Willow Financial Bancorp (WGBC) 425 Business combination disclosure

FOR IMMEDIATE RELEASE

CONTACT:                Paul D. Geraghty, President and CEO

PHONE:                      215-513-2391

HARLEYSVILLE NATIONAL CORPORATION REPORTS

THIRD QUARTER EARNINGS OF $6.6 MILLION

HARLEYSVILLE, PA (October 15, 2008) - Harleysville National Corporation (NASDAQ: HNBC) today reported net income of $6.6 million, or $.21 per diluted share, for the third quarter of 2008, compared to $7.2 million or $.25 per diluted share for the third quarter of 2007.  For the nine months ended September 30, 2008, net income was $21.3 million or $.67 per diluted share compared to $20.4 million or $.70 per diluted share during the comparable period in 2007.  Net income for the third quarter and year to date 2008 included pre-tax merger costs of $974,000, or $.02 per diluted share related to the acquisition of Willow Financial Bancorp, Inc. expected to close during the fourth quarter.  These charges include system conversion, integration consulting and severance expenses associated with the acquisition.  Harleysville expects to incur additional merger-related expenses in the fourth quarter of 2008.

Paul D. Geraghty, President and CEO, said, “Despite the difficult economic environment and the turmoil in the financial markets, Harleysville's third quarter performance was stable.  Earnings, excluding merger costs, were level on a sequential basis. Year over year loan and deposit growth was largely driven by a combination of organic loan growth of $111.7 million and deposit growth of $87.2 million along with the impact of the East Penn Financial acquisition, which closed in November 2007.”

 Mr. Geraghty continued, “While many banks and financial institutions are struggling to survive today, Harleysville is open for business for reasonable transactions with creditworthy relationships in our market territory.  We remain well-capitalized with good liquidity.  We continue to place significant effort on credit management and have increased resources to contend with the economy.”

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Mr. Geraghty continued, “The acquisition of Willow Financial Bank continues to move forward, and earlier this month we received needed approvals from the Office of the Comptroller of the Currency.  The Office of Thrift Supervision has also not objected to the transaction, and we expect to receive approvals from the Federal Reserve Board and the Pennsylvania Department of Banking by the end of October.  Once those approvals are in place we will move quickly to close the transaction, and expect to accomplish this by early December 2008.”

Mr. Geraghty concluded, “We continue to move toward our strategic goals, however, there is no single initiative that will drive us there overnight.  With our continued focus on our three-fold strategy to drive improvement through expansion, empowerment, and effectiveness, we have derived multiple benefits.  The acquisition of Willow Financial is a key milestone in that regard.  With many of our larger competitors in Southeastern Pennsylvania experiencing dramatic changes, we believe that the market opportunity for a strong locally-headquartered community bank with the scale, market presence, and sophisticated product set of the combined Harleysville National/Willow Financial Bank will be significant.”

The following is an overview of the key financial highlights for the quarter:

·   Total assets were $3.9 billion at September 30, 2008, an increase of 16.8% from $3.4 billion at September 30, 2007.

·   Loans were $2.5 billion, an increase of 21.1% from $2.1 billion at September 30, 2007.  Deposits were $3.02 billion, up 18.6% from $2.54 billion last year.

·   Net interest income on a tax equivalent basis in the third quarter of 2008 increased $4.8 million or  21.6% from the same period in 2007 mainly as a result of a decrease in customer deposit costs and the East Penn acquisition as well as organic loan growth.  Third quarter net interest margin was 3.02%, increasing 14 basis points year over year and decreasing 4 basis points sequentially.

·   Nonperforming assets were $38.8 million at September 30, 2008.  Nonperforming assets as a percentage of total assets were 0.98% at September 30, 2008, compared to 1.01% at June 30, 2008 and 0.46% at September 30, 2007.  Net charge-offs were $2.1 million, compared to $1.5 million in the third quarter of 2007.  The allowance for credit losses increased to $31.7 million at quarter end, compared to $31.2 million at June 30, 2008, and $22.6 million at September 30, 2007.  Provision for loan losses increased to $2.6 million from $2.5 million during the third quarter of 2007.

