FOR IMMEDIATE RELEASE

CONTACT:Gregg J. Wagner, President and CEO

PHONE:215-513-2391

HARLEYSVILLE NATIONAL CORPORATION REPORTS

THIRD QUARTER EARNINGS OF $10.2 MILLION

HARLEYSVILLE, PA (October 18, 2005)  -  Harleysville National Corporation (NASDAQ: HNBC), today announced third quarter 2005 earnings of $10.2 million, level with third quarter 2004 earnings. Earnings for the nine-month period ending September 30, 2005, were $29.0 million, a 2.0% increase over earnings of $28.5 million for the nine-month period ending September 30, 2004.

 The Corporation’s consolidated total assets were $3.12 billion at September 30, 2005, an increase of 4.8% or $144.0 million over $2.98 billion in total assets reported at September 30, 2004. Of this increase, 5.6% or $167.7 million was due to loan growth, partially offset by a net decrease in cash and investments of 1.2% or $34.3 million.

For the quarter ending September 30, 2005, diluted earnings per share of $.36 and basic earnings per share of $.37 remained level with the earnings during the third quarter of 2004. For the nine-month period ended September 30, 2005, diluted earnings per share were $1.03 compared to $1.02 for the same period in 2004 and basic earnings per share of $1.05 remained consistent with those during the first nine months of 2004. The financial results for 2005 include the issuance of 1,310,000 shares of the Corporation’s common stock for a 5% stock dividend payable September 15, 2005. All share and per share information has been restated to reflect this stock dividend.

    “We are pleased with the results for the quarter, particularly with our ability to grow both loans and deposits in this intensely competitive market,” said Gregg J. Wagner, President and Chief Executive Officer. “The interest rate environment has continued to make it difficult to maintain our historical levels of earnings growth and we see this as an ongoing challenge over the near term.”

DETAILED REVIEW OF FINANCIAL RESULTS

Net interest income on a fully tax-equivalent basis in the third quarter of 2005 decreased $449,000 or 1.9% over the same period in 2004 and increased $949,000 or 1.4% from the nine-month period ending September 30, 2004. The decrease during the third quarter of 2005 was mainly attributed to higher deposit rates offset in part by higher loan volume. The increase for the nine months of 2005 was mostly due to higher loan volume, partially offset by higher deposit rates and an elevated level of borrowings. The net interest margin for the third quarter of 2005 was 3.23%, compared to 3.34% for the second quarter of 2005 and 3.51% for the third quarter of 2004. The decline in the net interest margin from 2004 is primarily due to higher funding costs, particularly in money market deposit accounts and short-term borrowings. Average earning assets increased $171.4 million or 6.4% during the third quarter of 2005 versus the comparable period in 2004. Average loans grew by $195.3 million or 11.4% during the same period, partially offset by a decrease in investment securities of $28.4 million or 3.0%.

Nonperforming assets (including nonaccrual loans, net assets in foreclosure and loans 90 days or more past due) were .26% of total assets at September 30, 2005, compared to .20% at December 31, 2004, and .16% at September 30, 2004. The increase in nonperforming assets at September 30, 2005, in relation to December 31, 2004 was mainly due to commercial mortgage loans, primarily attributable to one borrower, totaling $1.5 million and placed on nonaccrual of interest. The increase in the provision for the three and nine-month periods ending September 30, 2005, compared to the same periods in 2004, was primarily due to inherent risk related to loan growth and the increase in nonperforming loans.

Core deposits increased 4.7% or $72.0 million, to $1.61 billion at September 30, 2005, up from $1.54 billion at September 30, 2004. Total deposits increased $139.8 million for the same period, which was primarily attributable to the growth in core deposits and time deposits of $100,000 or greater.

