<DOCUMENT>
<TYPE>DEFA14A
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<DESCRIPTION>PROXY
<TEXT>

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
     Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under ss. 240.14a-12

                         NATIONAL PENN BANCSHARES, INC.
                (Name of Registrant as Specified In Its Charter)

                                       N/A
     (Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

     (1)  Title of each class of securities to which transaction applies:

          N/A

     (2)  Aggregate number of securities to which transaction applies:

          N/A

     (3)  Per unit price or other underlying value of transaction computed
          pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
          filing fee is calculated and state how it was determined):

          N/A

     (4)  Proposed maximum aggregate value of transaction:

          N/A

     (5)  Total fee paid:

          N/A

[  ] Fee paid previously with preliminary materials.

[  ] Check box if any part of the fee is offset as provided by Exchange Act
     Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
     paid previously. Identify the previous filing by registration statement
     number, or the Form or Schedule and the date of its filing.

     1)   Amount Previously Paid:
     2)   Form, Schedule or Registration Statement No.:
     3)   Filing Party:
     4)   Date Filed:



<PAGE>

[GRAPHIC OMITTED]


                     NOTICE OF ANNUAL SHAREHOLDERS' MEETING


Dear National Penn Shareholder:

     On Tuesday, April 22, 2003, National Penn Bancshares, Inc. will hold its
Annual Meeting of Shareholders at the Sheraton Reading Hotel, Route 422 West and
Paper Mill Road, Wyomissing, Pennsylvania. The meeting will begin at 4:00 p.m.

     Only shareholders who owned stock at the close of business on March 7, 2003
can attend and vote at the meeting or any postponement or adjournment. At the
meeting, we will:

     1. Elect four directors;

     2. Attend to other business, if any, properly presented at the meeting.

     Your Board of Directors recommends that you vote in favor of the election
of directors described in this proxy statement.

     At the meeting, we also will report on our 2002 business results and other
matters of interest to shareholders.

     We are enclosing with this proxy statement a copy of our 2002 Annual Report
on Form 10-K. The approximate date this proxy statement and card(s) are being
mailed is March 24, 2003.

     IMPORTANT: Your proxy statement contains an Admission Ticket.  FOR
     ---------
SECURITY PURPOSES, YOU WILL NEED THIS ADMISSION TICKET TO ATTEND THE
MEETING.



                                              By Order of the Board of Directors




                                                /s/ Sandra L. Spayd
                                                -------------------
                                                Sandra L. Spayd
                                                Secretary

March 24, 2003


<PAGE>

<TABLE>
<CAPTION>


                                                   TABLE OF CONTENTS

-------------------------------------------------------------------------------------------------------------------
<S>                                                                                                         <C>


Proxy Statement...........................................................................................   1
   Election of Directors..................................................................................   1
     Director Information.................................................................................   2
     Corporate Governance.................................................................................   3
     Meetings and Attendance..............................................................................   5
     Director Compensation................................................................................   5
   Executive Compensation.................................................................................   7
     Compensation Committee Report........................................................................   7
     Summary Compensation Table............................................................................ 11
     Stock Options......................................................................................... 12
     Pension Benefits...................................................................................... 14
     Employment and Change-in-Control Agreements........................................................... 15
   Performance Graph....................................................................................... 18
   Audit Committee Report.................................................................................. 19
   Stock Ownership......................................................................................... 21
     Directors and Executive Officers...................................................................... 21
     Five Percent Shareholders............................................................................. 22
   Other Director and Executive Officer Information........................................................ 22
     Related Party and Similar Transactions................................................................ 22
     Section 16(a) Beneficial Ownership Reporting Compliance............................................... 22
   Additional Information.................................................................................. 23
     Record Date; Shares Outstanding....................................................................... 23
     Quorum................................................................................................ 23
     Proxies; Right to Revoke.............................................................................. 24
     Default Voting........................................................................................ 24
     Tabulation of Votes................................................................................... 24
     Voting by Street Name Holders......................................................................... 24
     Independent Accountants............................................................................... 24
     Proxy Solicitation.................................................................................... 25
     Shareholder Proposals for Next Year's Meeting......................................................... 25
     Director Nominees..................................................................................... 25
     Shareholder List...................................................................................... 26
     Annual Report for 2002................................................................................ 26
   Appendix A: Audit Committee Charter..................................................................... 27
</TABLE>




                                                          i

<PAGE>



                         NATIONAL PENN BANCSHARES, INC.


                                 PROXY STATEMENT

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


     This Proxy Statement is furnished in connection with the solicitation of
proxies by National Penn Bancshares, Inc. ("National Penn"), on behalf of the
Board of Directors, for the 2003 Annual Meeting of Shareholders. This Proxy
Statement and the related proxy form are being distributed on or about March 24,
2003.

     You can vote your shares by completing and returning the enclosed written
proxy card. You can also vote your shares by telephone. To do so, simply follow
the instructions attached to the proxy card. Telephone voting is toll-free, and
is available 24 hours a day. Votes submitted by telephone must be received by
4:00 p.m. on April 22, 2003. If you vote by telephone, you need not return a
proxy card.

     You can also vote in person at the meeting. Submitting your voting
instructions by returning a proxy card or by voting over the telephone will not
affect your right to attend the meeting and vote.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ELECTION OF DIRECTORS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


     The proposal scheduled to be voted on at the meeting is the election of
four directors. These directors will serve a three-year term as Class I
directors. The Board of Directors has nominated John H. Body, J. Ralph Borneman,
Jr., Glenn E. Moyer and Robert E. Rigg for election as Class I directors. All of
these individuals are currently serving as National Penn directors.

The Board of Directors recommends a vote "FOR" all its nominees.

     The Board has no reason to believe that any nominee will be unable or
unwilling to serve if elected. If a nominee becomes unable or unwilling to
accept nomination or election, the Board will either select a substitute nominee
or will reduce the size of the Board. If you have submitted a proxy and a
substitute nominee is selected, your shares will be voted for the election of
the substitute nominee.

     Lawrence T. Jilk, Jr., who served as a Class II director, retired as a
director effective October 23, 2002, completing his transition into retirement.
Mr. Jilk retired as Chairman of National Penn on December 28, 2001.

     The bylaws permit shareholders to nominate candidates for election as
directors. A nomination must be made in compliance with the advance notice and
information requirements of the bylaws. National Penn has not received any such
notice of a nomination.

     In accordance with the bylaws, directors are elected by a plurality of the
votes of shares present and entitled to be voted at the meeting. That means the
four nominees of the Board will be elected if they receive more affirmative
votes than any other nominees.



                                        1

<PAGE>



--------------------------------------------------------------------------------
Director Information
--------------------------------------------------------------------------------


     The Board is separated into three classes, each with a three-year term. The
terms of the persons elected as Class I directors will expire in 2006. The terms
of the continuing Class II directors expire in 2004, and the terms of the
continuing Class III directors expire in 2005.

     Below is biographical and other information about the nominees for election
as Class I directors, and the continuing Class II and Class III directors, as of
March 7, 2003.

Nominees as Class I directors to serve until 2006:

John H. Body, age 69, has been a director since 1981. Mr. Body, who is retired,
is the former Manager, General Services of Air Products and Chemicals, Inc. He
is a member of the following Board committees: Audit, Compensation, Executive
and Nominating/Corporate Governance (Chair).

J. Ralph Borneman, Jr., age 64, has been a director since 1988. Mr. Borneman is
President of Body-Borneman Associates, Inc., an insurance agency. Mr. Borneman
is also a member of the boards of directors of Erie Indemnity Co. and Erie
Family Life Insurance Co. He is a member of the following Board committees:
Audit, Compensation (Chair), Executive and Nominating/Corporate Governance.

Glenn E. Moyer, age 51, has been a director since 2002. Mr. Moyer has been
Executive Vice President of National Penn since April 2001 and President and
Chief Operating Officer of National Penn Bank since January 2001. He was
Executive Vice President and Chief Lending Officer of National Penn Bank and
President of National Penn Bank's Elverson Division from January 1999 to January
2001. Prior to that, he was President, Chief Executive Officer and a director of
Elverson National Bank.

Robert E. Rigg, age 50, has been a director since 1999. Mr. Rigg is the
President of Rigg Darlington Group Inc., an insurance agency, and is a cousin of
Mr. Jacobs. Mr. Rigg was first elected a director when National Penn acquired
Elverson National Bank, as provided in the acquisition agreement. He is a member
of the Audit Committee of the Board.

Continuing Class II directors to serve until 2004:

Frederick H. Gaige, age 66, has been a director since 1997. Dr. Gaige, who is
retired, is the former Dean and Campus Executive Officer of Penn State,
Berks-Lehigh Valley College. He is a member of the following Board committees:
Audit and Compensation.

John W. Jacobs, age 53, has been a director since 1999. Mr. Jacobs is a private
investor and is a cousin of Mr. Rigg. Mr. Jacobs was first elected a director
when National Penn acquired Elverson National Bank, as provided in the
acquisition agreement. He is a member of the Nominating/Corporate Governance
Committee of the Board.

C. Robert Roth, age 55, has been a director since 1990. Mr. Roth is a Bucks
County District Justice. He is a member of the Audit Committee of the Board.

John C. Spier, age 52, was named a director in February 2003. He is Group
Executive Vice President for Corporate Planning of National Penn Bank, and
Chairman and Chief Executive Officer of the FirstService Division of National
Penn Bank. Prior to that, he was President and Chief Executive Officer and a
director of FirstService Bank. Mr. Spier was elected a director when National
Penn acquired FirstService Bank, as provided in the acquisition agreement.

                                        2

<PAGE>



Continuing Class III Directors to serve until 2005:

Frederick P. Krott, age 56, has been a director since 2001. Mr. Krott is
President of Lamm & Witman Funeral Home, Inc. Mr. Krott was first elected a
director when National Penn acquired Community Independent Bank, Inc., as
provided in the acquisition agreement. He is a member of the Compensation
Committee of the Board.

