Harleysville National Corp. Ends 2003 With Record Earnings
HARLEYSVILLE, Pa., Jan. 12 /PRNewswire-FirstCall/ -- Harleysville
National Corporation (HNC) , today announced record fourth quarter
2003 earnings of $8,972,000, a 7.8% increase over fourth quarter
2002 earnings of $8,323,000. Net income for the year ending
December 31, 2003, was $35,333,000, a 7.3% increase over the
$32,927,000 for the comparable period in 2002. This increase
resulted in 28 consecutive years of record earnings for HNC. For
the quarter ending December 31, 2003, diluted earnings per share of
$.37 were 8.8% higher than the $.34 earned during the fourth
quarter of 2002, and basic earnings per share at $.37 were up 5.7%
from $.35 in the fourth quarter of 2002. For the year ending
December 31, 2003, diluted earnings per share of $1.44 were up 7.5%
from the $1.34 in the comparable period last year. Basic earnings
per share of $1.48 for the year ending December 31, 2003, were 7.2%
higher than the $1.38 in 2002. "We have once again maintained
strong returns and improved loan quality," said Walter E. Daller,
Jr., Chairman, President and CEO of HNC. "2003 was a challenging
year and we are pleased that HNC managed to maintain its long-
running record of increased earnings," he added. Net interest
income in the fourth quarter of 2003 increased $1,611,000 or 8.4%
over the same period in 2002. This rise in net interest income was
due to an increase in earning asset volumes and a rise in the net
interest margin. The fourth quarter 2003 net interest margin of
3.82% surpassed the 3.64% net interest margin recorded in the same
period in 2002. The higher net interest margin was the result of a
reduction in funding rates and an increase in loan volumes. The
fourth quarter of 2003 net interest margin was also higher than the
third quarter of 2003 net interest margin of 3.71%. "During the
last few months, we have seen signs that the economy is
strengthening. We have achieved good returns during the recent
economic downturn, and feel we are well positioned as the economy
improves," said Daller. "During the second half of 2003, the
annualized growth in loans was 10.8% and we are encouraged by an
improvement in the net interest margin during the fourth quarter,"
he added. The loan balance at December 31, 2003 of $1,408,391,000
increased 5.6% from the December 31, 2002 balance of
$1,333,292,000. The growth in loans during 2003 was impacted by
planned declines in both the indirect vehicle loan and vehicle
leasing portfolios. Net of these two portfolios, total loans grew
12.2%, led by increases in commercial related and home equity
loans. HNC continued to experience improvement in its asset quality
during 2003. Nonperforming assets, including nonaccrual loans, net
assets in foreclosure and loans 90 days or more past due was .22%
of total assets at December 31, 2003, compared to .27% at December
31, 2002. The ratio of the allowance for loan losses to
nonperforming loans was 371.7% at December 31, 2003, compared to
272.8% at December 31, 2002, and 326.5% at September 30, 2003.
During 2003, HNC continued its efforts to grow funding through core
deposits. While total deposits remained relatively flat, lower rate
core deposits grew $95,648,000, or 7.9% and higher rate
certificates of deposits were reduced by $96,389,000, or 12.5%.
Other operating income of $5,216,000 earned in the fourth quarter
of 2003 was $224,000 less than the fourth quarter of 2002 as a
result of lower security gains, residential mortgage sale gains and
bank-owned life insurance income. Offsetting these decreases were
increases in deposit service charges and higher trust and
investment services income. The higher deposit service charges were
primarily related to higher overdraft fees and the increase in
trust and investment services income resulted from higher retail
investment fees. The fourth quarter 2003 other operating expenses
of $13,891,000 increased $288,000, or 2.1% from the fourth quarter
of 2002. Salaries increased $336,000, or 4.7% and furniture and
equipment expenses grew $137,000, or 9.1%. A $182,000 reduction in
other expenses was the result of a decrease in the off-lease
vehicle residual reserve expense, partially offset by increases in
deferred compensation expenses and legal fees. Occupancy expense
decreased $3,000, or 0.3%. Providing Real Life Financial Solutions,
Harleysville National Corporation (HNC) has assets in excess of
$2.5 billion and operates 41 banking offices in 10 counties
throughout Eastern Pennsylvania through its three subsidiary banks
- Harleysville National Bank and Trust Company, Citizens National
Bank and Security National Bank. Investment Management and Trust
Services are provided throughout the company by Harleysville
National Bank and Trust Company. Harleysville National
Corporation's stock is traded under the symbol "HNBC" and is
commonly quoted under Nasdaq National Market Issues. For more
information, visit the HNC Web site at http://www.hncbank.com/.
This press release may contain forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995.
