HNBC Harleysville Natl Corp Pa (MM)

Harleysville National Corporation Ends 2004 With Record Earnings 29 Consecutive Years of Record Earnings and 30 Consecutive Years of Dividend Increases HARLEYSVILLE, Pa., Jan. 18 /PRNewswire-FirstCall/ -- Harleysville National Corporation (NASDAQ:HNBC), today announced fourth quarter 2004 earnings of $10.1 million, a 12.7% increase over fourth quarter 2003 earnings of $9.0 million. Earnings for the year ending December 31, 2004, were $38.6 million, a 9.2% increase over earnings of $35.3 million for the year ending December 31, 2003. The corporation's consolidated total assets were $3.02 billion at December 31, 2004, an increase of 20.5% or $513.6 million above the December 31, 2003, level of $2.51 billion. Of this increase 9.2% or $231.3 million, was attributable to the acquisition of Millennium Bank. For the quarter ending December 31, 2004, diluted earnings per share of $.37 increased 5.7% over the $.35 earned during the fourth quarter of 2003, and basic earnings per share at $.38 increased 8.6% over $.35 earned in the fourth quarter of 2003. For the year ended December 31, 2004, diluted earnings per share of $1.44 were 5.1% higher than the $1.37 earned during 2003, and basic earnings per share of $1.49 for 2004 were up 5.7% from $1.41 in 2003. The financial results for 2004 include the impact of operations from the acquisition of Millennium Bank effective April 30, 2004, and the related issuance of 946,000 (993,000 restated for stock dividend) common shares, as well as the issuance of 1,295,000 common shares for a 5% stock dividend paid on September 15, 2004. All share and per share information has been restated to reflect this stock dividend. Walter E. Daller, Jr., Chairman and Chief Executive Officer said, "We are extremely pleased to once again report record earnings for Harleysville National Corporation. This is the 29th consecutive year we have been able to do so, and the 30th consecutive year that we have reported record dividends to our shareholders. We have done this while growing our assets to over $3 billion - another milestone for our company - and maintaining pristine credit quality in our loan portfolios." Net interest income on a fully tax-equivalent basis in the fourth quarter of 2004 increased $307,000 or 1.3% over the same period in 2003 and increased $3.8 million or 4.3% for the year ending December 31, 2004, over the prior year. This increase was primarily the result of higher earning asset volumes partially offset by lower loan rates. The net interest margin for the fourth quarter of 2004 was 3.34%, compared to 3.82% for the fourth quarter of 2003, the decline being primarily due to lower loan yields and higher funding costs, particularly increased volumes in higher-rate money market accounts. Average earning assets increased $367.6 million or 15.3% during the fourth quarter of 2004 versus the comparable period in 2003, while average loans increased $404.3 million or 29.1% during the same period. Loans totaling $157.1 million were acquired in the acquisition of Millennium Bank which contributed to the increase in average loans. Nonperforming assets, including nonaccrual loans, net assets in foreclosure and loans 90 days or more past due were .20% of total assets at December 31, 2004, compared to .22% at December 31, 2003. The ratio of the allowance for loan losses to nonperforming loans (nonaccruing loans and loans 90 days or more past due) was 317.7% at December 31, 2004, compared to 371.7% at December 31, 2003. The lower provision for loan losses for the twelve- month period ending December 31, 2004, compared to the same period in 2003, is reflective of improved loan quality during the early part of the year and management's ongoing analysis of the loan portfolio. The increase in the provision for the fourth quarter of 2004 compared to the fourth quarter of 2003 was primarily due to loan growth and an increase in nonperforming loans of $1.3 million. Core deposits increased 20.6% or $269.2 million, to $1.58 billion at December 31, 2004, from $1.31 billion at December 31, 2003. Of this increase, 4.6% or $59.8 million was due to the acquisition of Millennium Bank. Total deposits increased $233.5 million for the same period, of which $151.2 million was attributable to the acquisition of