HARLEYSVILLE, Pa., April 23 /PRNewswire-FirstCall/ -- Harleysville National Corporation reported today net income of $4.6 million or $.11 per diluted share for the first quarter of 2009, compared to $7.3 million, or $.23 per diluted share for the first quarter of 2008. First quarter results include a non-cash other-than-temporary impairment charge of $1.3 million on collateralized debt obligation investments in pooled trust preferred securities, as well as other investments. First quarter results also include $1.0 million in severance expenses associated with re-staffing the company. These costs were offset by a $2.0 million gain on the sale of investment securities, as well as a $1.7 million gain from the sale of Harleysville National Bank's merchant credit card business.
Paul D. Geraghty, President and CEO, Harleysville National Corporation, said, "Leading economists continue to forecast a deteriorating economy at least through the end of 2009 and possibly into 2010. This means that prudent banks like Harleysville must take steps to conserve capital, cut costs, and carefully manage credit exposures now and into the future. We believe that the actions we took in the first quarter will position us for long-term strength and stability. At the same time, our profitable results and continued organic loan and deposit growth indicate the strength of our underlying franchise as we manage through economic instability and legacy credit costs."
Provision for Loan Losses
During the first quarter of 2009, provision for loan losses was $7.1 million, compared to $2.0 million in the first quarter of 2008. The increase in provision for loan losses reflects an increase in nonperforming assets to $89.5 million at March 31, 2009, up from $78.5 million at the end of 2008 and $27.1 million from a year ago.
Geraghty continued, "We have taken a number of steps to protect the interest of shareholders and to proactively reduce exposure to troubled borrowers, while continuing to support our customers and communities. We have enhanced our credit review process with additional staff and have also bolstered resources in our loan workout group. During the first quarter we also proactively reduced exposures to several troubled borrowers without the need to write down any of the underlying loans - a significant accomplishment in this economy. We are carefully monitoring our positions in the loan portfolio to ensure that we are well-equipped to deal with any deteriorating credit situations. We continue to actively lend to creditworthy commercial and retail customers."
During the fourth quarter of 2008, the company reported that its Total Capital to Risk-Weighted Assets fell below the well-capitalized level to adequately capitalized. As of March 31, 2009, this ratio increased to 9.39% from 8.88% at December 31, 2008.
Second Quarter Dividend
The Board of Directors of Harleysville National Corporation declared a regular cash dividend of $.01 per share on 42,715,408 shares of outstanding common stock as of April 22, 2009. The dividend is payable June 15, 2009, to shareholders of record on May 30, 2009.
Geraghty continued, "As we continue to manage through legacy credit issues and build loan loss reserves, conservation of capital is of the top priority of any prudent financial institution in the current economic environment. This necessitated this quarter's dividend action which, while painful for our shareholders, enables us to conserve approximately $3.9 million of capital per quarter for reinvestment in balance sheet strength. We understand the importance of dividends to our shareholders and, after careful consideration, feel this reduction is the right thing to do to safeguard their long-term investment in Harleysville National Corporation."
In addition, the Board of Directors has determined that it will withdraw its previously-submitted application under the U.S. Treasury Department's Capital Purchase Program, ("CPP") as part of the Troubled Asset Relief Program ("TARP"). Geraghty, on behalf of the Corporation, said, "Harleysville continues its efforts to return to 'Well-Capitalized' under regulatory guidelines, but at this time we believe that the TARP program is not the best course of action for us. We are exploring alternative sources of capital."