Actual results and trends could differ materially from those set
forth in such statements due to various factors. Such factors
include the possibility that increased demand or prices for the
Company's financial services and products may not occur, changing
economic and competitive conditions, technological developments,
and other risks and uncertainties, including those detailed in the
company's filings with the Securities and Exchange Commission.
Harleysville National Corporation Consolidated Selected Financial
Data December 31, 2003 (unaudited) For the period: Three Months
Ended Dec. 31, Sept. 30, June 30, March 31, Dec. 31, 2003 2003 2003
2003 2002 Interest Income $30,287 $28,439 $29,889 $30,585 $32,371
Interest Expense 9,393 9,216 10,084 11,386 13,088 Net Interest
Income 20,894 19,223 19,805 19,199 19,283 Provision For Loan Losses
641 630 1,320 609 969 Net Interest Income After Provision For Loan
Losses 20,253 18,593 18,485 18,590 18,314 Service Charges 2,081
2,007 1,937 1,830 1,929 Security Gains, Net 164 359 4,774 1,316 282
Trust and Investment Services Income 1,017 954 978 888 955
Bank-Owned Life Insurance Income 680 673 631 631 789 Income on Life
Insurance - - - 1,119 - Other Income 1,274 1,259 1,639 1,427 1,485
Total Other Income 5,216 5,252 9,959 7,211 5,440 Salaries, Wages
and Employee Benefits 7,518 7,938 7,876 7,841 7,182 Occupancy 924
941 882 1,023 927 Furniture and Equipment 1,637 1,525 1,376 1,305
1,500 Prepayment Fee - - 2,594 - - Other Expenses 3,812 2,694 4,399
5,344 3,994 Total Other Operating Expenses 13,891 13,098 17,127
15,513 13,603 Income Before Income Taxes 11,578 10,747 11,317
10,288 10,151 Income Tax Expense 2,606 1,952 2,216 1,823 1,828 Net
Income $8,972 $8,795 $ 9,101 $8,465 $8,323 Per Common Share Data: *
Weighted Average Common Shares - Diluted 24,768,712 24,587,614
24,540,648 24,469,511 24,552,398 Weighted Average Common Shares -
Basic 23,837,623 23,812,431 23,779,235 23,770,390 23,829,011 Net
Income Per Share - Diluted $0.37 $0.36 $0.37 $0.34 $0.34 Net Income
Per Share - Basic $0.37 $0.37 $0.38 $0.36 $0.35 Cash Dividend Per
Share $0.190 $0.160 $ 0.152 $0.152 $0.168 Book Value $9.52 $9.18
$9.42 $9.06 $8.67 Market Value $30.10 $23.39 $ 21.55 $19.46 $21.22
* Adjusted for a five-for-four common stock split effective
September 15, 2003. For the period: Twelve Months Ended December
31, 2003 2002 Interest Income $119,200 $132,630 Interest Expense
40,079 52,610 Net Interest Income 79,121 80,020 Provision For Loan
Losses 3,200 4,370 Net Interest Income After Provision For Loan
Losses 75,921 75,650 Service Charges 7,855 6,923 Security Gains,
Net 6,613 3,475 Trust and Investment Services Income 3,837 3,764
Bank-Owned Life Insurance Income 2,615 2,689 Income on Life
Insurance 1,119 - Other Income 5,599 5,672 Total Other Income
27,638 22,523 Salaries, Wages and Employee Benefits 31,173 29,813
Occupancy 3,770 3,829 Furniture and Equipment 5,843 5,535
Prepayment Fee 2,594 - Other Expenses 16,249 17,120 Total Other
Operating Expenses 59,629 56,297 Income Before Income Taxes 43,930
41,876 Income Tax Expense 8,597 8,949 Net Income $35,333 $32,927
Per Common Share Data: * Weighted Average Common Shares - Diluted
24,624,063 24,625,609 Weighted Average Common Shares - Basic
23,804,813 23,902,223 Net Income Per Share - Diluted $1.44 $1.34
Net Income Per Share - Basic $1.48 $1.38 Cash Dividend Per Share
$0.654 $0.564 * Adjusted for a five-for-four common stock split
effective September 15, 2003. 2003 2003 2003 2003 2002 Asset
Quality Data: 4Q 3Q 2Q 1Q 4Q Nonaccrual Loans $3,343 $3,962 $ 4,146
$4,492 $5,109 90 + Days Past Due Loans 1,164 1,200 1,681 1,406
1,193 Nonperforming Loans 4,507 5,162 5,827 5,898 6,302 Net Assets
In foreclosure 935 893 729 485 390 Nonperforming Assets $5,442