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 ● Noninterest income was $10.4 million during the quarter, an increase of 7.0% from $9.8 million in last year’s second quarter, driven by growth in service  charges on deposits of $964,000 partially offset by a decrease in wealth management income of $746,000.

        ● Noninterest expense was $25.2 million, an increase of 33.4% from $18.9 million in the third quarter of 2007, driven by the acquisition of East Penn, charges related to the upcoming merger with Willow Financial Bancorp as well as branch expansion. Occupancy expenses increased due to the addition of the East Penn branches as well as rent expense on the bank properties in the sale-leaseback transaction completed in the fourth quarter of 2007. Other expenses increased mostly due to additional professional and consulting fees, FDIC insurance assessments and the identifiable intangible asset amortization related to the East Penn acquisition.

Harleysville National Corporation, with assets of $3.9 billion, is the holding company for Harleysville National Bank (HNB) and its division, East Penn Bank (EPB).  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 on the NASDAQ Global Select Market®.   For more information, visit the Harleysville National Corporation website at www.hncbank.com.

The following disclosure is made in accordance with Rule 165 of the Securities and Exchange Commission.

Harleysville National Corporation has filed a registration statement on Form S-4 in connection with the merger transaction, and Harleysville National Corporation and Willow Financial Bancorp mailed a joint proxy statement/prospectus to their respective shareholders in connection with the transaction. Shareholders and investors are urged to read the joint proxy statement/prospectus, because it contains important information about Harleysville National Corporation, Willow Financial Bancorp and the transaction. You may obtain a free copy of the proxy statement/prospectus as well as other filings containing information about Harleysville National Corporation, at the SEC’s web site at www.sec.gov. A free copy of the proxy statement/prospectus, and the filings with the SEC that are incorporated by reference in the proxy statement/prospectus, may also be obtained from Harleysville National Corporation by

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directing the request to: George Rapp, Executive Vice President and CFO, Harleysville National Corporation, 483 Main Street, Harleysville, Pennsylvania, 19438, telephone 215-513-2307.

