HNBC Harleysville Natl Corp Pa (MM)

HARLEYSVILLE, Pa., Oct. 15 /PRNewswire-FirstCall/ -- Harleysville National Corporation (NASDAQ:HNBC) today reported net income of $6.6 million, or $.21 per diluted share, for the third quarter of 2008, compared to $7.2 million or $.25 per diluted share for the third quarter of 2007. For the nine months ended September 30, 2008, net income was $21.3 million or $.67 per diluted share compared to $20.4 million or $.70 per diluted share during the comparable period in 2007. Net income for the third quarter and year to date 2008 included pre-tax merger costs of $974,000, or $.02 per diluted share related to the acquisition of Willow Financial Bancorp, Inc. expected to close during the fourth quarter. These charges include system conversion, integration consulting and severance expenses associated with the acquisition. Harleysville expects to incur additional merger-related expenses in the fourth quarter of 2008. Paul D. Geraghty, President and CEO, said, "Despite the difficult economic environment and the turmoil in the financial markets, Harleysville's third quarter performance was stable. Earnings, excluding merger costs, were level on a sequential basis. Year over year loan and deposit growth was largely driven by a combination of organic loan growth of $111.7 million and deposit growth of $87.2 million along with the impact of the East Penn Financial acquisition, which closed in November 2007." Mr. Geraghty continued, "While many banks and financial institutions are struggling to survive today, Harleysville is open for business for reasonable transactions with creditworthy relationships in our market territory. We remain well-capitalized with good liquidity. We continue to place significant effort on credit management and have increased resources to contend with the economy." Mr. Geraghty continued, "The acquisition of Willow Financial Bank continues to move forward, and earlier this month we received needed approvals from the Office of the Comptroller of the Currency. The Office of Thrift Supervision has also not objected to the transaction, and we expect to receive approvals from the Federal Reserve Board and the Pennsylvania Department of Banking by the end of October. Once those approvals are in place we will move quickly to close the transaction, and expect to accomplish this by early December 2008." Mr. Geraghty concluded, "We continue to move toward our strategic goals, however, there is no single initiative that will drive us there overnight. With our continued focus on our three-fold strategy to drive improvement through expansion, empowerment, and effectiveness, we have derived multiple benefits. The acquisition of Willow Financial is a key milestone in that regard. With many of our larger competitors in Southeastern Pennsylvania experiencing dramatic changes, we believe that the market opportunity for a strong locally-headquartered community bank with the scale, market presence, and sophisticated product set of the combined Harleysville National/Willow Financial Bank will be significant." The following is an overview of the key financial highlights for the quarter: -- Total assets were $3.9 billion at September 30, 2008, an increase of 16.8% from $3.4 billion at September 30, 2007. -- Loans were $2.5 billion, an increase of 21.1% from $2.1 billion at September 30, 2007. Deposits were $3.02 billion, up 18.6% from $2.54 billion last year. -- Net interest income on a tax equivalent basis in the third quarter of 2008 increased $4.8 million or 21.6% from the same period in 2007 mainly as a result of a decrease in customer deposit costs and the East Penn acquisition as well as organic loan growth. Third quarter net interest margin was 3.02%, increasing 14 basis points year over year and decreasing 4 basis points sequentially. -- Nonperforming assets were $38.8 million at September 30, 2008. Nonperforming assets as a percentage of total assets were 0.98% at September 30, 2008, compared to 1.01% at June 30, 2008 and 0.46% at September 30, 2007. Net charge-offs were $2.1 million, compared to $1.5 million in the third quarter of 2007. The allowance for credit losses increased to $31.7 million at quarter end, compared to $31.2 million at June 30, 2008, and $22.6 million at September 30, 2007. Provision for loan losses increased to $2.6 million from $2.5 million during the third