HNBC Harleysville Natl Corp Pa (MM)

Second Quarter Earnings Up 3.1% at Harleysville National Corporation HARLEYSVILLE, Pa., July 13 /PRNewswire-FirstCall/ -- Harleysville National Corporation (HNC) (NASDAQ:HNBC) today announced second quarter 2004 earnings of $9.4 million, a 3.1% increase over second quarter 2003 earnings of $9.1 million. Earnings for the six months ended June 30, 2004, were $18.3 million, a 4.1% increase over earnings of $17.6 million for the six months ended June 30, 2003. The current quarter results include the impact of operations from the acquisition of Millennium Bank effective April 30, 2004 and the related issuance by Harleysville National Corporation of 946,000 common shares. The Company's consolidated total assets were $2.87 billion at June 30, 2004, an increase of 19.1% or $459.8 million above the June 30, 2003 level of $2.41 billion. Of this increase, 9.6% or $230.1 million was attributable to the acquisition of Millennium Bank. For the quarter ending June 30, 2004, diluted earnings per share of $.37 were equal to the $.37 earned during the second quarter of 2003, and basic earnings per share at $.38 were equal to $.38 in the second quarter of 2003. For the six months ended June 30, 2004, diluted earnings per share of $.73 were 2.8% higher than the $.71 earned during the six months of 2003, and basic earnings per share of $.75 were up 1.4% from $.74 during the six months of 2003. "We are pleased to announce yet another increase in earnings. We are also happy to report that our acquisition of Millennium Bank and its wholly owned subsidiary, Cumberland Advisors, Inc., was successfully completed this quarter," said Walter E. Daller, Jr., Chairman, President and CEO of HNC. Net interest income on a fully tax-equivalent basis in the second quarter of 2004 increased $1.3 million or 5.9% over the same period in 2003 and increased $2.0 million or 4.6% from the six months ended June 30, 2003. This increase was primarily the result of the rise in higher earning asset volumes. The net interest margin for the second quarter of 2004 was 3.62%, compared to 3.73% for the first quarter of 2004 and 3.82% for the second quarter of 2003. Average earning assets increased $287.5 million or 12.5% during the second quarter of 2004 versus the comparable period in 2003. The lower net interest margin is primarily due to the continuing decline in loan yields. During this period, average loans increased $230.1 million or 17.1%. Loans totaling $157.1 million were acquired from Millennium Bank. The company also experienced an improvement in loan quality during the second quarter of 2004, compared to the second and fourth quarters of 2003. Nonperforming assets decreased in the second quarter of 2004 by $2.0 million and $889,000 from the second 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 430.8% at June 30, 2004, compared to 371.7% at December 31, 2003, and 301.0% at June 30, 2003. Nonperforming assets, including nonaccrual loans, net assets in foreclosure and loans 90 days or more past due was .16% of total assets at June 30, 2004, an improvement from .22% at December 31, 2003, and .27% at June 30, 2003. The lower provision for loan losses for the three and six months ended June 30, 2004, compared to the same periods in 2003, is reflective of the improved loan quality. Core deposits increased 16.4% or $198.5 million to $1.41 billion at June 30, 2004, from $1.21 billion at June 30, 2003. Of this increase, 4.9% or $59.8 million was due to the acquisition of Millennium Bank. Total deposits increased $219.9 million for the same period of which $151.2 million was due to the acquisition of Millennium Bank. Borrowings increased $216.2 million or 84.9% primarily due to loan