Millennium Bank. Average borrowings increased $122.7 million or 41.4%, primarily to support loan growth and the Millennium Bank acquisition. Total noninterest income of $9.4 million for the fourth quarter of 2004 reflects an increase of $4.2 million from the comparable period in 2003, primarily due to increases of $1.9 million in the gain on sales of investment securities, $982,000 in trust and investment advisory fees, $586,000 in life insurance income and $785,000 in gains related to the auto leasing portfolio, partially offset by a $440,000 loss on the sale of equipment lease receivables. For the year ended December 31, 2004, total noninterest income of $28.2 million increased $520,000, or 1.9% from $27.6 million for 2003. This was mainly due to an increase of $2.7 million in trust and investment advisory fees and an increase of $1.4 million in the gains related to the auto leasing portfolio, partially offset by a decrease of $2.9 million in the gain on sales of investment securities and a decrease of $868,000 in gains related to the sale of residential mortgages, due to lower origination volume. Noninterest expense of $16.7 million increased $2.8 million or 20.0% from $13.9 million in the fourth quarter of 2003. The increase in noninterest expense was due to a $2.7 million increase in salaries and benefits, primarily related to the acquisition of Millennium Bank, higher pension and healthcare costs and an increase in bonus expense related to the corporation's improved financial performance. In addition, deferred compensation expense for directors and employees was $874,000 higher during the fourth quarter of 2004 over the comparable period in 2003 while deferred loan origination expenses increased $1.3 million. Deferred compensation expense includes a one-time after tax expense amounting to $819,000 associated with the retirement announcement of the Chief Executive Officer under the terms of his employment agreement. For the year ended December 31, 2004, noninterest expense remained level at $59.6 million compared to 2003. Salary and employee benefit expense increased $5.9 million in 2004 primarily due to the Millennium acquisition and higher pension and medical costs. Occupancy expense increased $787,000 during 2004 mostly due to the Millennium acquisition and a new branch opening. Partially offsetting these variances were Federal Home Loan Bank borrowings prepayment fees which decreased $2.6 million and other expenses which decreased $4.1 million in 2004. The decrease in other expenses was primarily due to lower off-lease vehicle residual reserve of $2.6 million, higher loan origination expense deferrals amounting to $3.8 million, partially offset by an increase in deferred compensation expense for directors and employees of $717,000. Harleysville National Corporation, with assets of $3.02 billion, is the holding company for Harleysville National Bank (HNB). Investment Management and Trust Services are provided through Millennium Wealth Management & Private Banking, a division of HNB, with assets under management exceeding $1.5 billion. Cumberland Advisors, Inc., a registered investment advisor specializing in fixed-income money management and equities, using exchange- traded funds, is also a part of Millennium Wealth Management & Private Banking. Harleysville National Corporation stock is traded under the symbol "HNBC" and is commonly quoted under Nasdaq National Market Issues. For more information, visit the HNC Web site at http://www.hncbank.com/. This press release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results and trends could differ materially from those set forth in such statements due to various factors. Such factors include the possibility that increased demand or prices for the Corporation's financial services and products may not occur, changing economic and competitive conditions, technological developments, and other risks and uncertainties, including those detailed in the Corporation's filings with the Securities and Exchange Commission. Harleysville National Corporation Consolidated Selected Financial Data (Dollars in thousands, except per share data) December 31, 2004 (unaudited) For the period: Three Months Ended Dec. 31, Sept. 30, June 30, 2004 2004 2004 Interest Income $34,196 $33,366 $30,994 Interest Expense 