
  of the economy and conditions in the real estate market.
  
           Net interest income is the difference between interest income on assets
  and interest expense on liabilities.  Net interest income increased $1.3 million
  or 6.8% to $20.8 million  during the third quarter of 1999 from $19.5 million in
  1998. For the comparative nine month period,  net interest income increased $2.8
  million or 4.9% to $60.5  million  from $57.7  million in 1998.  The increase in
  interest  income for the first nine months is a result of  increased  investment
  income of $3.8 million and  increased  loan income of $3.6 million due to growth
  in loan  outstandings  and higher  rates on loans that was  partially  offset by
  growth in deposits and higher rates on deposits and  borrowings.  Interest  rate
  risk is a major concern in forecasting earnings potential. On November 18, 1998,
  the prime rate changed to 7.75%. From July 1, 1999 to August 24, 1999, the prime
  rate was 8.00%.  On August 25, 1999,  the prime rate changed to 8.25%.  Interest
  expense  during the first nine  months of 1999  increased  $4.0  million or 7.1%
  compared  to the prior  year's  first nine  months.  Despite  the  current  rate
  environment,   the  cost  of  attracting  and  holding  deposited  funds  is  an
  ever-increasing  expense in the banking  industry.  These increases are the real
  costs of deposit accumulation and retention,  including FDIC insurance costs and
  branch overhead  expenses.  Such costs are necessary for continued growth and to
  maintain and increase market share of available deposits.
  
           The  provision  for loan and lease  losses is  determined  by  periodic
  reviews of loan quality,  current economic conditions,  loss experience and loan
  growth.  Based on these  factors,  the  provision  for  loan  and  lease  losses
  increased  $150,000 for the nine month period ended  September 30, 1999 compared
  to the same period in 1998.  The  allowance  for loan and lease  losses of $32.3
  million at  September  30,  1999 and $30.8  million at  December  31,  1998 as a
  percentage  of total loans was 2.1% for both time  periods.  The  Company's  net
  charge-offs of $2,813,000 and $953,000  during the first nine months of 1999 and
  1998,  respectively,  continue to be comparable to those of the Company's peers,
  as reported in the Bank Holding Company Performance Report.
  
           Other income  increased  $1.1 million or 24.4% during the third quarter
  of 1999, as a result of increased other income of $1,102,000, which includes the
  investment in bank-owned  life  insurance,  increased  trust income of $191,000,
  increased service charges on deposit accounts of $190,000 and increased mortgage
  banking  income of $15,000.  This was partially  offset by a decrease in trading
  revenue  of  $328,000  and a  decrease  in  net  gains  (losses)  in  investment
  securities  of $64,000.  Year-to-date,  other income  increased  $2.8 million or
  21.9% as a result of increased  other income of $3.0  million,  increased  trust
  income of $492,000,  increased  service charges on deposit  accounts of $398,000
  and increased mortgage banking income of $118,000.  This was partially offset by
  decreases  in gains on sale of  investment  securities  of $615,000  and trading
  revenue of $561,000.  Other  expenses  increased $1.1 million or 7.8% during the
  quarter ended September 30, 1999 and increased $4.0 million or 9.1% for the nine
  month  period.  Of this  year-to-date  increase,  salaries,  wages and  benefits
  increased $3.6 million or 14.6%,
  
                                         9
  other  operating  expenses  increased  $235,000  or 1.9%  and net  premises  and
  equipment increased $181,000 or 2.6%.
  
           Income before income taxes increased $1.2 million or 15.6% in the third
  quarter of 1999 compared to the same time period in 1998. In comparing the first
  nine months of 1999 to 1998,  income before income taxes  increased $1.5 million
  or 6.7%.  Income taxes  increased  $235,000 for the quarter ended  September 30,
  1999 and decreased $541,000 for the nine month period.
  
                       LIQUIDITY AND INTEREST RATE SENSITIVITY
  
           The  primary  functions  of  asset/liability  management  are to assure
  adequate liquidity and maintain an appropriate balance between  interest-earning
  assets and  interest-bearing  liabilities.  Liquidity  management  involves  the
  ability  to meet the cash  flow  requirements  of  customers  who may be  either
  depositors  wanting  to  withdraw  funds or  borrowers  needing  assurance  that
  sufficient funds will be available to meet their credit needs. Funding affecting
  short-term  liquidity,  including  deposits,  repurchase  agreements,  fed funds
  purchased,  and  short-term  borrowings,  increased  $89.8 million from year end
  1998.  Long-term borrowings increased $49.5 million during the first nine months
  of 1999.
  