$6,055 $ 6,556 $6,383 $6,692 Loan Loss Reserve $16,753 $16,854
$17,538 $16,902 $17,190 Loan Loss Reserve / Loans 1.19% 1.22% 1.31%
1.26% 1.29% Loan Loss Reserve / Nonperforming Loans 371.7% 326.5%
301.0% 286.6% 272.8% Nonperforming Assets / Total Assets 0.22%
0.24% 0.27% 0.26% 0.27% Net Loan Charge-offs $742 $1,313 $684 $898
$918 Net Loan Charge-offs (annualized) / Average Loans 0.21% 0.39%
0.20% 0.27% 0.28% Selected Ratios 2003 2003 2003 2003 2002
(annualized): 4Q 3Q 2Q 1Q 4Q Return on Average Assets 1.41% 1.44%
1.49% 1.38% 1.34% Return on Average Shareholders' Equity 16.22%
16.11% 16.67% 16.18% 16.10% Return on Average Shareholders'
Realized Equity * 16.56% 16.65% 17.53% 16.78% 16.81% Yield on
Earning Assets (FTE) 5.38% 5.31% 5.57% 5.65% 5.86% Cost of Interest
Bearing Funds 1.88% 1.95% 2.12% 2.34% 2.64% Net Interest Margin
(FTE) 3.82% 3.71% 3.82% 3.68% 3.64% Leverage Ratio 8.77% 8.97%
8.73% 8.49% 8.19% * Excluding unrealized gain (loss) on investment
securities available for sale. 2003 2002 Selected Ratios
(annualized): Year-to-date Year-to-date Return on Average Assets
1.43% 1.43% Return on Average Shareholders' Equity 16.29% 16.60%
Return on Average Shareholders' Realized Equity * 16.87% 17.06%
Yield on Earning Assets (FTE) 5.52% 6.41% Cost of Interest Bearing
Funds 2.07% 2.89% Net Interest Margin (FTE) 3.80% 4.00% Leverage
Ratio * Excluding unrealized gain (loss) on investment securities
available for sale. Balance Sheet (Period End): 2003 2003 2003 2003
2002 4Q 3Q 2Q 1Q 4Q Assets $2,510,939 $2,523,002 $2,406,132 $
2,470,414 $ 2,490,864 Earning Assets 2,371,816 2,386,477 2,244,720
2,324,511 2,346,669 Securities 924,874 915,832 866,191 959,095
971,467 Loans, Net 1,408,391 1,377,682 1,335,919 1,337,130
1,333,292 Other Earning Assets 38,551 92,963 42,610 28,286 41,910
Total Deposits 1,979,081 1,990,832 1,873,218 1,953,466 1,979,822
Non-Interest Bearing Deposits 294,121 283,886 291,454 270,759
269,781 Interest Bearing Checking 283,607 276,941 218,200 234,660
249,646 Money Market 506,516 490,341 483,326 507,913 488,944
Savings 221,778 217,969 220,001 212,967 202,003 Time, under
$100,000 491,740 506,976 503,850 516,994 526,885 Time, $100,000 or
greater 181,319 214,719 156,387 210,173 242,563 Other Borrowings
255,056 263,828 254,563 247,919 253,906 Federal Home Loan Bank
172,750 168,750 153,750 162,750 162,750 Other Borrowings 82,306
95,078 100,813 85,169 91,156 Shareholders' Equity 226,991 218,878
223,849 215,109 206,206 Balance Sheet (Daily Average): 2003 2003
2003 2003 2002 4Q 3Q 2Q 1Q 4Q Assets $2,543,616 $2,436,763
$2,435,580 $ 2,450,397 $ 2,491,372 Earning Assets 2,408,967
2,298,565 2,305,590 2,321,612 2,360,479 Securities 983,318 898,886
948,782 970,336 1,000,651 Loans, Net 1,389,595 1,354,394 1,342,758
1,329,093 1,337,848 Other Earning Assets 36,054 45,285 14,050
22,183 21,980 Total Deposits 1,976,616 1,906,373 1,889,663
1,938,766 1,966,489 Non-Interest Bearing Deposits 279,307 278,267
260,688 242,793 244,785 Interest Bearing Checking 280,076 241,283
223,152 235,502 248,302 Money Market 501,127 479,375 493,561
498,328 476,107 Savings 221,116 219,778 216,445 207,512 201,157
Time, under $100,000 497,281 508,256 510,703 523,089 529,515 Time,
$100,000 or greater 197,709 179,414 185,114 231,542 266,623 Other
Borrowings 296,344 260,383 274,567 252,411 263,062 Federal Home
Loan Bank 172,750 164,728 164,794 162,750 162,750 Other Borrowings
123,594 95,655 109,773 89,661 100,312 Shareholders' Equity 221,236
218,396 218,363 209,241 206,739 DATASOURCE: Harleysville National
Corporation CONTACT: Walter E. Daller Jr., Chairman, President and
CEO of Harleysville National Corporation, +1-215-256-8851 ext. 2300
Web site: http://www.hncbank.com/
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