HNBC Harleysville Natl Corp Pa (MM)

First Quarter Earnings Up 2.9% at Harleysville National Corporation HARLEYSVILLE, Pa., April 18 /PRNewswire-FirstCall/ -- Harleysville National Corporation (HNC) (NASDAQ:HNBC), today announced first quarter 2005 earnings of $9.2 million, a 2.9% increase over first quarter 2004 earnings of $8.9 million. The corporation's consolidated total assets were $3.0 billion at March 31, 2005, an increase of 18.1% or $460.2 million above the March 31, 2004, level of $2.54 billion. Of this increase, 11.0% or $279.8 was due to loan growth and 9.1%, or $231.3 million, was attributable to the acquisition of Millennium Bank partially offset by a net decrease in cash and investments of 2.5% or $63.0 million. For the quarter ending March 31, 2005, diluted earnings per share of $.34 and basic earnings per share of $.35 remained level with the earnings during the first quarter of 2004. The financial results for 2005 include the impact of operations from the acquisition of Millennium Bank effective April 30, 2004, and the related issuance of 946,000 (993,000 restated for stock dividend) common shares, as well as the issuance of 1,295,000 common shares for a 5% stock dividend paid on September 15, 2004. All share and per share information has been restated to reflect this stock dividend. Gregg J. Wagner, President and Chief Executive Officer, said, "We are pleased to announce another successful quarter. I am proud of our employees' efforts which are reflected in these first quarter results. Our entire team remains committed to superior financial performance, enhancing shareholder value and providing our customers with the best banking experience possible. We continue our emphasis on building Millennium Wealth Management & Private Banking's full line of trust, wealth management and private banking products and services and hope to build upon the success they achieved this quarter, which is represented in the increase in noninterest income generated." Net interest income on a fully tax-equivalent basis in the first quarter of 2005 increased $1.2 million or 5.3% over the same period in 2004. This increase was primarily the result of loan growth partially offset by a higher level of borrowings and higher deposit rates. The net interest margin for the first quarter of 2005 was 3.37%, compared to 3.73% for the first quarter of 2004, the decline being primarily due to higher funding costs, particularly increased volumes in higher-rate money market accounts and lower loan yields. The net interest margin increased 3 basis points over the fourth quarter of 2004 after declines during the previous four quarters. Average earning assets increased $436.3 million or 18.4% during the first quarter of 2005 versus the comparable period in 2004, while average loans increased $430.6 million or 30.4% during the same period. Loans totaling $157.1 million were acquired in the acquisition of Millennium Bank which contributed to the increase in average loans. Nonperforming assets, including nonaccrual loans, net assets in foreclosure and loans 90 days or more past due was .19% of total assets at March 31, 2005, compared to .20% at December 31, 2004 and .21% at March 31, 2004. The ratio of the allowance for loan losses to nonperforming loans (nonaccruing loans and loans 90 days or more past due) was 362.1% at March 31, 2005, compared to 324.6% at December 31, 2004 and 341.3% at March 31, 2004. The increase in the provision for the first quarter of 2005 compared to the first quarter of 2004 was primarily due to inherent risk related to loan growth and an increase in nonperforming loans of $348,000. Core deposits increased 19.1% or $254.3 million, to $1.59 billion at