HNBC Harleysville Natl Corp Pa (MM)

Third Quarter Earnings Up 15.6% at Harleysville National Corporation HARLEYSVILLE, Pa., Oct. 13 /PRNewswire-FirstCall/ -- Harleysville National Corporation (HNC) (NASDAQ:HNBC), today announced third quarter 2004 earnings of $10.2 million, a 15.6% increase over third quarter 2003 earnings of $8.8 million. Earnings for the nine-month period ending September 30, 2004, were $28.5 million, a 7.9% increase over earnings of $26.4 million for the nine-month period ending September 30, 2003. The Company's consolidated total assets were $2.98 billion at September 30, 2004, an increase of 18.0% or $453.2 million above the September 30, 2003, level of $2.52 billion. Of this increase, 9.2% or $231.3 million was attributable to the acquisition of Millennium Bank. For the quarter ending September 30, 2004, diluted earnings per share of $.38 increased 11.8% over the $.34 earned during the third quarter of 2003, and basic earnings per share at $.39 increased 8.3% over $.36 earned in the third quarter of 2003. For the nine-month period ended September 30, 2004, diluted earnings per share of $1.07 were 4.9% higher than the $1.02 earned during the nine months of 2003, and basic earnings per share of $1.11 were up 4.7% from $1.06 during the nine months of 2003. The financial results for 2004 include the impact of operations from the acquisition of Millennium Bank effective April 30, 2004, and the related issuance of 946,000 common shares, as well as the issuance of 1,295,000 shares for a 5% stock dividend payable September 15, 2004. All share and per share information has been restated to reflect this stock dividend. "We are certainly pleased to announce a double-digit percentage increase in earnings. And, we are especially happy to report core loan growth, which exceeded 15.2% for the most recent twelve months," said Walter E. Daller, Jr., President and CEO of HNC. Net interest income on a fully tax-equivalent basis in the third quarter of 2004 increased $2.5 million or 11.7% over the same period in 2003 and increased $4.5 million or 6.9% from the nine-month period ending September 30, 2003. This increase was primarily the result of higher earning asset volumes. The net interest margin for the third quarter of 2004 was 3.51%, compared to 3.71% for the third quarter of 2003, the decline being primarily due to the decline in loan yields. Average earning assets increased $397 million or 17.3% during the third quarter of 2004 versus the comparable period in 2003, while average loans increased $362.9 million or 26.8%. Loans totaling $157.1 million were acquired in the acquisition of Millennium Bank. The company also experienced an improvement in loan quality during the third quarter of 2004, compared to the third and fourth quarters of 2003. Nonperforming assets decreased in the third quarter of 2004 by $1.5 million and $912,000 from the third 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 425.4% at September 30, 2004, compared to 371.7% at December 31, 2003, and 326.5% at September 30, 2003. Nonperforming assets, including nonaccrual loans, net assets in foreclosure and loans 90 days or more past due was .15% of total assets at September 30, 2004, an improvement from .22% at December 31, 2003, and .24% at September 30, 2003. The lower provision for loan losses for the three and nine-month periods ending September 30, 2004, compared to the same periods in 2003, is reflective of the improved loan quality and management's continued analysis. Core deposits increased 21.1% or $267.7 million, to $1.54 billion at September 30, 2004, from $1.27 billion at September 30, 2003. Of this increase, 4.7% or $59.8 million was due to the acquisition of Millennium Bank. Total deposits increased $218.9 million for the same period of which $151.2 million was due to the acquisition of Millennium Bank. Borrowings increased $183.7 million or 69.6% primarily due to loan growth and the Millennium Bank acquisition. Trust and investment advisory services income for the quarter ending September 30, 2004 increased $924,000 or 96.9% from the same period a year ago. Of this amount, $676,000 or 70.9% was attributable to the acquisition of Millennium Bank. Total noninterest income of $6.7 million for the current quarter reflects an increase of $1.4 million from the comparable period in 2003, primarily due to an increase of $924,000 in trust and investment advisory fees and an increase of $680,000 in the gains related to the auto leasing portfolio, partially offset by a $247,000 decrease in the gain on sales of investment