EX-99 3 exh_99.htm P R EXH 99 P R exh 99
 


FOR IMMEDIATE RELEASE
CONTACT:    Walter E. Daller Jr., President and CEO
 PHONE:          215-256-8851 ext. 2300   
           
FIRST QUARTER EARNINGS UP 5.2%
AT HARLEYSVILLE NATIONAL CORPORATION


HARLEYSVILLE, PA (April 13, 2004) - Harleysville National Corporation (HNC) (Nasdaq:HNBC), today announced first quarter 2004 earnings of $8.9 million, a 5.2% increase over first quarter 2003 earnings of $8.5 million. The company’s consolidated total assets were $2.54 billion at March 31, 2004, 2.9% above the March 31, 2003, level of $2.47 billion.
 
For the quarter ending March 31, 2004, diluted earnings per share of $.36 were 5.9% higher than the $.34 earned during the first quarter of 2003, and basic earnings per share at $.37 were up 2.8% from $.36 in the first quarter of 2003.
 
“We are pleased to announce yet another increase in earnings. We are also happy to report that the consolidation of our subsidiary banks into our largest bank, Harleysville National Bank and Trust Company, was successfully completed in the first quarter as well. We look forward, now, to the acquisition of Millennium Bank and its wholly-owned subsidiary, Cumberland Advisors, Inc., at the end of April,” said Walter E. Daller Jr., Chairman, President and CEO of HNC.
 
Net interest income on a fully tax-equivalent basis in the first quarter of 2004 increased $656,000 or 3.1% over the same period in 2003. This increase was the result of the rise in the net interest margin and higher earning asset volumes. The net interest margin for the first quarter of 2004 of 3.73%, increased 5 basis points from the first quarter of 2003 net interest margin of 3.68%. Average earning assets increased $43.9 million or 1.9% during the first quarter of 2004 versus the comparable period in 2003.
 
The higher net interest margin is primarily due to loan growth funded, in part, by the reduction of investment securities. The continuing decline in loan yields has partially offset this positive impact on the net interest margin. During this period, average loans grew $85.7 million or 6.5%, while average investment securities decreased $60.0 million or 6.2%.
 
The company also experienced an improvement in loan quality during the first quarter of 2004, compared to the first and fourth quarters of 2003. Nonperforming assets decreased in the first quarter of 2004 by $1.1 million and $196,000 from the first and fourth quarters of 2003, respectively. The ratio of the allowance for loan losses to nonperforming loans (nonaccruing loans and loans 90 days or more past due) was 341.3% at March 31, 2004, compared to 371.7% at December 31, 2003, and 286.6% at March 31, 2003. Nonperforming assets, including nonaccrual loans, net assets in foreclosure and loans 90 days or more past due was .21% of total assets at March 31, 2004, an improvement from the .22% at December 31, 2003, and the .26% at March 31, 2003. The lower provision for loan losses in the first quarter of 2004, compared to the first quarter of 2003, is reflective of the improved loan quality.
 
                 Core deposits grew to $1.33 billion or 8.7% at March 31, 2004, from $1.23 billion at March 31, 2003. Total deposit growth of $15.1 million for the same period was limited, due to the bank’s strategy to de-emphasize higher costing certificates of deposit. Other borrowings increased $31.2 million or 12.6%, primarily due to HNC’s previously announced issuance of Trust Preferred Securities in the amount of $20 million during the first quarter of 2004.
 
                 Service charges and trust and investment services income for the quarter ended March 31, 2004, increased $95,000 and $233,000 or 5.2% and 26.2% respectively, from the same period a year ago. Other operating income of $5.8 million for the current quarter reflects a decrease of $1.4 million for the comparable period in 2003, primarily due to $1.1 million non-recurring income from life insurance proceeds during the first quarter of 2003, lower net security gains amounting to $416,000 and lower other income of $201,000 during first quarter of 2004.
 