Patricia L. Langiotti, age 56, has been a director since 1986. Ms. Langiotti is
President of Creative Management Concepts, a management consulting firm. From
1989 until 1998, she was also the Chief Executive Officer of Brubacher
Excavating, Inc. She is a member of the following Board committees: Audit
(Chair), Compensation, Executive and Nominating/Corporate Governance.

Kenneth A. Longacre, age 69, has been a director since October 2001, and was a
director from 1990 through 2000. Mr. Longacre is Chairman of Farm & Home Oil
Company. He was Chief Executive Officer of Farm & Home Oil Company from 1990
through 1998. He is a member of the following Board committees: Compensation and
Executive (Chair).

Alexander Rankin, age 70, was named a director in February 2003. Mr. Rankin is
Chairman of Vulcan Spring & Manufacturing Co. Mr. Rankin was elected a director
when National Penn acquired FirstService Bank, as provided in the acquisition
agreement.

Wayne R. Weidner, age 60, has been a director since 1985. Mr. Weidner has been
Chairman, President and Chief Executive Officer of National Penn since January
2002. He was President and Chief Executive Officer of National Penn in 2001, and
President from 1998 to 2000. He is also Chairman and Chief Executive Officer of
National Penn Bank. He is a member of the Executive Committee of the Board.

--------------------------------------------------------------------------------
Corporate Governance
--------------------------------------------------------------------------------


     National Penn's governing body is its Board of Directors. The Board is
elected by the shareholders to direct and oversee the company's management in
the long-term interests of shareholders.

     Corporate Governance Guidelines
     -------------------------------

     The Board has adopted a set of Corporate Governance Guidelines that,
together with National Penn's articles of incorporation, bylaws, and the
charters of Board committees, provide a framework for the governance of National
Penn. The Guidelines are intended to assist the Board in the exercise of its
responsibilities. As the operation of the Board is a dynamic process, these
Guidelines are reviewed periodically and may be changed by the Board from time
to time.

     Director Independence
     ---------------------

     A majority of Board members are independent directors, as defined by the
Securities and Exchange Commission, The Nasdaq Stock Market and other regulatory
authorities. The independent directors periodically meet in executive session
without management present.

     Board Membership Criteria
     -------------------------

     Each member of the Board must possess the individual qualities of integrity
and accountability, informed judgment, financial literacy, mature confidence and
high

                                        3

<PAGE>



performance standards. Candidates for membership on the Board are selected for
their character, judgment, business experience and acumen. Each non-employee
director is expected to, and currently does, meet National Penn's stock
ownership guidelines, which provide for ownership of National Penn stock worth
at least twice the annual retainer.

     Board Committees
     ----------------

     The Board maintains four standing committees: Executive, Audit,
Compensation and Nominating/Corporate Governance. Each committee operates under
its own separate charter which is approved by the Board.

     Executive Committee. The Executive Committee is authorized to act on behalf
of the Board during intervals between meetings of the Board. The Executive
Committee quickly responds to time-sensitive business and legal matters when
they arise. The Executive Committee also is responsible for ensuring an
appropriate structure for management succession and development.

     Audit Committee. National Penn's Audit Committee is currently comprised of
six directors, all of whom are independent as described above. The Audit
Committee's duties include:

     o   Appointing, approving compensation for, and providing oversight of,
         National Penn's independent accountants;

     o   Approving all audit and non-audit services to be performed by the
         independent accountants;

     o   Reviewing the scope and results of the audit plans of the independent
         accountants and internal auditors;

     o   Overseeing the scope and adequacy of internal accounting control and
         record- keeping systems;

     o   Reviewing the objectivity, effectiveness and resources of the internal
         audit function;

     o   Conferring independently with, and reviewing various reports generated
         by, the independent accountants;

     o   Resolving any disagreements between management and the independent
         accountants; and

     o   Establishing procedures for the receipt, retention and treatment of
         complaints regarding accounting, internal accounting controls or
         auditing matters, and the confidential, anonymous submission by
         employees of concerns regarding questionable accounting or auditing
         matters.

     A more comprehensive description of the duties and responsibilities may be
found in the Audit Committee Charter, attached to this Proxy Statement as
Appendix A.

     Compensation Committee. National Penn's Compensation Committee generally
reviews, approves and reports to the Board on compensation and related programs
and plans. The Compensation Committee is currently comprised of six directors,
all of whom are independent, as described above. The Compensation Committee's
duties include:

     o   Determining the compensation for executive management;


                                        4

<PAGE>



     o   Establishing compensation policies for National Penn's directors,
         officers and employees generally; and

     o   Administering National Penn's stock-based compensation plans.

     Nominating/Corporate Governance Committee. National Penn's
Nominating/Corporate Governance Committee is comprised of four directors, all of
whom are independent as described above. The Nominating/Corporate Governance
Committee's duties include:

     o   Screening and recommending Board member candidates (see also "Director
         Nominees" on page 25);

     o   Evaluating the performance of the Board, including the training and
         orientation of directors; and

     o   Reviewing corporate policies such as Code of Conduct, stock ownership
         of directors and management, insider trading and director attendance.

     Code of Conduct
     ---------------

     National Penn has adopted a Code of Conduct that includes a conflict of
interest policy and applies to all directors, officers and employees. All
directors, officers and employees are required annually to affirm in writing
their acceptance of the Code of Conduct.

     Code of Ethics
     --------------

     In addition to the Code of Conduct, National Penn has adopted a Code of
Ethics that applies to the Chief Executive Officer, the Chief Financial Officer
and other senior financial officers. The Code of Ethics supplements the Code of
Conduct and addresses additional subjects including the integrity of financial
reports.

--------------------------------------------------------------------------------
Meetings and Attendance
--------------------------------------------------------------------------------


     In 2002, the full Board met 13 times, the Audit Committee met five times,
the Compensation Committee met four times, the Executive Committee met seven
times and the Nominating/Corporate Governance Committee met once.

     All directors attended at least 75% of the meetings of the full Board and
the meetings of the committees on which they served.

--------------------------------------------------------------------------------
Director Compensation
--------------------------------------------------------------------------------


     Messrs. Weidner, Moyer and Spier are the only directors who are also
National Penn employees. National Penn does not pay them any additional
compensation for serving as directors of National Penn or any subsidiary.

     Annual Retainer and Per-Meeting Fees. National Penn pays each non-employee
director an annual retainer fee and committee meeting fees for serving as a
director. Various National Penn subsidiaries or divisions also pay certain fees
to non-employee directors serving on their boards.

     Annual Retainer. During 2002, the annual retainer fee was $7,500, except
that the Chair of each committee received an annual retainer of $8,500.


                                        5

<PAGE>



     Beginning January 1, 2003, the annual retainer fee is $10,000, except that
the Chairs of the Executive, Compensation and Nominating/Corporate Governance
Committees will receive an annual retainer fee of $12,500, and the Audit
Committee Chair will receive an annual retainer fee of $15,000.

     Per-Meeting and Other Fees. During 2002, the committee meeting fee was $350
for each committee meeting attended. If there was a Board meeting or another
committee meeting as well on the same day, or if the meeting was held by
telephone conference call, the per-meeting fee was $175.

     Beginning January 1, 2003, committee meeting fees are $500 or $250 if the
meeting is held by telephone conference call. Audit committee meeting fees are
$750 or $375 if the meeting is held by telephone conference call. Also beginning
January 1, 2003, the Audit Committee Chair receives a $250 fee per telephone
meeting with National Penn's management and independent accountants (increased
from $175 in 2002), and a $500 fee per meeting with the board of directors of
any National Penn subsidiary. The Audit Committee Chair or other designated
Audit Committee member receives a $500 fee plus mileage per meeting attended of
the audit committee of Panasia Bank, N.A. ("Panasia"), a National Penn
subsidiary (increased from $350 in 2002).

     Each non-employee director is also a director of National Penn Bank.
Beginning January 1, 2003, National Penn Bank pays each non-employee director a
fee of $1,000 per Bank Board meeting attended (increased from $500). Bank Board
committee fees and telephone conference call meeting fees are the same as the
National Penn fees described above.

     Certain non-employee directors also serve as directors of various National
Penn Bank subsidiaries or divisions and are separately paid for such services,
as follows:

     o   Mr. Jacobs is also a non-employee director of Penn Securities, Inc. and
         receives $500 for each Penn Securities Board meeting attended
         (increased from $250 in 2002).

     o   Messrs. Jacobs and Rigg are also non-employee members of National Penn
         Bank's Elverson Divisional Board and each receives $650 for each
         divisional board meeting attended.

     o   Ms. Langiotti is also a non-employee director of Penn 1st Financial
         Services, Inc. and receives $500 for each Penn 1st Board meeting
         attended (increased from $250 in 2002).

     o   Mr. Longacre is also a non-employee director of Investors Trust Company
         and Penn 1st Financial Services, Inc. and receives $500 for each
         Investors Trust or Penn 1st Board meeting attended (increased from $250
         in 2002).

     o   Mr. Krott is also a non-employee member of National Penn Bank's
         Berks/Lancaster Divisional Board and receives $600 for each divisional
         board meeting attended.

     o   Mr. Rankin is also a non-employee member of National Penn Bank's
         FirstService Divisional Board and receives an annual retainer of
         $13,500, provided he attends at least 75% of the Divisional Board
         meetings in the year.

     Directors' Fee Plan. Each non-employee director may elect to receive his or
her directors' fees in cash or National Penn common shares. If the director
wishes, the payment may be deferred to a later time. During 2002, National Penn
directors accrued a total of $193,053 in directors' fees. Of this amount,
$118,778 was paid in cash or stock,

                                        6

<PAGE>



$5,400 was deferred and will be paid in cash, and $68,875 was deferred and will
be paid in stock.