growth and the Millennium Bank acquisition. Trust and investment advisory services income for the quarter ended June 30, 2004 increased $598,000 or 61.1% from the same period a year ago. Of this amount, $442,000 or 45.2% was attributable to the acquisition of Millennium Bank. Total non-interest income of $6.3 million for the current quarter reflects a decrease of $3.7 million from the comparable period in 2003, primarily due to a $4.1 million decrease in the gain on the sale of investment securities during the second quarter of 2003. For the first six months of 2004, total non-interest income of $12.1 million decreased $5.1 million, or 29.7% from $17.2 million in the comparable period last year. This was mainly due to a decrease of $4.5 million in the gain on sale of investment securities and a $1.1 million decrease in life insurance income, partially offset by an increase of $831,000 in trust and investment advisory income. Noninterest expense of $14.6 million decreased $2.5 million or 14.8% from $17.1 million in the second quarter of 2003. The reduction in noninterest expense was primarily due to a $2.6 million decrease in prepayment fees related to the early retirement of Federal Home Loan Bank borrowings during the second quarter of 2003 along with reduced off-lease vehicle residual reserve expense amounting to $800,000 in the second quarter of 2003, compared to the second quarter of 2004. The company reviews and adjusts, if necessary, the off-lease vehicle residual reserve on a quarterly basis. Net of these reductions, noninterest expenses increased $900,000 or 6.3% in the second quarter of 2004, compared to the second quarter of 2003. Contributing to this growth were increases in salaries and employee benefits and occupancy expense of $958,000 and $238,000, respectively. For the first six months of 2004, noninterest expense decreased $4.2 million, or 13.0%, to $28.4 million from $32.6 million in 2003. This decrease was mainly due to reduced off-lease vehicle residual reserve of $2.6 million, and a decrease of $2.6 million in Federal Home Loan Bank borrowings prepayment fees, partially offset by an increase of $1.4 million in salary and employee benefit expense and $299,000 in occupancy expense of which $711,000 and $114,000, respectively, was attributable to the Millennium acquisition. Harleysville National Corporation, with assets in excess of $2.8 billion, is the holding company for its major subsidiary, Harleysville National Bank and Trust Company (HNB). Providing Real Life Financial Solutions, HNB operates 45 offices in 10 counties throughout eastern Pennsylvania. Individuals, families and businesses can apply for banking, trust and investment services at any HNB office, by calling 1-888-HNB-2100 or online at http://www.harleysvillebank.com/. 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) June 30, 2004 (unaudited) For the period: Three Months Ended June 30, Mar. 31, Dec. 31, 2004 2004 2003 Interest Income $30,994 $29,173 $30,287 Interest Expense 9,674 8,943 9,393 Net Interest Income 21,320 20,230 20,894 Provision for Loan Losses 497 489 641 Net Interest Income after Provision for Loan Losses 20,823 19,741 20,253 Service Charges 1,929 1,925 2,081 Gains on Sales of Investment Securities, Net 641 900 164 Trust, Investment Services and Advisory Income 1,576 1,121 1,017 Bank-Owned Life Insurance Income 521 611 680 Other Income 1,620 1,226 1,274 Total Noninterest Income 6,287 5,783 5,216 Salaries, Wages and Employee Benefits 8,834 8,277 7,518 Occupancy 1,120 1,084 924 Furniture and Equipment 1,510 1,258 1,637 Prepayment Fee - - - Other Expenses 3,129 3,198 3,812 Total Noninterest Expense 14,593 13,817 13,891 Income Before Income Taxes 12,517 11,707 11,578 