EX-99.1 2 exhibit991.htm HNC EARNINGS RELEASE exhibit991.htm  


 FOR IMMEDIATE RELEASE

MEDIA CONTACT:
Joseph J. Crivelli
 
Gregory FCA Communications
PHONE:
610-228-2100
 
COMPANY CONTACT:
Paul D. Geraghty, President and CEO
PHONE:
215-513-2391
 

 
HARLEYSVILLE NATIONAL CORPORATION REPORTS
THIRD QUARTER RESULTS

HARLEYSVILLE, PA (October 30, 2009) - Harleysville National Corporation (NASDAQ:HNBC) reported today a net loss of $4.4 million or $.10 per diluted share for the third quarter of 2009.  This compares to net income of $6.6 million, or $.21 per diluted share, for the third quarter of 2008.
 
For the nine months ended September 30, 2009, net loss was $222.3 million or $5.16 per diluted share.  Excluding the non-cash goodwill charge of $214.5 million recorded in the second quarter, the net loss was $7.7 million or $.18 per diluted share, compared to net income of $21.3 million or $.68 per diluted share during the comparable period in 2008.
 
Third quarter results included a $14.8 million provision for credit losses; a $4.7 million non-cash other-than-temporary impairment (OTTI) charge on investment securities; as well as professional fees of $2.4 million associated with recent corporate finance activities, including the pending merger with First Niagara Financial Group, Inc. (“First Niagara”), which is expected to close during the first quarter of 2010.
 
Paul D. Geraghty, President and CEO, Harleysville National Corporation, said, “We are carefully managing our loan portfolio to preserve and protect the bank’s capital base, and minimize increases in delinquencies and non-performing assets, while also working hard to grow our franchise.  To this end, during the third quarter we increased our penetration of retail and business accounts, grew non-municipal core deposits, and continued to expand sales of electronic banking services.  We were also encouraged by the full payoffs of two nonperforming loans totaling $18 million after quarter end.  The payoffs virtually offset the increase in nonperforming loans over the linked quarter.”
 
During the third quarter of 2009, provision for loan losses was $14.8 million, compared to $2.6 million in the third quarter of 2008 and $32.0 million in the second quarter of 2009.  The increase in provision for loan losses reflects an increase in nonperforming assets to $153.7 million at September 30, 2009, up from $138.9 million at June 30, 2009 and $38.8 million from a year ago.  Total Capital to Risk-Weighted Assets improved to 9.51% at September 30, 2009 from 8.88% at December 31, 2008.
 
Key Financial Metrics
The following is an overview of the key financial metrics for the quarter:
·  
Total assets were $5.2 billion at September 30, 2009, an increase of 30.7% or $1.2 billion over $3.9 billion at September 30, 2008, primiarily rhe result of the Willow Financial Bancorp acquisition (“Willow Financial”), which had assets of approximately $1.6 billion at the acquisition date of December 5, 2008.
·  
Loans increased $711.1 million and deposits grew $923.6 million from September 30, 2008, primarily the result of the Willow Financial acquisition.
·  
Net interest income on a tax equivalent basis in the third quarter of 2009 increased $6.3 million or 23.3% from the same period in 2008 mainly as a result of the Willow Financial acquisition.  The net interest margin for the third quarter of 2009 was 2.75% compared to 3.02% for the same period in 2008.
·  
Nonperforming assets were $153.7 million at September 30, 2009.  Nonperforming assets as a percentage of total assets increased to 2.98% from 2.67% at June 30, 2009, and 0.98% at September 30, 2008.  As noted above, subsequent to quarter end the bank benefited from the full payoff of two nonperforming loans totaling $18 million.  Net charge-offs were $7.8 million compared to $14.7 million in the second quarter of 2009 and $2.1 million in the third quarter of 2008.  The allowance for credit losses increased to $77.3 million at September 30, 2009, compared to $70.3 million at June 30, 2009, and $31.7 million at September 30, 2008.  Provision for loan losses increased to $14.8 million from $2.6 million during the third quarter of 2008.  Total loans delinquent 30 to 89 days totaled $31.8 million at September 30, 2009 compared to $34.4 million at June 30, 2009 and $27.5 million at September 30, 2008.
 