Total noninterest income of $7.7 million for the third quarter of 2005 reflects an increase of $1.0 million or 15.5% from the comparable period in 2004. For the nine-month period ended September 30, 2005, noninterest income rose $3.7 million or 19.5%, up from $18.8 million for the same period in 2004. The third quarter increase was primarily due to $1.8 million in gains on sales of investment securities, partially offset by a decrease of $617,000 in trust and investment advisory fees related to the sale of Cumberland Advisors, Inc., which took place in the second quarter of this year. The year-to-date increase over the first nine months of 2004 was attributed to $1.4 million in the gains on sales of investment securities, a cumulative increase in trust and investment advisory fees of $654,000, key-man life insurance income of $434,000 and gains of $690,000 and $287,000 on the sales of Harleysville National Bank’s McAdoo branch and Cumberland Advisors, Inc., respectively, during the second quarter of 2005.

Noninterest expense of $15.3 million for the third quarter of 2005 increased $836,000 or 5.8% from $14.5 million in the third quarter of 2004, and $4.8 million or 11.2% for the first nine months of 2005 in comparison to the same period in 2004. Salaries and benefits expense decreased $565,000 during the third quarter of 2005 from the comparable period in 2004. This was primarily related to the sale of Cumberland Advisors, Inc. and lower bonus expense, which were partially offset by higher pension and healthcare costs. Salaries and benefits expense increased $2.0 million for the nine months ended September 30, 2005, over the same period in 2004, primarily due to the acquisition of Millennium Bank and higher pension and healthcare costs. Occupancy expense increased $572,000 for the nine months ended September 30, 2005 over the same period in 2004, mostly due to the Millennium acquisition and a new branch opening. Other expense increased $1.5 million for the third quarter of 2005 and $2.6 million for the nine-month period, mainly due to increased expenses for advertising, professional fees (Sarbanes-Oxley related) and deferred compensation expense for directors and employees, as well as lower loan origination expense deferrals related to decreased loan origination volume.

Harleysville National Corporation, with assets of $3 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. Harleysville National Corporation stock is traded under the symbol "HNBC" and is commonly quoted under Nasdaq National Market Issues. For more information, visit the Harleysville National Corporation website 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 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, 2005
(unaudited)
For the period:		Three Months Ended
		Sept. 30,		Jun. 30,		Mar. 31,		Dec. 31,		Sept. 30,
		2005		2005		2005		2004		2004
Interest Income	$	38,570	$	36,889	$	35,272	$	34,196	$	33,366
Interest Expense		16,826		15,042		13,602		12,735		11,286
Net Interest Income		21,744		21,847		21,670		21,461		22,080
Provision for Loan Losses		650		650		750		1,070		499
Net Interest Income after
Provision for Loan Losses		21,094		21,197		20,920		20,391		21,581
Service Charges		2,112		2,044		1,957		1,953		2,000
Gains on Sales of Investment Securities, Net		1,898		226		923		2,036		112
Gain on Sale of Branch		0		690		0		0		0
Trust, Investment Services and Advisory Income		1,261		2,051		1,929		1,999		1,878
Bank-Owned Life Insurance Income		497		645		493		627		647
Income on Life Insurance		0		177		0		586		0
Other Income		1,962		1,919		1,641		2,194		2,056
Total Noninterest Income		7,730		7,752		6,943		9,395		6,693
Salaries, Wages and Employee Benefits		9,189		10,180		9,500		10,215		9,754
Occupancy		1,277		1,243		1,391		1,218		1,135
Furniture and Equipment		963		1,151		1,170		1,256		1,217
Other Expenses		3,884		4,319		3,442		3,985		2,371
Total Noninterest Expense		15,313		16,893		15,503		16,674		14,477
Income Before Income Taxes		13,511		12,056		12,360		13,112		13,797
Income Tax Expense		3,349		2,366		3,195		2,999		3,632
Net Income	$	10,162	$	9,690	$	9,165	$	10,113	$	10,165
Per Common Share Data:
Weighted Average Common Shares - Basic		27,521,780		27,552,322		27,559,493		27,492,032		27,552,647
Weighted Average Common Shares - Diluted		28,075,455		28,113,870		28,316,146		28,410,643		28,408,383
Net Income Per Share - Basic	$	0.37	$	0.35	$	0.33	$	0.37	$	0.37
Net Income Per Share - Diluted	$	0.36	$	0.35	$	0.32	$	0.35	$	0.36
Cash Dividend Per Share	$	0.18	$	0.17	$	0.17	$	0.21	$	0.16
Book Value	$	10.04	$	10.00	$	9.75	$	9.81	$	9.71
Market Value	$	21.94	$	22.06	$	20.24	$	25.33	$	23.34

