First Quarter Earnings Up 5.2% at Harleysville National Corporation

First Quarter Earnings Up 5.2% at Harleysville National
Corporation 


HARLEYSVILLE, Pa., April 13  /PRNewswire-FirstCall/ -- Harleysville National
Corporation  (HNC), today announced first quarter 2004 earnings of $8.9 million,
a 5.2% increase over first quarter 2003 earnings of $8.5 million.  The company's
consolidated total assets were $2.54 billion at March 31, 2004, 2.9% above the
March 31, 2003, level of $2.47 billion.

For the quarter ending March 31, 2004, diluted earnings per share of $.36 were
5.9% higher than the $.34 earned during the first quarter of 2003, and basic
earnings per share at $.37 were up 2.8% from $.36 in the first quarter of 2003.

"We are pleased to announce yet another increase in earnings.  We are also happy
to report that the consolidation of our subsidiary banks into our largest bank,
Harleysville National Bank and Trust Company, was successfully completed in the
first quarter as well.  We look forward, now, to the acquisition of Millennium
Bank and its wholly-owned subsidiary, Cumberland Advisors, Inc., at the end of
April," said Walter E. Daller Jr., Chairman, President and CEO of HNC.

Net interest income on a fully tax-equivalent basis in the first quarter of 2004
increased $656,000 or 3.1%over the same period in 2003.  This increase was the
result of the rise in the net interest margin and higher earning asset volumes. 
The net interest margin for the first quarter of 2004 of 3.73%, increased 5
basis points from the first quarter of 2003 net interest margin of 3.68%. 
Average earning assets increased $43.9 million or 1.9% during the first quarter
of 2004 versus the comparable period in 2003.

The higher net interest margin is primarily due to loan growth funded, in part,
by the reduction of investment securities.  The continuing decline in loan
yields has partially offset this positive impact on the net interest margin. 
During this period, average loans grew $85.7 million or 6.5%, while average
investment securities decreased $60.0million or 6.2%.

The company also experienced an improvement in loan quality during the first
quarter of 2004, compared to the first and fourth quarters of 2003.
Nonperforming assets decreased in the first quarter of 2004 by $1.1 million and
$196,000 from the first 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 341.3% at March 31, 2004, compared to 371.7%
at December 31, 2003, and 286.6% at March 31, 2003. Nonperforming assets,
including nonaccrual loans, net assets in foreclosure and loans 90 days or more
past due was .21% of total assets at March 31, 2004, an improvement from the
.22% at December 31, 2003, and the .26% at March 31, 2003.  The lower provision
for loan losses in the first quarter of 2004, compared to the first quarter of
2003, is reflective of the improved loan quality.

Core deposits grew to $1.33 billion or 8.7% at March 31, 2004, from $1.23
billion at March 31, 2003.  Total deposit growth of $15.1 million for the same
period was limited, due to the bank's strategy to de-emphasize higher costing
certificates of deposit.  Other borrowings increased $31.2 million or 12.6%,
primarily due to HNC's previously announced issuance of Trust Preferred
Securities in the amount of $20 million during the first quarter of 2004.

Service charges and trust and investment services income for the quarter ended
March 31, 2004, increased $95,000 and $233,000 or 5.2% and 26.2% respectively,
from the same period a year ago.  Other operating income of $5.8 million for the
current quarter reflects a decrease of $1.4 million for the comparable period in
2003, primarily due to $1.1 million non-recurring income from life insurance
proceeds during the first quarter of 2003, lower net security gains amounting to
$416,000 and lower other income of $201,000 during first quarter of 2004.

During the first quarter 2004, other operating expenses of $13.8 million
decreased $1.7 million or 10.9% from $15.5 million in the first quarter of 2003.
 The reduction in other operating expenses was primarily due to a $2.1 million
decrease in other expenses, which primarily consists of reduced off- lease
vehicle residual reserve expense amounting to $1.8 million in the first quarter
of 2004, compared to the first quarter of 2003.  The company reviews and
adjusts, if necessary, the off-lease vehicle residual reserve on a quarterly
basis.  Net of the reduction in other expenses, total operating expenses
increased $450,000 or 4.4% in the first quarter of 2004, compared to the first
quarter of 2003.  Contributing to this growth were increases in salaries and
employee benefits, and occupancy expense of $436,000 and $61,000, respectively.