     Stock Option Plan. Under a ten-year plan adopted in 1995, National Penn
grants each non-employee director stock options for National Penn common stock
on the first business day of each year through the year 2004. Due to the effect
of stock splits and stock dividends, the number of shares covered by such
options has increased from 500 in 1995 to 1,094 in 2003. This number will be
adjusted in 2004 if there is a stock split or stock dividend prior to the grant
date. The exercise price of these options is equal to the fair market value of
the stock on the date of grant. The options become exercisable two years from
the date of grant, subject to acceleration if a change of control of National
Penn occurs or is attempted. The options expire ten years from the date of
grant.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


Compensation Committee Report
--------------------------------------------------------------------------------


     The Compensation Committee of National Penn's Board of Directors, comprised
of six independent directors, establishes the compensation levels of National
Penn's executive officers, including the Chief Executive Officer.

     Compensation Philosophy. The Committee believes the maximization of
corporate performance and, in turn, shareholder value, depends largely on
establishing a close alignment between the financial interests of shareholders
and management. To that end, the Committee follows a pay-for-performance
philosophy.

     The Committee intends to place at risk a major portion of executive
management's compensation by emphasizing compensation earned through achievement
of National Penn's financial goals and through appreciation in the market value
of National Penn's stock. The Committee seeks to provide a high level of overall
compensation to executive management if a high level of profitability is
achieved.

     Components of Compensation. National Penn's compensation program for
executive officers consists of three components:

     o   Base salary;

     o   Annual incentive compensation; and

     o   Long-term stock-based compensation.

     Annual incentive and long-term stock-based incentive compensation
constitute a significant portion of overall compensation for executive
management. The Committee feels that this compensation practice is an essential
element in fostering a strong commitment to long-term growth in shareholder
value.

     The three components of executive compensation are discussed separately
below:

     Base Salary. The Committee reviews base salaries of executive officers
annually, considering:

     o   Job scope and responsibilities;

     o   Corporate, unit and individual performance; and

                                        7

<PAGE>



     o   Salary rates for similar positions at other companies.

     The Committee generally targets base salaries for executive management in
the range of median salary levels of comparable level executives at peer
institutions. Although the Committee considers National Penn's financial
performance, its salary decisions are generally not tied to any specific
financial performance factor. Although salary decisions are made independently
of decisions on other components of compensation, they are made in the context
of overall compensation.

     For 2002, the Committee reviewed an independent salary study of
Pennsylvania banking companies, broken down by asset size, including data on
chief executive officer compensation. These companies are more comparable to
National Penn than the companies in the Nasdaq Bank Stock Index included in the
graph on page 18, as that index includes larger companies throughout the United
States. After this review, the Committee established Mr. Weidner's 2002 base
salary at $292,000, a 6.1% increase over his 2001 salary level, which is in the
range of median salary levels of the chief executive officers of the peer
companies covered by the study.

     Annual Incentive Compensation. Superior performance in the short-term is
rewarded with annual incentive compensation. This compensation tool motivates
executive officers to accomplish and improve on-going operating results.

     Executive officers and others approved by the Committee are eligible to
earn bonuses under the Executive Incentive Plan. These bonuses are a function
of:

     o   The size of the bonus fund, which the Committee determines each year,
         utilizing a formula as provided in the Plan;

     o   The number of participants in the Plan, which the Committee determines
         each year; and

     o   The Committee's subjective evaluation of each participant's
         contribution to National Penn's results for the year, after considering
         the participant's responsibility level and opportunity for team
         leadership, and the application of the individual limits set forth in
         the Plan.

     Bonuses awarded under the Plan are based on company-wide performance
measures, and require high performance results for awards to be paid. Each year
the Committee establishes internal and external financial performance goals for
the ensuing year. For 2002:

     o   The internal goal was for diluted per share operating income to exceed
         the same for 2001; and

     o   The external goal was for net operating income before securities
         transactions, as a percent of average realized common equity, to exceed
         the average of such income, as a percent of average realized common
         equity, for a group of ten Pennsylvania banking companies selected by
         the Committee. This group is less varied than the companies in the
         Nasdaq Bank Stock Index included in the graph on page 18. The Committee
         believes that short-term financial performance should be measured
         against that of other regional banking companies. The Committee selects
         the comparison group annually, in advance.

     At the end of the year, the Committee determines if the two goals have been
met. If so, a bonus fund is determined by a formula reflecting the extent by
which the external goal was met. The maximum bonus fund is established if
National Penn meets the

                                        8

<PAGE>



external goal by 30% or more. If National Penn does not meet either goal, there
is no bonus fund.

     The Plan provides for a maximum cash bonus of 50% of base salary for
National Penn's two most senior executive officers, Messrs. Weidner and Moyer
(Type A participants). For other officers, the Plan provides maximum cash
bonuses of 35% or 25% of base salary (Type B or C participants).

     The Plan also provides that 25% of the total bonus award for each Type A or
B participant is subject to mandatory deferral and the risk of forfeiture for
five years. At the end of five years, if the participant is still employed, has
retired at age 60 or later or has died, the participant (or his or her
designated beneficiary) becomes entitled to the deferred bonus plus interest,
together with a matching contribution from National Penn. The participant
forfeits the deferred bonus if the requirements for a matching contribution are
not satisfied. If there is a change-in-control of National Penn, each
participant becomes entitled to an amount equal to all bonuses still deferred
under the Plan plus interest, together with a matching contribution from
National Penn. On the date of the change-in- control, the Plan terminates and
all amounts are to be paid out within 30 days.

     In 2002, National Penn met both goals established under the Plan. Based on
the resulting size of the bonus fund, the number of Plan participants, and the
Committee's subjective performance evaluations of Plan participants for 2002,
the Committee recommended, and the Board of Directors approved, a cash bonus of
$146,026 and a mandatory deferred bonus of $48,675 for Mr. Weidner. In
evaluating Mr. Weidner's performance, the Committee noted National Penn's record
earnings in 2002 and Mr. Weidner's leadership in continuing to position National
Penn for long-term profitable growth, including by acquisitions of other
companies.

     Long-Term Stock-Based Compensation. The Committee believes that ownership
of National Penn stock by executives who play significant roles in the success
of National Penn is a key to building long-term shareholder value. To that end,
stock options are an effective compensation tool. While the Committee encourages
executives to retain stock acquired upon the exercise of options, the Committee
recognizes that personal circumstances often lead executives to sell some or all
of the stock acquired in any given exercise of options.

     The Committee grants stock options annually to executive officers and
others under a stock compensation plan approved by shareholders. All options
have an exercise price equal to the stock's fair market value on the date of
grant and vest (become exercisable) in 20% increments over a five-year period.
If an optionee's employment ends other than upon death or retirement at age 60
or later, non-vested options terminate. If there is a change-in-control of
National Penn, all non-vested options vest immediately.

     In determining the number of options to be granted in 2002 to executive
officers and others, the Committee considered:

     o   Publicly available management compensation and option data about other
         banking companies;

     o   The number of options previously granted;

     o   Potential dilution;

     o   Vesting requirements;

     o   The number of shares outstanding; and

                                        9

<PAGE>



     o   National Penn's financial performance.

     The Committee did not apply any specific quantitative or qualitative
criteria or assign any specific weight to any factor; the Committee made the
grants subjectively in its best judgment. In 2002, the Committee granted
executive officers and others stock options for a total of 292,429 shares or
1.4% of National Penn's shares outstanding at December 31, 2002, including stock
options for 44,100 shares granted to Mr. Weidner (as adjusted for a subsequent
5% stock dividend).

     Tax Law. Under the federal income tax law, compensation to executives of
public companies in excess of $1 million per year is not deductible for income
tax purposes if it is not "performance-based." Given National Penn's current
executive compensation levels, the Committee does not expect this tax law to
affect National Penn, but the Committee will continue to monitor the situation.
To the extent the Committee develops new executive compensation programs, it
intends to structure them so that compensation will be deemed
"performance-based" under this income tax law.

         J. Ralph Borneman, Jr., Chairman               Frederick P. Krott
         John H. Body                                   Patricia L. Langiotti
         Frederick H. Gaige                             Kenneth A. Longacre



                                       10

<PAGE>



--------------------------------------------------------------------------------
Summary Compensation Table
--------------------------------------------------------------------------------


     The following table summarizes the total compensation, for each of the last
three years, for Mr. Weidner, National Penn's chief executive officer during
2002, and the four other most highly compensated persons who were serving as
executive officers at the end of 2002. These individuals are referred to as the
"Named Executive Officers."
<TABLE>
<CAPTION>


                                                                                 Long-Term Compensation
                                                                            --------------------------------
                                         Annual Compensation                       Awards           Payouts
                            ----------------------------------------------  ---------------------  ---------
                                                                                        Securities
                                                                Other        Restricted  Underlying
         Name and                                               Annual         Stock      Options/     LTIP      All Other
         Principal                   Salary(1)   Bonus (2)   Compensation     Awards       SARs       Payouts   Compensation
         Position            Year      ($)         ($)           ($)            ($) U      (#)         ($)         ($)
--------------------------- -------  ---------- ----------- --------------  --------- -----------  --------- --------------
            (a)               (b)       (c)         (d)          (e)           (f)        (g)         (h)         (i)
<S>                          <C>       <C>         <C>            <C>           <C>        <C>         <C>          <C>
Wayne R. Weidner             2002      $304,597    $197,201       0             0          44,100      0            $51,543(3)
  Chairman, President        2001       286,723     185,832       0             0          43,260      0             51,345
  and Chief Executive        2000       240,800     164,833       0             0          41,124      0             48,710
  Officer

Glenn E. Moyer               2002       235,912     152,398       0             0          33,075      0              6,392(3)
  Executive Vice             2001       216,712     152,235       0             0          27,038      0              5,553
  President; President       2000       192,611     108,477       0             0          11,356      0              5,512
  of National Penn Bank

Bruce G. Kilroy              2002       165,092      75,788       0             0           8,925      0              6,084(3)
  Group Executive Vice       2001       160,034      74,000       0             0           8,652      0              3,922
  President of National      2000       152,719      75,805       0             0           8,517      0              3,893
  Penn Bank

