HNBC Harleysville Natl Corp Pa (MM)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.      )

 

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Harleysville National Corporation

 

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Forward Looking Statements

Except for historical information, all other information in this filing consists of forward-looking statements. These forward-looking statements involve a number of risks, uncertainties and other factors that may cause actual results to be materially different from those expressed or implied in the forward-looking statements. Important factors that could cause the statements made to differ include that the transaction is subject to a number of conditions and approvals. Other important factors are discussed under the caption “Forward-Looking Statements” in the Company’s Form 10-K Annual Report for the year ended December 31, 2008 and in subsequent filings made prior to or after the date hereof.

The proposed merger transaction involving Harleysville National Corporation and First Niagara Financial Group, Inc. will be submitted to Harleysville National Corporation’s shareholders for their consideration. Shareholders are encouraged to read the proxy statement/prospectus regarding the proposed transaction when it becomes available because it will contain important information.  Shareholders will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings containing information about Harleysville National Corporation and First Niagara Financial Group, Inc., without charge, at the SEC’s Internet site ( http://www.sec.gov ). Copies of the proxy statement/prospectus and the filings with the SEC that will be incorporated by reference in the proxy statement/prospectus can also be obtained, when available, without charge, by directing a request to Harleysville National Corporation, Attn: Shareholder Services, 483 Main Street, P.O. Box 195, Harleysville, PA 19438-0195, (215) 256-8851 or (800) 423-3955

Harleysville National Corporation, First Niagara Financial Group, Inc., their respective directors and executive officers and other persons may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding Harleysville National Corporation’s directors and executive officers is available in its Annual Report on Form 10-K for the year ended December 31, 2008, which was filed with the Securities and Exchange Commission on March 13, 2009, and its notice of annual meeting and proxy circular for its most recent annual meeting, which was filed with the Securities and Exchange Commission on March 24, 2009. Information regarding First Niagara Financial Group, Inc.’s directors and executive officers is available in First Niagara Financial Group, Inc.’s proxy statement for its most recent annual meeting, which was filed with the Securities and Exchange Commission on March 24, 2009. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available.

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The following is a press released issued by Harleysville National Corporation on July 31, 2009 entitled “Harleysville National Corporation Reports Second Quarter Results, Non-cash Goodwill Charge Negatively Impacts Earnings.”

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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

SECOND QUARTER RESULTS

NON-CASH GOODWILL CHARGE NEGATIVELY IMPACTS EARNINGS

HARLEYSVILLE, PA (July 30, 2009) - Harleysville National Corporation (NASDAQ:HNBC) reported today a net loss of $8.0 million or $.18 per diluted share excluding the non-cash goodwill charge of $214.5 million for the second quarter of 2009. This compares to net income of $7.3 million, or $.23 per diluted share, for the second quarter of 2008. For the six months ended June 30, 2009, the net loss was $3.4 million or $.08 per diluted share excluding the non-cash goodwill charge compared to net income of $14.6 million or $.46 per diluted share during the comparable period in 2008. Reported net loss including the non-cash goodwill charge was $222.5 million or $5.17 per diluted share for the second quarter of 2009. For the six months ended June 30, 2009, reported net loss including the non-cash goodwill charge was $217.9 million or $5.06 per diluted share.

The second quarter loss was driven by a non-cash goodwill impairment charge of $214.5 million, resulting from the decrease in the market value of the company’s stock. This effectively constitutes the difference between the announced sale price of the company to First Niagara Financial Group for $5.50 per share, which was a 37.5% premium to the pre-announcement market price of the stock, and the company’s book value per share of $10.75 prior to the announcement of the sale of the company to First Niagara Financial Group. The impairment charge was evaluated as part of the company’s annual goodwill analysis. Also contributing to the loss was a provision for credit losses of $32.0 million and a one-time FDIC special assessment of $2.6 million, which were partially offset by a $4.9 million gain on the sale of investment securities.

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Harleysville’s second quarter financial results were anticipated, were made known to First Niagara during due diligence and will not impact the exchange ratio as outlined in the merger agreement with First Niagara.