During the first quarter 2004, other operating expenses of $13.8 million decreased $1.7 million or 10.9% from $15.5 million in the first quarter of 2003. The reduction in other operating expenses was primarily due to a $2.1 million decrease in other expenses, which primarily consists of reduced off-lease vehicle residual reserve expense amounting to $1.8 million in the first quarter of 2004, compared to the first quarter of 2003. The company reviews and adjusts, if necessary, the off-lease vehicle residual reserve on a quarterly basis. Net of the reduction in other expenses, total operating expenses increased $450,000 or 4.4% in the first quarter of 2004, compared to the first quarter of 2003. Contributing to this growth were increases in salaries and employee benefits, and occupancy expense of $436,000 and $61,000, respectively.
 
Harleysville National Corporation, with assets in excess of $2.5 billion, is the holding company for its major subsidiary, Harleysville National Bank and Trust Company (HNB).  Providing Real Life Financial Solutions, HNB operates 41 offices in 10 counties throughout eastern Pennsylvania. Families and businesses can apply for banking, trust and investment services at any HNB office, by calling 1-888-HNB-2100 or online at www.harleysvillebank.com.  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 www.harleysvillebank.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
(Dollars in Thousands, Except Per Share Data)
March 31, 2004
(unaudited)
    
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
    
 
  
   
For the period:
    
Three Month Ended
        
         
 
    
Mar. 31,

 

 
Dec. 31,

 

 
Sept. 30,

 

 
June 30,

 

 
March 31,

 

 

 

 
2004

 

 
2003

 

 
2003

 

 
2003

 

 
2003
  
     
  		    
  		    
  		    
  		    
  		  
Interest Income
  
$
29,173
  
$
30,287
  
$
28,439
  
$
29,889
  
$
30,585
  
Interest Expense
    
8,943
   
9,393
   
9,216
   
10,084
   
11,386
 
     
   
  		    
  		    
  		    
  		  
Net Interest Income
    
20,230
   
20,894
   
19,223
   
19,805
   
19,199
 
Provision For Loan Losses
    
489
   
641
   
630
   
1,320
   
609
 
     
  		    
  		    
  		    
  		    
  		  
Net Interest Income After
    
 
    
 
    
 
    
 
    
 
  
Provision For Loan Losses
    
19,741
   
20,253
   
18,593
   
18,485
   
18,590
 
 
    
 
    
 
    
 
    
 
    
 
  
Service Charges
    
1,925
   
2,081
   
2,007
   
1,937
   
1,830
 
Security Gains, Net
    
900
   
164
   
359
   
4,774
   
1,316
 
Trust and Investment Services Income
    
1,121
   
1,017
   
954
   
978
   
888
 
Bank-Owned Life Insurance Income
    
611
   
680
   
673
   
631
   
631
 
Income on Life Insurance
    
-   
    
-   
    
-   
    
-   
    
1,119
 
Other Income
    
1,226
   
1,274
   
1,259
   
1,639
   
1,427
 
     
  		    
  		    
  		    
  		    
  		  
Total Other Operating Income
    
5,783
   
5,216
   
5,252
   
9,959
   
7,211
 
 
    
 
    
 
    
 
    
 
    
 
  
Salaries, Wages and Employee Benefits
    
8,277
   
7,518
   
7,938
   
7,876
   
7,841
 
Occupancy
    
1,084
   
924
   
941
   
882
   
1,023
 
Furniture and Equipment
    
1,258
   
1,637
   
1,525
   
1,376
   
1,305
 
Prepayment Fee
    
-   
    
-   
    
-   
    
2,594
   
-   
  
Other Expenses
    
3,198
   
3,812
   
2,694
   
4,399
   
5,344
 
     
  		    
  		    
  		    
  		    
  		  
Total Other Operating Expenses
    
13,817
   
13,891
   
13,098
   
17,127
   
15,513
 
 
    
 
    
 
    
 
    
 
    
 
  
Income Before Income Taxes
    
11,707
   
11,578
   
10,747
   
11,317
   
10,288
 
Income Tax Expense
    
2,800
   
2,606
   
1,952
   
2,216
   
1,823
 
     
  		    
  		    
  		    
  		    
  		  
Net Income
  
$
8,907
  
$
8,972
  
$
8,795
  
$
9,101
  
$
8,465
  
 
    
 
    
 
    
 
    
 
    
 
  
   
 
 
 
 
 
Per Common Share Data: *
    
 
    
 
    
 
    
 
    
 
  