Paul W. McGloin(4)           2002       156,730      72,404       0             0           8,925      0              5,370(3)
  Group Executive Vice       2001       103,267      41,967       0             0           5,408      0              1,439
  President of National      2000             0           0       0             0               0      0                  0
  Penn Bank

Sharon L. Weaver             2002       156,003      74,154       0             0           8,925      0             18,874(3)
  Group Executive Vice       2001       145,200      69,467       0             0           8,652      0             17,397
  President of National      2000       127,980      66,417       0             0           8,517      0             16,582
  Penn Bank

<FN>

(1)  Includes automobile and telephone allowances.
(2)  Includes 25% mandatory deferral of total award under National Penn's
     Executive Incentive Plan.
(3)  o    50% matching contributions by National Penn under the Capital
          Accumulation Plan (a 401(k) plan) ($6,000 for Mr. Weidner, $6,000 for
          Mr. Moyer, $5,775 for Mr. Kilroy, $3,967 for Mr. McGloin and $5,355
          for Ms. Weaver);

     o    National Penn's matching contribution with respect to previously
          awarded, mandatorily deferred amounts under National Penn's Executive
          Incentive Plan paid in accordance with the Plan ($43,017 for Mr.
          Weidner and $13,287 for Ms. Weaver);

     o    Imputed value of life insurance benefits equal to $1,122 for Mr.
          Weidner, $392 for Mr. Moyer, $309 for Mr. Kilroy, $1,403 for Mr.
          McGloin and $232 for Ms. Weaver; and

     o    Long-term disability insurance premiums of $1,404 for Mr. Weidner.

(4) Mr. McGloin became an employee of National Penn in March 2001.

</FN>
</TABLE>



                                       11

<PAGE>



--------------------------------------------------------------------------------
Stock Options
--------------------------------------------------------------------------------



     The following table shows certain information about the stock option awards
that were made to the Named Executive Officers during 2002. Each award has been
adjusted for National Penn's subsequent 5% stock dividend, as provided in the
stock option plan.
<TABLE>
<CAPTION>

                                                 Stock Option Grants in 2002


                                                           Individual Grants                              Grant Date Value
                                 ---------------------------------------------------------------------    ---------------
                                  Number of         % of Total                                                 Grant Date
                                  Securities           Options                                                Present Value
                                 Underlying         Granted to                                                 Based on
                                  Options             Employees          Exercise or                          Black-Scholes
                                  Granted(1)            in               Base Price(2)      Expiration          Model(4)
           Name                     (#)              Fiscal Year         ($/Share)            Date(3)            ($)
--------------------------       -----------       -------------       -----------          ----------    ---------------
            (a)                      (b)                (c)                (d)                  (e)               (f)

<S>                                   <C>                 <C>               <C>               <C> <C>            <C>
Wayne R. Weidner                      44,100              15.08%            $25.46            1/3/2013           $333,837

Glenn E. Moyer                        33,075              11.31%             25.46            1/3/2013            250,378

Bruce G. Kilroy                        8,925               3.05%             25.46            1/3/2013             67,562

Paul W. McGloin                        8,925               3.05%             25.46            1/3/2013             67,562

Sharon L. Weaver                       8,925               3.05%             25.46            1/3/2013             67,562
_______________________
<FN>

(1)      Each option becomes exercisable, if the holder remains an employee
         after the grant date, as follows: 20% per year on the first through
         fifth anniversary dates of the grant. All amounts represent stock
         options; National Penn's stock compensation plans do not provide for
         the issuance of stock appreciation rights. Each option is transferable
         to family members under specified conditions.

(2)      National Penn's stock compensation plans provide that all options must
         be granted with an exercise price equal to the fair market value of the
         stock on the date of grant. The exercise price for an option must be
         paid in cash; an optionee exercising a non-qualified stock option may
         elect to surrender a percentage of the shares otherwise issuable to
         cover any required withholding taxes upon compliance with detailed
         procedural rules set forth in the plans.

(3)      If employment terminates other than for retirement at age 60 or later
         or death, or for "cause," the non-vested portion of any option will
         lapse immediately and the unexercised vested portion of any option will
         lapse no later than three months after termination of employment. If
         employment terminates upon retirement at age 60 or later or death, the
         nonvested portion of any option will vest immediately and the option,
         to the extent remaining unexercised, will lapse no later than five
         years after termination of employment. If employment terminates for
         "cause," all unexercised options lapse immediately.

(4)      Based upon the Black-Scholes option valuation model, which estimates
         the present dollar value of National Penn's common stock options to be
         $7.57 per share under option. The actual value, if any, an executive
         may realize will depend on the excess of the stock price over the
         exercise price on the date the option is exercised. Therefore, there is
         no assurance the value realized will be at or near the value estimated
         by the Black-Scholes model. The assumptions underlying the
         Black-Scholes model include: (a) an expected volatility of 35%; (b) a
         risk-free rate of return of 3.93%, which approximates the 6-year,
         8-month zero-coupon Treasury bond rate; (c) National Penn's average
         common shares dividend yield of 3.28% on the grant date; (d) an
         expected term of 6.83 years; and (e) an expected turnover of 5%.
</FN>
</TABLE>









                                       12

<PAGE>



     The following table shows certain information about option exercises during
2002 by the Named Executive Officers and the value of their unexercised options
at the end of the year.
<TABLE>
<CAPTION>

                                       Aggregated Option/SAR Exercises in Last Fiscal Year and
                                                  Fiscal Year End Option/SAR Values



                                                                                                Value of Unexercised
                                                               Number of Securities                 In-the-Money
                                                              Underlying Unexercised                Options/SARs
                                                              Options/SARs at FY-End                 at FY-End(2)
                                                          -------------------------------  -------------------------------
                              Shares
                             Acquired         Value
                            n Exercise     Realized(1)      Exercisable    Unexercisable    Exercisable     Unexercisable
          Name                 (#)             ($)              (#)             (#)             ($)              ($)
------------------------   ------------   --------------  --------------- ---------------  --------------  ---------------
          (a)                  (b)             (c)              (d)             (e)             (f)              (g)

<S>                              <C>            <C>               <C>             <C>          <C>                <C>
Wayne R. Weidner                 34,268         $595,022          353,012         130,728      $3,180,514         $458,328

Glenn E. Moyer                        0                0           49,038          67,722         530,542          200,873

Bruce G. Kilroy                       0                0           24,275          25,968          95,819           92,492

Paul W. McGloin                       0                0            1,081          13,252           4,282           26,893

Sharon L. Weaver                      0                0           42,674          25,968         310,526           92,492
_________________
<FN>

(1)      Represents the total market value of the underlying common shares on
         the date of exercise minus the total exercise price for the options
         exercised.

(2)      "In-the-Money Options" are stock options where the market value of the
         underlying common shares exceeded the exercise price at December 31,
         2002. The value of such options is determined by subtracting the total
         exercise price for such options from the total fair market value of the
         underlying common shares on December 31, 2002.
</FN>
</TABLE>


                                       13

<PAGE>



--------------------------------------------------------------------------------
Pension Benefits
--------------------------------------------------------------------------------



     National Penn has a non-contributory, defined benefit Pension Plan
generally covering employees who have reached 20 1/2 years of age and completed
1,000 hours of service with National Penn.

     The following table shows the annual retirement benefits payable under the
plan in the form of a straight life annuity for a range of compensation and
years of service classifications. The amounts shown in the table are based on an
employee who is presently age 65 and has had a constant salary for the past five
years. The amounts are not subject to offset for social security or other
amounts.

     As of December 31, 2002, Messrs. Weidner, Moyer, Kilroy, McGloin and Ms.
Weaver were credited with 40, 3, 5, 1 and 24 years of service under the plan,
respectively, for benefit calculation purposes.
<TABLE>
<CAPTION>

                                                      Pension Benefits


                                                       Years of Service
                    --------------------------------------------------------------------------------------
    Salary              15                  20                  25                 30               35
--------------      ----------          ----------          ----------          ---------      -----------

<S>   <C>              <C>                 <C>                 <C>                <C>            <C>
      $ 75,000         $15,300             $20,400             $25,500            $30,600        $  35,700
       100,000         $21,863             $29,150             $36,438            $43,725        $  51,013
       125,000         $28,425             $37,900             $47,375            $56,850        $  66,325
       150,000         $34,988             $46,650             $58,913            $69,975        $  81,638
       175,000         $41,555             $55,400             $69,250            $83,100        $  96,950
       200,000(1)      $48,113             $64,150             $80,188            $96,225         $112,263
       225,000(1)      $48,113             $64,150             $80,188            $96,225         $112,263
       250,000(1)      $48,113             $64,150             $80,188            $96,225         $112,263
       275,000(1)      $48,113             $64,150             $80,188            $96,225         $112,263
       300,000(1)      $48,113             $64,150             $80,188            $96,225         $112,263
       325,000(1)      $48,113             $64,150             $80,188            $96,225         $112,263
       350,000(1)      $48,113             $64,150             $80,188            $96,225         $112,263
       375,000(1)      $48,113             $64,150             $80,188            $96,225         $112,263
________________
<FN>

(1)      Salary in excess of $200,000 is disregarded in determining a
         participant's retirement benefit. The 2002 compensation covered by the
         plan (all salary) for Messrs. Weidner, Moyer, Kilroy, McGloin and Ms.
         Weaver was $200,000, $200,000, $165,092, $156,730 and $156,003,
         respectively.
</FN>
</TABLE>


     National Penn is also contractually obligated to provide Messrs. Weidner
and Moyer with additional retirement benefits for a specified time period. See
"Employment and Change-in- Control Agreements" on the next page.



                                       14

<PAGE>



--------------------------------------------------------------------------------
Employment and Change-in-Control Agreements
--------------------------------------------------------------------------------


     Wayne R. Weidner. On January 22, 2003, National Penn and National Penn Bank
entered into an employment agreement with Wayne R. Weidner, Chairman, President
and Chief Executive Officer of National Penn and Chairman and Chief Executive
Officer of National Penn Bank. This agreement superseded an agreement originally
entered into in 1989 that provided Mr. Weidner with a supplemental retirement
benefit and a "change-in-control" benefit.