Key Financial Metrics The following is an overview of the key financial metrics for the quarter: -- Total assets were $5.6 billion at March 31, 2009, an increase of 45.0% or $1.8 billion over $3.9 billion at March 31, 2008. Willow Financial had assets of approximately $1.6 billion at the acquisition date of December 5, 2008. -- Loans increased $1.1 billion and deposits grew $1.2 billion from March 31, 2008. Adjusted for the Willow Financial acquisition, organic loan growth was approximately $81.3 million or 3.3%, and deposits grew by $240.4 million or 8.1%. -- Net interest income on a tax equivalent basis in the first quarter of 2009 increased $11.6 million or 44.5% from the same period in 2008 mainly as a result of the Willow Financial acquisition. The net interest margin for the first quarter of 2009 was 3.02% compared to 2.91% for the same period in 2008. -- Nonperforming assets were $89.5 million at March 31, 2009. Nonperforming assets as a percentage of total assets increased to 1.58% from 1.43% at December 31, 2008, and 0.69% at March 31, 2008. Net charge-offs were $4.0 million compared to $798,000 in the first quarter of 2008. -- Quarterly noninterest income was up $5.3 million from the first quarter of 2008. Gains on sales of investment securities and loans increased by $3.3 million over last year's quarter. Service charges on deposits increased $1.1 million, or 34.7% mainly from Willow Financial deposit accounts. In addition, first quarter noninterest income includes $1.7 million gain on the sale of the Bank's merchant credit card business. A non-cash other-than-temporary impairment charge of $1.3 million on collateralized debt obligation investments in pooled trust preferred securities as well as other investments was also recorded during the first quarter of 2009. -- Quarterly noninterest expenses were up $14.9 million over the same period in the prior year, driven by the acquisition of Willow Financial. In addition, FDIC insurance assessments increased by $2.6 million and severance costs were $1.0 million. Other expenses were $3.5 million higher during the first quarter of 2009 mostly due to Willow Financial including increased professional, consulting and data processing expenses.
Harleysville National Corporation, with assets of $5.6 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 $2.5 billion. Harleysville National Corporation stock is traded under the symbol "HNBC" and is commonly quoted under NASDAQ Global Select Market(R). For more information, visit the Harleysville National Corporation 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 anticipated cost savings may not be realized, estimated synergies may not occur, 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. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the following: ineffectiveness of their business strategy due to changes in current or future market conditions; 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; inability to achieve merger-related synergies; difficulties in integrating distinct business operations, including information technology difficulties; disruption from the transaction making it more difficult to maintain relationships with customers and employees, and 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 in the Corporation's filings with the Securities and Exchange Commission.