Paul D. Geraghty, President and CEO, Harleysville National Corporation, said, “Second quarter results were disappointing for Harleysville National Corporation. Credit quality continued to be a challenge in our commercial real estate and home equity portfolios, necessitating a significant increase in loan loss reserves. In addition, the announced sale of the company to First Niagara earlier this week resulted in the writeoff of goodwill. That said, we look optimistically to the future. Our merger with First Niagara will make Harleysville part of a $20 billion community bank with a strong franchise stretching from Upstate New York through the Philadelphia suburbs and west to the Pittsburgh region. First Niagara is well capitalized and profitable, and our partnership with them will bring additional products and services to benefit all of our customers.”

Mr. Geraghty continued, “As noted in our merger announcement, First Niagara does not plan to close any branches with the completion of the merger transaction, and is looking to leverage its acquisitions of Harleysville in the Philadelphia suburbs and National City branches in Pittsburgh as a springboard for growth throughout Pennsylvania.”

Mr. Geraghty added, “From a credit standpoint, the Willow loan portfolio has performed extremely well during the recession, and while legacy Willow loans represent 27.8% of our total loan portfolio at June 30, 2009, they represent only 2.11% of chargeoffs. The addition of the Willow franchise, its branches in high-value, high-growth markets, its strong fee-generating product portfolio, and its expertise in credit management and administration made Harleysville a better bank and a more attractive acquisition target for First Niagara.”

Provision for Loan Losses

During the second quarter of 2009, provision for loan losses was $32.0 million, compared to $3.1 million in the second quarter of 2008. The increase in provision for loan losses reflects an increase in nonperforming assets to $138.9 million at June 30, 2009, up from $89.5 million at March 31, 2009 and $39.1 million from a year ago.

Geraghty continued, “Our single biggest challenge over the past several quarters has been our exposure to the real estate markets, and in particular our legacy loans to commercial real estate developers as well as consumer home equity loans. We have taken several steps to triage and manage this exposure,

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but as the recession persisted, credit quality continued to deteriorate. We believe the loan loss reserves booked in the second quarter will position us to move forward as we work towards the completion of our merger with First Niagara.”

During the first quarter of 2009, the company reported that its Total Capital to Risk-Weighted Assets at December 31, 2008 fell below the well-capitalized level to adequately capitalized. As of June 30, 2009, this ratio increased to 9.39% 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 June 30, 2009, an increase of 34.2% or $1.3 billion over $3.9 billion at June 30, 2008. Willow Financial had assets of approximately $1.6 billion at the acquisition date of December 5, 2008.

 

•

Loans increased $937.3 million and deposits grew $1.1 billion from June 30, 2008. Adjusted for the Willow Financial acquisition and non-recurring loan sales during the second quarter of 2009 totaling approximately $117.2 million, organic loan growth was approximately $83.6 million or 3.3%, and organic deposits grew by $183.6 million or 6.4%.

 

•

Net interest income on a tax equivalent basis in the second quarter of 2009 increased $8.6 million or 31.6% from the same period in 2008 mainly as a result of the Willow Financial acquisition. The net interest margin for the second quarter of 2009 was 2.82% compared to 3.06% for the same period in 2008.

 

•

Nonperforming assets were $138.9 million at June 30, 2009. Nonperforming assets as a percentage of total assets increased to 2.67% from 1.58% at March 31, 2009, and 1.01% at June 30, 2008. Net charge-offs were $14.7 million compared to $423,000 in the second quarter of 2008. The allowance for credit losses increased to $70.3 million at quarter end, compared to $53.1 million at March 31, 2009, and $31.2 million at June 30, 2008. Provision for loan losses increased to $32.0 million from $3.1 million during the second quarter of 2008. Total loans delinquent 30 to 89 days totaled $34.4 million at June 30, 2009 compared to $139.3 million at March 31, 2009 and $25.1 million at June 30, 2008. The company’s nonperforming assets combined with loans 30 to 89 days delinquent totaled $173.3 million at June 30, 2009. This is the measurement that corresponds to the Adjustment of Exchange Ratio included in the merger agreement.

