EX-99 3 r8k4a.htm

FOR IMMEDIATE RELEASE

CONTACT: Walter E. Daller Jr., Chairman, President and CEO

PHONE: 215-256-8851 ext. 2300

 

RECORD QUARTERLY EARNINGS AT

HARLEYSVILLE NATIONAL CORPORATION

HARLEYSVILLE, PA (October 9, 2003) - Harleysville National Corporation (HNC) (Nasdaq:HNBC), announced record third quarter 2003 diluted earnings per share of $.36, a 5.9% increase over the $.34 earned during the third quarter of 2002. Basic earnings per share at $.37 were up 5.7% from $.35 in the third quarter of 2002. For the first nine months of 2003, diluted earnings per share of $1.07 were up 7.0% from $1.00 in the comparable period last year. Basic earnings per share of $1.11 for the first nine months of 2003 were 7.8% higher than the $1.03 year-to-date September 30, 2002.

Third quarter 2003 net income of $8,795,000 represented a 4.5% increase over third quarter 2002 net income of $8,413,000. Net income for the first nine months of 2003 was $26,361,000 a 7.1% increase over the $24,604,000 for the comparable period in 2002. This continues the company's 28 consecutive years of record earnings.

Walter E. Daller, Jr., Chairman, President and CEO of Harleysville National Corp noted, "We view this solid earnings report as a real accomplishment, considering the difficult economy in which we have been operating for some time now. In addition to the record earnings this quarter, we were pleased to have paid a 25% common stock dividend and increased our regular cash dividend by 17%, as well."

Net interest income on a fully tax-equivalent basis in the third quarter of 2003 decreased $276,000 or 1.3% over the same period in 2002. This slight decrease in tax-equivalent net interest income was the result of a lower net interest margin in the third quarter of 2003, compared to the third quarter of 2002. This was partially offset by the interest income generated from the increase in earning assets. The net interest margins for the third quarters of 2003 and 2002 were 3.71% and 3.90%, respectively.

"We continue to realize strong core deposit growth and our asset quality remains very strong. While the decline in the net interest margin impacted earnings during the third quarter of 2003, we are well positioned to benefit from rising interest rates once the economy begins to improve," said Daller.

Total loans increased 2.5% from September 30, 2002 to September 30, 2003. This reversed the decline in loans experienced during the second quarter of 2003. The growth in loans during 2003 is being impacted by declines in the indirect vehicle and auto leasing portfolios. Net of these two portfolios, total loans grew 9.1%, led by increases in commercial related and home equity loans.

Asset quality continued to improve in this economy that is slowly beginning to strengthen. Nonperforming assets, including nonaccrual loans, net assets in foreclosure and loans 90 days or more past due was .24% of total assets at September 30, 2003, compared to .30% at September 30, 2002. The ratio of the allowance for loan losses to nonperforming loans was 326.5% at September 30, 2003, compared to 286.6% at December 31, 2002, and 248.2% at September 30, 2002.

Total deposits grew $39,633,000 or 2.0%, from September 30, 2002, to September 30, 2003 as a result of the growth in core deposits. Core deposit growth of $126,184,000 or 11.0%, was partially offset by a $86,551,000 or 10.7% reduction in higher-rate certificates of deposits.

Other operating income of $5,252,000, earned in the third quarter of 2003, was $189,000 less than the third quarter of 2002 as a result of lower security gains. For the third quarters of 2003 and 2002, security gains were $359,000 and $719,000, respectively. Net of the security gains, third quarter 2003 other operating income increased $171,000 or 3.6%, compared to the same period in 2002. The increase is primarily the result of higher fees related to trust and investment services, mortgage servicing and deposits.

The corporation's third quarter 2003 other operating expenses of $13,098,000 decreased $403,000 or 3.0% from the third quarter of 2002. This reduction was primarily the result of a $500,000 decrease in the off-lease vehicle residual reserve expense, a $684,000 net recovery in the value of mortgage servicing rights and lower expenses related to HNC Reinsurance Company of $214,000. Net of these reductions, other operating expenses grew $995,000, or 7.8%. This growth was due to increases in salaries and employee benefits, occupancy and furniture and fixtures costs of $388,000, $97,000 and $97,000, respectively. Net of the residual reserve expense, net recovery in the value of mortgage servicing rights and the HNC Reinsurance Company expenses, other expenses grew $413,000, primarily due to higher marketing and deferred compensation expenses.