 

For the period:		Nine Months Ended
		September 30,
		2005		2004
Interest Income	$	110,731	$	93,533
Interest Expense		45,470		29,903
Net Interest Income		65,261		63,630
Provision for Loan Losses		2,050		1,485
Net Interest Income after
Provision for Loan Losses		63,211		62,145
Service Charges		6,113		5,854
Gains on Sales of Investment Securities, Net		3,047		1,653
Gain on Sale of Branch		690		0
Trust, Investment Services and Advisory Income		5,241		4,587
Bank-Owned Life Insurance Income		1,635		1,779
Income on Life Insurance		177		0
Other Income		5,522		4,890
Total Noninterest Income		22,425		18,763
Salaries, Wages and Employee Benefits		28,869		26,865
Occupancy		3,911		3,339
Furniture and Equipment		3,284		3,607
Other Expenses		11,645		9,076
Total Noninterest Expense		47,709		42,887
Income Before Income Taxes		37,927		38,021
Income Tax Expense		8,910		9,567
Net Income	$	29,017	$	28,454

Per Common Share Data:
Weighted Average Common Shares - Basic		27,544,393		27,032,475
Weighted Average Common Shares - Diluted		28,134,749		27,945,621
Net Income Per Share - Basic	$	1.05	$	1.05
Net Income Per Share - Diluted	$	1.03	$	1.02
Cash Dividend Per Share	$	0.52	$	0.47