     The current agreement provides for Mr. Weidner to continue service in his
current executive positions. The initial term of the agreement is three
years--from January 22, 2003 through January 21, 2006. Unless terminated, the
agreement is automatically extended by adding one year to the term of the
agreement at the end of each year, until Mr. Weidner reaches the age of 62,
after which there will be no further extensions.

     Mr. Weidner's annual base compensation under the agreement is $355,000,
effective January 1, 2003. Mr. Weidner is eligible for annual merit salary
increases and awards of stock options, and he is entitled to participate in
National Penn's Executive Incentive Plan and to receive certain fringe benefits.

     The current agreement also provides Mr. Weidner with a supplemental
retirement benefit, namely, a retirement annuity for 15 years for up to 65% of
his final average base salary, depending on the number of years served by him.
If Mr. Weidner had retired at December 31, 2002, he would have been entitled
under the 1989 agreement to receive a retirement annuity of $154,632 per year
for 15 years, with any concurrent payments under National Penn's pension plan
credited toward the annuity payments. The current agreement does not change Mr.
Weidner's supplemental retirement benefit.

     Mr. Weidner's current agreement also contains a "change-in-control"
benefit. This benefit is exercisable by Mr. Weidner at any time within three
years after a "change-in-control" of National Penn occurs (including a "merger
of equals"). If a change-in-control occurs, Mr. Weidner may elect to terminate
employment and receive a lump-sum cash severance payment equal to 299% of his
average annual compensation for the five years preceding the change-in-control.

     National Penn may terminate the current agreement at any time with or
without "cause," as defined in the agreement. If terminated without cause, the
agreement will remain in effect for the remainder of its term, and Mr. Weidner
will receive his base salary through the remaining term of the agreement and
certain other benefits for one year. In addition, he will remain entitled to the
supplemental retirement benefit and to the change-in-control benefit (should a
change-in-control occur during the remaining term of the agreement). If
terminated for cause, Mr. Weidner will only be entitled to receive accrued and
unpaid salary through the date of termination. If terminated due to Mr.
Weidner's disability, he will remain entitled to receive his base salary through
the remaining term of the agreement and the supplemental retirement benefit. If
terminated due to Mr. Weidner's death, Mr. Weidner's designated beneficiary will
be entitled to receive a lump sum payment of his base salary through the
remaining term of the agreement and the supplemental retirement benefit.

     The current agreement may be terminated by Mr. Weidner at any time. In such
event, Mr. Weidner will be entitled to receive accrued unpaid salary through the
date of termination, the supplemental retirement benefit and the
change-in-control benefit (if applicable).

     The current agreement contains non-solicitation and non-competition
provisions that restrict Mr. Weidner's right to compete with National Penn and
National Penn Bank during the term of the agreement and, if he voluntarily
terminates employment before reaching age 65, for the remainder of the term in
effect at the time of termination. The current agreement also contains a
non-disclosure provision binding on Mr. Weidner.

                                       15

<PAGE>



     Glenn E. Moyer. On December 18, 2002, National Penn and National Penn Bank
entered into an employment agreement with Glenn E. Moyer, Executive Vice
President of National Penn and President and Chief Operating Officer of National
Penn Bank. This agreement superseded an agreement originally entered into in
1999 that provided Mr. Moyer with a "change-in-control" benefit.

     The current agreement provides for Mr. Moyer to continue service in his
current or more senior executive positions. The initial term of the agreement is
three years--from December 18, 2002 through December 17, 2005. Unless
terminated, the agreement is automatically extended by adding one year to the
term of the agreement at the end of each year, until Mr. Moyer reaches the age
of 62, after which there will be no further extensions.

     Mr. Moyer's annual base compensation under the agreement is $284,000,
effective January 1, 2003. Mr. Moyer is eligible for annual merit salary
increases and awards of stock options, and he is entitled to participate in
National Penn's Executive Incentive Plan and to receive certain fringe benefits.

     The current agreement also provides Mr. Moyer with a supplemental
retirement benefit, namely, a retirement annuity for 10 years for up to 65% of
his final average base salary, depending generally on the number of years served
by him. Payments due to him under National Penn's pension plan will be credited
toward the annuity payments.

     Mr. Moyer's current agreement also contains a "change-in-control" benefit.
This benefit is exercisable by Mr. Moyer at any time within three years after a
"change-in-control" of National Penn occurs (including a "merger of equals"). If
a change-in-control occurs, Mr. Moyer may elect to terminate employment and
receive a lump-sum cash severance payment equal to 299% of his average annual
compensation for the five years preceding the change-in-control.

     National Penn may terminate the current agreement at any time with or
without "cause," as defined in the agreement. If terminated without cause, the
agreement will remain in effect for the remainder of its term, and Mr. Moyer
will receive his base salary through the remaining term of the agreement and
certain other benefits for one year. In addition, he will remain entitled to the
supplemental retirement benefit (which, if less than 15/21 of the maximum amount
based on his years of service, shall be increased to 15/21 of the maximum
amount) and to the change-in- control benefit (should a change-in-control occur
during the remaining term of the agreement). If terminated for cause, Mr. Moyer
will only be entitled to receive accrued and unpaid salary through the date of
termination. If terminated due to Mr. Moyer's disability, he will remain
entitled to receive his base salary through the remaining term of the agreement
and the supplemental retirement benefit. If terminated due to Mr. Moyer's death,
Mr. Moyer's designated beneficiary will be entitled to receive a lump sum
payment of his base salary through the remaining term of the agreement and the
supplemental retirement benefit.

     The current agreement may be terminated by Mr. Moyer at any time. In such
event, Mr. Moyer will be entitled to receive accrued unpaid salary through the
date of termination, the supplemental retirement benefit (if he is at least 58
years old at the date of termination), and the change-in-control benefit (if
applicable). Should Mr. Moyer terminate the agreement prior to reaching age 58,
he will not receive any supplemental retirement benefit.

     The current agreement contains non-solicitation and non-competition
provisions that restrict Mr. Moyer's right to compete with National Penn and
National Penn Bank during the term of the agreement and, if he voluntarily
terminates employment before reaching age 65, for the remainder of the term in
effect at the time of termination. The current agreement also contains a
non-disclosure provision binding on Mr. Moyer.



                                       16

<PAGE>



     Bruce G. Kilroy, Paul W. McGloin, Sharon L. Weaver. National Penn and
National Penn Bank are parties to agreements with Bruce G. Kilroy, Group
Executive Vice President and Chief Delivery Officer of National Penn Bank, Paul
W. McGloin, Group Executive Vice President and Chief Lending Officer of National
Penn Bank, and Sharon L. Weaver, Group Executive Vice President--Human
Resources/Branch Administration/Retail Banking/Marketing of National Penn Bank,
that provide each of them with "change-in-control" benefits.

     The benefits provided by these agreements become payable if two events
occur. First, there must be a "change-in-control" of National Penn or National
Penn Bank (as defined in the agreements). Second, the executive's employment
must be terminated without cause or the executive must resign after an adverse
change in the terms of his or her employment. Adverse changes include reduction
in title or responsibilities, reduction in compensation or benefits (except for
a reduction for all employees generally), reassignment beyond a thirty-minute
commute from Boyertown, Pennsylvania, or increased travel requirements. If these
two events occur, the executive will receive a lump-sum cash severance payment
equal to 200% of the executive's average annual compensation for the five years
preceding the change-in-control.

                                       17

<PAGE>



--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PERFORMANCE GRAPH
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------



     The following graph compares the performance of National Penn's common
shares to the Nasdaq Stock Market Total Return Index and the Nasdaq Bank Stock
Index during the last five years. The graph shows the value of $100 invested in
National Penn common stock and both indices on December 31, 1997, and the change
in the value of National Penn's common shares compared to the indices as of the
end of each year. The graph assumes the reinvestment of all dividends.
Historical stock price performance is not necessarily indicative of future stock
price performance.

                    COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
     Among National Penn Bancshares, Nasdaq Stock Market Total Return Index
                            & Nasdaq Bank Stock Index




                    [GRAPH OMITTED - DATA POINTS AS FOLLOWS]

<TABLE>
<CAPTION>
                                                                   December 31,
                                        -------------------------------------------------------------------
                                            1997       1998        1999       2000      2001       2002
                                        -------------------------------------------------------------------
<S>                                         <C>         <C>        <C>         <C>        <C>       <C>
 National Penn Bancshares, Inc.             100         106        106          93        109       142
-----------------------------------------------------------------------------------------------------------
 Nasdaq Stock Market Total Return           100         141        261         157        125        86
-----------------------------------------------------------------------------------------------------------
 Nasdaq Bank Stocks                         100          99         96         109        118       121
-----------------------------------------------------------------------------------------------------------
</TABLE>





                                       18

<PAGE>



--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AUDIT COMMITTEE REPORT
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


     The Audit Committee of National Penn's Board of Directors is composed of
six independent directors, as currently defined by Nasdaq rules, and operates
under a written charter adopted by the Board of Directors. In light of
additional responsibilities resulting from the Sarbanes- Oxley Act of 2002, the
Board revised the charter in February 2003. The revised charter is attached to
this proxy statement as Appendix A.

     Under its charter, the Audit Committee assists the Board of Directors in
its general oversight of National Penn's financial reporting, internal controls
and audit functions.

     Management is responsible for National Penn's financial reporting process,
including its system of internal controls, and for the preparation of
consolidated financial statements in accordance with accounting principles
generally accepted in the United States. Grant Thornton LLP, National Penn's
independent accountants, are responsible for performing an independent audit of
National Penn's consolidated financial statements in accordance with auditing
standards generally accepted in the United States and to issue a report thereon
based on such audit.