March 31, 2005, from $1.33 billion at March 31, 2004. Of this increase, 4.5% or $59.8 million was due to the acquisition of Millennium Bank. Total deposits increased $269.0 million for the same period, which was primarily due to the growth in core deposits. Average borrowings increased $202.6 million primarily to support loan growth and the Millennium Bank acquisition. Total noninterest income of $6.9 million for the first quarter of 2005 reflects an increase of $1.2 million from the comparable period in 2004, primarily due to increases of $808,000 in trust and investment advisory fees, $225,000 in income from reinsurance activities and $226,000 in gains related to the auto leasing portfolio, partially offset by $223,000 in losses related to the equipment leasing portfolio. Noninterest expense of $15.5 million for the first quarter of 2005 increased $1.7 million or 12.2% from $13.8 million in the first quarter of 2004. The increase in noninterest expense was mainly due to a $1.2 million increase in salaries and benefits, primarily related to the acquisition of Millennium Bank and higher healthcare costs. In addition, occupancy expense increased $307,000 during the first quarter of 2005 over the comparable period in 2004 mostly due to the Millennium acquisition and a new branch opening, deferred compensation expense for directors and employees increased $168,000 and advertising expense increased $223,000. Partially offsetting these variances was higher loan origination expense deferrals amounting to $457,000 related to higher 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, with assets under management exceeding $1.6 billion. Cumberland Advisors, Inc., a SEC registered investment advisor specializing in fixed-income money management and equities, using exchange- traded funds, is also a part of Millennium Wealth Management & Private Banking. 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 website 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 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 (Dollars in thousands, except per share data) March 31, 2005 (unaudited) For the period: Three Months Ended Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 2005 2004 2004 2004 2004 Interest Income $35,272 $34,196 $33,366 $30,994 $29,173 Interest Expense 13,602 12,735 11,286 9,674 8,943 Net Interest Income 21,670 21,461 22,080 21,320 20,230 Provision for Loan Losses 750 1,070 499 497 489 Net Interest Income after Provision for Loan Losses 20,920 20,391 21,581 20,823 19,741 Service Charges 1,957 1,953 2,000 1,929 1,925 Gains on Sales of Investment Securities, Net 923 2,036 112 641 900 Trust, Investment Services and Advisory Income 1,929 1,999 1,878 1,588 1,121 Bank-Owned Life Insurance Income 493 627 647 521 611 Income on Life Insurance - 586 - - - Other Income 1,641 2,194 2,056 1,608 1,226 Total Noninterest Income 6,943 9,395 6,693 6,287 5,783 Salaries, Wages and Employee Benefits 9,500 10,215 9,754 8,834 8,277 Occupancy 1,391 1,218 1,135 1,120 1,084 Furniture and Equipment 1,373 1,454 1,414 1,510 1,258 Other Expenses 3,239 3,787 2,174 3,129 3,198 Total Noninterest Expense 15,503 16,674 14,477 14,593 13,817 Income Before Income Taxes 12,360 13,112 13,797 12,517 11,707 Income Tax Expense 3,195 2,999 3,632 3,135 2,800 Net Income $9,165 $10,113 $10,165 $9,382 $8,907 Per Common Share Data: Weighted Average Common Shares - Basic 26,247,137 26,182,888 26,240,616 25,861,549 25,128,032 Weighted Average Common Shares - Diluted 26,967,759 27,057,756 27,055,603 26,722,932 26,033,205 Net Income Per Share - Basic $0.35 $0.38 $0.39 $0.37 $0.35 Net Income Per Share - Diluted $0.34 $0.37 $0.38 $0.35 $0.34 Cash Dividend Per Share $0.18 $0.22 $0.18 $0.16 $0.16 Book Value $10.24 $10.30 $10.19 $9.58 $9.45 Market Value $21.25 $26.60 $24.51 $24.38 $26.50 2005 2004 2004 2004 2004 Asset Quality Data: 1Q 4Q 3Q 2Q 1Q Nonaccrual Loans $4,572 $4,705 $3,350 $3,245 $3,645 90 + Days Past Due Loans 599 981 948 919 1,178 Nonperforming Loans 5,171 5,686 4,298 4,164 4,823 Net Assets in Foreclosure 411 370 347 389 423 Nonperforming Assets $5,582 $6,056 $4,645 $4,553 $5,246 Loan Loss Reserve $18,724 $18,455 $17,795 $17,940 $16,464 Loan Loss Reserve / Loans 1.00% 1.00% 1.00% 1.07% 1.15% Loan Loss Reserve / Nonperforming Loans 362.1% 324.6% 414.0% 430.8% 341.3% Nonperforming Assets / Total Assets 0.19% 0.20% 0.16% 0.16% 0.21% Net Loan Charge-offs $481 $410 $644 $698 $778 Net Loan Charge-offs (annualized) / Average Loans 0.11% 0.09% 0.15% 0.18% 0.22% 2005 2004 2004 2004 2004 Selected Ratios (annualized): 1Q 4Q 3Q 2Q 1Q Return on Average Assets 1.25% 1.36% 1.40% 1.37% 1.43% Return on Average Shareholders' Equity 13.69% 15.00% 15.61% 15.06% 15.33% Yield on Earning Assets (FTE) 5.34% 5.16% 5.18% 5.12% 5.25% Cost of Interest- Bearing Funds 2.37% 2.19% 2.01% 1.82% 1.86% Net Interest Margin (FTE) 3.37% 3.34% 3.51% 3.62% 3.73% Leverage Ratio 8.99% 8.91% 8.99% 9.28% 10.04% Balance Sheet (Period End): 2005 2004 2004 2004 2004 1Q 4Q 3Q 2Q 1Q Assets $3,002,572 $3,024,515 $2,976,173 $2,865,949 $2,542,328 Earning Assets 2,817,956 2,845,656 2,791,891 2,678,772 2,406,068 Investment Securities 907,379 943,563 975,750 957,398 948,749 Loans, Net of Unearned Fees 1,865,641 1,845,802 1,774,189 1,683,528 1,428,145 Other Earning Assets 44,936 56,291 41,952 37,846 29,174 Interest-Bearing Liabilities 2,343,177 2,367,229 2,332,102 2,218,687 1,930,052 Total Deposits 2,237,567 2,212,563 2,209,753 2,093,101 1,968,521 Noninterest- Bearing Deposits 332,525 333,516 325,132 345,191 317,566 Interest-Bearing Checking 352,132 305,584 320,276 258,739 268,110 Money Market 679,872 713,039 661,480 561,823 521,085 Savings 222,553 223,039 229,992 245,768 225,981 Time, under $100,000 523,782 508,010 527,971 523,587 481,400 Time, $100,000 or greater 126,703 129,375 144,902 157,993 154,379 Total Borrowed Funds 438,135 488,182 447,481 470,777 279,097 Federal Home Loan Bank 272,750 317,750 257,750 241,750 172,750 Other Borrowings 165,385 170,432 189,731 229,027 106,347 Shareholders' Equity 268,624 270,532 266,966 251,877 237,964 Balance Sheet (Average): 2005 2004 2004 2004 2004 1Q 4Q 3Q 2Q 1Q Assets $2,976,361 $2,957,559 $2,878,769 $2,759,563 $2,497,085 Earning Assets 2,801,817 2,776,599 2,695,579 2,593,105 2,365,497 Investment Securities 910,981 941,704 932,330 983,420 910,314 Loans, Net of Unearned Fees 1,845,408 1,793,935 1,717,245 1,572,830 1,414,802 Other Earning Assets 45,428 40,960 46,004 36,855 40,381 Interest-Bearing Liabilities 2,328,569 2,308,446 2,237,681 2,136,010 1,931,950 Total Deposits 2,196,584 2,213,829 2,154,443 2,048,279 1,961,481 Noninterest- Bearing Deposits 321,912 324,466 329,559 316,715 280,809 Interest-Bearing Checking 325,081 317,328 285,735 274,978 280,142 Money Market 688,602 692,703 620,420 537,614 517,846 Savings 222,853 226,251 237,463 239,971 222,807 Time, under $100,000 513,986 517,167 525,701 508,275 487,379 Time, $100,000 or greater 124,150 135,914 155,565 170,726 172,498 Total Borrowed Funds 453,897 419,083 412,797 404,446 251,278 Federal Home Loan Bank 292,917 263,566 255,837 187,608 172,750 Other Borrowings 160,980 155,517 156,960 216,838 78,528 Shareholders' Equity 271,531 268,211 259,035 250,504 232,386 DATASOURCE: Harleysville National Corporation CONTACT: Gregg J. Wagner, President and CEO, Harleysville National Corporation, +1-215-513-2391 Web site: http://www.hncbank.com/

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