		2005		2005		2005		2004		2004
Asset Quality Data:		3Q		2Q		1Q		4Q		3Q
Nonaccrual Loans	$	6,388	$	3,531	$	4,572	$	4,705	$	3,350
90 + Days Past Due Loans		1,125		679		599		981		948
Nonperforming Loans		7,513		4,210		5,171		5,686		4,298
Net Assets in Foreclosure		469		459		411		370		347
Nonperforming Assets	$	7,982	$	4,669	$	5,582	$	6,056	$	4,645
Loan Loss Reserve		19,205		18,890		18,724		18,455		17,795
Loan Loss Reserve / Loans		0.99%		1.00	%	1.00%		1.00	%	1.00%
Loan Loss Reserve / Nonperforming Loans		255.6%		448.7	%	362.1%		324.6	%	414.0%
Nonperforming Assets / Total Assets		0.26%		0.15	%	0.19%		0.20	%	0.16%
Net Loan Charge-offs	$	335	$	484	$	481	$	410	$	644
Net Loan Charge-offs (annualized)
/ Average Loans		0.07%		0.10	%	0.11%		0.09	%	0.15%
		2005		2005		2005		2004		2004
Selected Ratios (annualized):		3Q		2Q		1Q		4Q		3Q
Return on Average Assets		1.32%		1.29	%	1.25%		1.36	%	1.40%
Return on Average Shareholders' Equity		14.64%		14.30	%	13.69%		15.00	%	15.61%
Yield on Earning Assets (FTE)		5.56%		5.48	%	5.34%		5.16	%	5.18%
Cost of Interest Bearing Funds		2.79%		2.57	%	2.37%		2.19	%	2.01%
Net Interest Margin (FTE)		3.23%		3.34	%	3.37%		3.34	%	3.51%
Leverage Ratio		9.83%		9.06	%	8.99%		8.91	%	8.99%
		2005		2004
Selected Ratios (annualized):		Year-to-date		Year-to-date
Return on Average Assets		1.29%		1.40	%
Return on Average Shareholders' Equity		14.22%		15.42	%
Yield on Earning Assets (FTE)		5.46%		5.19	%
Cost of Interest Bearing Funds		2.58%		1.90	%
Net Interest Margin (FTE)		3.31%		3.62	%
Balance Sheet (Period End):		2005		2005		2005		2004		2004
		3Q		2Q		1Q		4Q		3Q
Assets	$	3,120,138	$	3,032,588	$	3,002,572	$	3,024,515	$	2,976,173
Earning Assets		2,920,126		2,837,263		2,817,956		2,845,656		2,791,891
Investment Securities		900,345		893,587		907,379		943,563		975,750
Loans		1,941,866		1,891,692		1,865,641		1,845,802		1,774,189
Other Earning Assets		77,915		51,984		44,936		56,291		41,952
Interest-Bearing Liabilities		2,464,440		2,349,820		2,343,177		2,367,229		2,332,102
Total Deposits		2,349,559		2,223,304		2,237,567		2,212,563		2,209,753
Noninterest-Bearing Deposits		335,614		360,695		332,525		333,516		325,132
Interest-Bearing Checking		399,482		331,201		352,132		305,584		320,276
Money Market		677,507		676,260		679,872		713,039		661,480
Savings		196,242		209,865		222,553		223,039		229,992
Time, under $100,000		529,302		508,313		523,782		508,010		527,971
Time, $100,000 or greater		211,412		136,970		126,703		129,375		144,902
Total Borrowed Funds		450,495		487,211		438,135		488,182		447,481
Federal Home Loan Bank		292,750		272,750		272,750		317,750		257,750
Other Borrowings		157,745		214,461		165,385		170,432		189,731
Shareholders' Equity		275,627		275,484		268,724		270,532		266,966
Balance Sheet (Average):		2005		2,005		2,005		2,004		2,004
		3Q		2Q		1Q		4Q		3Q
Assets	$	3,054,895	$	3,006,076	$	2,976,361	$	2,957,559	$	2,878,769
Earning Assets		2,866,964		2,823,832		2,801,817		2,776,599		2,695,559
Investment Securities		903,924		900,457		910,981		941,704		932,310
Loans		1,912,551		1,879,028		1,845,408		1,793,935		1,717,245
Other Earning Assets		50,489		44,347		45,428		40,960		46,004
Interest-Bearing Liabilities		2,388,883		2,344,504		2,328,569		2,308,446		2,237,681
Total Deposits		2,260,962		2,226,609		2,196,584		2,213,829		2,154,443
Noninterest-Bearing Deposits		343,658		339,234		321,912		324,466		329,559
Interest-Bearing Checking		350,425		342,133		325,081		317,328		285,735
Money Market		675,550		675,052		688,602		692,703		620,420
Savings		206,161		216,287		222,853		226,251		237,463
Time, under $100,000		514,590		508,723		513,986		517,167		525,701
Time, $100,000 or greater		170,578		145,180		124,150		135,914		155,565
Total Borrowed Funds		471,579		457,129		453,897		419,083		412,797
Federal Home Loan Bank		277,967		272,750		292,917		263,566		255,837
Other Borrowings		193,612		184,379		160,980		155,517		156,960
Shareholders' Equity		275,450		271,735		271,531		268,211		259,035