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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 Corporation’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 Corporation’s filings 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)
September 30, 2008
(unaudited)
For the period:			Three Months Ended
	Sep. 30,		Jun. 30,		Mar. 31,		Dec. 31,		Sep. 30,
	2008		2008		2008		2007		2007
Interest Income	$	49,942	$	49,353	$	52,416	$	51,133	$	49,022
Interest Expense		24,645		24,164		28,209		29,555		28,158
Net Interest Income		25,297		25,189		24,207		21,578		20,864
Provision for Loan Losses		2,580		3,107		1,960		4,475		2,525
Net Interest Income after
Provision for Loan Losses		22,717		22,082		22,247		17,103		18,339
Service Charges		3,424		3,312		3,113		2,870		2,460
Gains/(Losses) on Sales of Investment Securities, Net		-		97		128		657		(58	)
Gain on Sale-Leaseback of Bank Properties		-		-		-		2,788		-
Wealth Management Income		3,779		4,567		4,277		5,019		4,525
Bank-Owned Life Insurance Income		706		657		684		656		648
Other Income		2,536		2,963		2,630		2,181		2,190
Total Noninterest Income		10,445		11,596		10,832		14,171		9,765
Salaries, Wages and Employee Benefits		13,539		14,201		13,859		13,050		11,735
Occupancy		2,412		2,441		2,585		2,043		1,731
Furniture and Equipment		1,074		1,083		1,094		1,051		897
Merger Charges		974		-		-		339		25
Other Expenses		7,154		6,733		6,180		7,096		4,468
Total Noninterest Expense		25,153		24,458		23,718		23,579		18,856
Income Before Income Taxes		8,009		9,220		9,361		7,695		9,248
Income Tax Expense		1,370		1,893		2,057		1,514		2,047
Net Income	$	6,639	$	7,327	$	7,304	$	6,181	$	7,201
Per Common Share Data:
Weighted Average Common Shares - Basic		31,385,257		31,359,011		31,346,833		30,075,054		28,881,006
Weighted Average Common Shares - Diluted		31,551,026		31,521,608		31,522,736		30,278,743		29,107,274
Net Income Per Share - Basic	$	0.21	$	0.24	$	0.23	$	0.20	$	0.25
Net Income Per Share - Diluted	$	0.21	$	0.23	$	0.23	$	0.20	$	0.25
Cash Dividend Per Share	$	0.20	$	0.20	$	0.20	$	0.20	$	0.20
Book Value	$	9.90	$	10.45	$	10.95	$	10.83	$	10.19
Market Value	$	16.98	$	11.16	$	14.42	$	14.57	$	15.89
For the period:	Nine Months Ended
	September 30,
	2008		2007
Interest Income	$	151,711	$	143,428
Interest Expense		77,018		82,572
Net Interest Income		74,693		60,856
Provision for Loan Losses		7,647		6,075
Net Interest Income after
Provision for Loan Losses		67,046		54,781
Service Charges		9,849		6,820
Gains on Sales of Investment Securities, Net		225		475
Wealth Management Income		12,623		13,623
Bank-Owned Life Insurance Income		2,047		1,833
Other Income		8,129		6,416
Total Noninterest Income		32,873		29,167
Salaries, Wages and Employee Benefits		41,599		35,782
Occupancy		7,438		4,965
Furniture and Equipment		3,251		2,890
Merger Charges		974		84
Other Expenses		20,067		14,055
Total Noninterest Expense		73,329		57,776
Income Before Income Taxes		26,590		26,172				��
Income Tax Expense		5,320		5,758
Net Income	$	21,270	$	20,414