Providing Real Life Financial Solutions, Harleysville National Corporation (HNC) has assets in excess of $2.5 billion and operates 40 banking offices in 9 counties throughout Eastern Pennsylvania through its three subsidiary banks - Harleysville National Bank and Trust Company, Citizens National Bank and Security National Bank. Investment Management and Trust Services are provided throughout the company by Harleysville National Bank and Trust Company. Harleysville National Corporation's 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 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 Company'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 company's filings with the Securities and Exchange Commission.

 

Harleysville National Corporation

Consolidated Selected Financial Data

September 30, 2003

(unaudited)

For the period:

Three Months Ended

Nine Months Ended

Sept. 30,

June 30,

March 31,

Dec. 31,

Sept. 30,

September 30,

2003

2003

2003

2002

2002

2003

2002

Interest Income

$ 28,439

$ 29,889

$ 30,585

$ 32,371

$ 33,118

$ 88,913

$ 100,259

Interest Expense

9,216

10,084

11,386

13,088

13,439

30,686

39,522

Net Interest Income

19,223

19,805

19,199

19,283

19,679

58,227

60,737

Provision For Loan Losses

630

1,320

609

969

956

2,559

3,401

Net Interest Income After

 

Provision For Loan Losses

18,593

18,485

18,590

18,314

18,723

55,668

57,336

 

Service Charges

2,007

1,937

1,830

1,929

1,846

5,774

4,993

Security Gains, Net

359

4,774

1,316

282

719

6,449

3,193

Trust and Investment Services Income

954

978

888

955

896

2,820

2,322

Bank-Owned Life Insurance Income

673

631

631

789

631

1,935

1,900

Income on Life Insurance

-

-

1,119

-

-

1,119

-

Other Income

1,259

1,639

1,427

1,485

1,349

4,325

4,675

Total Other Income

5,252

9,959

7,211

5,440

5,441

22,422

17,083

 

Salaries, Wages and Employee Benefits

7,938

7,876

7,841

7,182

7,550

23,655

22,631

Occupancy

941

882

1,023

927

844

2,846

2,902

Furniture and Equipment

1,525

1,376

1,305

1,500

1,428

4,206

4,034

Prepayment Fee

-

2,594

-

-

-

2,594

-

Other Expenses

2,694

4,399

5,344

3,994

3,679

12,437

13,127

Total Other Operating Expenses

13,098

17,127

15,513

13,603

13,501

45,738

42,694

 

Income Before Income Taxes

10,747

11,317

10,288

10,151

10,663

32,352

31,725

Income Tax Expense

1,952

2,216

1,823

1,828

2,250

5,991

7,121

Net Income

$ 8,795

$ 9,101

$ 8,465

$ 8,323

$ 8,413

$ 26,361

$ 24,604

 

Per Common Share Data: *

 

Weighted Average Common Shares - Diluted

24,587,614

24,540,648

24,469,511

24,552,398

24,609,988

24,555,092

24,644,984

Weighted Average Common Shares - Basic

23,812,431

23,779,235

23,770,390

23,829,011

23,891,899

23,793,891

23,926,895

Net Income Per Share - Diluted

$ 0.36

$ 0.37

$ 0.34

$ 0.34

$ 0.34

$ 1.07

$ 1.00

Net Income Per Share - Basic

$ 0.37

$ 0.38

$ 0.36

$ 0.35

$ 0.35

$ 1.11

$ 1.03

Cash Dividend Per Share **

$ 0.160

$ 0.152

$ 0.152

$ 0.168

$ 0.137

$ 0.464

$ 0.396

Book Value

$ 9.18

$ 9.42

$ 9.06

$ 8.67

$ 8.74

Market Value

$ 23.39

$ 21.55

$ 19.46

$ 21.22

$ 19.31

* Adjusted for a five-for-four common stock split effective September 15, 2003.