Harleysville National Corporation, with assets of $2.5 billion, is the holding
company for its major subsidiary, Harleysville National Bank and Trust Company
(HNB).  Providing Real Life Financial Solutions, HNB operates 41 offices in 10
counties throughout eastern Pennsylvania.  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)
   March 31, 2004
   (unaudited)

  For the period:                          Three Month Ended
                      Mar 31,    Dec. 31,    Sept. 30,   June 30,    Mar 31,
                       2004        2003        2003        2003        2003
  Interest Income    $29,173     $30,287     $28,439     $29,889     $30,585
  Interest Expense     8,943       9,393       9,216      10,084      11,386
  Net Interest Income 20,230      20,894      19,223      19,805      19,199
  Provision For Loan
   Losses                489         641         630       1,320         609
  Net Interest Income
   After Provision For
   Loan Losses        19,741      20,253      18,593      18,485      18,590

  Service Charges      1,925       2,081       2,007       1,937       1,830
  Security Gains, Net    900         164         359       4,774       1,316
  Trust and Investment
   Services Income     1,121       1,017         954         978         888
  Bank-Owned Life
   Insurance Income      611         680         673         631         631
  Income on Life
   Insurance             ---         ---         ---         ---       1,119
  Other Income         1,226       1,274       1,259       1,639       1,427
     Total Other
      Operating Income 5,783       5,216       5,252       9,959       7,211

  Salaries, Wages and
   Employee Benefits   8,277       7,518       7,938       7,876       7,841
  Occupancy            1,084         924         941         882       1,023
  Furniture and
   Equipment           1,258       1,637       1,525       1,376       1,305
  Prepayment Fee         ---         ---         ---       2,594         ---
  Other Expenses       3,198       3,812       2,694       4,399       5,344
    Total Other
     Operating
     Expenses         13,817      13,891      13,098      17,127      15,513

  Income Before Income
   Taxes              11,707      11,578      10,747    11,317      10,288
  Income Tax Expense   2,800       2,606       1,952       2,216       1,823
    Net Income        $8,907      $8,972      $8,795      $9,101      $8,465

  Per Common Share Data: *
  Weighted Average
   Common Shares -
   Diluted  24,793,529  24,768,712  24,587,614  24,540,648  24,469,511
  Weighted Average
   Common Shares -
   Basic          23,931,459  23,837,623  23,812,431  23,779,235  23,770,390
  Net Income Per
   Share - Diluted     $0.36       $0.37       $0.36    $0.37       $0.34
  Net Income Per
   Share - Basic       $0.37       $0.37       $0.37       $0.38       $0.36
  Cash Dividend Per
   Share               $0.17       $0.19       $0.16      $0.152      $0.152
  Book Value           $9.92       $9.52 $9.18       $9.42       $9.06
  Market Value        $27.83      $30.10      $23.39      $21.55      $19.46

   *  Adjusted for a five-for-four common stock split effective
      September 15, 2003.


                       2004        2003        2003        2003       2003
  Asset Quality Data:   1Q          4Q          3Q          2Q         1Q
  Nonaccrual Loans    $3,645      $3,343      $3,962      $4,146     $4,492
  90 + Days Past
   Due Loans           1,178       1,164       1,200      1,681      1,406
  Nonperforming Loans  4,823       4,507       5,162       5,827      5,898
  Net Assets In
   foreclosure           423         935         893         729        485
  Nonperforming
   Assets             $5,246      $5,442      $6,055      $6,556     $6,383
  Loan Loss Reserve  $16,464     $16,753     $16,854     $17,538    $16,902
  Loan Loss
   Reserve/Loans        1.15%       1.19%       1.22%       1.31%      1.26%
  Loan Loss Reserve/
   Nonperforming Loans 341.3%      371.7% 326.5%      301.0%     286.6%
  Nonperforming Assets/
   Total Assets         0.21%       0.22%       0.24%       0.27%      0.26%
  Net Loan Charge-offs  $779        $742      $1,313        $684       $898
  Net Loan Charge-offs
   (annualized)/
 Average Loans        0.22%       0.21%       0.39%       0.20%      0.27%