securities. For the first nine months of 2004, total noninterest income of $18.8 million decreased $3.7 million, or 16.3% from $22.4 million in the comparable period last year. This was mainly due to a decrease of $4.8 million on the sale of investment securities and a $1.1 million decrease in life insurance income, partially offset by an increase of $1.8 million in trust and investment advisory income and an increase of $680,000 in the gains related to the auto leasing portfolio. Noninterest expense of $14.5 million increased $1.4 million or 10.5% from $13.1 million in the third quarter of 2003. The increase in noninterest expense was due to a $1.8 million increase in salaries and benefits primarily related to the acquisition of Millennium and a $427,000 increase in amortization of mortgage servicing rights, partially offset by a decrease in other expenses of $947,000. The decrease in other expenses was due to higher deferred loan expenses of $1.3 million, offset by an increase of $398,000 in marketing costs. For the first nine months of 2004, noninterest expense decreased $2.9 million, or 6.2%, to $42.9 million from $45.7 million in 2003. This decrease was mainly due to lower off-lease vehicle residual reserve of $2.6 million, a decrease of $2.6 million in Federal Home Loan Bank borrowings prepayment fees, and higher loan origination expense deferrals amounting to $2.4 million, partially offset by an increase of $3.2 million in salary and employee benefit expense and $493,000 in occupancy expense, mostly related to the Millennium acquisition and a new branch opening. Harleysville National Corporation, with assets of $2.98 billion, is the holding company for Harleysville National Bank (HNB). Investment Management and Trust Services are provided through the Millennium Wealth Management and Private Banking Group, a division of HNB, with assets under management exceeding $1.4 billion. Cumberland Advisors, Inc., a registered investment advisor specializing in fixed-income money management and equities, using exchange-traded funds, is also a part of the Millennium Wealth Management and Private Banking Group. 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 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 (Dollars in thousands, except per share data) September 30, 2004 (unaudited) For the period: Three Months Ended Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, 2004 2004 2004 2003 2003 Interest Income $33,366 $30,994 $29,173 $30,287 $28,439 Interest Expense 11,286 9,674 8,943 9,393 9,216 Net Interest Income 22,080 21,320 20,230 20,894 19,223 Provision for Loan Losses 499 497 489 641 630 Net Interest Income after Provision for Loan Losses 21,581 20,823 19,741 20,253 18,593 Service Charges 2,000 1,929 1,925 2,081 2,007 Gains on Sales of Investment Securities, Net 112 641 900 164 359 Trust, Investment Services and Advisory Income 1,878 1,588 1,121 1,017 954 Bank-Owned Life Insurance Income 647 521 611 680 673 Other Income 2,056 1,608 1,226 1,274 1,259 Total Noninterest Income 6,693 6,287 5,783 5,216 5,252 Salaries, Wages and Employee Benefits 9,754 8,834 8,277 7,518 7,938 Occupancy 1,135 1,120 1,084 924 941 Furniture and Equipment 1,414 1,510 1,258 1,637 1,525 Other Expenses 2,174 3,129 3,198 3,812 2,694 Total Noninterest Expense 14,477 14,593 13,817 13,891 13,098 Income Before Income Taxes 13,797 12,517 11,707 11,578 10,747 Income Tax Expense 3,632 3,135 2,800 2,606 1,952 Net Income $10,165 $9,382 $8,907 $8,972 $8,795 Per Common Share Data: Weighted Average Common Shares - Basic 26,240,616 25,861,549 25,128,032 25,029,504 25,003,053 Weighted Average Common Shares - Diluted 27,055,603 26,722,932 26,033,205 26,007,148 25,816,995 Net Income Per Share - Basic $0.39 $0.37 $0.35 $0.35 $0.36 Net Income Per Share - Diluted $0.38 $0.35 $0.34 $0.35 $0.34 Cash Dividend Per Share $0.18 $0.16 $0.16 $0.18 $0.15 Book Value $10.19 $9.58 $9.45 $9.07 $8.75 Market Value $24.51 $24.38 $26.50 $28.67 $22.28 For the period: Nine Months Ended September 30, 2004 2003 Interest Income $93,533 $88,913 Interest Expense 29,903 30,686 Net Interest Income 63,630 58,227 Provision for Loan Losses 1,485 2,559 Net Interest Income after Provision for Loan Losses 62,145 55,668 Service Charges 5,854 5,774 Gains on Sales of Investment Securities, Net 1,653 6,449 Trust, Investment Services and Advisory Income 4,587 2,820 Bank-Owned Life Insurance Income 1,779 1,935 Income on Life Insurance - 1,119 Other Income 4,890 4,325 Total Noninterest Income 18,763 22,422 Salaries, Wages and Employee Benefits 26,865 23,655 Occupancy 3,339 2,846 Furniture