12,735 11,286 9,674 Net Interest Income 21,461 22,080 21,320 Provision for Loan Losses 1,070 499 497 Net Interest Income after Provision for Loan Losses 20,391 21,581 20,823 Service Charges 1,953 2,000 1,929 Gains on Sales of Investment Securities, Net 2,036 112 641 Trust, Investment Services and Advisory Income 1,999 1,878 1,588 Bank-Owned Life Insurance Income 627 647 521 Income on Life Insurance 586 - - Other Income 2,194 2,056 1,608 Total Noninterest Income 9,395 6,693 6,287 Salaries, Wages and Employee Benefits 10,215 9,754 8,834 Occupancy 1,218 1,135 1,120 Furniture and Equipment 1,454 1,414 1,510 Other Expenses 3,787 2,174 3,129 Total Noninterest Expense 16,674 14,477 14,593 Income Before Income Taxes 13,112 13,797 12,517 Income Tax Expense 2,999 3,632 3,135 Net Income $10,113 $10,165 $9,382 Per Common Share Data: Weighted Average Common Shares - Basic 26,182,888 26,240,616 25,861,549 Weighted Average Common Shares - Diluted 27,057,756 27,055,603 26,722,932 Net Income Per Share - Basic $0.38 $0.39 $0.37 Net Income Per Share - Diluted $0.37 $0.38 $0.35 Cash Dividend Per Share $0.22 $0.18 $0.16 Book Value $10.30 $10.19 $9.58 Market Value $26.60 $24.51 $24.38 For the period: Three Months Ended Mar. 31, Dec. 31, 2004 2003 Interest Income $29,173 $30,287 Interest Expense 8,943 9,393 Net Interest Income 20,230 20,894 Provision for Loan Losses 489 641 Net Interest Income after Provision for Loan Losses 19,741 20,253 Service Charges 1,925 2,081 Gains on Sales of Investment Securities, Net 900 164 Trust, Investment Services and Advisory Income 1,121 1,017 Bank-Owned Life Insurance Income 611 680 Income on Life Insurance - - Other Income 1,226 1,274 Total Noninterest Income 5,783 5,216 Salaries, Wages and Employee Benefits 8,277 7,518 Occupancy 1,084 924 Furniture and Equipment 1,258 1,637 Other Expenses 3,198 3,812 Total Noninterest Expense 13,817 13,891 Income Before Income Taxes 11,707 11,578 Income Tax Expense 2,800 2,606 Net Income $8,907 $8,972 Per Common Share Data: Weighted Average Common Shares - Basic 25,128,032 25,029,504 Weighted Average Common Shares - Diluted 26,033,205 26,007,148 Net Income Per Share - Basic $0.35 $0.35 Net Income Per Share - Diluted $0.34 $0.35 Cash Dividend Per Share $0.16 $0.18 Book Value $9.45 $9.07 Market Value $26.50 $28.67 For the period: Twelve Months Ended December 31, 2004 2003 Interest Income $127,729 $119,200 Interest Expense 42,638 40,079 Net Interest Income 85,091 79,121 Provision for Loan Losses 2,555 3,200 Net Interest Income after Provision for Loan Losses 82,536 75,921 Service Charges 7,807 7,855 Gains on Sales of Investment Securities, Net 3,689 6,613 Trust, Investment Services and Advisory Income 6,586 3,837 Bank-Owned Life Insurance Income 2,406 2,615 Income on Life Insurance 586 1,119 Other Income 7,084 5,599 Total Noninterest Income 28,158 27,638 Salaries, Wages and Employee Benefits 37,080 31,173 Occupancy 4,557 3,770 Furniture and Equipment 5,636 5,843 Prepayment Fee - 2,594 Other Expenses 12,288 16,249 Total Noninterest Expense 59,561 59,629 Income Before Income Taxes 51,133 43,930 Income Tax Expense 12,566 8,597 Net Income $38,567 $35,333 Per Common Share Data: Weighted Average Common Shares - Basic 25,855,230 24,995,054 Weighted Average Common Shares - Diluted 26,726,180 25,855,266 Net Income Per Share - Basic $1.49 $1.41 Net Income Per Share - Diluted $1.44 $1.37 Cash Dividend Per Share $0.72 $0.62 2004 2004 2004 Asset Quality Data: 4Q 3Q 2Q Nonaccrual Loans $4,797 $3,350 $3,245 90 + Days Past Due Loans 1,012 948 919 Nonperforming Loans 5,809 4,298 4,164 Net Assets in Foreclosure 370 347 389 Nonperforming Assets $6,179 $4,645 $4,553 Loan Loss Reserve $18,455 $17,795 $17,940 Loan Loss Reserve / Loans 1.00% 1.00% 1.07% Loan Loss Reserve / Nonperforming Loans 317.7% 414.0% 430.8% Nonperforming Assets / Total Assets 0.20% 0.16% 0.16% Net Loan Charge-offs $410 $644 $698 Net Loan Charge-offs (annualized) / Average Loans 0.09% 0.15% 0.18% 2004 2003 Asset Quality Data: 1Q 4Q Nonaccrual Loans $3,645 $3,343 90 + Days Past Due Loans 1,178 1,164 Nonperforming Loans 4,823 4,507 Net Assets in Foreclosure 423 935 Nonperforming Assets $5,246 $5,442 Loan Loss Reserve $16,464 $16,753 Loan Loss Reserve / Loans 1.15% 1.19% Loan Loss Reserve / Nonperforming Loans 341.3% 371.7% Nonperforming Assets / Total Assets 