** The cash dividend payable December 16, 2002 included a $.024 special cash dividend.

2003

2003

2003

2002

2002

Asset Quality Data:

3Q

2Q

1Q

4Q

3Q

Nonaccural Loans

$ 3,962

$ 4,146

$ 4,492

$ 5,109

$ 5,325

90 + Days Past Due Loans

1,200

1,681

1,406

1,193

1,580

Nonperforming Loans

5,162

5,827

5,898

6,302

6,905

Net Assets In foreclosure

893

729

485

390

473

Nonperforming Assets

$ 6,055

$ 6,556

$ 6,383

$ 6,692

$ 7,378

Loan Loss Reserve

$ 16,854

$ 17,538

$ 16,902

$ 17,190

$ 17,139

Loan Loss Reserve / Loans

1.22%

1.31%

1.26%

1.29%

1.28%

Loan Loss Reserve / Nonperforming Loans

326.5%

301.0%

286.6%

272.8%

248.2%

Nonperforming Assets / Total Assets

0.24%

0.27%

0.26%

0.27%

0.30%

Net Loan Charge-offs

$ 1,313

$ 684

$ 898

$ 918

$ 672

Net Loan Charge-offs (annualized)

/ Average Loans

0.39%

0.20%

0.27%

0.28%

0.20%

2003

2003

2003

2002

2002

2003

2002

Selected Ratios (annualized):

3Q

2Q

1Q

4Q

3Q

Year-to-date

Year-to-date

Return on Average Assets

1.44%

1.49%

1.38%

1.34%

1.44%

1.44%

1.46%

Return on Average Shareholders' Equity

16.11%

16.67%

16.18%

16.10%

16.71%

16.32%

16.78%

Return on Average Shareholders'

 

Realized Equity *

16.65%

17.53%

16.78%

16.81%

17.29%

16.99%

17.15%

Yield on Earning Assets (FTE)

5.31%

5.57%

5.65%

5.86%

6.33%

5.51%

6.62%

Cost of Interest Bearing Funds

1.95%

2.12%

2.34%

2.64%

2.92%

2.14%

2.99%

Net Interest Margin (FTE)

3.71%

3.82%

3.68%

3.64%

3.90%

3.74%

4.14%

Leverage Ratio

8.97%

8.73%

8.49%

8.19%

8.61%

* Excluding unrealized gain (loss) on investment securities available for sale.

Balance Sheet (Period End):

2003

2003

2003

2002

2002

3Q

2Q

1Q

4Q

3Q

Assets

$2,523,002

$2,406,132

$2,470,414

$2,490,864

$2,472,052

Earning Assets

2,386,477

2,244,720

2,324,511

2,346,669

2,318,495

Securities

915,832

866,191

959,095

971,467

949,276

Loans, Net

1,377,682

1,335,919

1,337,130

1,333,292

1,344,199

Other Earning Assets

92,963

42,610

28,286

41,910

25,020

Total Deposits

1,990,832

1,873,218

1,953,466

1,979,822

1,951,199

Non-Interest Bearing Deposits

283,886

291,454

270,759

269,781

267,254

Interest Bearing Checking

276,941

218,200

234,660

249,646

251,571

Money Market

490,341

483,326

507,913

488,944

427,006

Savings

217,969

220,001

212,967

202,003

197,122

Time, under $100,000

506,976

503,850

516,994

526,885

534,967

Time, $100,000 or greater

214,719

156,387

210,173

242,563

273,279

Other Borrowings

263,828

254,563

247,919

253,906

255,002

Federal Home Loan Bank

168,750

153,750

162,750

162,750

162,750

Other Borrowings

95,078

100,813

85,169

91,156

92,252

Shareholders' Equity

218,878

223,849

215,109

206,206

208,666

Balance Sheet (Daily Average):

2003

2003

2003

2002

2002

3Q

2Q

1Q

4Q

3Q

Assets

$2,436,763

$2,435,580

$2,450,397

$2,491,372

$2,342,225

Earning Assets

2,298,565

2,305,590

2,321,612

2,360,479

2,213,646

Securities

898,886

948,782

970,336

1,000,651

856,783

Loans, Net

1,354,394

1,342,758

1,329,093

1,337,848

1,339,041

Other Earning Assets

45,285

14,050

22,183

21,980

17,822

Total Deposits

1,906,373

1,889,663

1,938,766

1,966,489

1,831,087

Non-Interest Bearing Deposits

278,267

260,688

242,793

244,785

242,568

Interest Bearing Checking

241,283

223,152

235,502

248,302

203,621

Money Market

479,375

493,561

498,328

476,107

408,673

Savings

219,778

216,445

207,512

201,157

201,034

Time, under $100,000

508,256

510,703

523,089

529,515

533,923

Time, $100,000 or greater

179,414

185,114

231,542

266,623

241,268

Other Borrowings

260,383

274,567

252,411

263,062

253,855

Federal Home Loan Bank

164,728

164,794

162,750

162,750

162,750

Other Borrowings

95,655

109,773

89,661

100,312

91,105

Shareholders' Equity

218,396

218,363

209,241

206,739

201,402