Harleysville National Corporation Consolidated Selected Financial Data (1) (Dollars in thousands, except per share data) March 31, 2009 (unaudited) For the period: Three Months Ended --------------- Mar. 31, Dec. 31, Sep. 30, 2009 2008 2008 ---- ---- ---- Interest Income $63,638 $54,583 $49,942 Interest Expense 28,334 25,136 24,645 ------ ------ ------ Net Interest Income 35,304 29,447 25,297 Provision for Loan Losses 7,121 7,920 2,580 ----- ----- ----- Net Interest Income after Provision for Loan Losses 28,183 21,527 22,717 ------ ------ ------ Service Charges 4,194 3,666 3,424 Gain on Sales of Investment Securities, Net 1,952 2,417 - Other-than-temporary Impairment of Available for Sale Securities (1,344) (1,923) - Gain (Loss) on Sales of Loans, Net 1,698 136 (5) Wealth Management Income 4,322 5,888 3,862 Bank-Owned Life Insurance Income 778 730 706 Other Income 4,559 2,430 2,458 ----- ----- ----- Total Noninterest Income 16,159 13,344 10,445 ------ ------ ------ Salaries, Wages and Employee Benefits 20,279 14,509 13,539 Occupancy 4,206 2,663 2,412 Furniture and Equipment 1,608 1,181 1,074 Intangibles Expense 948 2,211 678 FDIC Deposit Insurance 2,787 1,164 551 Merger Charges - 2,456 974 Other Expenses 8,793 7,109 5,925 ----- ----- ----- Total Noninterest Expense 38,621 31,293 25,153 ------ ------ ------ Income Before Income Taxes 5,721 3,578 8,009 Income Tax (Benefit) Expense 1,126 (245) 1,370 ----- ---- ----- Net Income $4,595 $3,823 $6,639 ====== ====== ====== Per Common Share Data: ----------------------- Weighted Average Common Shares - Basic 42,990,542 34,695,062 31,385,257 Weighted Average Common Shares - Diluted 43,018,233 34,843,058 31,551,026 Net Income Per Share - Basic $0.11 $0.11 $0.21 Net Income Per Share - Diluted $0.11 $0.11 $0.21 Cash Dividend Per Share $0.10 $0.20 $0.20 Book Value $11.00 $11.05 $9.90 Market Value $6.06 $14.44 $16.98 2009 2008 2008 Asset Quality Data: 1Q 4Q 3Q ------------------- -- -- -- Nonaccrual Loans $85,393 $75,060 $36,278 90 + Days Past Due Loans 2,073 1,849 1,275 ----- ----- ----- Nonperforming Loans 87,466 76,909 37,553 Net Assets in Foreclosure 2,008 1,626 1,221 ----- ----- ----- Nonperforming Assets $89,474 $78,535 $38,774 ------- ------- ------- Loan Loss Reserve $53,062 $49,955 $31,668 Loan Loss Reserve / Loans 1.47% 1.36% 1.25% Loan Loss Reserve / Nonperforming Loans 60.7% 65.0% 84.3% Nonperforming Assets / Total Assets 1.58% 1.43% 0.98% Net Loan Charge-offs $4,014 $2,558 $2,086 Net Loan Charge-offs (annualized) / Average Loans 0.44% 0.36% 0.33% 2009 2008 2008 Selected Ratios (annualized): 1Q 4Q 3Q ----------------------------- -- -- -- Return on Average Assets 0.33% 0.35% 0.68% Return on Average Shareholders' Equity 3.88% 4.40% 8.20% Yield on Earning Assets (FTE) 5.29% 5.69% 5.76% Cost of Interest Bearing Funds 2.53% 2.82% 3.10% Net Interest Margin (FTE) 3.02% 3.16% 3.02% Leverage Ratio 6.33% 8.19% 8.13% 2009 2008 2008 Balance Sheet (Period End): 1Q 4Q 3Q --------------------------- -- -- -- Assets $5,646,195 $5,490,509 $3,949,730 Earning Assets 5,109,083 4,944,126 3,626,352 Investment Securities 1,179,213 1,231,661 983,349 Loans 3,615,775 3,685,244 2,539,037 Other Earning Assets 314,095 27,221 103,966 Interest-Bearing Liabilities 4,585,275 4,449,461 3,221,921 Total Deposits 4,147,418 3,938,432 3,018,276 Noninterest-Bearing Deposits 497,921 479,469 343,308 Interest-Bearing Checking 579,922 556,855 430,607 Money Market 1,074,892 1,042,302 727,693 Savings 309,767 270,885 182,342 Time Deposits 1,684,916 1,588,921 1,334,326 Total Borrowed Funds 935,778 990,498 546,953 Federal Home Loan Bank 515,993 522,671 213,755 Other Borrowings 419,785 467,827 333,198 Shareholders' Equity 473,713 474,707 310,994 2009 2008 2008 Balance Sheet (Average): 1Q 4Q 3Q ------------------------ -- -- -- Assets $5,580,099 $4,341,741 $3,899,593 Earning Assets 5,047,766 3,956,963 3,580,454 Investment Securities 1,209,012 1,072,468 1,002,901 Loans 3,666,744 2,860,891 2,522,034 Other Earning Assets 172,010 23,604 55,519 Interest-Bearing Liabilities 4,543,033 3,550,359 3,158,464 Total Deposits 4,062,577 3,289,483 2,923,815 Noninterest-Bearing Deposits 472,687 445,495 348,183 Interest-Bearing