quarter of 2007. -- Noninterest income was $10.4 million during the quarter, an increase of 7.0% from $9.8 million in last year's second quarter, driven by growth in service charges on deposits of $964,000 partially offset by a decrease in wealth management income of $746,000. -- Noninterest expense was $25.2 million, an increase of 33.4% from $18.9 million in the third quarter of 2007, driven by the acquisition of East Penn, charges related to the upcoming merger with Willow Financial Bancorp as well as branch expansion. Occupancy expenses increased due to the addition of the East Penn branches as well as rent expense on the bank properties in the sale- leaseback transaction completed in the fourth quarter of 2007. Other expenses increased mostly due to additional professional and consulting fees, FDIC insurance assessments and the identifiable intangible asset amortization related to the East Penn acquisition. Harleysville National Corporation, with assets of $3.9 billion, is the holding company for Harleysville National Bank (HNB) and its division, East Penn Bank (EPB). Investment Management and Trust Services are provided through Millennium Wealth Management and Cornerstone, divisions of HNB, with assets under management of $2.7 billion. Harleysville National Corporation stock is traded under the symbol "HNBC" and is commonly quoted on the NASDAQ Global Select Market(R). For more information, visit the Harleysville National Corporation website at http://www.hncbank.com/. The following disclosure is made in accordance with Rule 165 of the Securities and Exchange Commission. Harleysville National Corporation has filed a registration statement on Form S-4 in connection with the merger transaction, and Harleysville National Corporation and Willow Financial Bancorp mailed a joint proxy statement/prospectus to their respective shareholders in connection with the transaction. Shareholders and investors are urged to read the joint proxy statement/prospectus, because it contains important information about Harleysville National Corporation, Willow Financial Bancorp and the transaction. You may obtain a free copy of the proxy statement/prospectus as well as other filings containing information about Harleysville National Corporation, at the SEC's web site at http://www.sec.gov/. A free copy of the proxy statement/prospectus, and the filings with the SEC that are incorporated by reference in the proxy statement/prospectus, may also be obtained from Harleysville National Corporation by directing the request to: George Rapp, Executive Vice President and CFO, Harleysville National Corporation, 483 Main Street, Harleysville, Pennsylvania, 19438, telephone 215-513-2307. 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 (1) (Dollars in thousands, except per share data) September 30, 2008 (unaudited) For the period: Three Months Ended Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, 2008 2008 2008 2007 2007 Interest Income $49,942 $49,353 $52,416 $51,133 $49,022 Interest Expense 24,645 24,164 28,209 29,555 28,158 Net Interest Income 25,297 25,189 24,207 21,578 20,864 Provision for Loan Losses 2,580 3,107 1,960 4,475 2,525 Net Interest Income after Provision for Loan Losses 22,717 22,082 22,247 17,103 18,339 Service Charges 3,424 3,312 3,113 2,870 2,460 Gains/(Losses) on Sales of Investment Securities, Net - 97 128 657 (58) Gain on Sale- Leaseback of Bank Properties - - - 2,788 - Wealth Management Income 3,779 4,567 4,277 5,019 4,525 Bank-Owned Life Insurance Income 706 657 684 656 648 Other Income 2,536 2,963 2,630 2,181 2,190 Total Noninterest Income 10,445 11,596 10,832 14,171 9,765 Salaries, Wages and Employee Benefits 13,539 14,201 13,859 13,050 11,735 Occupancy 2,412 2,441 2,585 2,043 1,731 Furniture and Equipment 1,074 1,083 1,094 1,051 897 Merger Charges 974 - - 339 25 Other Expenses 7,154 6,733 6,180 7,096 4,468 Total Noninterest Expense 25,153 24,458 23,718 23,579 18,856 Income Before Income Taxes 8,009 9,220 9,361 7,695 9,248 Income Tax Expense 1,370 1,893 2,057 1,514 2,047 Net Income $6,639 $7,327 $7,304 $6,181 $7,201 Per Common Share Data: Weighted Average Common Shares - Basic 31,385,257 31,359,011 31,346,833 30,075,054 28,881,006 Weighted Average Common Shares - Diluted 31,551,026 31,521,608 31,522,736 30,278,743 29,107,274 Net Income Per Share - Basic $0.21 $0.24 $0.23 $0.20 $0.25 Net Income Per Share - Diluted $0.21 $0.23 $0.23 $0.20 $0.25 Cash Dividend Per Share $0.20 $0.20 $0.20 $0.20 $0.20 Book Value $9.90 $10.45 $10.95 $10.83 $10.19 Market Value $16.98 $11.16 $14.42 $14.57 $15.89 For the period: Nine Months Ended September 30, 2008 2007 Interest Income $151,711 $143,428 Interest Expense 77,018 82,572 Net Interest Income 74,693 60,856 Provision for Loan Losses 7,647 6,075 Net Interest Income after Provision for Loan Losses 67,046 54,781 Service Charges 9,849 6,820 Gains on Sales of Investment Securities, Net 225 475 Wealth Management Income 12,623 13,623 Bank-Owned Life Insurance Income 2,047 1,833 Other Income 8,129 6,416 Total Noninterest Income 32,873 29,167 Salaries, Wages and Employee Benefits 41,599 35,782 Occupancy 7,438 4,965 Furniture and Equipment 3,251 2,890 Merger Charges 974 84 Other Expenses 20,067 14,055 Total Noninterest Expense 73,329 57,776 Income Before Income Taxes 26,590 26,172 Income Tax Expense 5,320 5,758 Net Income $21,270 $20,414 Nine Months Ended September 30, Per Common Share Data: 2008 2007 Weighted Average Common Shares - Basic 31,363,779 28,930,073 Weighted Average Common Shares - Diluted 31,531,942 29,183,811 Net Income Per Share - Basic $0.68 $0.71 Net Income Per Share - Diluted $0.67 $0.70 Cash Dividend Per Share $0.60 $0.60 2008 2008 2008 2007 2007 Asset Quality Data: 3Q 2Q 1Q 4Q 3Q Nonaccrual Loans $36,278 $36,284 $23,819 $21,091 $14,507 90 + Days Past Due Loans 1,275 1,676 1,702 857 1,119 Nonperforming Loans 37,553 37,960 25,521 21,948 15,626 Net Assets in Foreclosure 1,221 1,189 1,536 28 28 Nonperforming Assets $38,774 $39,149 $27,057 $21,976 $15,654 Loan Loss Reserve $31,668 $31,174 $28,490 $27,328 $22,622 Loan Loss Reserve / Loans 1.25% 1.25% 1.15% 1.11% 1.08% Loan Loss Reserve / Nonperforming Loans 84.3% 82.1% 111.6% 124.5% 144.8% Nonperforming Assets / Total Assets 0.98% 1.01% 0.69% 0.56% 0.46% Net Loan Charge-offs $2,086 $423 $798 $3,019 $1,549 Net Loan Charge-offs (annualized) / Average Loans 0.33% 0.07% 0.13% 0.53% 0.29% 2008 2008 2008 2007 2007 Selected Ratios (annualized): 3Q 2Q 1Q 4Q 3Q Return on Average Assets 0.68% 0.76% 0.75% 0.68% 0.86% Return on Average Shareholders' Equity 8.20% 8.79% 8.55% 7.74% 9.86% Yield on Earning Assets (FTE) 5.76% 5.80% 6.07% 6.28% 6.50% Cost of Interest Bearing Funds 3.10% 3.12% 3.60% 4.02% 4.19% Net Interest Margin (FTE) 3.02% 3.06% 2.91% 2.76% 2.88% Leverage Ratio 8.13% 8.18% 8.07% 8.72% 9.98% 2008 2007 Selected Ratios (annualized): Year-to-date Year-to-date Return on Average Assets 0.73% 0.83% Return on Average Shareholders' Equity 8.52% 9.34% Yield on Earning Assets (FTE) 5.88% 6.43% Cost of Interest Bearing Funds 3.27% 4.17% Net Interest Margin (FTE) 3.00% 2.84% Balance Sheet (Period End): 2008 2008 2008 2007 2007 3Q 2Q 1Q 4Q 3Q Assets $3,949,730 $3,882,232 $3,894,019 $3,903,001 $3,380,519 Earning Assets 3,626,352 3,544,587 3,569,040 3,579,211 3,143,019 Investment Securities 983,349 1,014,134 1,048,915 982,915 929,103 Loans 2,539,037 2,501,968 2,481,930 2,460,823 2,095,800 Other Earning Assets 103,966 28,485 38,195 135,473 118,116 Interest- Bearing Liabilities 3,221,921 3,114,993 3,129,316 3,135,085 2,737,079 Total Deposits 3,018,276 2,865,148 2,987,907 2,985,058 2,544,340 Noninterest- Bearing Deposits 343,308 362,750 355,027 358,258 309,489 Interest- Bearing Checking 430,607 422,850 399,178 482,104 494,653 Money Market 727,693 756,588 854,831 796,325 727,486 Savings 182,342 183,226 171,337 145,681 106,890 Time Deposits 1,334,326 1,139,734 1,207,534 1,202,690 905,822 Total Borrowed Funds 546,953 612,595 496,436 508,285 502,228 Federal Home Loan Bank 213,755 223,764 208,774 216,785 204,750 Other Borrowings 333,198 388,831 287,662 291,500 297,478 Shareholders' Equity 310,994 327,910 343,282 339,310 294,394 Balance Sheet (Average): 2008 2008 2008 2007 2007 3Q 2Q 1Q 4Q 3Q Assets $3,899,593 $3,856,900 $3,890,959 $3,589,139 $3,309,516 Earning Assets 3,580,454 3,552,208 3,590,965 3,326,663 3,081,953 Investment Securities 1,002,901 1,029,502 1,043,566 962,918 933,672 Loans 2,522,034 2,491,894 2,463,242 2,278,188 2,090,440 Other Earning Assets 55,519 30,812 84,157 85,557 57,841 Interest- Bearing Liabilities 3,158,464 3,114,520 3,151,996 2,914,269 2,666,889 Total Deposits 2,923,815 2,900,523 2,977,052 2,718,625 2,477,260 Noninterest- Bearing Deposits 348,183 340,802 324,120 313,556 312,123 Interest- Bearing Checking 428,078 415,398 436,828 