and Equipment 4,182 4,206 Prepayment Fee - 2,594 Other Expenses 8,501 12,437 Total Noninterest Expense 42,887 45,738 Income Before Income Taxes 38,021 32,352 Income Tax Expense 9,567 5,991 Net Income $28,454 $26,361 Per Common Share Data: Weighted Average Common Shares - Basic 25,745,214 24,983,586 Weighted Average Common Shares - Diluted 26,614,877 25,782,847 Net Income Per Share - Basic $1.11 $1.06 Net Income Per Share - Diluted $1.07 $1.02 Cash Dividend Per Share $0.50 $0.44 Asset Quality 2004 2004 2004 2003 2003 Data: 3Q 2Q 1Q 4Q 3Q Nonaccrual Loans $3,235 $3,245 $3,645 $3,343 $3,962 90 + Days Past Due Loans 948 919 1,178 1,164 1,200 Nonperforming Loans 4,183 4,164 4,823 4,507 5,162 Net Assets in Foreclosure 347 389 423 935 893 Nonperforming Assets $4,530 $4,553 $5,246 $5,442 $6,055 Loan Loss Reserve $17,795 $17,940 $16,464 $16,753 $16,854 Loan Loss Reserve / Loans 1.00% 1.07% 1.15% 1.19% 1.22% Loan Loss Reserve / Nonperforming Loans 425.4% 430.8% 341.3% 371.7% 326.5% Nonperforming Assets / Total Assets 0.15% 0.16% 0.21% 0.22% 0.24% Net Loan Charge-offs $644 $698 $778 $742 $1,313 Net Loan Charge-offs (annualized) / Average Loans 0.15% 0.18% 0.22% 0.21% 0.39% Selected Ratios 2004 2004 2004 2003 2003 (annualized): 3Q 2Q 1Q 4Q 3Q Return on Average Assets 1.40% 1.37% 1.43% 1.41% 1.44% Return on Average Shareholders' Equity 15.61% 15.06% 15.33% 16.22% 16.11% Return on Average Shareholders' Realized Equity * 15.40% 15.17% 15.97% 16.56% 16.65% Yield on Earning Assets (FTE) 5.18% 5.12% 5.25% 5.38% 5.31% Cost of Interest Bearing Funds 2.01% 1.82% 1.86% 1.88% 1.95% Net Interest Margin (FTE) 3.51% 3.62% 3.73% 3.82% 3.71% Leverage Ratio 8.99% 9.28% 10.04% 8.77% 8.97% * Excluding unrealized gain (loss) on investment securities available for sale. 2004 2003 Selected Ratios (annualized): Year-to-date Year-to-date Return on Average Assets 1.40% 1.44% Return on Average Shareholders' Equity 15.42% 16.32% Return on Average Shareholders' Realized Equity * 15.57% 16.99% Yield on Earning Assets (FTE) 5.19% 5.51% Cost of Interest Bearing Funds 1.90% 2.14% Net Interest Margin (FTE) 3.62% 3.74% * Excluding unrealized gain (loss) on investment securities available for sale. Balance Sheet (Period End): 2004 2004 2004 2003 2003 3Q 2Q 1Q 4Q 3Q Assets $2,976,173 $2,865,949 $2,542,328 $2,510,939 $2,523,002 Earning Assets 2,791,891 2,678,772 2,406,068 2,371,816 2,386,477 Investment Securities 975,750 957,398 948,749 924,874 915,832 Loans, Net of Unearned Fees 1,774,189 1,683,528 1,428,145 1,408,391 1,377,682 Other Earning Assets 41,952 37,846 29,174 38,551 92,963 Interest-Bearing Liabilities 2,332,102 2,218,687 1,930,052 1,940,016 1,970,774 Total Deposits 2,209,753 2,093,101 1,968,521 1,979,081 1,990,832 Noninterest- Bearing Deposits 325,132 345,191 317,566 294,121 283,886 Interest-Bearing Checking 320,276 258,739 268,110 283,607 276,941 Money Market 661,480 561,823 521,085 506,516 490,341 Savings 229,992 245,768 225,981 221,778 217,969 Time, under $100,000 527,971 523,587 481,400 491,740 506,976 Time, $100,000 or greater 144,902 157,993 154,379 181,319 214,719 Total Borrowed Funds 447,481 470,777 279,097 255,056 263,828 Federal Home Loan Bank 257,750 241,750 172,750 172,750 168,750 Other Borrowings 189,731 229,027 106,347 82,306 95,078 Shareholders' Equity 266,965 251,877 237,964 227,053 218,878 Balance Sheet (Average): 2004 2004 2004 2003 2003 3Q 2Q 1Q 4Q 3Q Assets $2,878,769 $2,759,563 $2,497,085 $2,543,616 $2,436,763 Earning Assets 2,695,579 2,593,105 2,365,497 2,408,967 2,298,565 Investment Securities 932,330 983,420 910,314 983,318 898,886 Loans, Net of Unearned Fees 1,717,245 1,572,830 1,414,802 1,389,595 1,354,394 Other Earning Assets 46,004 36,855 40,381 36,054 45,285 Interest-Bearing Liabilities 2,237,681 2,136,010 1,931,950 1,993,653 1,888,489 Total Deposits 2,154,443 2,048,279 1,961,481 1,976,616 1,906,373 Noninterest- Bearing Deposits 329,559 316,715 280,809 279,307 278,267 Interest-Bearing Checking 285,735 274,978 280,142 280,076 241,283 Money Market 620,420 537,614 517,846 501,127 479,375 Savings 237,463 239,971 222,807 221,116 219,778 Time, under $100,000 525,701 508,275 487,379 497,281 508,256 Time, $100,000 or greater 155,565 170,726 172,498 197,709 179,414 Total Borrowed Funds 412,797 404,446 251,278 296,344 260,383 Federal Home Loan Bank 255,837 187,608 172,750 172,750 164,728 Other Borrowings 156,960 216,838 78,528 123,594 95,655 Shareholders' Equity 259,035 250,504 232,386 221,236 218,396 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.harleysvillebank.com/

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