Checking 560,239 444,141 428,078 Money Market 1,060,299 820,395 739,931 Savings 286,317 212,081 182,403 Time Deposits 1,683,035 1,367,371 1,225,220 Total Borrowed Funds 953,143 706,371 582,832 Federal Home Loan Bank 520,592 289,245 217,717 Other Borrowings 432,551 417,126 365,115 Shareholders' Equity 480,491 345,887 322,077 For the period: Three Months Ended --------------- Jun. 30, Mar. 31, 2008 2008 ---- ---- Interest Income $49,353 $52,416 Interest Expense 24,164 28,209 ------ ------ Net Interest Income 25,189 24,207 Provision for Loan Losses 3,107 1,960 ----- ----- Net Interest Income after Provision for Loan Losses 22,082 22,247 ------ ------ Service Charges 3,312 3,113 Gain on Sales of Investment Securities, Net 97 128 Other-than-temporary Impairment of Available for Sale Securities - - Gain (Loss) on Sales of Loans, Net 219 207 Wealth Management Income 4,615 4,279 Bank-Owned Life Insurance Income 657 684 Other Income 2,696 2,421 ----- ----- Total Noninterest Income 11,596 10,832 ------ ------ Salaries, Wages and Employee Benefits 14,201 13,859 Occupancy 2,441 2,585 Furniture and Equipment 1,083 1,094 Intangibles Expense 631 688 FDIC Deposit Insurance 204 163 Merger Charges - - Other Expenses 5,898 5,329 ----- ----- Total Noninterest Expense 24,458 23,718 ------ ------ Income Before Income Taxes 9,220 9,361 Income Tax (Benefit) Expense 1,893 2,057 ----- ----- Net Income $7,327 $7,304 ====== ====== Per Common Share Data: ----------------------- Weighted Average Common Shares - Basic 31,359,011 31,346,833 Weighted Average Common Shares - Diluted 31,521,608 31,522,736 Net Income Per Share - Basic $0.24 $0.23 Net Income Per Share - Diluted $0.23 $0.23 Cash Dividend Per Share $0.20 $0.20 Book Value $10.45 $10.95 Market Value $11.16 $14.42 2008 2008 Asset Quality Data: 2Q 1Q ------------------- -- -- Nonaccrual Loans $36,284 $23,819 90 + Days Past Due Loans 1,676 1,702 ----- ----- Nonperforming Loans 37,960 25,521 Net Assets in Foreclosure 1,189 1,536 ----- ----- Nonperforming Assets $39,149 $27,057 ------- ------- Loan Loss Reserve $31,174 $28,490 Loan Loss Reserve / Loans 1.25% 1.15% Loan Loss Reserve / Nonperforming Loans 82.1% 111.6% Nonperforming Assets / Total Assets 1.01% 0.69% Net Loan Charge-offs $423 $798 Net Loan Charge-offs (annualized) / Average Loans 0.07% 0.13% 2008 2008 Selected Ratios (annualized): 2Q 1Q ----------------------------- -- -- Return on Average Assets 0.76% 0.75% Return on Average Shareholders' Equity 8.79% 8.55% Yield on Earning Assets (FTE) 5.80% 6.07% Cost of Interest Bearing Funds 3.12% 3.60% Net Interest Margin (FTE) 3.06% 2.91% Leverage Ratio 8.18% 8.07% 2008 2008 Balance Sheet (Period End): 2Q 1Q --------------------------- -- -- Assets $3,882,232 $3,894,019 Earning Assets 3,544,587 3,569,040 Investment Securities 1,014,134 1,048,915 Loans 2,501,968 2,481,930 Other Earning Assets 28,485 38,195 Interest-Bearing Liabilities 3,114,993 3,129,316 Total Deposits 2,865,148 2,987,907 Noninterest-Bearing Deposits 362,750 355,027 Interest-Bearing Checking 422,850 399,178 Money Market 756,588 854,831 Savings 183,226 171,337 Time Deposits 1,139,734 1,207,534 Total Borrowed Funds 612,595 496,436 Federal Home Loan Bank 223,764 208,774 Other Borrowings 388,831 287,662 Shareholders' Equity 327,910 343,282 2008 2008 Balance Sheet (Average): 2Q 1Q ------------------------ -- -- Assets $3,856,900 $3,890,959 Earning Assets 3,552,208 3,590,965 Investment Securities 1,029,502 1,043,566 Loans 2,491,894 2,463,242 Other Earning Assets 30,812 84,157 Interest-Bearing Liabilities 3,114,520 3,151,996 Total Deposits 2,900,523 2,977,052 Noninterest-Bearing Deposits 340,802 324,120 Interest-Bearing Checking 415,398 436,828 Money Market 804,890 822,411 Savings 176,917 156,211 Time Deposits 1,162,516 