0.21% 0.22% Net Loan Charge-offs $778 $742 Net Loan Charge-offs (annualized) / Average Loans 0.22% 0.21% 2004 2004 2004 Selected Ratios (annualized): 4Q 3Q 2Q Return on Average Assets 1.36% 1.40% 1.37% Return on Average Shareholders' Equity 15.00% 15.61% 15.06% Yield on Earning Assets (FTE) 5.16% 5.18% 5.12% Cost of Interest Bearing Funds 2.19% 2.01% 1.82% Net Interest Margin (FTE) 3.34% 3.51% 3.62% Leverage Ratio 8.91% 8.99% 9.28% 2004 2003 Selected Ratios (annualized): 1Q 4Q Return on Average Assets 1.43% 1.41% Return on Average Shareholders' Equity 15.33% 16.22% Yield on Earning Assets (FTE) 5.25% 5.38% Cost of Interest Bearing Funds 1.86% 1.88% Net Interest Margin (FTE) 3.73% 3.82% Leverage Ratio 10.04% 8.77% 2004 2003 Selected Ratios (annualized): Year-to-date Year-to-date Return on Average Assets 1.39% 1.43% Return on Average Shareholders' Equity 15.31% 16.29% Yield on Earning Assets (FTE) 5.18% 5.52% Cost of Interest Bearing Funds 1.98% 2.07% Net Interest Margin (FTE) 3.55% 3.80% Balance Sheet (Period End): 2004 2004 2004 4Q 3Q 2Q Assets $3,024,515 $2,976,173 $2,865,949 Earning Assets 2,845,656 2,791,891 2,678,772 Investment Securities 943,563 975,750 957,398 Loans, Net of Unearned Fees 1,845,802 1,774,189 1,683,528 Other Earning Assets 56,291 41,952 37,846 Interest-Bearing Liabilities 2,367,229 2,332,102 2,218,687 Total Deposits 2,212,563 2,209,753 2,093,101 Noninterest-Bearing Deposits 333,516 325,132 345,191 Interest-Bearing Checking 305,584 320,276 258,739 Money Market 713,039 661,480 561,823 Savings 223,039 229,992 245,768 Time, under $100,000 508,117 527,971 523,587 Time, $100,000 or greater 129,268 144,902 157,993 Total Borrowed Funds 488,182 447,481 470,777 Federal Home Loan Bank 317,750 257,750 241,750 Other Borrowings 170,432 189,731 229,027 Shareholders' Equity 270,532 266,966 251,877 Balance Sheet (Period End): 2004 2003 1Q 4Q Assets $2,542,328 $2,510,939 Earning Assets 2,406,068 2,371,816 Investment Securities 948,749 924,874 Loans, Net of Unearned Fees 1,428,145 1,408,391 Other Earning Assets 29,174 38,551 Interest-Bearing Liabilities 1,930,052 1,940,016 Total Deposits 1,968,521 1,979,081 Noninterest-Bearing Deposits 317,566 294,121 Interest-Bearing Checking 268,110 283,607 Money Market 521,085 506,516 Savings 225,981 221,778 Time, under $100,000 481,400 491,740 Time, $100,000 or greater 154,379 181,319 Total Borrowed Funds 279,097 255,056 Federal Home Loan Bank 172,750 172,750 Other Borrowings 106,347 82,306 Shareholders' Equity 237,964 227,053 Balance Sheet (Average): 2004 2004 2004 4Q 3Q 2Q Assets $2,957,559 $2,878,769 $2,759,563 Earning Assets 2,776,599 2,695,579 2,593,105 Investment Securities 941,704 932,330 983,420 Loans, Net of Unearned Fees 1,793,935 1,717,245 1,572,830 Other Earning Assets 40,960 46,004 36,855 Interest-Bearing Liabilities 2,308,446 2,237,681 2,136,010 Total Deposits 2,213,829 2,154,443 2,048,279 Noninterest-Bearing Deposits 324,466 329,559 316,715 Interest-Bearing Checking 317,328 285,735 274,978 Money Market 692,703 620,420 537,614 Savings 226,251 237,463 239,971 Time, under $100,000 517,167 525,701 508,275 Time, $100,000 or greater 135,914 155,565 170,726 Total Borrowed Funds 419,083 412,797 404,446 Federal Home Loan Bank 263,566 255,837 187,608 Other Borrowings 155,517 156,960 216,838 Shareholders' Equity 268,211 259,035 250,504 Balance Sheet (Average): 2004 2003 1Q 4Q Assets $2,497,085 $2,543,616 Earning Assets 2,365,497 2,408,967 Investment Securities 910,314 983,318 Loans, Net of Unearned Fees 1,414,802 1,389,595 Other Earning Assets 40,381 36,054 Interest-Bearing Liabilities 1,931,950 1,993,653 Total Deposits 1,961,481 1,976,616 Noninterest-Bearing Deposits 280,809 279,307 Interest-Bearing Checking 280,142 280,076 Money Market 517,846 501,127 Savings 222,807 221,116 Time, under $100,000 487,379 497,281 Time, $100,000 or greater 172,498 197,709 Total Borrowed Funds 251,278 296,344 Federal Home Loan Bank 172,750 172,750 Other Borrowings 78,528 123,594 Shareholders' Equity 232,386 221,236 DATASOURCE: Harleysville National Corporation CONTACT: Walter E. Daller Jr., Chairman and CEO, +1-215-256-8851 ext. 2300, or Gregg J. Wagner, President, +1-215-256-8851 ext. 2391, both of Harleysville National Corporation Web site: http://www.hncbank.com/

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