                                
Weighted Average Common Shares - Diluted
    
24,793,529
   
24,768,712
   
24,587,614
   
24,540,648
   
24,469,511
 
Weighted Average Common Shares - Basic
    
23,931,459
   
23,837,623
   
23,812,431
   
23,779,235
   
23,770,390
 
Net Income Per Share - Diluted
  
$
0.36
  
$
0.37
  
$
0.36
  
$
0.37
  
$
0.34
  
Net Income Per Share - Basic
  
$
0.37
  
$
0.37
  
$
0.37
  
$
0.38
  
$
0.36
  
Cash Dividend Per Share
 
$
0.17
  
$
0.19
  
$
0.16
  
$
0.15
  
$
0.15
  
Book Value
  
$
9.92
  
$
9.52
  
$
9.18
  
$
9.42
  
$
9.06
  
Market Value
  
$
27.83
  
$
30.10
  
$
23.39
  
$
21.55
  
$
19.46
  
* Adjusted for a five-for-four common stock split effective September 15, 2003.
    
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
    
 
  
 
    
2004

 

 
2003

 

 
2003

 

 
2003

 

 
2003
  
Asset Quality Data:
    
1Q

 

 
4Q

 

 
3Q

 

 
2Q

 

 
1Q
  
    
  		    
  		    
  		    
  		    
  		  
Nonaccrual Loans
  
$
3,645
  
$
3,343
  
$
3,962
  
$
4,146
  
$
4,492
  
90 + Days Past Due Loans
    
1,178
   
1,164
   
1,200
   
1,681
   
1,406
 
     
  		    
  		    
  		    
  		    
  		  
Nonperforming Loans
    
4,823
   
4,507
   
5,162
   
5,827
   
5,898
 
Net Assets In foreclosure
    
423
   
935
   
893
   
729
   
485
 
     
  		    
  		    
  		    
  		    
  		  
Nonperforming Assets
  
$
5,246
  
$
5,442
  
$
6,055
  
$
6,556
  
$
6,383
  
     
   
  		    
  		    
  		    
  		  
Loan Loss Reserve
  
$
16,464
  
$
16,753
  
$
16,854
  
$
17,538
  
$
16,902
  
Loan Loss Reserve / Loans
    
1.15
%
  
1.19
%
  
1.22
%
  
1.31
%
  
1.26
%
Loan Loss Reserve / Nonperforming Loans
    
341.3
%
  
371.7
%
  
326.5
%
  
301.0
%
  
286.6
%
Nonperforming Assets / Total Assets
    
0.21
%
  
0.22
%
  
0.24
%
  
0.27
%
  
0.26
%
Net Loan Charge-offs
  
$
779
  
$
742
  
$
1,313
  
$
684
  
$
898
  
Net Loan Charge-offs (annualized)
   
 
    
 
    
 
    
 
    
 
  
/ Average Loans
    
0.22
%
  
0.21
%
  
0.39
%
  
0.20
%
  
0.27
%
 
    
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
    
 
  
 
    
2004

 

 
2003

 

 
2003

 

 
2003

 

 
2003
  
Selected Ratios (annualized):
    
1Q

 

 
4Q

 

 
3Q

 

 
2Q

 

 
1Q
  
    
  		    
  		    
  		    
  		    
  		  
Return on Average Assets
    
1.43
%
  
1.41
%
  
1.44
%
  
1.49
%
  
1.38
%
Return on Average Shareholders' Equity
    
15.33
%
  
16.22
%
  
16.11
%
  
16.67
%
  
16.18
%
Return on Average Shareholders'
    
 
    
 
    
 
    
 
    
 
  
Realized Equity(a)
    
15.97
%
  
16.56
%
  
16.65
%
  
17.53
%
  
16.78
%
Yield on Earning Assets (FTE)
    
5.25
%
  
5.38
%
  
5.31
%
  
5.57
%
  
5.65
%
Cost of Interest Bearing Funds
    
1.86
%
  
1.88
%
  
1.95
%
  
2.12
%
  
2.34
%
Net Interest Margin (FTE)
    
3.73
%
  
3.82
%
  
3.71
%
  
3.82
%
  
3.68
%
Leverage Ratio
    
10.04
%
  
8.77
%
  
8.97
%
  
8.73
%
  
8.49
%
 
    
 
    
 
    
 
    
 
    
 
  
(a) Excluding unrealized gain (loss) on investment securities available for sale.
    