  Selected Ratios       2004        2003        2003        2003       2003
   (annualized):         1Q          4Q          3Q          2Q         1Q
  Return on Average
   Assets               1.43%       1.41%       1.44%       1.49%      1.38%
  Return on Average
   Shareholders'
   Equity              15.33%      16.22%      16.11%      16.67%     16.18%
  Return on Average
   Shareholders'
   Realized Equity (A) 15.97%16.56%      16.65%      17.53%     16.78%
  Yield on Earning
   Assets (FTE)         5.25%       5.38%       5.31%       5.57%      5.65%
  Cost of Interest
   Bearing Funds        1.86%       1.88%       1.95%       2.12%      2.34%
  Net Interest Margin
   (FTE)                3.73%       3.82%       3.71%       3.82%      3.68%
  Leverage Ratio       10.04%       8.77%       8.97%       8.73%      8.49%

   (A) Excluding unrealized gain (loss) on investment securities available
       for sale.


  Balance Sheet
  (Period End):      2004        2003        2003        2003        2003
                      1Q          4Q          3Q          2Q          1Q
  Assets          $2,542,328  $2,510,939  $2,523,002  $2,406,132  $2,470,414
  Earning Assets   2,406,068   2,371,816   2,386,477   2,244,720   2,324,511
    Investment
     Securities      948,749     924,874     915,832     866,191     959,095
    Loans, Net of
     Unearned Fees 1,428,145   1,408,391   1,377,682   1,335,919   1,337,130
    Other Earning
     Assets           29,174      38,551      92,963      42,610      28,286
  Total Deposits   1,968,521   1,979,081   1,990,832   1,873,218   1,953,466
    Non-Interest
     Bearing
     Deposits        317,566     294,121     283,886     291,454     270,759
    Interest Bearing
     Checking        268,110     283,607     276,941     218,200     234,660
    Money Market     521,085     506,516     490,341     483,326     507,913
    Savings          225,981     221,778     217,969     220,001     212,967
    Time, under
     $100,000        481,400     491,740     506,976     503,850     516,994
    Time, $100,000
     or greater      154,379     181,319     214,719     156,387     210,173
  Other Borrowings   279,097     255,056     263,828     254,563     247,919
    Federal Home
     Loan Bank       172,750     172,750     168,750     153,750     162,750
    Other Borrowings 106,347      82,306      95,078     100,813      85,169
  Shareholders'
   Equity            237,964     227,053     218,878     223,849     215,109


  Balance Sheet
  (Daily Average):   2004        2003        2003        2003         2003
                      1Q          4Q          3Q          2Q           1Q
  Assets          $2,497,085  $2,543,616  $2,436,763  $2,435,580  $2,450,397
  Earning Assets   2,365,497   2,408,967   2,298,565   2,305,590   2,321,612
    Investment
     Securities      910,314     983,318     898,886     948,782     970,336
    Loans, Net of
     Unearned Fees 1,414,802   1,389,595   1,354,394   1,342,758   1,329,093
    Other Earning
     Assets           40,381      36,054      45,285      14,050      22,183
  Total Deposits   1,961,481   1,976,616   1,906,373   1,889,663   1,938,766
    Non-Interest
     Bearing
     Deposits        280,809     279,307     278,267     260,688     242,793
    Interest Bearing
     Checking        280,142     280,076     241,283     223,152     235,502
    Money Market     517,846     501,127     479,375     493,561     498,328
    Savings          222,807     221,116     219,778     216,445     207,512
    Time, under
     $100,000        487,379     497,281     508,256     510,703     523,089
    Time, $100,000
     or greater      172,498     197,709     179,414     185,114     231,542
  Other Borrowings   251,278     296,344     260,383     274,567     252,411
    Federal Home
     Loan Bank       172,750     172,750     164,728     164,794     162,750
    Other Borrowings  78,528     123,594      95,655     109,773   89,661
  Shareholders'
   Equity            232,386     221,236     218,396     218,363     209,241


DATASOURCE: Harleysville National Corporation



CONTACT:  Walter E. Daller Jr., President and CEO of Harleysville

National Corporation, [phone], Ext. 2300



Web site:  http://www.harleysvillebank.com/

http://www.hncbank.com/ 

Copyright