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•

Quarterly noninterest income was up $10.1 million from the second quarter of 2008. Gains on sales of investment securities increased by $4.8 million over last year’s quarter. Service charges on deposits increased $1.0 million, or 30.0% mainly from the acquired Willow Financial deposit accounts. Wealth management fee growth was $.4 million or 7.8%. Gains from mortgage banking loan sales totaled $2.6 million, an increase of $2.4 million over last year’s quarter. Other income increased $1.9 million over the second quarter of 2008 primarily from increases in automated teller machine and point of sale revenue as well as fees and valuation adjustments on derivative instruments. A non-cash other-than-temporary impairment charge of $.5 million on two private label collateralized mortgage obligations was also recorded during the second quarter of 2009.

 

•

Quarterly noninterest expenses were up $228.3 million over the same period in the prior year, primarily due to the aforementioned goodwill impairment charge of $214.5 million and the Willow Financial acquisition. In addition, FDIC insurance assessments increased by $4.9 million inclusive of the $2.6 million one-time FDIC special assessment previously mentioned. Other expenses were $3.4 million higher during the second 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.

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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 $2.7 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

 

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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 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.

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Harleysville National Corporation

Consolidated Selected Financial Data ⁽¹⁾

(Dollars in thousands, except per share data)

June 30, 2009

(unaudited)

 

		Three Months Ended
For the period:		Jun. 30, 2009				Mar. 31, 2009				Dec. 31, 2008				Sep. 30, 2008				Jun. 30, 2008
Interest Income		$	60,045			$	63,638			$	54,583			$	49,942			$	49,353
Interest Expense			26,592				28,334				25,136				24,645				24,164
Net Interest Income			33,453				35,304				29,447				25,297				25,189
Provision for Loan Losses			32,000				7,121				7,920				2,580				3,107
Net Interest Income after Provision for Loan Losses			1,453				28,183				21,527				22,717				22,082
Service Charges			4,304				4,194				3,666				3,424				3,312
Gain on Sales of Investment Securities, Net			4,945				1,952				2,417				—				97
Other-than-temporary Impairment of Available for Sale Securities			(530	)			(1,344	)			(1,923	)			—				—
Gain (Loss) on Mortgage Banking Sales, Net			2,703				1,698				136				(5	)			219
Wealth Management Income			4,975				4,322				5,888				3,862				4,615
Bank-Owned Life Insurance Income			770				778				730				706				657
Other Income			4,544				4,559				2,430				2,458				2,696
Total Noninterest Income			21,711				16,159				13,344				10,445				11,596
Salaries, Wages and Employee Benefits			17,991				20,279				14,509				13,539				14,201
Occupancy			3,709				4,206				2,663				2,412				2,441
Furniture and Equipment			1,483				1,608				1,181				1,074				1,083
Intangibles Expense			696				948				2,211				678				631
FDIC Deposit Insurance			5,056				2,787				1,164				551				204
Goodwill impairment			214,536				—				—				—				—
Merger Charges			—				—				2,456				974				—
Other Expenses			9,279				8,793				7,109				5,925				5,898
Total Noninterest Expense			252,750				38,621				31,293				25,153				24,458
(Loss) Income Before Income Taxes			(229,586	)			5,721				3,578				8,009				9,220
Income Tax (Benefit) Expense			(7,083	)			1,126				(245	)			1,370				1,893
Net (Loss) Income		$	(222,503	)		$	4,595			$	3,823			$	6,639			$	7,327
Per Common Share Data:
Weighted Average Common Shares - Basic			43,080,849				42,990,542				34,695,062				31,385,257				31,359,011
Weighted Average Common Shares - Diluted			43,080,849				43,018,233				34,843,058				31,551,026				31,521,608
Net (Loss) Income Per Share - Basic		$	(5.17	)		$	0.11			$	0.11			$	0.21			$	0.24
Net (Loss) Income Per Share - Diluted		$	(5.17	)		$	0.11			$	0.11			$	0.21			$	0.23
Cash Dividend Per Share		$	0.01			$	0.10			$	0.20			$	0.20			$	0.20
Book Value		$	5.77			$	11.00			$	11.05			$	9.90			$	10.45
Market Value		$	4.73			$	6.06			$	14.44			$	16.98			$	11.16

 

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Harleysville National Corporation

Consolidated Selected Financial Data ⁽¹⁾

(Dollars in thousands, except per share data)

June 30, 2009

(unaudited)

 

