EX-99.1 2 exhibit991.htm PRESS RELEASE exhibit991.htm

 

 

FOR IMMEDIATE RELEASE
CONTACT:                Paul D. Geraghty, President and CEO
PHONE:                      215-513-2391
 
 
HARLEYSVILLE NATIONAL CORPORATION REPORTS
THIRD QUARTER EARNINGS OF $6.6 MILLION
 
HARLEYSVILLE, PA (October 15, 2008) - 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.”
 
 
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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.
 
 
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 ●
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®.   For more information, visit the Harleysville National Corporation website at 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 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
 
 
 
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directing the request to: George Rapp, Executive Vice President and CFO, Harleysville National Corporation, 483 Main Street, Harleysville, Pennsylvania, 19438, telephone 215-513-2307.


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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.


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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                                
                                               
 
 
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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 %      
                                               
   
 
   
 
                               
 
Selected Ratios (annualized):
   
2008
Year-to-date 
     
2007
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        
 
 
 
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Average Balance Sheets and Interest Rates - Fully-Taxable Equivalent Basis
                       
                                               
   
Three Months Ended September 30, 2008
   
Three Months Ended 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       24,645       3.10 %     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 September 30, 2008
   
Nine Months Ended 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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