           The  goal  of  interest  rate   sensitivity   management  is  to  avoid
  fluctuating  net  interest  margins,  and to  enhance  consistent  growth of net
  interest income through periods of changing  interest rates. Such sensitivity is
  measured  as the  difference  in the  volume of assets  and  liabilities  in the
  existing portfolio that are subject to repricing in a future time period.
  
           The following table shows  separately the interest rate  sensitivity of
  each category of  interest-earning  assets and  interest-bearing  liabilities at
  September 30, 1999:
  Repricing Periods  (1) (2)
                                                    ---------------------------------
                                                        Three Months    One Year
                                        Within Three    Through One    Through Five      Over
                                           Months           Year          Years       Five Years
                                        --------------------------------------------------------
                                                              (In Thousands)
  Assets
        Interest-bearing deposits
           at banks                      $   1,748      $      --      $      --      $      --
        Investment securities               72,855         56,851        183,285        251,323
        Trading account securities              --             --             --             --
        Loans and leases                   441,073        226,625        470,393        373,352
        Other assets                         3,561             --             --        171,064
                                         ---------      ---------      ---------      ---------
                                           519,237        283,476        653,678        795,739
                                         ---------      ---------      ---------      ---------
  Liabilities and equity
        Noninterest-bearing deposits       225,399             --             --             --
        Interest-bearing deposits          286,738        414,347        201,779        392,207
        Borrowed funds                     197,334         90,000        167,500         64,571
        Preferred securities                    --             --             --         40,250
        Other liabilities                       --             --             --         20,300
        Hedging instruments                 80,000        (30,000)       (50,000)            --
        Shareholders' equity                    --             --             --        151,055
                                         ---------      ---------      ---------      ---------
                                           789,471        474,347        319,279        669,033
                                         ---------      ---------      ---------      ---------
  Interest sensitivity gap                (270,234)      (190,871)       334,399        126,706
                                         ---------      ---------      ---------      ---------
  
  Cumulative interest rate
          sensitivity gap                ($270,234)     ($461,105)     ($126,706)     $      --
                                         =========      =========      =========      =========
  
                                         10
  (1) Adjustable rate loans are included in the period in which interest rates are
  next  scheduled to adjust rather than in the period in which they are due. Fixed
  rate loans are  included in the period in which they are  scheduled to be repaid
  and  are  adjusted  to  take  into  account  estimated  prepayments  based  upon
  assumptions  estimating  prepayments in the interest rate environment prevailing
  during the third  calendar  quarter of 1999. The table assumes  prepayments  and
  scheduled  principal   amortization  of  fixed-rate  loans  and  mortgage-backed
  securities  and  assumes  that   adjustable   rate  mortgages  will  reprice  at
  contractual repricing intervals.  There has been no adjustment for the impact of
  future commitments and loans in process.
  
  (2) Savings and NOW deposits are  scheduled  for  repricing  based on historical
  deposit decay rate analyses,  as well as historical  moving  averages of run-off
  for the  Company's  deposits in these  categories.  While  generally  subject to
  immediate  withdrawal,  management  considers a portion of these  accounts to be
  core deposits having  significantly  longer effective  maturities based upon the
  Company's  historical  retention  of such  deposits  in changing  interest  rate
  environments.  Specifically,  29.1% of these deposits are considered repriceable
  within three months and 70.9% are considered  repriceable in the over five years
  category.
  Interest   rate   sensitivity   is  a   function   of   the   repricing
  characteristics of the Company's assets and liabilities.  These  characteristics
  include  the  volume of assets  and  liabilities  repricing,  the  timing of the
  repricing,  and the relative  levels of  repricing.  Attempting  to minimize the
  interest  rate  sensitivity  gaps is a continual  challenge  in a changing  rate
  environment.  Based on the  Company's  gap  position as  reflected  in the above
  table,  current  accepted  theory would indicate that net interest  income would
  increase  in a falling  rate  environment  and would  decrease  in a rising rate
  environment.  An interest rate gap table does not,  however,  present a complete
  picture of the impact of interest  rate changes on net interest  income.  First,
  changes in the general level of interest  rates do not affect all  categories of
  assets and liabilities equally or simultaneously. Second, assets and liabilities
  which can contractually reprice within the same period may not, in fact, reprice
  at the same time or to the same extent.  Third,  the table  represents a one-day
  position; variations occur daily as the Company adjusts its interest sensitivity
  throughout the year. Fourth, assumptions must be made to construct such a table.
  For example,  non-interest  bearing  deposits are assigned a repricing  interval
  within  one year,  although  history  indicates  a  significant  amount of these
  deposits  will not move  into  interest  bearing  categories  regardless  of the
  general level of interest rates. Finally, the repricing distribution of interest
  sensitive assets may not be indicative of the liquidity of those assets.
  