		Six Months Ended June 30,
For the period:		2009				2008
Interest Income		$	123,683			$	101,769
Interest Expense			54,926				52,373
Net Interest Income			68,757				49,396
Provision for Loan Losses			39,121				5,067
Net Interest Income after Provision for Loan Losses			29,636				44,329
Service Charges			8,498				6,425
Gain on Sales of Investment Securities, Net			6,897				225
Other-than-temporary Impairment of Available for Sale Securities			(1,874	)			—
Gain on Mortgage Banking Sales, Net			4,401				426
Wealth Management Income			9,297				8,894
Bank-Owned Life Insurance Income			1,548				1,341
Other Income			9,103				5,117
Total Noninterest Income			37,870				22,428
Salaries, Wages and Employee Benefits			38,270				28,060
Occupancy			7,915				5,026
Furniture and Equipment			3,091				2,177
Intangibles Expense			1,644				1,319
FDIC Deposit Insurance			7,843				367
Goodwill Impairment			214,536				—
Other Expenses			18,072				11,227
Total Noninterest Expense			291,371				48,176
(Loss) Income Before Income Taxes			(223,865	)			18,581
Income Tax (Benefit) Expense			(5,957	)			3,950
Net (Loss) Income		$	(217,908	)		$	14,631
		Six Months Ended June 30,
Per Common Share Data:		2009				2008
Weighted Average Common Shares - Basic			43,035,945				31,352,922
Weighted Average Common Shares - Diluted			43,035,945				31,522,029
Net (Loss) Income Per Share - Basic		$	(5.06	)		$	0.47
Net (Loss) Income Per Share - Diluted		$	(5.06	)		$	0.46
Cash Dividend Per Share		$	0.11			$	0.40

 

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Harleysville National Corporation

Consolidated Selected Financial Data ⁽¹⁾

(Dollars in thousands, except per share data)

June 30, 2009

(unaudited)

 

Asset Quality Data:		2009 2Q				2009 1Q				2008 4Q				2008 3Q				2008 2Q
Nonaccrual Loans		$	132,598			$	85,393			$	75,060			$	36,278			$	36,284
90 + Days Past Due Loans			4,090				2,073				1,849				1,275				1,676
Nonperforming Loans			136,688				87,466				76,909				37,553				37,960
Net Assets in Foreclosure			2,168				2,008				1,626				1,221				1,189
Nonperforming Assets		$	138,856			$	89,474			$	78,535			$	38,774			$	39,149
Loan Loss Reserve		$	70,341			$	53,062			$	49,955			$	31,668			$	31,174
Loan Loss Reserve / Loans			2.05	%			1.47	%			1.36	%			1.25	%			1.25	%
Loan Loss Reserve / Nonperforming Loans			51.5	%			60.7	%			65.0	%			84.3	%			82.1	%
Nonperforming Assets / Total Assets			2.67	%			1.58	%			1.43	%			0.98	%			1.01	%
Net Loan Charge-offs		$	14,721			$	4,014			$	2,558			$	2,086			$	423
Net Loan Charge-offs (annualized) / Average Loans			1.68	%			0.44	%			0.36	%			0.33	%			0.07	%
Selected Ratios (annualized):		2009 2Q				2009 1Q				2008 4Q				2008 3Q				2008 2Q
Return on Average Assets			-15.92	%			0.33	%			0.35	%			0.68	%			0.76	%
Return on Average Shareholders’ Equity			-186.57	%			3.88	%			4.40	%			8.20	%			8.79	%
Yield on Earning Assets (FTE)			4.92	%			5.29	%			5.69	%			5.76	%			5.80	%
Cost of Interest Bearing Funds			2.35	%			2.53	%			2.82	%			3.10	%			3.12	%
Net Interest Margin (FTE)			2.82	%			3.02	%			3.16	%			3.02	%			3.06	%
Leverage Ratio			5.91	%			6.33	%			8.19	%			8.13	%			8.18	%
Selected Ratios (annualized):		2009 Year-to-date				2008 Year-to-date
Return on Average Assets			-7.86	%			0.76	%
Return on Average Shareholders’ Equity			-91.66	%			8.67	%
Yield on Earning Assets (FTE)			5.09	%			5.93	%
Cost of Interest Bearing Funds			2.43	%			3.36	%
Net Interest Margin (FTE)			2.90	%			2.99	%