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	Nine Months Ended
	September 30,
Per Common Share Data:	2008			2007
Weighted Average Common Shares - Basic		31,363,779			28,930,073
Weighted Average Common Shares - Diluted		31,531,942			29,183,811
Net Income Per Share - Basic	$	0.68		$	0.71
Net Income Per Share - Diluted	$	0.67		$	0.70
Cash Dividend Per Share	$	0.60		$	0.60
	2008			2008			2008			2007			2007
Asset Quality Data:		3Q			2Q			1Q			4Q			3Q
Nonaccrual Loans	$	36,278		$	36,284		$	23,819		$	21,091		$	14,507
90 + Days Past Due Loans		1,275			1,676			1,702			857			1,119
Nonperforming Loans		37,553			37,960			25,521			21,948			15,626
Net Assets in Foreclosure		1,221			1,189			1,536			28			28
Nonperforming Assets	$	38,774		$	39,149		$	27,057		$	21,976		$	15,654
Loan Loss Reserve	$	31,668		$	31,174		$	28,490		$	27,328		$	22,622
Loan Loss Reserve / Loans		1.25	%		1.25	%		1.15	%		1.11	%		1.08	%
Loan Loss Reserve / Nonperforming Loans		84.3	%		82.1	%		111.6	%		124.5	%		144.8	%
Nonperforming Assets / Total Assets		0.98	%		1.01	%		0.69	%		0.56	%		0.46	%
Net Loan Charge-offs	$	2,086		$	423		$	798		$	3,019		$	1,549
Net Loan Charge-offs (annualized)
/ Average Loans		0.33	%		0.07	%		0.13	%		0.53	%		0.29	%
	2008			2008			2008			2007			2007
Selected Ratios (annualized):		3Q			2Q			1Q			4Q			3Q
Return on Average Assets		0.68	%		0.76	%		0.75	%		0.68	%		0.86	%
Return on Average Shareholders' Equity		8.20	%		8.79	%		8.55	%		7.74	%		9.86	%
Yield on Earning Assets (FTE)		5.76	%		5.80	%		6.07	%		6.28	%		6.50	%
Cost of Interest Bearing Funds		3.10	%		3.12	%		3.60	%		4.02	%		4.19	%
Net Interest Margin (FTE)		3.02	%		3.06	%		2.91	%		2.76	%		2.88	%
Leverage Ratio		8.13	%		8.18	%		8.07	%		8.72	%		9.98	%
Selected Ratios (annualized):		2008 Year-to-date			2007 Year-to-date
Return on Average Assets		0.73	%		0.83	%
Return on Average Shareholders' Equity		8.52	%		9.34	%
Yield on Earning Assets (FTE)		5.88	%		6.43	%
Cost of Interest Bearing Funds		3.27	%		4.17	%
Net Interest Margin (FTE)		3.00	%		2.84	%
Balance Sheet (Period End):	2008			2008			2008			2007			2007
		3Q			2Q			1Q			4Q			3Q
Assets	$	3,949,730		$	3,882,232		$	3,894,019		$	3,903,001		$	3,380,519
Earning Assets		3,626,352			3,544,587			3,569,040			3,579,211			3,143,019
Investment Securities		983,349			1,014,134			1,048,915			982,915			929,103
Loans		2,539,037			2,501,968			2,481,930			2,460,823			2,095,800
Other Earning Assets		103,966			28,485			38,195			135,473			118,116
Interest-Bearing Liabilities		3,221,921			3,114,993			3,129,316			3,135,085			2,737,079
Total Deposits		3,018,276			2,865,148			2,987,907			2,985,058			2,544,340
Noninterest-Bearing Deposits		343,308			362,750			355,027			358,258			309,489
Interest-Bearing Checking		430,607			422,850			399,178			482,104			494,653
Money Market		727,693			756,588			854,831			796,325			727,486
Savings		182,342			183,226			171,337			145,681			106,890
Time Deposits		1,334,326			1,139,734			1,207,534			1,202,690			905,822
Total Borrowed Funds		546,953			612,595			496,436			508,285			502,228
Federal Home Loan Bank		213,755			223,764			208,774			216,785			204,750
Other Borrowings		333,198			388,831			287,662			291,500			297,478
Shareholders' Equity		310,994			327,910			343,282			339,310			294,394
Balance Sheet (Average):	2008			2008			2008			2007			2007
		3Q			2Q			1Q			4Q			3Q
Assets	$	3,899,593		$	3,856,900		$	3,890,959		$	3,589,139		$	3,309,516
Earning Assets		3,580,454			3,552,208			3,590,965			3,326,663			3,081,953
Investment Securities		1,002,901			1,029,502			1,043,566			962,918			933,672
Loans		2,522,034			2,491,894			2,463,242			2,278,188			2,090,440
Other Earning Assets		55,519			30,812			84,157			85,557			57,841
Interest-Bearing Liabilities		3,158,464			3,114,520			3,151,996			2,914,269			2,666,889
Total Deposits		2,923,815			2,900,523			2,977,052			2,718,625			2,477,260
Noninterest-Bearing Deposits		348,183			340,802			324,120			313,556			312,123
Interest-Bearing Checking		428,078			415,398			436,828			480,003			509,168
Money Market		739,931			804,890			822,411			768,596			740,678
Savings		182,403			176,917			156,211			122,442			113,957
Time Deposits		1,225,220			1,162,516			1,237,482			1,034,028			801,334
Total Borrowed Funds		582,832			554,799			499,064			509,200			501,752
Federal Home Loan Bank		217,717			213,860			211,607			211,043			191,141
Other Borrowings		365,115			340,939			287,457			298,157			310,611
Shareholders' Equity		322,077			335,311			343,400			316,778			289,828

