Harleysville National Corp. (HNBC) filed Quarterly Report for the period ended 2009-09-30.
Harleysville National Corporation (PA) is a bank holding company with 4 principal subsidiaries: Harleysville National Bank and Trust Company, Citizens National Bank of Lansford, Summit Hill Trust Company, and Security National Bank. The subsidiary banks provide a full-range of business, retail, trust, mortgage banking, real estate, and investment management and brokerage services to individual and commercial customers. They also offer checking, savings, loans, MasterCard, VISA, NOW accounts, and money market deposit accounts. Harleysville National Corp. has a market cap of $252.1 million; its shares were traded at around $5.85 with and P/S ratio of 1. Harleysville National Corp. had an annual average earning growth of 4.7% over the past 10 years.
Highlight of Business Operations:
The Corporation reported a net loss of $4.4 million, or $0.10 per diluted share for the third quarter of 2009. This compares to net income of $6.6 million, or $0.21 per diluted share for the third quarter of 2008. For the nine months ended September 30, 2009, the net loss was $222.3 million or $5.16 per diluted share, which included a $214.5 million goodwill impairment charge. This compares to net income of $21.3 million or $0.68 per diluted share during the comparable period in 2008.
The third quarter results included a $14.8 million provision for credit losses; a $4.7 million non-cash other-than–temporary impairment (OTTI) charge on investment securities; as well as professional fees of $2.4 million associated with recent corporate finance activities, including the pending merger with First Niagara Financial Group, Inc. (First Niagara). During the third quarter of 2009, the provision for loan losses was $14.8 million, compared to $2.6 million in the third quarter of 2008. For the nine months ended September 30, 2009, the provision for loan losses was $53.9 million compared to $7.6 million for the same period in 2008. The increase in the provision for loan losses reflects an increase in nonperforming assets to $153.7 million at September 30, 2009, up from $78.5 million at December 31, 2008 and $38.8 million at September 30, 2008. Subsequent to September 30, 2009, the Corporation benefited from the full
The year-to-date 2009 loss was driven by a non-cash goodwill impairment charge of $214.5 million, resulting from the decrease in market value caused by underlying capital and credit concerns which was valued through the Agreement and Plan of Merger dated July 26, 2009 between First Niagara and the Corporation in which the Corporation will be merged into First Niagara. The impairment effectively constituted the difference between the sale price of the Corporation to First Niagara for $5.50 per share, which established the fair value of the Corporation, compared to the Corporation s book value per share of $10.75 prior to the impairment charge with further evaluation through the Corporation s step two goodwill analysis.
Total assets were $5.2 billion at September 30, 2009, an increase of $1.2 billion or 30.7% from $3.9 billion at September 30, 2008. Loans were $3.3 billion, an increase of $711.1 million or 28.0% from $2.5 billion at September 30, 2008. Deposits were $4.0 billion, up $923.6 million or 30.6% from $3.0 billion at September 30, 2008. On the acquisition date, Willow Financial had approximately $1.6 billion in assets, $1.1 billion in loans and $946.7 million in deposits. Total assets at September 30, 2009 decreased $327.2 million, or 6.0%, as compared to total assets reported at the year ended December 31, 2008. Gross loans decreased by $459.7 million due to lower loan levels in all categories resulting mainly from increased refinancing activity and reduced origination volume as well as sales of first mortgage residential loans totaling $106.4 million and indirect consumer installment loans totaling $36.2 million for a net loss of $209,000.
Nonperforming assets were $153.7 million at September 30, 2009. Nonperforming assets as a percentage of total assets were 2.98% at September 30, 2009, compared to 1.43% at December 31, 2008 and 0.98% at September 30, 2008. Net charge-offs for the third quarter of 2009 were $7.8 million, compared to $2.1 million in the same period of 2008. The allowance for credit losses increased to $77.3 million at September 30, 2009, compared to $50.0 million at December 31, 2008, and $31.7 million at September 30, 2008.
On July 27, 2009, the Corporation and First Niagara Financial Group, Inc., the holding company for First Niagara Bank, announced that they had entered into an Agreement and Plan of Merger (the “Merger Agreement”), dated July 26, 2009, which sets forth the terms and conditions pursuant to which the Corporation will merge with and into First Niagara in a transaction valued at approximately $237 million. Under the terms of the Merger Agreement, stockholders of the Corporation will receive 0.474 shares of First Niagara stock for each share of common stock they own, representing a premium of about 37.5% based on the Corporation s closing price on July 24, 2009 of $4.00 per share. The exchange ratio is based on First Niagara s five-day average closing stock price of $11.60 on July 22, 2009. The exchange ratio is subject to downward adjustment if loan delinquencies of Harleysville National Bank and Trust Company exceed specified amounts. During the second quarter of 2009, the Corporation recorded a goodwill impairment charge of $214.5 million, resulting from the decrease in market value caused by underlying capital and credit concerns which was valued through the Merger Agreement. The impairment effectively constituted the difference between the sale price of the Corporation to First Niagara for $5.50 per share, which established the fair value of the Corporation, compared to the Corporation s book value per share of $10.75 prior to the impairment charge with further evaluation through the Corporation s step two goodwill analysis. See Note 5 – Goodwill and Other intangibles for further information.
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