Income Tax Expense 3,135 2,800 2,606 Net Income $9,382 $8,907 $8,972 Per Common Share Data: Weighted Average Common Shares - Basic 24,630,047 23,931,459 23,837,623 Weighted Average Common Shares - Diluted 25,450,411 24,793,529 24,768,712 Net Income Per Share - Basic $0.38 $0.37 $0.37 Net Income Per Share - Diluted $0.37 $0.36 $0.37 Cash Dividend Per Share $0.17 $0.17 $0.19 Book Value $10.06 $9.92 $9.52 Market Value $25.60 $27.83 $30.10 For the period: Three Months Ended Sept. 30, June 30, 2003 2003 Interest Income $28,439 $29,889 Interest Expense 9,216 10,084 Net Interest Income 19,223 19,805 Provision for Loan Losses 630 1,320 Net Interest Income after Provision for Loan Losses 18,593 18,485 Service Charges 2,007 1,937 Gains on Sales of Investment Securities, Net 359 4,774 Trust, Investment Services and Advisory Income 954 978 Bank-Owned Life Insurance Income 673 631 Other Income 1,259 1,639 Total Noninterest Income 5,252 9,959 Salaries, Wages and Employee Benefits 7,938 7,876 Occupancy 941 882 Furniture and Equipment 1,525 1,376 Prepayment Fee - 2,594 Other Expenses 2,694 4,399 Total Noninterest Expense 13,098 17,127 Income Before Income Taxes 10,747 11,317 Income Tax Expense 1,952 2,216 Net Income $8,795 $9,101 Per Common Share Data: Weighted Average Common Shares - Basic 23,812,431 23,779,235 Weighted Average Common Shares - Diluted 24,587,614 24,540,648 Net Income Per Share - Basic $0.37 $0.38 Net Income Per Share - Diluted $0.36 $0.37 Cash Dividend Per Share $0.16 $0.15 Book Value $9.18 $9.42 Market Value $23.39 $21.55 For the period: Six Months Ended June 30, 2004 2003 Interest Income $60,167 $60,474 Interest Expense 18,617 21,470 Net Interest Income 41,550 39,004 Provision for Loan Losses 986 1,929 Net Interest Income after Provision for Loan Losses 40,564 37,075 Service Charges 3,854 3,767 Gains on Sales of Investment Securities, Net 1,541 6,090 Trust, Investment Services and Advisory Income 2,697 1,866 Bank-Owned Life Insurance Income 1,132 1,262 Income on Life Insurance - 1,119 Other Income 2,846 3,066 Total Noninterest Income 12,070 17,170 Salaries, Wages and Employee Benefits 17,111 15,717 Occupancy 2,204 1,905 Furniture and Equipment 2,768 2,681 Prepayment Fee - 2,594 Other Expenses 6,327 9,743 Total Noninterest Expense 28,410 32,640 Income Before Income Taxes 24,224 21,605 Income Tax Expense 5,935 4,039 Net Income $18,289 $17,566 Per Common Share Data: Weighted Average Common Shares - Basic 24,280,753 23,774,838 Weighted Average Common Shares - Diluted 25,167,508 24,531,029 Net Income Per Share - Basic $0.75 $0.74 Net Income Per Share - Diluted $0.73 $0.71 Cash Dividend Per Share $0.34 $0.30 2004 2004 2003 2003 2003 Asset Quality Data: 2Q 1Q 4Q 3Q 2Q Nonaccrual Loans $3,245 $3,645 $3,343 $3,962 $4,146 90 + Days Past Due Loans 919 1,178 1,164 1,200 1,681 Nonperforming Loans 4,164 4,823 4,507 5,162 5,827 Net Assets in Foreclosure 389 423 935 893 729 Nonperforming Assets $4,553 $5,246 $5,442 $6,055 $6,556 Loan Loss Reserve $17,940 $16,464 $16,753 $16,854 $17,538 Loan Loss Reserve / Loans 1.07% 1.15% 1.19% 1.22% 1.31% Loan Loss Reserve / Nonperforming Loans 430.8% 341.3% 371.7% 326.5% 301.0% Nonperforming Assets / Total Assets 0.16% 0.21% 0.22% 0.24% 0.27% Net Loan Charge-offs $697 $778 $742 $1,313 $684 Net Loan Charge-offs (annualized) / Average Loans 0.18% 0.22% 0.21% 0.39% 0.20% 2004 2004 2003 2003 2003 Selected Ratios (annualized): 2Q 1Q 4Q 3Q 2Q Return on Average Assets 1.37% 1.43% 1.41% 1.44% 1.49% Return on Average Shareholders' Equity 15.06% 15.33% 16.22% 16.11% 16.67% Return on Average Shareholders' Realized Equity * 15.17% 15.97% 16.56% 16.65% 17.53% Yield on Earning Assets (FTE) 5.12% 5.25% 5.38% 5.31% 5.57% Cost of Interest Bearing Funds 1.82% 1.86% 1.88% 