           The Company anticipates  interest rates will move within a narrow range
  for the remainder of 1999,  with no clear  indication of  sustainable  rising or
  falling rates. Given this assumption, the Company's asset/liability strategy for
  1999 is to  maintain a negative  gap  (interest-bearing  liabilities  subject to
  repricing exceed interest-earning assets subject to repricing) for periods up to
  a year.  The impact of a sustained  interest  rate  environment  on net interest
  income is not expected to be significant to the Company's results of operations.
  Effective  monitoring of these interest  sensitivity gaps is the priority of the
  Company's asset/liability management committee.
  
                                  CAPITAL ADEQUACY
  
           The following table sets forth certain capital performance ratios:
  
                                                   Sept. 30,      Dec. 31,
                                                     1999           1998
                                                   ---------      --------
  CAPITAL PERFORMANCE
  Return on average assets (annualized)              1.23%           1.17%
  Return on average equity (annualized)             17.10           15.00
  Earnings retained                                 49.20           55.70
  Internal capital growth (annualized)               8.15            8.04
  
                                         11
  CAPITAL LEVELS
  Tier 1 Capital to   Tier 1 Capital to Risk-  Total Capital to Risk-
                                       Average Assets Ratio   Weighted Assets Ratio   Weighted Assets Ratio
                                       --------------------   ---------------------   ---------------------
                                        Sept. 30,  Dec. 31,   Sept. 30,    Dec. 31,   Sept. 30,    Dec. 31,
                                          1999       1998       1999         1998        1999        1998
                                          ----       -----      -----       ------      ------      ------
  The Company                             8.66%      8.77%      11.30%      12.21%      12.68%      13.51%
  National Penn Bank                      6.78%      6.80%       8.89%       9.52%      10.15%      10.78%
  "Well Capitalized" institution          5.00%      5.00%       6.00%       6.00%      10.00%      10.00%
      (under banking regulations)
  The Company's  capital  ratios above  compare  favorably to the minimum
  required amounts of Tier 1 and total capital to  "risk-weighted"  assets and the
  minimum Tier 1 leverage  ratio, as defined by banking  regulators.  At September
  30, 1999,  the Company was  required to have  minimum  Tier 1 and total  capital
  ratios of 4.0% and 8.0%,  respectively,  and a minimum Tier 1 leverage  ratio of
  3.0%. In order for the Company to be considered "well  capitalized",  as defined
  by banking regulators,  the Company must have Tier 1 and total capital ratios of
  6.0% and 10.0%,  respectively,  and a minimum Tier 1 leverage ratio of 5.0%. The
  Company  currently meets the criteria for a well  capitalized  institution,  and
  management believes that, under current  regulations,  the Company will continue
  to meet its minimum capital  requirements in the foreseeable future. At present,
  the Company has no commitments for significant capital expenditures.
  
           The Company is not under any agreement with regulatory  authorities nor
  is  the  Company  aware  of  any  current   recommendations  by  the  regulatory
  authorities  which,  if such  recommendations  were  implemented,  would  have a
  material effect on liquidity, capital resources or operations of the Company.
  
                                   FUTURE OUTLOOK
  
           The following is a Year 2000 readiness statement.
  