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Harleysville National Corporation

Consolidated Selected Financial Data ⁽¹⁾

(Dollars in thousands, except per share data)

June 30, 2009

(unaudited)

 

Balance Sheet (Period End):		2009 2Q			2009 1Q			2008 4Q			2008 3Q			2008 2Q
Assets		$	5,210,327		$	5,646,195		$	5,490,509		$	3,949,730		$	3,882,232
Earning Assets			4,909,443			5,109,083			4,944,126			3,626,352			3,544,587
Investment Securities			1,110,123			1,179,213			1,231,661			983,349			1,014,134
Loans			3,439,267			3,615,775			3,685,244			2,539,037			2,501,968
Other Earning Assets			360,053			314,095			27,221			103,966			28,485
Interest-Bearing Liabilities			4,353,600			4,585,275			4,449,461			3,221,921			3,114,993
Total Deposits			3,998,155			4,147,418			3,938,432			3,018,276			2,865,148
Noninterest-Bearing Deposits			517,108			497,921			479,469			343,308			362,750
Interest-Bearing Checking			597,831			579,922			556,855			430,607			422,850
Money Market			991,476			1,074,892			1,042,302			727,693			756,588
Savings			317,196			309,767			270,885			182,342			183,226
Time Deposits			1,574,544			1,684,916			1,588,921			1,334,326			1,139,734
Total Borrowed Funds			872,553			935,778			990,498			546,953			612,595
Federal Home Loan Bank			475,087			515,993			522,671			213,755			223,764
Other Borrowings			397,466			419,785			467,827			333,198			388,831
Shareholders’ Equity			248,685			473,713			474,707			310,994			327,910
Balance Sheet (Average):		2009 2Q			2008 1Q			2008 4Q			2008 3Q			2008 2Q
Assets		$	5,605,475		$	5,580,099		$	4,341,741		$	3,899,593		$	3,856,900
Earning Assets			5,080,393			5,047,766			3,956,963			3,580,454			3,552,208
Investment Securities			1,199,597			1,209,012			1,072,468			1,002,901			1,029,502
Loans			3,511,623			3,666,744			2,860,891			2,522,034			2,491,894
Other Earning Assets			369,173			172,010			23,604			55,519			30,812
Interest-Bearing Liabilities			4,547,522			4,543,033			3,550,359			3,158,464			3,114,520
Total Deposits			4,121,543			4,062,577			3,289,483			2,923,815			2,900,523
Noninterest-Bearing Deposits			493,142			472,687			445,495			348,183			340,802
Interest-Bearing Checking			601,230			560,239			444,141			428,078			415,398
Money Market			1,064,346			1,060,299			820,395			739,931			804,890
Savings			315,856			286,317			212,081			182,403			176,917
Time Deposits			1,646,969			1,683,035			1,367,371			1,225,220			1,162,516
Total Borrowed Funds			919,121			953,143			706,371			582,832			554,799
Federal Home Loan Bank			504,903			520,592			289,245			217,717			213,860
Other Borrowings			414,218			432,551			417,126			365,115			340,939
Shareholders’ Equity			478,338			480,491			345,887			322,077			335,311

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Harleysville National Corporation

Consolidated Selected Financial Data ⁽¹⁾

(Dollars in thousands, except per share data)

June 30, 2009

(unaudited)

Average Balance Sheets and Interest Rates - Fully-Taxable Equivalent Basis

 