480,003 509,168 Money Market 739,931 804,890 822,411 768,596 740,678 Savings 182,403 176,917 156,211 122,442 113,957 Time Deposits 1,225,220 1,162,516 1,237,482 1,034,028 801,334 Total Borrowed Funds 582,832 554,799 499,064 509,200 501,752 Federal Home Loan Bank 217,717 213,860 211,607 211,043 191,141 Other Borrowings 365,115 340,939 287,457 298,157 310,611 Shareholders' Equity 322,077 335,311 343,400 316,778 289,828 Average Balance Sheets and Interest Rates - Fully-Taxable Equivalent Basis Three Months Ended Three Months Ended September 30, 2008 September 30, 2007 Average Average Average Average Balance Interest Rate Balance Interest Rate Assets Earning assets: Investment securities Taxable investments $701,626 $9,518 5.40% $669,051 $8,769 5.20% Non-taxable investments (2) 301,275 4,554 6.01% 264,621 4,004 6.00% Total investment securities 1,002,901 14,072 5.58% 933,672 12,773 5.43% Federal funds sold and deposits in banks 55,519 232 1.66% 57,841 661 4.53% Loans(2) (3) 2,522,034 37,541 5.91% 2,090,440 37,094 7.04% Total earning assets 3,580,454 51,845 5.76% 3,081,953 50,528 6.50% Noninterest- earning assets 319,139 227,563 Total assets $3,899,593 $3,309,516 Liabilities and Shareholders' Equity Interest-bearing liabilities: Interest-bearing deposits: Savings and money market $1,350,412 5,780 1.70% $1,363,803 12,276 3.57% Time 1,225,220 12,976 4.21% 801,334 9,652 4.78% Total interest- bearing deposits 2,575,632 18,756 2.90% 2,165,137 21,928 4.02% Borrowed funds 582,832 5,889 4.02% 501,752 6,230 4.93% Total interest- bearing liabilities 3,158,464 24,6453 .10% 2,666,889 28,158 4.19% Noninterest- bearing liabilities: Demand deposits 348,183 312,123 Other liabilities 70,869 40,676 Total noninterest- bearing liabilities 419,052 352,799 Total liabilities 3,577,516 3,019,688 Shareholders' equity 322,077 289,828 Total liabilities and shareholders' equity $3,899,593 $3,309,516 Net interest spread 2.66% 2.31% Effect of noninterest- bearing sources 0.36% 0.57% Net interest income/margin on earning assets $27,200 3.02% $22,370 2.88% Less tax equivalent adjustment 1,903 1,506 Net interest income $25,297 $20,864 Nine Months Ended Nine Months Ended September 30, 2008 September 30, 2007 Average Average Average Average Balance Interest Rate Balance Interest Rate Assets Earning assets: Investment securities Taxable investments $731,870 $28,894 5.27% $676,787 $25,821 5.10% Non-taxable investments (2) 293,371 13,290 6.05% 261,458 11,849 6.06% Total investment securities 1,025,241 42,184 5.50% 938,245 37,670 5.37% Federal funds sold and deposits in banks 56,825 1,045 2.46% 67,548 2,553 5.05% Loans(2) (3) 2,492,498 114,013 6.11% 2,070,931 107,708 6.95% Total earning assets 3,574,564 157,242 5.88% 3,076,724 147,931 6.43% Noninterest- earning assets 307,982 221,173 Total assets $3,882,546 $3,297,897 Liabilities and Shareholders' Equity Interest-bearing liabilities: Interest-bearing deposits: Savings and money market $1,387,554 19,536 1.88% $1,385,133 37,212 3.59% Time 1,208,467 40,414 4.47% 806,638 28,670 4.75% Total interest- bearing deposits 2,596,021 59,950 3.08% 2,191,771 65,882 4.02% Borrowed funds 545,701 17,068 4.18% 458,523 16,690 4.87% Total interest- bearing liabilities 3,141,722 77,018 3.27% 2,650,294 82,572 4.17% Noninterest- bearing liabilities: Demand deposits 337,739 311,491 Other liabilities 69,531 43,915 Total noninterest- bearing liabilities 407,270 355,406 Total liabilities 3,548,992 3,005,700 Shareholders' equity 333,554 292,197 Total liabilities and shareholders' equity $3,882,546 $3,297,897 Net interest spread 2.61% 2.26% Effect of noninterest- bearing sources 0.39% 0.58% Net interest income/margin on earning assets $80,224 3.00% $65,359 2.84% Less tax equivalent adjustment 5,531 4,503 Net interest income $74,693 $60,856 (1) Certain prior period amounts have been reclassified to conform to current period presentation. (2) The interest earned on nontaxable investment securities and loans is shown on a tax equivalent basis (tax rate of 35%). (3) Nonaccrual loans have been included in the appropriate average loan balance category, but interest on nonaccrual loans has not been included for purposes of determining interest income. DATASOURCE: Harleysville National Corporation CONTACT: Paul D. Geraghty, President and CEO of Harleysville National Corporation, +1-215-513-2391 Web site: http://www.harleysvillebank.com/

Copyright