 
 · 
The merger agreement with First Niagara, as filed with the SEC on July 28, 2009, calls for a downward adjustment to the merger consideration to be received by Harleysville National Corporation shareholders if the amount of our delinquent loans equals or exceeds $237.5 million as of any month end prior to the closing date of the merger.  For purposes of this calculation, “delinquent loans” is defined as the sum of non-performing assets, loans 30 to 89 days delinquent, and cumulative charge-offs subsequent to the signing of the agreement.  By this definition, at September 30, 2009, delinquent loans were $193.3 million.
·  
Quarterly noninterest income was up $1.8 million from the third quarter of 2008.  Gains on sales of investment securities increased by $1.4 million over last year’s quarter.  Gains from mortgage banking loan sales totaled $2.4 million; there were no gains in last year’s quarter.  Service charges on deposits increased $.9 million or 27.4% mainly from the acquired Willow Financial deposit accounts.  Other income increased $.9 million over the third quarter of 2008 primarily from increases in automated teller machine and point of sale revenue and an increase in the cash surrender value of keyman life insurance.  These increases were partially offset by a non-cash OTTI charge of $4.7 million recorded during the third quarter of 2009 mainly on two collateralized debt obligation investments in pooled trust preferred securities.
·  
Quarterly noninterest expenses were up $15.1 million over the same period in the prior year, primarily due to the Willow Financial acquisition and the previously-mentioned professional fees of $2.4 million.  In addition, FDIC insurance assessments increased by $2.7 million.  Other expenses were $6.8 million higher during the third quarter of 2009 mostly due to Willow Financial including increased professional, consulting and data processing expenses.
 
 
Non-GAAP Measures
Net loss excluding a non cash goodwill charge is not a defined term under U.S. generally accepted accounting principles (non-GAAP measure).  A Non-GAAP measure should not be considered in isolation or as a substitute for net loss prepared in accordance with GAAP and may not be comparable to calculations of similarly titled measures by other companies.  Management of the company believes that net loss excluding a non cash goodwill charge is a useful measure and can be used to evaluate the company’s operations.
###
 
 
Harleysville National Corporation, with assets of $5.2 billion, is the holding company for Harleysville National Bank (HNB).  Investment Management and Trust Services are provided through Millennium Wealth Management and Cornerstone, divisions of HNB, with assets under management of $3.1 billion.  Harleysville National Corporation stock is traded under the symbol "HNBC" and is commonly quoted under NASDAQ Global Select Market®.  For more information, visit the Harleysville National Corporation website at www.hncbank.com.
 
- # # # -
 
This press release contains 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 risks, uncertainties and other factors.  Such risks, uncertainties and other factors that could cause actual results and experience to differ include, but are not limited to, the following: the Corporation’s merger with First Niagara Financial Group, Inc. is subject to a number of conditions and approvals, including regulatory approvals, and the final consideration to be paid to Harleysville stockholders is subject to adjustment, the strategic initiatives may not be completed on satisfactory terms or at all; increased demand or prices for the Corporation’s financial services and products may not occur; changing economic and competitive conditions; technological developments; the effectiveness of the Corporation’s business strategy due to changes in current or future market conditions; effects of deterioration of economic conditions on customers specifically the effect on loan customers to repay loans; inability of the Corporation to raise or achieve desired or required levels of capital; the effects of competition, and of changes in laws and regulations, including industry consolidation and development of competing financial products and services; interest rate movements; relationships with customers and employees; challenges in establishing and maintaining operations in new markets; volatilities in the securities markets; and deteriorating economic conditions and other risks and uncertainties, including those detailed under the caption “Forward-Looking Statements” in the Corporation’s Form 10-K Annual Report for the year ended December 31, 2008 and subsequent filings made with the Securities and Exchange Commission.


 


Harleysville National Corporation
                                    
Consolidated Selected Financial Data (1)
                                    
(Dollars in thousands, except per share data)
                                    
September 30, 2009
                                    
(unaudited)
                                    
                                     
For the period:
        
Three Months Ended
                    
   
Sep. 30,
    
Jun. 30,
    
Mar. 31,
    
Dec. 31,
    
Sep. 30,
        
 
  
2009
    
2009
    
2009
    
2008
    
2008
        
Interest Income
   $ 55,005     $ 60,045     $ 63,638     $ 54,583     $ 49,942        
Interest Expense
     23,567       26,592       28,334       25,136       24,645        
Net Interest Income
     31,438       33,453       35,304       29,447       25,297        
Provision for Loan Losses
     14,750       32,000       7,121       7,920       2,580        
Net Interest Income after
                                              