            The Company's Year 2000 initiative  began in 1996 with the creation of
  a "Year 2000 Compliance  Project team"  comprised of various Company  employees,
  including senior management.  The Year 2000 Project was divided into five phases
  -- Awareness, Assessment, Renovation, Validation, and Implementation. These five
  phases have all been completed.  All active ATM machines have been renovated and
  are now compliant.  The company has been actively  involved in the joint testing
  of electronic  payment and transfer  systems.  Actual costs for 1998 were within
  the budgeted amount of $300,000, which represented approximately 9% of the total
  information  technology  budget  for  1998.  The  amount  budgeted  for  1999 is
  $200,000,  which is approximately 12% of the total information technology budget
  for 1999.  However,  there can be no  guarantee  that  these  estimates  will be
  achieved and actual  results  could differ  materially  from those  anticipated.
  Specific factors that may cause such material  differences  include, but are not
  limited to, the  availability  and cost of personnel  trained in this area,  the
  ability  to  locate  and  correct  all  relevant  computer  codes,  and  similar
  uncertainties.  A business  impact  analysis has been  completed for the systems
  which  support  critical  functions.   The  Company  believes  the  most  likely
  worst-case  scenario to be a total or partial  failure to perform of one or more
  of the Company's material third-party business partners or providers of service,
  commodity,  or data,  which failure could have a material  adverse impact on the
  Company's  operations.  In an attempt to  mitigate  this risk,  the  Company has
  included  the  assessment  of these  partners  and  providers  in its Year  2000
  project.  The  assessment of the Year 2000 readiness of third parties upon which
  the Company depends for various services has been substantially  completed.  The
  Company will continue to monitor critical third parties throughout the remainder
  of 1999. However,  there can be no guarantee that the systems of other companies
  on which  Company's  systems rely will be timely  converted and would not have a
  material  adverse  effect on the  Company's  systems  and  operations.  No
  
                                         12
  major information  technology projects have been delayed as a result of the Year
  2000 Project.  In addition,  the Company's  audit  department  contracted for an
  independent  consultant to verify and validate the Company's  Year 2000 Project.
  No  major  recommendations  were  suggested  by the  independent  consultant  to
  mitigate exposures in the Company's Year 2000 Project plan.
  
           The following is a more detailed discussion of the Year 2000 Project:
  
           The Year 2000 Project has been in operation at the Company  since 1996.
  During this time the Company has been  operating  under a project plan reflected
  in many individual  documents such as the Microsoft Project charts,  binders for
  specific project areas, and the inventories which were created.
  
           For the  purposes of  consistency  with the  guidance of the  Company's
  regulatory agencies, the Company has structured the project in the standard five
  phases: Awareness, Assessment, Renovation, Validation, and Implementation.  None
  of these phases are purely consecutive chronologically.  For example, Awareness,
  the phase which was begun before the others, will most likely continue well into
  the first and second quarters of 2000.
  
           It is  important  to note that the Year  2000  Project  at the  Company
  includes  both  the  progression  from  1999 to 2000 and the  identification  of
  February 29, 2000 as a leap year day.
  
           The following is a more detailed description of each project phase.
  
  Awareness
           This phase began in 1996 with the assignment of project  managers.  The
  first  task was to review as much  information  as  possible  from user  groups,
  seminars,  periodicals,  and the  written  guidance  available  from  regulatory
  agencies.  The  project  managers  created a project  plan to address  Year 2000
  issues.
  
           To address  individual areas of  responsibility  in the project plan, a
  team was formed  composed  of various  representatives  of  National  Penn Bank,
  Investors Trust Company, and, beginning in 1998, Penn Securities,  Inc. The team
  has been charged  with guiding the Year 2000 efforts of the Company  through all
  project phases.
  
           The next step in the  Awareness  phase  was to  educate  the  Company's
  employees on Year 2000 issues.  This was accomplished  through periodic items in
  Company memos and through e-mail.  Year 2000 training was conducted for all bank
  officers.  In the  Spring  of 1998,  seminars  were  offered  for the  Company's
  business loan customers and lending staff.
  
           The  seminars  were one  component of the  Company's  effort to educate
  customers.  Another was a variety of statement stuffers concerning the Year 2000
  issue and specifically  providing  information on the Company's project plan and
  status.  In  September  1998,  a Year 2000  update  was  added to the  Company's
  internet  home page.  In  addition,  the  Company  has  participated  in various
  television programs and newspaper articles produced by the local media.
  
           The  Company  intends  to  continue  to use this  variety  of  channels
  (statement  stuffers,  letters,  seminars,  home page, and printed brochures) to
  attempt to provide  frequent  updates on the status of the Year 2000  project at
  the Company and all of its subsidiary organizations.
  