     The Audit Committee's responsibility is to monitor and oversee these
processes. It is not the Audit Committee's duty or responsibility to conduct
auditing or accounting reviews or procedures. The Audit Committee members are
not National Penn employees and are not accountants or auditors by profession or
experts in accounting or auditing, and their functions are not intended to
duplicate or certify the activities of management or the independent
accountants. Likewise, the Audit Committee cannot certify that the independent
accountants are "independent" under applicable rules. The Audit Committee serves
a Board-level oversight role, in which it provides advice, counsel and direction
to management and the independent accountants on the basis of the information it
receives, discussions with management and the independent accountants, and the
experience of the Audit Committee's members in business, finance and accounting
matters.

     In this context, the Audit Committee has met and held discussions with
management and the independent accountants. Management has represented to the
Audit Committee that National Penn's consolidated financial statements were
prepared with integrity and objectivity and in accordance with accounting
principles generally accepted in the United States, and the independent
accountants have represented to the Audit Committee that they have performed
their audit of National Penn's consolidated financial statements in accordance
with auditing standards generally accepted in the United States. The Audit
Committee has relied upon the representations of management and the independent
accountants without independent verification. The Audit Committee has reviewed
and discussed the consolidated financial statements with management and the
independent accountants.

     The Audit Committee discussed with the independent accountants the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication With Audit Committees).

     National Penn's independent accountants also provided to the Audit
Committee the written disclosures required by Independence Standards Board
Standard No. 1 (Independence Discussions With Audit Committees), and the Audit
Committee discussed with the independent accountants that firm's independence.

     Based on the Audit Committee's discussions with management and the
independent accountants, the representations of management to the Audit
Committee, the representations of the independent accountants included in their
report on National Penn's consolidated

                                       19

<PAGE>



financial statements and otherwise on such report of the independent
accountants, the Audit Committee recommended that the Board of Directors include
the audited consolidated financial statements in National Penn's Annual Report
on Form 10-K for the year ended December 31, 2002.

     Aggregate fees billed to National Penn by the independent accountants for
the years ended December 31, 2002 and December 31, 2001 were as follows:

                                    Year Ended                  Year Ended
                                 December 31, 2002            December 31, 2001
                                 -----------------            -----------------

 Audit Fees                        $280,224                     $177,950

 Audit-Related Fees (a)               9,750                        4,450

 Tax Fees (b)                        92,519                       63,035

 All Other Fees                        None                         None
__________________
     (a)  Includes fees for accounting assistance related to acquisitions and
          consultations related to financial accounting and reporting standards.
     (b)  Includes fees for services related to tax compliance and tax planning.

     The Audit Committee considered whether the independent accountants'
provision of non- audit services is compatible with maintaining the independent
accountants' independence. The Audit Committee is satisfied that it is.


         Patricia L. Langiotti, Chair                       Frederick H. Gaige
         John H. Body                                       Robert E. Rigg
         J. Ralph Borneman, Jr.                             C. Robert Roth







                                       20

<PAGE>



--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
STOCK OWNERSHIP
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


Directors and Executive Officers

--------------------------------------------------------------------------------


     The following table shows certain information, as of March 7, 2003, about
the ownership of National Penn common shares by the directors and executive
officers.
<TABLE>
<CAPTION>


                                                              Amount and Nature of Beneficial Ownership
                                            -----------------------------------------------------------------------------
                                                                      Sole               Shared
                                                 Total             Voting and          Voting and             Percent
               Name of                        Beneficial           Investment          Investment               of
          Beneficial Owner                     Ownership              Power              Power               Class(1)
-------------------------------------       ---------------      ---------------    ----------------      ---------------
<S>         <C>                                     <C>                  <C>                   <C>

Directors and Nominees
John H. Body(2)(4)                                  159,865              154,965               4,900                    -
J. Ralph Borneman, Jr.(2)(4)                         28,250               13,092              15,158                    -
Frederick H. Gaige(4)                                 5,499                5,499                   -                    -
John W. Jacobs(4)                                   430,663              121,521             309,142                1.86%
Frederick P. Krott(5)                                 4,941                2,575               2,366                    -
Patricia L. Langiotti(4)                             15,972               14,902               1,070                    -
Kenneth A. Longacre(4)                              109,014              109,014                   -                    -
Glenn E. Moyer(2)(3)(7)                              61,429               59,425               2,004                    -
Alexander Rankin                                    336,518              279,953              56,565                1.46%
Robert E. Rigg(2)(4)                                332,355              314,859              17,496                1.44%
C. Robert Roth(4)                                    28,192               15,729              12,463                    -
John C. Spier(6)                                    180,862              180,862                   -                    -
Wayne R. Weidner(3)                                 408,926              408,143                 783                1.75%

Other Named Executive Officers
Bruce G. Kilroy(3)                                   31,875               31,875                   -                    -
Paul W. McGloin(3)                                   13,837                1,594              12,243                    -
Sharon L. Weaver(3)                                  50,273               50,273                   -                    -

All Directors and Executive
Officers as a Group
(20 Persons)(3)(4)                                2,424,307            1,972,094             452,213               10.20%
______________________
<FN>


(1)  Unless otherwise indicated, amount owned does not exceed 1% of the total
     number of common shares outstanding as of March 7, 2003.

(2)  Nominee for election as a Class I director.

(3)  Includes shares allocated under the Capital Accumulation Plan. Includes the
     following shares which may be acquired by exercise of vested options
     granted under employee stock compensation plans: Mr. Weidner - 353,012
     shares, Mr. Moyer - 50,469 shares, Mr. Kilroy - 19,275 shares, Mr. McGloin
     - 1,081 shares, and Ms. Weaver - 42,674 shares. Does not include shares
     which may be acquired in the future by exercise of options not yet
     exercisable under employee stock compensation plans.

(4)  Includes the following shares which may be acquired by exercise of vested
     options granted to non-employee directors under the stock option plan for
     non-employee directors: Mr. Body - 20,805 shares, Mr. Borneman - 5,470
     shares, Mr. Gaige - 4,376 shares, Mr. Jacobs - 3,282 shares, Ms. Langiotti
     - 6,564 shares, Mr. Longacre - 3,282 shares, Mr. Rigg - 3,282 shares, and
     Mr. Roth - 8,208 shares. Does not include shares which may be acquired in
     the future by exercise of options not yet exercisable under the stock
     option plan for non-employee directors.

(5)  Includes 1,022 shares which may be acquired by exercise of vested options
     granted in substitution for Community Independent Bank, Inc. stock options,
     as provided in the acquisition agreement.

(6)  Includes 140,509 shares which may be acquired by exercise of vested options
     granted in substitution for FirstService Bank stock options, as provided in
     the acquisition agreement.

(7)  Includes 2,004 shares held by Mr. Moyer's spouse. Mr. Moyer disclaims
     beneficial ownership of these shares.
</FN>
</TABLE>

                                       21

<PAGE>



--------------------------------------------------------------------------------
Five Percent Shareholders
--------------------------------------------------------------------------------


     The following table shows individuals or groups known by National Penn to
own more than 5% of its outstanding common shares as of March 7, 2003.

<TABLE>
<CAPTION>

                                               Amount and Nature
        Name and Address                         of Beneficial                        Percent of
      of Beneficial Owner                           Ownership                       Common Shares
--------------------------------             ----------------------                ----------------

<S>                                               <C>                                   <C>
James K. Overstreet                               2,123,948(1)                          9.20%
315 Natlie Road
Phoenixville, PA 19460
____________________
<FN>

(1)  These shares are owned of record by persons or entities identified by Mr.
     Overstreet in filings with regulatory authorities and National Penn, as
     being parties through which he holds common shares of National Penn. Evelyn
     M. Overstreet, Mr. Overstreet's wife, holds 112,232 of these shares, and a
     limited partnership in which Mr. Overstreet is a partner holds 25,537 of
     these shares.
</FN>
</TABLE>


--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OTHER DIRECTOR AND EXECUTIVE OFFICER INFORMATION
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Related Party and Similar Transactions
--------------------------------------------------------------------------------


     Certain directors and officers of National Penn, and companies with which
they are associated, are customers of National Penn's banking subsidiaries,
National Penn Bank and/or Panasia Bank, N.A. During 2002, these individuals and
companies had banking transactions with National Penn Bank and/or Panasia Bank,
N.A. in the ordinary course of business. Similar transactions may be expected to
occur in the future. All loans and commitments to loan involved in such
transactions were made under substantially the same terms, including interest
rates, collateral, and repayment terms, as those prevailing at the time for
comparable transactions with other persons. In the opinion of National Penn's
management, these transactions do not involve more than the normal risk of
collection, nor do they present other unfavorable features. As of December 31,
2002, loans to officers, directors, and affiliates represented 2.8% of
shareholders' equity in National Penn.

--------------------------------------------------------------------------------
Section 16(a) Beneficial Ownership Reporting Compliance
--------------------------------------------------------------------------------


     Section 16(a) of the Securities Exchange Act of 1934 requires National
Penn's directors, executive officers and more-than-10% beneficial shareholders
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission. These persons are required by SEC regulations to furnish
National Penn with copies of all their Section 16(a) filings.

     Based solely on review of the Section 16(a) filings furnished to National
Penn and/or written representations that no year-end Forms 5 were required to be
filed, National Penn believes that its directors, executive officers and
more-than-10% shareholders complied during 2002 with all Section 16(a) filing
requirements.


                                       22

<PAGE>



--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------


"Householding" of Proxy Materials and Annual Reports

     The Securities and Exchange Commission recently adopted rule amendments
regarding the delivery of proxy statements, prospectuses and certain other
materials to shareholders who share the same address. These new rule amendments
permit companies and intermediaries (such as brokers, banks and other companies
that hold shares in "street name") to satisfy the delivery requirements for
these materials by delivering a single copy of the materials to an address
shared by two or more of National Penn's shareholders. This delivery method is
referred to as "householding," and can result in significant cost savings for
National Penn, and in turn, National Penn's shareholders.