1,237,482 Total Borrowed Funds 554,799 499,064 Federal Home Loan Bank 213,860 211,607 Other Borrowings 340,939 287,457 Shareholders' Equity 335,311 343,400 Average Balance Sheets and Interest Rates - Fully-Taxable Equivalent Basis ---------------------------------------------------------- Three Months Ended March 31,2009 ---------------------------- Average Average Balance Interest Rate ------- -------- ---- Assets Earning assets: Investment securities Taxable investments $885,819 $11,786 5.40% Non-taxable investments (2) 323,193 5,325 6.68% ------- ----- ---- Total investment securities 1,209,012 17,111 5.74% Federal funds sold and deposits in banks 172,010 127 0.30% Loans (2) (3) 3,666,744 48,658 5.38% --------- ------ ---- Total earning assets 5,047,766 65,896 5.29% Noninterest-earning assets 532,333 ------- Total assets $5,580,099 ========== Liabilities and Shareholders' Equity Interest-bearing liabilities: Interest-bearing deposits: Savings and money market $1,906,855 6,171 1.31% Time 1,683,035 14,693 3.54% --------- ------ ---- Total interest-bearing deposits 3,589,890 20,864 2.36% Borrowed funds 953,143 7,470 3.18% ------- ----- ---- Total interest-bearing liabilities 4,543,033 28,334 2.53% Noninterest-bearing liabilities: Demand deposits 472,687 Other liabilities 83,888 ------ Total noninterest-bearing liabilities 556,575 ------- Total liabilities 5,099,608 Shareholders' equity 480,491 ------- Total liabilities and shareholders' equity $5,580,099 ========== Net interest spread 2.76% Effect of noninterest-bearing sources 0.26% ------- ---- Net interest income/margin on earning assets $37,562 3.02% ------- ---- Less tax equivalent adjustment 2,258 ----- Net interest income $35,304 ======= Three Months Ended March 31, 2008 ---------------------------- Average Average Balance Interest Rate ------- -------- ---- Assets Earning assets: Investment securities Taxable investments $753,468 $9,754 5.21% Non-taxable investments (2) 290,098 4,356 6.04% ------- ----- ---- Total investment securities 1,043,566 14,110 5.44% Federal funds sold and deposits in banks 84,157 694 3.32% Loans(2) (3) 2,463,242 39,405 6.43% --------- ------ ---- Total earning assets 3,590,965 54,209 6.07% Noninterest-earning assets 299,994 ------- Total assets $3,890,959 ========== Liabilities and Shareholders' Equity Interest-bearing liabilities: Interest-bearing deposits: Savings and money market $1,415,450 8,095 2.30% Time 1,237,482 14,501 4.71% --------- ------ ---- Total interest-bearing deposits 2,652,932 22,596 3.43% Borrowed funds 499,064 5,613 4.52% ------- ----- ---- Total interest-bearing liabilities 3,151,996 28,209 3.60% Noninterest-bearing liabilities: Demand deposits 324,120 Other liabilities 71,443 ------ Total noninterest-bearing liabilities 395,563 ------- Total liabilities 3,547,559 Shareholders' equity 343,400 ------- Total liabilities and shareholders' equity $3,890,959 ========== Net interest spread 2.47% Effect of noninterest-bearing sources 0.44% ------- ---- Net interest income/margin on earning assets $26,000 2.91% ------- ---- Less tax equivalent adjustment 1,793 ----- Net interest income $24,207 ======= Regulatory Capital ------------------- Actual ------ As of March 31, 2009 Amount Ratio --------------------- ------ ----- Total Capital (to risk weighted assets): Corporation $388,884 9.39% Harleysville National Bank 375,036 9.07% Tier 1 Capital (to risk weighted assets): Corporation 337,084 8.14% Harleysville National Bank 323,355 7.82% Tier 1 Capital (to average assets): Corporation 337,084 6.33% Harleysville National Bank 323,355 6.09% 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.
Harleysville National Bank
CONTACT: Paul D. Geraghty, President and CEO, +1-215-513-2391
Web Site: http://www.hncbank.com/
