Harleysville National Bank Faces Strains from Residential Real Estate Market

Strategic Insights -

Harleysville National Bank & Trust Co. has been a reliable lender to homebuilders in suburban Philadelphia, but the current struggles of those builders are starting to affect the bank. Chief executive Paul Geraghty acknowledged the strain, citing the bank's substantial exposure to the residential real estate market. With half of its $3.6 billion in loans backed by residential real estate, Harleysville is vulnerable to loan losses. The bank has been instructed by federal regulators to boost its capital cushion to cover potential losses by the end of the month.

Key Takeaways:

  • Harleysville National Bank has $3.6 billion in loans, with $1.5 billion in first mortgages and home-equity loans, backed by residential real estate.
  • The bank has $324 million in loans to residential builders, who account for a third of its troubled loans.
  • Harleysville was instructed by federal regulators to boost its capital cushion to cover potential loan losses by the end of the month.
  • The bank plans to raise $65 million to $120 million from private investors to meet regulatory requirements.
  • Harleysville has at least a dozen regional homebuilders in its portfolio, but declined to name any of them.

Statistics:

  • $3.6 billion: The total amount of loans held by Harleysville National Bank as of March 31.
  • $1.5 billion: The total amount of first mortgages and home-equity loans backed by residential real estate.
  • $324 million: The total amount of loans to residential builders.
  • $46.7 million: The amount of the bridge loan contributed by Harleysville to help Boscov's emerge from bankruptcy.
  • 59 cents: The decline in Harleysville shares, amounting to a 9.74 percent loss to close at $5.47.

Sources:

"The Philadelphia Inquirer"

"Harleysville National Bank & Trust Co., East Penn Financial Corp., Willow Financial Corp., Bell Rock Capital, McClatchy-Tribune Information Services, The Permissions Group Inc."