     In order to take advantage of this opportunity, National Penn has delivered
only one proxy statement and annual report to multiple shareholders who share an
address, unless National Penn received contrary instructions from the affected
shareholders prior to the mailing date. National Penn will, however, promptly
deliver, upon written or oral request, a separate copy of the proxy statement or
annual report, as requested, to a shareholder at a shared address to which a
single copy of those documents was delivered. Shareholders of record who prefer
to receive separate copies of a proxy statement or annual report, either now or
in the future, can request a separate copy of the proxy statement or annual
report by writing to National Penn at the following address: Corporate
Secretary, National Penn Bancshares, Inc., Philadelphia and Reading Avenues,
Boyertown, PA 19512, or by telephone at (610) 369-6202. Conversely, if you are
currently a shareholder of record who shares an address with another National
Penn shareholder and wish to have your future proxy statements and annual
reports "householded," please contact National Penn at the above address or
telephone number.

     If your National Penn stock is held in "street name" (i.e., held by a
broker, bank or other intermediary), you can request separate copies of these
documents by contacting the broker, bank or other intermediary. Conversely, if
your National Penn shares are held in street name and you wish to have your
future proxy statements and annual reports "householded," you can request
"householding" by contacting the broker, bank or other intermediary.

Record Date; Shares Outstanding

     Shareholders of record at the close of business on March 7, 2003 are
entitled to vote their shares at the annual meeting. As of that date, there were
23,072,549 common shares outstanding and entitled to be voted at the meeting.
The holders of those shares are entitled to one vote per share.

Quorum

     The presence, in person or by proxy, of shareholders with power to cast a
majority of all votes entitled to be cast at the meeting will constitute a
quorum. A quorum must be present at the meeting before any business may be
conducted.

     If a quorum is not present, the shareholders who are represented at the
meeting may adjourn the meeting until a quorum is present. The time and place of
the adjourned meeting will be announced at the time the adjournment is taken,
and no other notice need be given. An adjournment will have no effect on the
business that may be conducted at the meeting.


                                       23

<PAGE>



Proxies; Right to Revoke

     If you participate in National Penn's Dividend Reinvestment Plan and/or
Employee Stock Purchase Plan, your proxy will represent the number of shares
registered in your name and the number of shares credited to your Dividend
Reinvestment Plan and/or Employee Stock Purchase Plan accounts.

     By submitting your proxy, you will authorize the persons named thereon or
their substitutes to represent you and vote your shares at the meeting in
accordance with your instructions. They may also vote your shares to adjourn the
meeting and will be authorized to vote your shares at any adjournments or
postponements of the meeting.

     If you attend the meeting, you may vote your shares in person, regardless
of whether you have submitted a proxy. In addition, you may revoke your proxy by
sending a written notice of revocation to National Penn's Corporate Secretary,
by submitting a later-dated proxy, or by voting in person at the meeting.

Default Voting

     If you submit a proxy but do not indicate any voting instructions, your
shares will be voted FOR the election of the Board of Directors' nominees as
directors.

     National Penn's Board and management know of no other business that is
planned to be brought before the meeting. If any other business properly comes
before the meeting for a vote, your shares will be voted according to the
discretion of the holders of the proxy.

Tabulation of Votes

     Mellon Investor Services LLC, the transfer agent, will tabulate the votes.

     If your shares are treated as a broker non-vote, your shares will be
included in the number of shares present at the meeting for purposes of
determining whether a quorum is present. Because the election of directors is by
a plurality of votes, a broker non-vote will have no effect on the outcome.

Voting by Street Name Holders

     If you are the beneficial owner of shares held in "street name" by a
broker, the broker, as the record holder of the shares, is required to vote
those shares according to your instructions. If you do not give instructions to
the broker, the broker will be entitled to vote the shares in its discretion.

Independent Accountants

     National Penn has again selected Grant Thornton LLP as independent
accountants for 2003. Representatives of that firm will be at the meeting to
respond to appropriate questions, and they will have an opportunity to make a
statement if they desire to do so.



                                       24

<PAGE>



Proxy Solicitation

     National Penn will bear all costs of this proxy solicitation. National
Penn's officers, directors and regular employees may solicit proxies by mail, in
person, by telephone or by facsimile. National Penn will reimburse brokerage
firms, custodians, nominees and fiduciaries for their expenses in forwarding
proxy materials to beneficial owners.

Shareholder Proposals for Next Year's Meeting

     Any shareholder who wishes to present a proposal for consideration at next
year's annual meeting, and who wishes for National Penn to consider including
such proposal in next year's proxy statement, must deliver the proposal to
National Penn's principal executive offices no later than the close of business
on November 22, 2003. Any proposal should be addressed to Corporate Secretary,
National Penn Bancshares, Inc., Philadelphia and Reading Avenues, Boyertown, PA
19512.

     For any proposal that is not submitted for possible inclusion in next
year's proxy statement (as described in the preceding paragraph) but is instead
sought to be presented directly at next year's annual meeting, SEC rules permit
management to vote proxies in its discretion if:

     o   National Penn receives notice of the proposal before the close of
         business on January 28, 2004 (or, if the annual meeting is not held on
         the fourth Tuesday in April, 2004, the tenth day following public
         disclosure of the meeting date) and advises shareholders in next year's
         proxy statement about the nature of the matter and how management
         intends to vote on such matter, or

     o   National Penn does not receive notice of the proposal prior to the
         close of business on January 28, 2004 (or, if the annual meeting is not
         held on the fourth Tuesday in April, 2004, the tenth day following
         public disclosure of the meeting date).

     Any notice of intention to present a proposal at next year's annual meeting
should be addressed to Corporate Secretary, National Penn Bancshares, Inc.,
Philadelphia and Reading Avenues, Boyertown, PA 19512.

Director Nominees

     National Penn's bylaws provide that the Board of Directors, or any
shareholder who complies with the requirements of the bylaws, may nominate
candidates for election as directors. The Board of Directors seeks persons of
proven judgment and experience. Shareholders who wish to suggest qualified
candidates may write to the Corporate Secretary, National Penn Bancshares, Inc.,
Philadelphia and Reading Avenues, Boyertown, PA 19512, stating in detail the
qualifications of the persons they recommend.

     The bylaws provide that any shareholder who wishes to nominate a candidate
for election as a director must deliver to National Penn written notice at least
90 days before the date of the shareholders' meeting (or, if the annual meeting
is not held on the fourth Tuesday in April, 2004, the tenth day following public
disclosure of the meeting date). This notice must contain the same information,
to the extent known to the notifying shareholder, as that required to be
provided by National Penn in its proxy statement for the nominees of the Board
of Directors. The chairman of the meeting may disregard any nomination not made
in compliance with the bylaws, and may instruct the vote tabulator to disregard
any votes cast for that person.


                                       25

<PAGE>



Shareholder List

     For at least ten days prior to the meeting, a list of the shareholders
entitled to vote at the annual meeting will be available for examination, for
purposes germane to the meeting, during ordinary business hours at National
Penn's principal executive offices. The list will also be available for
examination at the meeting.

Annual Report for 2002

     National Penn's Annual Report on Form 10-K (without exhibits) is enclosed
with this proxy statement. It is also available at National Penn's website
(www.nationalpennbancshares.com) and at the web site of the Securities and
Exchange Commission (www.sec.gov).






                                       26

<PAGE>



                                                                      APPENDIX A
                                                                      ----------

                         NATIONAL PENN BANCSHARES, INC.
                         ------------------------------

                             AUDIT COMMITTEE CHARTER
                             -----------------------


     The Audit Committee of the Board of Directors (the "Board") of National
Penn Bancshares, Inc. (the "Company") assists the Board with four major
responsibilities, in monitoring (1) the integrity of the Company's financial
statements, (2) the reported status of significant internal controls affecting
business operations, (3) the Company's reported compliance with legal and
regulatory requirements, and (4) the qualifications, independence and
performance of the Company's internal and independent auditors.

     The Audit Committee will be comprised of five or more independent
directors. The members of the Audit Committee shall meet the independence and
experience requirements of (1) The Nasdaq Stock Market, Inc., (2) Section
10A(m)(3) of the Securities Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations of the Securities and Exchange Commission ("SEC") issued
thereunder, and (3) the Federal Deposit Insurance Act and the regulations of the
Federal Deposit Insurance Corporation ("FDIC") issued thereunder. The Board
shall appoint the members of the Audit Committee.

     The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Company shall
provide for appropriate funding, as determined by the Audit Committee, for
payment of compensation to any advisors employed by the Audit Committee.

     The Audit Committee may request any officer or employee of the Company or
the Company's outside counsel or independent auditors to attend a meeting of the
Committee or to meet with any members of, or consultants to, the Committee.

     The Audit Committee shall meet quarterly and as called by the Chairperson
and will maintain minutes and other relevant records of its meetings and
decisions. The Audit Committee shall make regular reports to the Board,
including an annual review and assessment of the adequacy of this Charter and
will recommend any proposed changes to the Board for approval.

     While the Audit Committee may perform additional duties as determined by
the Board, the Audit Committee shall perform the tasks outlined in the following
paragraphs in order to fulfill its four major responsibilities noted above.

Monitor the integrity of the Company's financial statements

     o   Review with management and the independent auditors the Company's
         annual audited financial statements, and recommend to the Board whether
         the audited financial statements should be included in the Company's
         Annual Report on Form 10-K.

     o   Review with management and the independent auditors the interim
         financial information contained in the Company's Quarterly Report on
         Form 10-Q prior to its filing.

     o   Review with management and the independent auditors any significant
         financial reporting issues and judgments made in connection with the
         preparation of the Company's financial statements, including any
         significant changes in the Company's selection or application of
         accounting principles, any major issues as to the adequacy of the
         Company's internal controls and any special steps adopted in light of
         material control deficiencies.