Average Balance Sheets and Interest Rates - Fully-Taxable Equivalent Basis

	Three Months Ended September 30, 2005							Three Months Ended September 30, 2004
		Average			Average		Average				Average
		Balance		Interest	Rate		Balance			Interest	Rate
Assets
Earning assets:
Investment securities
Taxable investments	$	642,405	$	5,678	3.51	%	$        709,890		$	6,448	3.61	%
Non-taxable investments (2)		261,519		4,190	6.36	%	222,420			3,873	6.93	%
Total investment securities		903,924		9,868	4.33	%	932,310			10,321	4.40	%
Federal funds sold and deposits in banks		50,489		418	3.28	%	46,004			162	1.40	%
Loans(2)  (3)		1,912,551		29,886	6.20	%	1,717,245			24,598	5.70	%
Total earning assets		2,866,964		40,172	5.56	%	2,695,559			35,081	5.18	%
Noninterest-earning assets		187,931					183,210
Total assets	$	3,054,895					$    2 ,878,769
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Savings and money market	$	1,232,136	$	5,916	1.90	%	$     1,143,618		$	2,647	0.92	%
Time		685,168		6,163	3.57	%	681,266			5,327	3.11	%
Total interest-bearing deposits		1,917,304		12,079	2.50	%	1,824,884			7,974	1.74	%
Borrowed funds		471,579		4,747	3.99	%	412,797			3,312	3.19	%
Total interest-bearing liabilities		2,388,883		16,826	2.79	%	2,237,681			11,286	2.01	%
Noninterest-bearing liabilities:
Demand deposits		343,658					329,559
Other liabilities		46,904					52,494
Total noninterest-bearing liabilities		390,562					382,053
Total liabilities		2,779,445					2,619,734
Shareholders' equity		275,450					259,035
Total liabilities and shareholders' equity	$	3,054,895					$     2,878,769
Net interest spread					2.77	%					3.17	%
Effect of noninterest-bearing sources					0.46	%					0.34	%
Net interest income/margin on earning assets			$	23,346	3.23	%			$	23,795	3.51	%
Less tax equivalent adjustment				1,602						1,715
Net interest income			$	21,744					$	22,080

 Nine Months Ended September 30, 2005  Nine Months Ended September 30, 2004

		Average		Average			Average			Average
		Balance	Interest	Rate			Balance		Interest	Rate
Assets
Earning assets:
Investment securities
Taxable investments	$	641,102	$      17,362	3.62	%	$	703,978	$	17,690	3.36	%
Non-taxable investments (2)		263,993	12,675	6.42	%		238,001		12,835	7.20	%
Total investment securities		905,095	30,037	4.44	%		941,979		30,525	4.33	%
Federal funds sold and deposits in banks		46,773	994	2.84	%		41,098		331	1.08	%
Loans(2) (3)		1,879,230	84,602	6.02	%		1,568,837		68,261	5.81	%
Total earning assets		2,831,098	115,633	5.46	%		2,551,914		99,117	5.19	%
Noninterest-earning assets		181,633					159,653
Total assets	$	3,012,731				$	2,711,567
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Savings and money market	$	1,234,032	$      15,235	1.65	%	$	1,072,585	$	6,143	0.77	%
Time		659,241	17,130	3.47	%		673,411		15,570	3.09	%
Total interest-bearing deposits		1,893,273	32,365	2.29	%		1,745,996		21,713	1.66	%
Borrowed funds		460,933	13,105	3.80	%		356,380		8,190	3.07	%
Total interest-bearing liabilities		2,354,206	45,470	2.58	%		2,102,376		29,903	1.90	%
Noninterest-bearing liabilities:
Demand deposits		335,015					309,102
Other liabilities		50,590					53,585
Total noninterest-bearing liabilities		385,605					362,687
Total liabilities		2,739,811					2,465,063
Shareholders' equity		272,920					246,504
Total liabilities and shareholders' equity	$	3,012,731				$	2,711,567
Net interest spread				2.88	%					3.29	%
Effect of noninterest-bearing sources				0.43	%					0.33	%
Net interest income/margin on earning assets			$      70,163	3.31	%			$	69,214	3.62	%
Less tax equivalent adjustment			4,902						5,584
Net interest income			$      65,261					$	63,630

(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.