        Provision for Loan Losses
     16,688       1,453       28,183       21,527       22,717        
                                               
Service Charges
     4,361       4,304       4,194       3,666       3,424        
Gain on Sales of Investment Securities, Net
     1,383       4,945       1,952       2,417       -        
Other-than-temporary Impairment of  Available for Sale Securities
     (4,650 )     (530 )     (1,344 )     (1,923 )     -        
Gain (Loss) on Mortgage Banking Sales, Net
     2,352       2,703       1,698       136       (5 )      
Wealth Management Income
     4,656       4,975       4,322       5,888       3,862        
Bank-Owned Life Insurance Income
     789       770       778       730       706        
Other Income
     3,384       4,544       4,559       2,430       2,458        
          Total Noninterest Income
     12,275       21,711       16,159       13,344       10,445        
                                               
Salaries, Wages and Employee Benefits
     17,561       17,991       20,279       14,509       13,539        
Occupancy
     3,752       3,709       4,206       2,663       2,412        
Furniture and Equipment
     1,286       1,483       1,608       1,181       1,074        
Intangibles Expense
     1,669       696       948       2,211       678        
FDIC Deposit Insurance
     3,227       5,056       2,787       1,164       551        
Goodwill impairment
     -       214,536       -       -       -        
Merger Charges
     -       -       -       2,456       974        
Other Expenses
     12,726       9,279       8,793       7,109       5,925        
          Total Noninterest Expense
     40,221       252,750       38,621       31,293       25,153        
                                               
(Loss) Income Before Income Taxes
     (11,258 )     (229,586 )     5,721       3,578       8,009        
Income Tax (Benefit) Expense
     (6,889 )     (7,083 )     1,126       (245 )     1,370        
          Net (Loss) Income
   $ (4,369 )   $ (222,503 )   $ 4,595     $ 3,823     $ 6,639        
                                               
Per Common Share Data:
                                              
Weighted Average Common Shares - Basic
     43,102,844       43,080,849       42,990,542       34,695,062       31,385,257        
Weighted Average Common Shares - Diluted
     43,102,844       43,080,849       43,018,233       34,843,058       31,551,026        
Net (Loss) Income Per Share - Basic
   $ (0.10 )   $ (5.17 )   $ 0.11     $ 0.11     $ 0.21        
Net (Loss) Income Per Share - Diluted
   $ (0.10 )   $ (5.17 )   $ 0.11     $ 0.11     $ 0.21        
Cash Dividend Per Share
   $ -     $ 0.01     $ 0.10     $ 0.20     $ 0.20        
Book Value
   $ 6.04     $ 5.77     $ 11.00     $ 11.05     $ 9.90        
Market Value
   $ 5.33     $ 4.73     $ 6.06     $ 14.44     $ 16.98        
                                               
                                               
For the period:
  
Nine Months Ended
                                
   
September 30,
                                
 
     2009       2008                                
Interest Income
   $ 178,688     $ 151,711                                
Interest Expense
     78,493       77,018                                
Net Interest Income
     100,195       74,693                                
Provision for Loan Losses
     53,871       7,647                                
Net Interest Income after
                                              
        Provision for Loan Losses
     46,324       67,046                                
                                               
Service Charges
     12,859       9,849                                
Gain on Sales of Investment Securities, Net
     8,280       225                                
Other-than-temporary Impairment of Available for Sale Securities
     (6,524 )     -                                
Gain on Mortgage Banking Sales, Net
     6,753       420                                
Wealth Management Income
     13,953       12,756                                
Bank-Owned Life Insurance Income
     2,337       2,047                                
Other Income
     12,487       7,576                                
          Total Noninterest Income
     50,145       32,873                                
                                               
Salaries, Wages and Employee Benefits
     55,831       41,599                                
Occupancy
     11,667       7,438                                
Furniture and Equipment
     4,377       3,251                                
Intangibles Expense
     3,313       1,997                                
FDIC Deposit Insurance
     11,070       918                                
Goodwill Impairment
     214,536       -                                
Merger Charges
     -       974                                
Other Expenses
     30,798       17,152                                
          Total Noninterest Expense
     331,592       73,329                                
                                               
(Loss) Income Before Income Taxes
     (235,123 )     26,590                                
Income Tax (Benefit) Expense
     (12,846 )     5,320                                
          Net (Loss) Income
   $ (222,277 )   $ 21,270                                
                                               