                                       27

<PAGE>



     o   Discuss with the independent auditors the quality, not just the
         acceptability, of the Company's accounting principles and other matters
         required to be discussed by Statement on Auditing Standards No. 61, as
         amended by Statement on Auditing Standards No. 90, relating to the
         conduct of the audit.

     o   Review and discuss quarterly reports from the independent auditors on
         (a) all critical accounting policies and practices to be used; (b) all
         alternative treatments of financial information within GAAP that have
         been discussed with management, ramifications of the use of such
         alternative disclosures and treatments, and the treatment preferred by
         the independent auditors; and (c) other material written communications
         between the independent auditors and management, such as any management
         letter and any responses thereto.

     o   Review with management the Company's earnings announcements before
         their release.

     o   Review disclosures made to the Audit Committee by the Company's CEO and
         CFO during their certification process for the Annual Report on Form
         10-K and Quarterly Report on Form 10-Q about any significant
         deficiencies in the design or operation of internal controls or
         material weaknesses therein and any fraud involving management or other
         employees who have a significant role in the Company's internal
         controls.

Monitor the reported status of significant internal controls affecting business
operations

     o   Inquire of the internal auditors, independent auditors, bank examiners,
         and management, as necessary, about reported significant risks and
         exposures and assess the steps management has taken to minimize such
         risks and exposures, including the adequacy of policies, procedures,
         and internal controls.

Monitor the Company's reported compliance with legal and regulatory requirements

     o   Approve, after preparation by counsel and review by internal audit and
         the independent auditors, the report required by the rules of the
         Securities and Exchange Commission to be included in the Company's
         annual proxy statement.

     o   Establish procedures for the receipt, retention and treatment of
         complaints received by the Company regarding accounting, internal
         accounting controls or auditing matters, and the confidential,
         anonymous submission by employees of concerns regarding questionable
         accounting or auditing matters.

     o   Perform such additional duties as shall be required by applicable
         regulations of the SEC and/or the FDIC.

Monitor the qualifications, independence and performance of the Company's
internal and independent auditors

     o   Meet at least annually with the Chief Financial Officer, the senior
         internal audit executive, and the independent auditors in separate
         sessions.

     o   Annually review and assess the adequacy of the Company's Internal Audit
         Policy and recommend to the Board any proposed changes.

     o   Review and approve, as appropriate, the internal audit function's
         responsibilities, budget, compensation, staffing, schedule,
         performance, and replacement of the senior internal audit executive.


                                       28

<PAGE>



     o   Have sole authority to appoint, evaluate the performance of, and
         replace, the independent auditors, which firm shall report directly to
         the Audit Committee.

     o   Be directly responsible for the level of compensation, and oversight of
         the work, of the independent auditors, including resolution of
         disagreements between management and the independent auditors regarding
         financial reporting, for the purpose of preparing or issuing an audit
         report or related work.

     o   Pre-approve all auditing services and permitted non-audit services,
         including the fees and terms thereof, to be performed for the Company
         by the independent auditors.

     o   In its discretion, form and delegate authority to subcommittees
         consisting of one or more members, including the authority to grant
         pre-approvals of audit and permitted non-audit services, provided that
         decisions of such subcommittee to grant pre-approvals shall be
         presented to the full Audit Committee at its next meeting.

     o   Annually review the total fees paid to the independent auditors,
         considering whether the provision of non-audit services impaired or
         impairs the independence of the independent auditors.

     o   Meet with the independent auditors prior to the audit to review the
         planning and staffing of the audit.

     o   Meet with the independent auditors periodically to review the
         qualifications of any members or employees of the firm assigned to
         perform either audit or permitted non- audit services for the Company.

     o   Review with the independent auditors any problems or difficulties the
         auditors may have encountered in the course of the audit work,
         including any restrictions on the scope of activities or access to
         required information.

     o   Receive periodic reports from the independent auditors regarding the
         auditors' independence consistent with Independence Standards Board
         Standard 1; discuss such reports with the auditors; and if so
         determined by the Audit Committee, take appropriate action to oversee
         the independence of the auditors.

     o   Ensure the rotation of the audit partners as required by law.

     o   Obtain assurance from the independent auditors that the required
         response to audit discovery provisions of Section 10A(b) of the
         Exchange Act have not been implicated.

     While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to prepare the Company's financial statements. These are the
responsibilities of management and the independent auditors.

                                       29




<PAGE>









                                [GRAPHIC OMITTED]
                         www.nationalpennbancshares.com















<PAGE>
PROXY



           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

                         NATIONAL PENN BANCSHARES, INC.

     The  undersigned  hereby  appoints Paul W. McEwen,  Dale C. Henne,  and Dr.
Harold C.  Wegman  proxies,  each with power to act  without the others and with
power of  substitution,  and hereby  authorizes  them to represent  and vote, as
designated  on the  other  side,  all the  shares  of  stock  of  National  Penn
Bancshares,  Inc. ("National Penn") standing in the name of the undersigned with
all powers which the undersigned  would possess if present at the Annual Meeting
of  Shareholders  of  National  Penn to be held on April  22,  2003,  and at any
adjournments or postponements thereof.


                          (Continued on the other side)


Address Change/Comments (Mark the corresponding box on the reverse side)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________


<PAGE>
                                                             Please Mark Here___
                                                             for Address Change
                                                             or Comments
                                                             SEE REVERSE SIDE



This proxy when properly  executed  will be voted in the manner  directed by the
undersigned  shareholder.  If no direction is made, this proxy will be voted FOR
the election of the Class I Director nominees listed below.

1.   Election of Class I Directors:

NOMINEES:                           FOR                      WITHHOLD
01 John H. Body              all nominees listed             AUTHORITY
02 J. Ralph Borneman, Jr.    to the left (except           to vote for all
03 Glenn E. Moyer               as marked to               nominees listed
04 Robert E. Rigg              the contrary).               to the left.
                                   ____                        ____


(INSTRUCTION:  To withhold authority to vote for any individual  nominee,  write
that nominee's name in the space provided below.)

________________________________________________________________________________

2.   In their  discretion,  the proxy  holders are  authorized to vote upon such
     other business as may come before the Annual  Meeting and any  adjournments
     or postponements thereof.

     If you wish to supply National Penn with your e-mail  address,  write it in
the following space.
________________________________________________________________________________


PLEASE  SIGN,  DATE  AND  RETURN  PROMPTLY  OR  VOTE  BY  TELEPHONE.  TO VOTE BY
TELEPHONE, FOLLOW THE INSTRUCTIONS ATTACHED BELOW.






Signature__________________________Signature__________________Date______________
Please sign exactly as name appears  hereon.  When shares are held by joint
tenants,  both should sign. When signing as attorney,  executor,  administrator,
trustee or guardian,  please give full title as such. If a  corporation,  please
sign in full  corporate  name by President  or other  authorized  officer.  If a
partnership, please sign in partnership name by authorized person.



                            * FOLD AND DETACH HERE *



                            Vote by Telephone or Mail
                CALL *** TOLL FREE *** ON A TOUCH TONE TELEPHONE
                          24 Hours a Day, 7 Days a Week

    Telephone voting is available until 4 PM Eastern Time on April 22, 2003,
                         the day of the annual meeting.

   Your telephone vote authorizes the named proxies to vote your shares in the
       same manner as if you marked, signed and returned your proxy card.


                Telephone                                Mail
            1-800-435-6710

Use any touch-tone telephone to                       Mark, sign and date
vote your proxy.  Have your proxy                     your proxy card and
card in hand when you call.  You will        OR       return it in the enclosed
be prompted to enter your control                     postage-paid envelope.
number, located in the box below,
and then follow the directions given.


                    If you vote your proxy by telephone, you
                    do NOT need to mail back your proxy card.


                                                             CONTROL NUMBER
                                                           ------------------
                                                           ------------------





<PAGE>


VOTING INSTRUCTION CARD



           THIS VOTING INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE
              BOARD OF DIRECTORS OF NATIONAL PENN BANCSHARES, INC.


     This Voting Instruction Card serves to instruct Investors Trust Company, as
trustee  (the  "Trustee")  under the  National  Penn  Bancshares,  Inc.  Capital
Accumulation  Plan (the "Plan"),  to vote, as designated on the other side,  all
the shares of stock of National Penn Bancshares, Inc. ("National Penn") entitled
to be voted by the  undersigned  participant  under  the terms of such Plan with
respect to the Annual  Meeting of  Shareholders  of National  Penn to be held on
April 22, 2003, and at any adjournments or postponements thereof.

     The undersigned,  in giving such instructions,  will act as named fiduciary
for (a) such shares that have been allocated to the account of the  undersigned,
(b) a  proportionate  share of such  shares  that  have  been  allocated  to the
accounts of other  participants in the Plan as to which the Trustee  receives no
instructions, and (c) a proportionate share of such shares held in the Plan that
have not been allocated to any participants in the Plan.





                          (Continued, and to be marked,
                      dated and signed, on the other side)


<PAGE>



This voting  instruction card when properly executed will be voted as instructed
by the undersigned participant subject to applicable law. If no instructions are
given, the shares allocated to the undersigned  participant will be voted by the
Trustee in accordance with the terms of the Plan and applicable law.


1. Election of Class I Directors:

   ___   FOR all nominees listed below (except as marked to the contrary).

   ___   WITHHOLD AUTHORITY to vote for all nominees listed below.


   NOMINEES: John H. Body, J. Ralph Borneman, Jr., Glenn E. Moyer,
                   Robert E. Rigg.

   (INSTRUCTION: To withhold authority to vote for any individual nominee,
   write that nominee's name in the space provided below.)




2.   In its  discretion,  the  Trustee  is  authorized  to vote upon such  other
     business as may come  before the Annual  Meeting  and any  adjournments  or
     postponements thereof.

Please sign exactly as your name appears herein.



Dated:                 , 2003
        ---------------


_________________________________
         (Signature of Participant)


PLEASE SIGN, DATE AND RETURN THE VOTING  INSTRUCTION CARD PROMPTLY (BY APRIL 14,
2003) TO DEBRA KENDERDINE AT INVESTORS TRUST COMPANY (INTEROFFICE CODE ITC).



</TEXT>
</DOCUMENT>