1.95% 2.12% Net Interest Margin (FTE) 3.62% 3.73% 3.82% 3.71% 3.82% Leverage Ratio 8.52% 10.04% 8.77% 8.97% 8.73% * 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 15.23% 16.43% Return on Average Shareholders' Realized Equity * 15.59% 17.16% Yield on Earning Assets (FTE) 5.19% 5.61% Cost of Interest Bearing Funds 1.84% 2.23% Net Interest Margin (FTE) 3.68% 3.75% * Excluding unrealized gain (loss) on investment securities available for sale. Balance Sheet (Period End): 2004 2004 2003 2Q 1Q 4Q Assets $2,865,949 $2,542,328 $2,510,939 Earning Assets 2,678,772 2,406,068 2,371,816 Investment Securities 957,398 948,749 924,874 Loans, Net of Unearned Fees 1,683,528 1,428,145 1,408,391 Other Earning Assets 37,846 29,174 38,551 Interest-Bearing Liabilities 2,218,687 1,930,052 1,940,016 Total Deposits 2,093,101 1,968,521 1,979,081 Noninterest-Bearing Deposits 345,191 317,566 294,121 Interest-Bearing Checking 258,739 268,110 283,607 Money Market 561,823 521,085 506,516 Savings 245,768 225,981 221,778 Time, under $100,000 523,587 481,400 491,740 Time, $100,000 or greater 157,993 154,379 181,319 Total Borrowed Funds 470,777 279,097 255,056 Federal Home Loan Bank 241,750 172,750 172,750 Other Borrowings 229,027 106,347 82,306 Shareholders' Equity 251,877 237,964 227,053 Balance Sheet (Period End): 2003 2003 3Q 2Q Assets $2,523,002 $2,406,132 Earning Assets 2,386,477 2,244,720 Investment Securities 915,832 866,191 Loans, Net of Unearned Fees 1,377,682 1,335,919 Other Earning Assets 92,963 42,610 Interest-Bearing Liabilities 1,970,774 1,836,327 Total Deposits 1,990,832 1,873,218 Noninterest-Bearing Deposits 283,886 291,454 Interest-Bearing Checking 276,941 218,200 Money Market 490,341 483,326 Savings 217,969 220,001 Time, under $100,000 506,976 503,850 Time, $100,000 or greater 214,719 156,387 Total Borrowed Funds 263,828 254,563 Federal Home Loan Bank 168,750 153,750 Other Borrowings 95,078 100,813 Shareholders' Equity 218,878 223,849 Balance Sheet (Average): 2004 2004 2003 2Q 1Q 4Q Assets $2,759,563 $2,497,085 $2,543,616 Earning Assets 2,593,105 2,365,497 2,408,967 Investment Securities 983,420 910,314 983,318 Loans, Net of Unearned Fees 1,572,830 1,414,802 1,389,595 Other Earning Assets 36,855 40,381 36,054 Interest-Bearing Liabilities 2,136,010 1,931,950 1,993,653 Total Deposits 2,048,279 1,961,481 1,976,616 Noninterest-Bearing Deposits 316,715 280,809 279,307 Interest-Bearing Checking 274,978 280,142 280,076 Money Market 537,614 517,846 501,127 Savings 239,971 222,807 221,116 Time, under $100,000 508,275 487,379 497,281 Time, $100,000 or greater 170,726 172,498 197,709 Total Borrowed Funds 404,446 251,278 296,344 Federal Home Loan Bank 187,608 172,750 172,750 Other Borrowings 216,838 78,528 123,594 Shareholders' Equity 250,504 232,386 221,236 Balance Sheet (Average): 2003 2003 3Q 2Q Assets $2,436,763 $2,435,580 Earning Assets 2,298,565 2,305,590 Investment Securities 898,886 948,782 Loans, Net of Unearned Fees 1,354,394 1,342,758 Other Earning Assets 45,285 14,050 Interest-Bearing Liabilities 1,888,489 1,903,542 Total Deposits 1,906,373 1,889,663 Noninterest-Bearing Deposits 278,267 260,688 Interest-Bearing Checking 241,283 223,152 Money Market 479,375 493,561 Savings 219,778 216,445 Time, under $100,000 508,256 510,703 Time, $100,000 or greater 179,414 185,114 Total Borrowed Funds 260,383 274,567 Federal Home Loan Bank 164,728 164,794 Other Borrowings 95,655 109,773 Shareholders' Equity 218,396 218,363 DATASOURCE: Harleysville National Corporation CONTACT: Walter E. Daller Jr., President and CEO, Harleysville National Corporation, +1-215-256-8851 ext. 2300 Web site: http://www.harleysvillebank.com/ http://www.hncbank.com/

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