 
 
 
                                               
   
Nine Months Ended
                                
   
September 30,
                                
Per Common Share Data:
     2009       2008                                
Weighted Average Common Shares - Basic
     43,058,489       31,363,779                                
Weighted Average Common Shares - Diluted
     43,058,489       31,531,942                                
Net (Loss) Income Per Share - Basic
   $ (5.16 )   $ 0.68                                
Net (Loss) Income Per Share - Diluted
   $ (5.16 )   $ 0.67                                
Cash Dividend Per Share
   $ 0.11     $ 0.60                                
                                               
                                               
      2009       2009       2009       2008       2008        
Asset Quality Data:
     3Q       2Q       1Q       4Q       3Q        
Nonaccrual Loans
   $ 133,737     $ 132,598     $ 85,393     $ 75,060     $ 36,278        
90 + Days Past Due Loans
     18,117       4,090       2,073       1,849       1,275        
Nonperforming Loans
     151,854       136,688       87,466       76,909       37,553        
Net Assets in Foreclosure
     1,824       2,168       2,008       1,626       1,221        
Nonperforming Assets
   $ 153,678     $ 138,856     $ 89,474     $ 78,535     $ 38,774        
Loan Loss Reserve
   $ 77,276     $ 70,341     $ 53,062     $ 49,955     $ 31,668        
Loan Loss Reserve / Loans
     2.38 %     2.05 %     1.47 %     1.36 %     1.25 %      
Loan Loss Reserve / Nonperforming Loans
     50.9 %     51.5 %     60.7 %     65.0 %     84.3 %      
Nonperforming Assets / Total Assets
     2.98 %     2.67 %     1.58 %     1.43 %     0.98 %      
Net Loan Charge-offs
   $ 7,814     $ 14,721     $ 4,014     $ 2,558     $ 2,086        
Net Loan Charge-offs (annualized)
                                              
       / Average Loans
     0.93 %     1.68 %     0.44 %     0.36 %     0.33 %      
                                               
                                               
      2009       2009       2009       2008       2008        
Selected Ratios (annualized):
     3Q       2Q       1Q       4Q       3Q        
Return on Average Assets
     -0.34 %     -15.92 %     0.33 %     0.35 %     0.68 %      
Return on Average Shareholders' Equity
     -6.73 %     -186.57 %     3.88 %     4.40 %     8.20 %      
Yield on Earning Assets (FTE)
     4.69 %     4.92 %     5.29 %     5.69 %     5.76 %      
Cost of Interest Bearing Funds
     2.18 %     2.35 %     2.53 %     2.82 %     3.10 %      
Net Interest Margin (FTE)
     2.75 %     2.82 %     3.02 %     3.16 %     3.02 %      
Leverage Ratio
     6.10 %     5.91 %     6.33 %     8.19 %     8.13 %      
                                               
      2009       2008                                
Selected Ratios (annualized):
  
Year-to-date
        Year-to-date                        
Return on Average Assets
     -5.46 %     0.73 %                              
Return on Average Shareholders' Equity
     -73.45 %     8.52 %                              
Yield on Earning Assets (FTE)
     4.96 %     5.88 %                              
Cost of Interest Bearing Funds
     2.35 %     3.27 %                              
Net Interest Margin (FTE)
     2.86 %     3.00 %                              
                                               
                                               
Balance Sheet (Period End):
     2009       2009       2009       2008       2008        
      3Q       2Q       1Q       4Q       3Q        
Assets
   $ 5,163,359     $ 5,210,327     $ 5,646,195     $ 5,490,509     $ 3,949,730        
Earning Assets
     4,870,316       4,909,443       5,109,083       4,944,126       3,626,352        
  Investment Securities
     1,082,032       1,110,123       1,179,213       1,231,661       983,349        
  Loans
     3,250,095       3,439,267       3,615,775       3,685,244       2,539,037        
  Other Earning Assets
     538,189       360,053       314,095       27,221       103,966        
Interest-Bearing Liabilities
     4,320,928       4,353,600       4,585,275       4,449,461       3,221,921        
Total Deposits
     3,941,908       3,998,155       4,147,418       3,938,432       3,018,276        
  Noninterest-Bearing Deposits
     495,644       517,108       497,921       479,469       343,308        
  Interest-Bearing Checking
     629,378       597,831       579,922       556,855       430,607        
  Money Market
     895,463       991,476       1,074,892       1,042,302       727,693        
  Savings
     309,586       317,196       309,767       270,885       182,342        
  Time Deposits
     1,611,837       1,574,544       1,684,916       1,588,921       1,334,326        
Total Borrowed Funds
     874,664       872,553       935,778       990,498       546,953        
  Federal Home Loan Bank
     471,948       475,087       515,993       522,671       213,755        
  Other Borrowings
     402,716       397,466       419,785       467,827       333,198        
Shareholders' Equity
     260,656       248,685       473,713       474,707       310,994        
                                               