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
    
 
  
Balance Sheet (Period End):
    
2004

 

 
2003

 

 
2003

 

 
2003

 

 
2003
  
    
  		    
  		    
  		    
  		    
  		  
 
    

 1Q

 

 
4Q

 

 
3Q

 

 
2Q

 

 
1Q
  
Assets
  
$
2,542,328
  
$
2,510,939
  
$
2,523,002
  
$
2,406,132
  
$
2,470,414
  
Earning Assets
    
2,406,068
   
2,371,816
   
2,386,477
   
2,244,720
   
2,324,511
 
Investment Securities
    
948,749
   
924,874
   
915,832
   
866,191
   
959,095
 
Loans, Net of Unearned Fees
    
1,428,145
   
1,408,391
   
1,377,682
   
1,335,919
   
1,337,130
 
Other Earning Assets
    
29,174
   
38,551
   
92,963
   
42,610
   
28,286
 
Total Deposits
    
1,968,521
   
1,979,081
   
1,990,832
   
1,873,218
   
1,953,466
 
Non-Interest Bearing Deposits
    
317,566
   
294,121
   
283,886
   
291,454
   
270,759
 
Interest Bearing Checking
    
268,110
   
283,607
   
276,941
   
218,200
   
234,660
 
Money Market
    
521,085
   
506,516
   
490,341
   
483,326
   
507,913
 
Savings
    
225,981
   
221,778
   
217,969
   
220,001
   
212,967
 
Time, under $100,000
    
481,400
   
491,740
   
506,976
   
503,850
   
516,994
 
Time, $100,000 or greater
    
154,379
   
181,319
   
214,719
   
156,387
   
210,173
 
Other Borrowings
    
279,097
   
255,056
   
263,828
   
254,563
   
247,919
 
Federal Home Loan Bank
    
172,750
   
172,750
   
168,750
   
153,750
   
162,750
 
Other Borrowings
    
106,347
   
82,306
   
95,078
   
100,813
   
85,169
 
Shareholders' Equity
    
237,964
   
227,053
   
218,878
   
223,849
   
215,109
 
 
    
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
    
 
  
Balance Sheet (Daily Average):
    
2004

 

 
2003

 

 
2003

 

 
2003

 

 
2003
  
    
   
  		    
  		    
  		    
  		  
 
    
1Q 
    
4Q

 

 
3Q

 

 
2Q

 

 
1Q
  
Assets
  
$
2,497,085
  
$
2,543,616
  
$
2,436,763
  
$
2,435,580
  
$
2,450,397
  
Earning Assets
    
2,365,497
   
2,408,967
   
2,298,565
   
2,305,590
   
2,321,612
 
Investment Securities
    
910,314
   
983,318
   
898,886
   
948,782
   
970,336
 
Loans, Net of Unearned Fees
    
1,414,802
   
1,389,595
   
1,354,394
   
1,342,758
   
1,329,093
 
Other Earning Assets
    
40,381
   
36,054
   
45,285
   
14,050
   
22,183
 
Total Deposits
    
1,961,481
   
1,976,616
   
1,906,373
   
1,889,663
   
1,938,766
 
Non-Interest Bearing Deposits
    
280,809
   
279,307
   
278,267
   
260,688
   
242,793
 
Interest Bearing Checking
    
280,142
   
280,076
   
241,283
   
223,152
   
235,502
 
Money Market
    
517,846
   
501,127
   
479,375
   
493,561
   
498,328
 
Savings
    
222,807
   
221,116
   
219,778
   
216,445
   
207,512
 
Time, under $100,000
    
487,379
   
497,281
   
508,256
   
510,703
   
523,089
 
Time, $100,000 or greater
    
172,498
   
197,709
   
179,414
   
185,114
   
231,542
 
Other Borrowings
    
251,278
   
296,344
   
260,383
   
274,567
   
252,411
 
Federal Home Loan Bank
    
172,750
   
172,750
   
164,728
   
164,794
   
162,750
 
Other Borrowings
    
78,528
   
123,594
   
95,655
   
109,773
   
89,661
 
Shareholders' Equity
    
232,386
   
221,236
   
218,396
   
218,363
   
209,241