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.
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