Balance Sheet (Average):
     2009       2009       2008       2008       2008        
      3Q       2Q       1Q       4Q       3Q        
Assets
   $ 5,153,024     $ 5,605,475     $ 5,580,099     $ 4,341,741     $ 3,899,593        
Earning Assets
     4,845,099       5,080,393       5,047,766       3,956,963       3,580,454        
  Investment Securities
     1,095,611       1,199,597       1,209,012       1,072,468       1,002,901        
  Loans
     3,332,059       3,511,623       3,666,744       2,860,891       2,522,034        
  Other Earning Assets
     417,429       369,173       172,010       23,604       55,519        
Interest-Bearing Liabilities
     4,298,522       4,547,522       4,543,033       3,550,359       3,158,464        
Total Deposits
     3,938,675       4,121,543       4,062,577       3,289,483       2,923,815        
  Noninterest-Bearing Deposits
     511,802       493,142       472,687       445,495       348,183        
  Interest-Bearing Checking
     612,674       601,230       560,239       444,141       428,078        
  Money Market
     943,047       1,064,346       1,060,299       820,395       739,931        
  Savings
     314,911       315,856       286,317       212,081       182,403        
  Time Deposits
     1,556,241       1,646,969       1,683,035       1,367,371       1,225,220        
Total Borrowed Funds
     871,649       919,121       953,143       706,371       582,832        
  Federal Home Loan Bank
     472,705       504,903       520,592       289,245       217,717        
  Other Borrowings
     398,944       414,218       432,551       417,126       365,115        
Shareholders' Equity
     257,435       478,338       480,491       345,887       322,077        
 
 
 
                                               
Average Balance Sheets and Interest Rates - Fully-Taxable Equivalent Basis
                        
                                               
   
Three Months Ended September 30, 2009
    
Three Months Ended September 30, 2008
  
   
Average
            
Average
    
Average
            
Average
  
   
Balance
    
Interest
    
Rate
    
Balance
    
Interest
    
Rate
  
Assets
                                              
Earning assets:
                                              
  Investment securities
                                              
    Taxable investments
   $ 798,874     $ 8,761       4.36 %   $ 701,626     $ 9,518       5.40 %
    Non-taxable investments (2)
     296,737       4,782       6.41 %     301,275       4,554       6.01 %
      Total investment securities
     1,095,611       13,543       4.92 %     1,002,901       14,072       5.58 %
  Federal funds sold and deposits in banks
     417,429       281       0.27 %     55,519       232       1.66 %
  Loans(2) (3)
     3,332,059       43,270       5.17 %     2,522,034       37,541       5.91 %
        Total earning assets
     4,845,099       57,094       4.69 %     3,580,454       51,845       5.76 %
  Noninterest-earning assets
     307,925                       319,139                  
          Total assets
   $ 5,153,024                     $ 3,899,593                  
                                                 
Liabilities and Shareholders' Equity
                                                
Interest-bearing liabilities:
                                                
  Interest-bearing deposits:
                                                
    Savings and money market
   $ 1,870,632       4,372       0.93 %   $ 1,350,412       5,780       1.70 %
    Time
     1,556,241       12,189       3.12 %     1,225,220       12,976       4.21 %
      Total interest-bearing deposits
     3,426,873       16,561       1.92 %     2,575,632       18,756       2.90 %
  Borrowed funds
     871,649       7,006       3.20 %     582,832       5,889       4.02 %
      Total interest-bearing liabilities
     4,298,522       23,567       2.18 %     3,158,464       24,645       3.10 %
  Noninterest-bearing liabilities:
                                                
    Demand deposits
     511,802                       348,183                  
    Other liabilities
     85,265                       70,869                  
      Total noninterest-bearing liabilities
     597,067                       419,052                  
        Total liabilities
     4,895,589                       3,577,516                  
  Shareholders' equity
     257,435                       322,077                  
          Total liabilities and shareholders' equity
   $ 5,153,024                     $ 3,899,593                  
                                                 
