BOYERTOWN, PA-National Penn Bancshares Inc. has signed a definitive merger agreement to acquire Bethlehem-based KNBT Bancorp Inc. in a transaction valued at approximately $464.6 million. This will add 56 KNBT and Keystone Nazareth Bank & Trust Co. branches in Lehigh, Northampton, Carbon, Monroe, Luzerne and Schuylkill counties to National Penn’s existing 81 branches in Pennsylvania.

This follows locally based National Penn’s June 27 agreement to acquire Greenville, DE-based Christiana Bank & Trust Co. for about $56.5 million in a transaction that is expected to close in early 2008. Under the agreement with KNBT, that company’s locations will retain their names and National Penn’s branches in Lehigh and Northampton counties will be rebranded under the KNBT name. There are now three such National Penn locations in Northampton and six in Lehigh County.

National Penn has slightly more than $5.6 billion in assets, and KNBT has $2.9 billion. The merger will make National Penn the fifth largest Pennsylvania-based bank holding company. It now operates under five divisions and identities: National Penn Bank, FirstService Bank, HomeTowne Heritage Bank, Nittany Bank and Peoples Bank of Oxford. As with previous National Penn acquisitions, the two Christiana locations, one each in Greenville and Wilmington, DE, will retain the Christiana flag.

The boards of National Penn and KNBT have approved the merger, which is subject to approval by the Federal Reserve Board, the Office of the Comptroller of the Currency and shareholders of both companies. Under the terms, current National Penn shareholders will own approximately 65% of the combined companies, and current KNBT shareholders will own 35%.

Glenn Moyer, National Penn’s president and CEO, will retain his posts. Scott Fainor, president and CEO of KNBT, will become senor EVP and COO of National Penn. Wayne Weidner will continue as chairman of National Penn, and Jeffrey Feather, chairman of KNBT, will become vice chairman.

“With this merger, we expect to create a new force in Pennsylvania-based financial services,” says Moyer in a statement. “The combined organization will be better positioned to deal with the challenges facing our industry and will boast a depth and quality of management found only in much larger organizations.” The transaction is expected to close late in the first quarter of 2008.

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