		Three Months Ended June 30, 2009									Three Months Ended June 30, 2008
		Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate
Assets
Earning assets:
Investment securities
Taxable investments		$	890,582		$	10,451		4.72	%		$	740,847		$	9,622		5.22	%
Non-taxable investments (2)			309,015			4,957		6.45	%			288,655			4,380		6.10	%
Total investment securities			1,199,597			15,408		5.17	%			1,029,502			14,002		5.47	%
Federal funds sold and deposits in banks			369,173			239		0.26	%			30,812			119		1.55	%
Loans (2) (3)			3,511,623			46,522		5.33	%			2,491,894			37,067		5.98	%
Total earning assets			5,080,393			62,169		4.92	%			3,552,208			51,188		5.80	%
Noninterest-earning assets			525,082									304,692
Total assets		$	5,605,475								$	3,856,900
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Savings and money market		$	1,981,432			5,335		1.08	%		$	1,397,205			5,661		1.63	%
Time			1,646,969			13,936		3.40	%			1,162,516			12,937		4.48	%
Total interest-bearing deposits			3,628,401			19,271		2.14	%			2,559,721			18,598		2.92	%
Borrowed funds			919,121			7,321		3.20	%			554,799			5,566		4.04	%
Total interest-bearing liabilities			4,547,522			26,592		2.35	%			3,114,520			24,164		3.12	%
Noninterest-bearing liabilities:
Demand deposits			493,142									340,802
Other liabilities			86,473									66,267
Total noninterest-bearing liabilities			579,615									407,069
Total liabilities			5,127,137									3,521,589
Shareholders’ equity			478,338									335,311
Total liabilities and shareholders’ equity		$	5,605,475								$	3,856,900
Net interest spread								2.57	%								2.68	%
Effect of noninterest-bearing sources								0.25	%								0.38	%
Net interest income/margin on earning assets					$	35,577		2.82	%					$	27,024		3.06	%
Less tax equivalent adjustment						2,126									1,835
Net interest income					$	33,451								$	25,189

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Harleysville National Corporation

Consolidated Selected Financial Data ⁽¹⁾

(Dollars in thousands, except per share data)

June 30, 2009

(unaudited)

 

		Six Months Ended June 30, 2009									Six Months Ended June 30, 2008
		Average Balance			Interest			Average Rate			Average Balance			Interest			Average Rate
Assets
Earning assets:
Investment securities
Taxable investments		$	888,214		$	22,237		5.03	%		$	747,157		$	19,376		5.22	%
Non-taxable investments (2)			316,064			10,282		6.54	%			289,377			8,736		6.07	%
Total investment securities			1,204,278			32,519		5.43	%			1,036,534			28,112		5.45	%
Federal funds sold and deposits in banks			271,136			366		0.27	%			57,485			813		2.84	%
Loans (2) (3)			3,588,754			95,180		5.33	%			2,477,569			76,472		6.21	%
Total earning assets			5,064,168			128,065		5.09	%			3,571,588			105,397		5.93	%
Noninterest-earning assets			528,687									302,341
Total assets		$	5,592,855								$	3,873,929
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Savings and money market		$	1,944,350			11,506		1.19	%		$	1,406,329			13,756		1.97	%
Time			1,664,903			28,629		3.46	%			1,199,999			27,438		4.60	%
Total interest-bearing deposits			3,609,253			40,135		2.24	%			2,606,328			41,194		3.18	%
Borrowed funds			936,038			14,791		3.18	%			526,932			11,179		4.27	%
Total interest-bearing liabilities			4,545,291			54,926		2.43	%			3,133,260			52,373		3.36	%
Noninterest-bearing liabilities:
Demand deposits			482,970									332,460
Other liabilities			85,188									68,854
Total noninterest-bearing liabilities			568,158									401,314
Total liabilities			5,113,449									3,534,574
Shareholders’ equity			479,406									339,355
Total liabilities and shareholders’ equity		$	5,592,855								$	3,873,929
Net interest spread								2.66	%								2.57	%
Effect of noninterest-bearing sources								0.24	%								0.42	%
Net interest income/margin on earning assets					$	73,139		2.90	%					$	53,024		2.99	%
Less tax equivalent adjustment						4,384									3,628
Net interest income					$	68,755								$	49,396

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Harleysville National Corporation

Consolidated Selected Financial Data ⁽¹⁾

(Dollars in thousands, except per share data)

June 30, 2009

(unaudited)

Regulatory Capital

 

		Actual
		Amount			Ratio
As of June 30, 2009
Total Capital (to risk weighted assets):
Corporation		$	379,698		9.39	%
Harleysville National Bank			361,488		8.95	%
Tier 1 Capital (to risk weighted assets):
Corporation			328,928		8.14	%
Harleysville National Bank			310,779		7.70	%
Tier 1 Capital (to average assets):
Corporation			328,928		5.91	%
Harleysville National Bank			310,779		5.60	%
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.