Net interest spread
                     2.51 %                     2.66 %
Effect of noninterest-bearing sources
                     0.24 %                     0.36 %
Net interest income/margin on earning assets
           $ 33,527       2.75 %           $ 27,200       3.02 %
Less tax equivalent adjustment
             2,089                       1,903          
Net interest income
           $ 31,438                     $ 25,297          
                                                 
   
Nine Months Ended September 30, 2009
    
Nine Months Ended September 30, 2008
  
   
Average
            
Average
    
Average
            
Average
  
   
Balance
    
Interest
    
Rate
    
Balance
    
Interest
    
Rate
  
Assets
                                                
Earning assets:
                                                
  Investment securities
                                                
    Taxable investments
   $ 858,107     $ 31,000       4.83 %   $ 731,870     $ 28,894       5.27 %
    Non-taxable investments (2)
     309,551       15,064       6.51 %     293,371       13,290       6.05 %
      Total investment securities
     1,167,658       46,064       5.27 %     1,025,241       42,184       5.50 %
  Federal funds sold and deposits in banks
     320,436       647       0.27 %     56,825       1,045       2.46 %
  Loans(2) (3)
     3,502,250       138,450       5.29 %     2,492,498       114,013       6.11 %
        Total earning assets
     4,990,344       185,161       4.96 %     3,574,564       157,242       5.88 %
  Noninterest-earning assets
     454,289                       307,982                  
          Total assets
   $ 5,444,633                     $ 3,882,546                  
                                                 
Liabilities and Shareholders' Equity
                                                
Interest-bearing liabilities:
                                                
  Interest-bearing deposits:
                                                
    Savings and money market
   $ 1,919,507       15,878       1.11 %   $ 1,387,554       19,536       1.88 %
    Time
     1,628,284       40,818       3.35 %     1,208,467       40,414       4.47 %
      Total interest-bearing deposits
     3,547,791       56,696       2.14 %     2,596,021       59,950       3.08 %
  Borrowed funds
     914,339       21,797       3.19 %     545,701       17,068       4.18 %
      Total interest-bearing liabilities
     4,462,130       78,493       2.35 %     3,141,722       77,018       3.27 %
  Noninterest-bearing liabilities:
                                                
    Demand deposits
     492,687                       337,739                  
    Other liabilities
     85,213                       69,531                  
      Total noninterest-bearing liabilities
     577,900                       407,270                  
        Total liabilities
     5,040,030                       3,548,992                  
  Shareholders' equity
     404,603                       333,554                  
          Total liabilities and shareholders' equity
   $ 5,444,633                     $ 3,882,546                  
                                                 
Net interest spread
                     2.61 %                     2.61 %
Effect of noninterest-bearing sources
                     0.25 %                     0.39 %
Net interest income/margin on earning assets
           $ 106,668       2.86 %           $ 80,224       3.00 %
Less tax equivalent adjustment
             6,473                       5,531          
Net interest income
           $ 100,195                     $ 74,693          
 
 
 
                                                 
Regulatory Capital
                                                
                                                 
                                                 
   
Actual
                                  
As of September 30, 2009
  
Amount
    
Ratio
                                  
                                                 
Total Capital (to risk weighted assets):
                                                
Corporation
   $ 358,533       9.51 %                                
Harleysville National Bank
     344,277       9.15 %                                
Tier 1 Capital (to risk weighted assets):
                                                
Corporation
     311,054       8.25 %                                
Harleysville National Bank
     296,884       7.89 %                                
Tier 1 Capital (to average assets):
                                                
Corporation
     311,054       6.10 %                                
Harleysville National Bank
     296,884       5.83 %                                
                                                 
As of December 31, 2008
                                                
                                                 
Total Capital (to risk weighted assets):
                                                
Corporation
   $ 384,522       8.88 %                                
Harleysville National Bank
     370,552       8.58 %                                
Tier 1 Capital (to risk weighted assets):
                                                
Corporation
     334,467       7.73 %                                
Harleysville National Bank
     320,497       7.42 %                                
Tier 1 Capital (to average assets):
                                                
Corporation
     334,467       8.19 %                                
Harleysville National Bank
     320,497       7.88 %                                
                                                 
                                                 
(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.