  Assessment
           The purpose of the  Assessment  phase is to inventory  all  potentially
  affected  software,  hardware,  equipment  (including  faxes,  ATMs,  hand  held
  calculators,  etc.), interfaces,  environmental systems, and third parties. Once
  this information was gathered,  it was organized to provide efficient  tracking.
  Letters
  
                                         13
  were  sent and web sites  visited  to  ascertain  the  compliance  status of the
  individual product or project at the particular organization.
  
           The Assessment  process went one step further with the investigation of
  the Year 2000 compliance  status of the Company's  largest  business  depositors
  (funds  providers),   large  commercial  loan  customers  (funds  takers),   and
  correspondent banks (capital market counterparties). The depositor investigation
  was done through a mailed survey to any business  account  holder with a balance
  of $100,000 or greater.  Commercial loan relationships with an aggregate balance
  greater than $300,000 were  individually  assessed by the lender.  The status of
  correspondent  banks has been tracked as part of the third-party  portion of the
  project.
  
           Year 2000 issues were  addressed  as part of the  acquisition  planning
  with Elverson in 1998.  After the acquisition was announced,  the teams began to
  share   information  by  the  project   leaders   participating   in  the  other
  institution's team meetings,  through data sharing, and through joint testing of
  common applications.
  
           In an effort to control the inventory of systems and applications after
  the assessment was completed, control points were reviewed. A policy was drafted
  requiring all new software  purchases to be certified Year 2000  compliant.  All
  hardware and  software  purchases  will be tested  before they are placed into a
  production  environment.  As all PC-based  hardware  and software are  installed
  through the Network Services group and all mainframe  applications are supported
  through Data  Processing,  two central  control  points are  established.  These
  groups are responsible  for the ongoing  monitoring of new software and hardware
  installation.  As an additional  control,  the MIS  department  must approve all
  requests for payment of hardware and software purchases.
  
  Renovation
           The  Renovation  phase  involves  upgrading or  replacing  hardware and
  software as  necessary.  Core systems have the highest  priority.  Other mission
  critical systems follow. Finally,  non-mission critical systems are addressed. A
  Remediation   Contingency  Plan  has  been  written  to  address  any  potential
  difficulties that may be encountered before December 31, 1999.
  
           The  Company  has  completed  renovation  efforts on  mission  critical
  systems.   The  Company   completed  the   replacement   of  the  two  remaining
  non-compliant, non-critical systems during the third quarter of 1999.
  
           Highlights of the Company's efforts to date include the installation of
  a new mainframe  system in January 1998. In May 1998, a new core banking  system
  was  installed.  In October and November 1998, all ATM machines were upgraded to
  compliant  releases of software  and the memory  necessary to process  them.  In
  December  1998,  the core  processing  system of  Investors  Trust  Company  was
  replaced,  including new hardware, software, and operating system. All have been
  thoroughly  tested by the users' group,  as discussed  herein in the  Validation
  phase.
  
  Validation
           The  Validation  phase of the project is guided by a written test plan.
  Testing of both  mission  critical  and  non-mission  critical  systems has been
  completed.
  
           The project  leader and the end users are jointly  responsible  for the
  individual  tests.  The project  leader  schedules the date and ensures that the
  testing environment is prepared.  He then meets with the end user to develop the
  testing  scripts and scenarios.  The project leader is responsible  for ensuring
  that the test adheres to the requirements of the Year 2000 testing plan. The end
  user is responsible for the data entry and system  operation during the test and
  for reviewing the results to verify that the test was successful.  When the test
  is completed and  documented,  both the end user and the project  leader sign to
  indicate its completion.
  
                                         14
  When a system is tested,  all interfaces and file transmissions will be
  tested at the same time whenever possible. As appropriate and feasible,  testing
  with third parties will also be completed.
  
           Initiatives to complete the  Validation  phase included the creation of
  an isolated PC network testing lab, the use of a secondary logical partition for
  validating  mainframe  applications  and interfaces,  user group testing for the
  core trust applications, and proxy testing by the network vendor for ATMs.
  
  Implementation
           Hardware and  software  certified to be compliant by the vendor will be
  thoroughly  tested  as  addressed  in the  Validation  phase.  Any  product  not
  currently in production must be tested and accepted by the end user before being
  placed  into a  production  environment.  After  a  system  is  certified  to be
  compliant,  no future releases or updates will be installed  unless first tested
  and confirmed to be compliant through the procedures discussed in the Validation
  phase. The control points for ensuring the future  installation of releases will
  continue to be the Network Services and Data Processing departments.
  