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Average Balance Sheets and Interest Rates - Fully-Taxable Equivalent Basis
	Three Months Ended September 30, 2008							Three Months Ended September 30, 2007
	Average				Average			Average				Average
	Balance		Interest		Rate			Balance		Interest		Rate
Assets
Earning assets:
Investment securities
Taxable investments	$	701,626	$	9,518		5.40	%	$	669,051	$	8,769		5.20	%
Non-taxable investments (2)		301,275		4,554		6.01	%		264,621		4,004		6.00	%
Total investment securities		1,002,901		14,072		5.58	%		933,672		12,773		5.43	%
Federal funds sold and deposits in banks		55,519		232		1.66	%		57,841		661		4.53	%
Loans(2) (3)		2,522,034		37,541		5.91	%		2,090,440		37,094		7.04	%
Total earning assets		3,580,454		51,845		5.76	%		3,081,953		50,528		6.50	%
Noninterest-earning assets		319,139							227,563
Total assets	$	3,899,593						$	3,309,516
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Savings and money market	$	1,350,412		5,780		1.70	%	$	1,363,803		12,276		3.57	%
Time		1,225,220		12,976		4.21	%		801,334		9,652		4.78	%
Total interest-bearing deposits		2,575,632		18,756		2.90	%		2,165,137		21,928		4.02	%
Borrowed funds		582,832		5,889		4.02	%		501,752		6,230		4.93	%
Total interest-bearing liabilities		3,158,464		24,645		3.10	%		2,666,889		28,158		4.19	%
Noninterest-bearing liabilities:
Demand deposits		348,183							312,123
Other liabilities		70,869							40,676
Total noninterest-bearing liabilities		419,052							352,799
Total liabilities		3,577,516							3,019,688
Shareholders' equity		322,077							289,828
Total liabilities and shareholders' equity	$	3,899,593						$	3,309,516
Net interest spread						2.66	%						2.31	%
Effect of noninterest-bearing sources						0.36	%						0.57	%
Net interest income/margin on earning assets			$	27,200		3.02	%			$	22,370		2.88	%
Less tax equivalent adjustment				1,903							1,506
Net interest income			$	25,297						$	20,864
	Nine Months Ended September 30, 2008							Nine Months Ended September 30, 2007
	Average				Average			Average				Average
	Balance		Interest		Rate			Balance		Interest		Rate
Assets
Earning assets:
Investment securities
Taxable investments	$	731,870	$	28,894		5.27	%	$	676,787	$	25,821		5.10	%
Non-taxable investments (2)		293,371		13,290		6.05	%		261,458		11,849		6.06	%
Total investment securities		1,025,241		42,184		5.50	%		938,245		37,670		5.37	%
Federal funds sold and deposits in banks		56,825		1,045		2.46	%		67,548		2,553		5.05	%
Loans(2) (3)		2,492,498		114,013		6.11	%		2,070,931		107,708		6.95	%
Total earning assets		3,574,564		157,242		5.88	%		3,076,724		147,931		6.43	%
Noninterest-earning assets		307,982							221,173
Total assets	$	3,882,546						$	3,297,897
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Savings and money market	$	1,387,554		19,536		1.88	%	$	1,385,133		37,212		3.59	%
Time		1,208,467		40,414		4.47	%		806,638		28,670		4.75	%
Total interest-bearing deposits		2,596,021		59,950		3.08	%		2,191,771		65,882		4.02	%
Borrowed funds		545,701		17,068		4.18	%		458,523		16,690		4.87	%
Total interest-bearing liabilities		3,141,722		77,018		3.27	%		2,650,294		82,572		4.17	%
Noninterest-bearing liabilities:
Demand deposits		337,739							311,491
Other liabilities		69,531							43,915
Total noninterest-bearing liabilities		407,270							355,406
Total liabilities		3,548,992							3,005,700
Shareholders' equity		333,554							292,197
Total liabilities and shareholders' equity	$	3,882,546						$	3,297,897
Net interest spread						2.61	%						2.26	%
Effect of noninterest-bearing sources						0.39	%						0.58	%
Net interest income/margin on earning assets			$	80,224		3.00	%			$	65,359		2.84	%
Less tax equivalent adjustment				5,531							4,503
Net interest income			$	74,693						$	60,856
(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.

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