  Additional Project Efforts
           Throughout  the  remainder of 1999, a database is being  maintained  to
  track the compliance status of third parties with which the Company conducts its
  affairs.  This information will be reported to the project team and forwarded to
  executive management as necessary.
  
           A separate budget for Year 2000 expenses is being  maintained for 1999.
  The status of the budget will be reported periodically to executive management.
  
           Contingency  plans have been written for all mission  critical and high
  priority  non-mission  critical  systems.  As the plans are completed,  they are
  reviewed  and  edited.  Additionally,  the  testing  of  these  plans  has  been
  completed.
  
           Although the Company believes that the program outlined above should be
  adequate  to address  the Year 2000  issue,  there can be no  assurance  to that
  effect.
  
           This report contains  forward-looking  statements  concerning earnings,
  asset quality,  Year 2000  compliance  and other future  events.  Actual results
  could differ materially due to, among other things,  the risks and uncertainties
  discussed  herein  and in Exhibit  99 to the  Company's  Report on Form 10-K for
  1998,  which is incorporated  herein by reference.  Readers are cautioned not to
  place undue reliance on these statements.  The Company  undertakes no obligation
  to publicly release or update any of these statements.
  
  Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
           There has been no material  change in the  Company's  assessment of its
  sensitivity to market risk since its  presentation  in the 1998 annual report on
  Form 10-K filed with the SEC.
  
                                         15
  PART II - OTHER INFORMATION
  
  Item 1.  Legal Proceedings.
  
           None.
  
  Item 2.  Changes in Securities.
  
           As  previously  reported in a Report on Form 8-K dated August 21, 1999,
  National Penn Bancshares, Inc. (the "Registrant") amended its Shareholder Rights
  Plan to extend the term of the Rights (as defined therein) to August 22, 2009.
  
  Item 3.  Defaults Upon Senior Securities.
  
           None.
  
  Item 4.  Submission of Matters to Vote of Security Holders.
  
           None.
  
  Item 5.  Other Information.
  
           On September 17, 1999, the Registrant's  banking  subsidiary,  National
  Penn Bank (the  "Bank"),  formed and  organized a new  wholly-owned  subsidiary,
  National Penn Mortgage Company ("NPMC"). NPMC is engaged in the mortgage lending
  business,  including  the  sub-prime  and agency and  alternative  A residential
  mortgage loan business.
  
           On September 22, 1999, the Registrant's  Board of Directors  declared a
  cash dividend of $.20 per share payable on November 17, 1999, to shareholders of
  record on October 29, 1999.
  
           On October 27, 1999, the Registrant's  Board of Directors declared a 5%
  stock  dividend  payable on December 22, 1999, to  shareholders  of record as of
  December 6, 1999.
  
           In October  1999,  the Bank  closed two  supermarket  branches  and the
  automated teller machines (ATMs) at those locations.
  
           As previously reported in its Report on Form 10-Q for the quarter ended
  June 30, 1999, the Registrant's Board of Directors  approved,  in July 1999, the
  repurchase of up to 850,000  shares of its common stock in the open market or in
  negotiated  transactions.  As of September  30, 1999, a total of 142,959  shares
  have been repurchased at an aggregate cost of $3,230,296.
  
  Item 6.  Exhibits and Reports on Form 8-K.
  
           (a)      Exhibits.
  
                    Exhibit 27 - Financial Data Schedule.
  
           (b)  Reports  on Form 8-K.  The  Registrant  filed a Report on Form 8-K
  dated August 21, 1999,  reporting under Item 5 the amendment of the Registrant's
  Shareholder Rights Plan to extend the term of the Rights (as defined therein) to
  August 22, 2009. The Report did not contain any financial statements.
  
                                         16
  SIGNATURES
  
           Pursuant to the  requirements of Section 13 of the Securities  Exchange
  Act of 1934, the Registrant has caused this report to be signed on its behalf by
  the undersigned thereunto duly authorized.
  
                                          NATIONAL PENN BANCSHARES, INC.
                                                    (Registrant)
  
  Dated:   November 12, 1999              By /s/  Wayne R. Weidner
                                             -------------------------------------
                                             Wayne R. Weidner, President
  
  Dated:   November 12, 1999              By /s/  Gary L. Rhoads
                                             -------------------------------------
                                             Gary L. Rhoads, Principal
                                             Financial Officer