##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20429
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-29709
 HARLEYSVILLE
SAVINGS FINANCIAL CORPORATION
  Pennsylvania
    
    23-3028464(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 271 Main Street, Harleysville, Pennsylvania 19438
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report)
 Yes þ No o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o Yes þ No




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##### 



HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
 Index
 PAGE(S)Part I FINANCIAL INFORMATIONItem 1. Financial StatementsUnaudited Consolidated Statements of Financial Condition as of
March 31, 2010, and September 30, 2009
    
    
    1Unaudited Consolidated Statements of Income for the Three and Six
Months Ended March 31, 2010 and 2009
    
    
    2Unaudited Consolidated Statements of Comprehensive Income
for the Three and Six Months Ended March 31, 2010 and 2009
    
    
    3Unaudited Consolidated Statements of Stockholders Equity
for the Six Months Ended March 31, 2010 and 2009
    
    
    4Unaudited Consolidated Statements of Cash Flows for the Six Months
Ended March 31, 2010 and 2009
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6  16Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    17  19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19  20Item 4. Controls and Procedures
    
    
    21Part II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3. Defaults upon Senior Securities
    
    
    22Item 4. (Removed and Reserved)
    
    
    22Item 5. Other Information
    
    
    22Item 6. Exhibits
    
    
    22Signatures
    
    
    23Exhibit 31.1Exhibit 31.2Exhibit 32.0




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##### Table of Contents



Harleysville Savings Financial Corporation
 
 Unaudited Consolidated Statements of Financial Condition
 March 31,
    
    
    September 30,(In thousands, except share data)
    
    2010
    
    
    2009AssetsCash and amounts due from depository institutions
    
    $
    3,066
    
    
    $
    3,222Interest bearing deposits
    
    
    12,157
    
    
    
    6,220Total cash and cash equivalents
    
    
    15,223
    
    
    
    9,442Investment securities held to maturity (fair value 
March 31, $116,415; September 30, $106,174)
    
    
    115,773
    
    
    
    105,194Investment securities available-for-sale at fair value
    
    
    3,888
    
    
    
    6,728Mortgage-backed securities held to maturity (fair value 
March 31, $150,609; September 30, $169,210)
    
    
    144,556
    
    
    
    162,430Mortgage-backed securities available-for-sale at fair value
    
    
    802
    
    
    
    785Loans receivable (net of allowance for loan losses 
March 31, $2,330; September 30, $2,094)
    
    
    511,495
    
    
    
    498,391Accrued interest receivable
    
    
    3,611
    
    
    
    3,719Federal Home Loan Bank stock  at cost
    
    
    16,096
    
    
    
    16,096Foreclosed real estate
    
    
    
    
    
    
    747Office properties and equipment, net
    
    
    12,121
    
    
    
    10,486Prepaid expenses and other assets
    
    
    19,509
    
    
    
    15,989TOTAL ASSETS
    
    $
    843,074
    
    
    $
    830,007Liabilities and Stockholders EquityLiabilities:Deposits
    
    $
    491,574
    
    
    $
    466,601Long-term debt
    
    
    290,398
    
    
    
    309,046Accrued interest payable
    
    
    1,457
    
    
    
    1,606Advances from borrowers for taxes and insurance
    
    
    4,484
    
    
    
    1,445Accounts payable and accrued expenses
    
    
    3,481
    
    
    
    1,170Total liabilities
    
    
    791,394
    
    
    
    779,868Commitments and contingenciesStockholders equity:Preferred Stock: $.01 par value;
7,500,000 shares authorized; none issued
    
    
    
    
    
    
    Common stock: $.01 par value; 15,000,000 shares authorized;
3,921,177 shares issued; outstanding March 31, 2010
3,660,892 shares
September 30, 2009 3,627,696 shares
    
    
    39
    
    
    
    39Additional paid-in capital
    
    
    8,039
    
    
    
    8,002Treasury
stock, at cost (March 31, 2010, 260,285 shares; September 30, 2009, 293,481 shares)
    
    
    (3,747
    )
    
    
    (4,202
    )Retained earnings  partially restricted
    
    
    47,321
    
    
    
    46,329Accumulated other comprehensive income (loss)
    
    
    28
    
    
    
    (29
    )Total stockholders equity
    
    
    51,680
    
    
    
    50,139TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    843,074
    
    
    $
    830,007
 See notes to unaudited consolidated financial statements.
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Harleysville Savings Financial Corporation
 
 Unaudited Consolidated Statements of Income
 For the Three Months Ended
    
    
    For the Six Months EndedMarch 31,
    
    
    March 31,(In thousands, except per share data)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Interest Income:Interest on mortgage loans
    
    $
    4,992
    
    
    $
    5,096
    
    
    $
    10,076
    
    
    $
    10,105Interest on commercial loans
    
    
    976
    
    
    
    740
    
    
    
    1,915
    
    
    
    1,449Interest on mortgage-backed securities
    
    
    1,772
    
    
    
    2,409
    
    
    
    3,677
    
    
    
    4,955Interest on consumer and other loans
    
    
    1,090
    
    
    
    1,188
    
    
    
    2,227
    
    
    
    2,495Interest on taxable investments
    
    
    851
    
    
    
    743
    
    
    
    1,760
    
    
    
    1,562Interest on tax-exempt investments
    
    
    262
    
    
    
    325
    
    
    
    543
    
    
    
    656Dividends on investment securities
    
    
    1
    
    
    
    3
    
    
    
    2
    
    
    
    8Total interest income
    
    
    9,944
    
    
    
    10,504
    
    
    
    20,200
    
    
    
    21,230Interest Expense:Interest on deposits
    
    
    2,273
    
    
    
    2,744
    
    
    
    4,808
    
    
    
    5,714Interest on borrowings
    
    
    3,152
    
    
    
    3,403
    
    
    
    6,486
    
    
    
    6,974Total interest expense
    
    
    5,425
    
    
    
    6,147
    
    
    
    11,294
    
    
    
    12,688Net Interest Income
    
    
    4,519
    
    
    
    4,357
    
    
    
    8,906
    
    
    
    8,542Provision for loan losses
    
    
    150
    
    
    
    100
    
    
    
    300
    
    
    
    200Net Interest Income after Provision for Loan Losses
    
    
    4,369
    
    
    
    4,257
    
    
    
    8,606
    
    
    
    8,342Other Income:Customer service fees
    
    
    152
    
    
    
    158
    
    
    
    313
    
    
    
    336Impairment of equity securities
    
    
    
    
    
    
    (449
    )
    
    
    
    
    
    
    (449
    )Gain on sale of investments
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    20Loss on sale of investments
    
    
    
    
    
    
    (11
    )
    
    
    
    
    
    
    (11
    )Income on bank-owned life insurance
    
    
    121
    
    
    
    121
    
    
    
    243
    
    
    
    243Other income
    
    
    185
    
    
    
    184
    
    
    
    404
    
    
    
    355Total other income
    
    
    458
    
    
    
    23
    
    
    
    960
    
    
    
    494Other Expenses:Salaries and employee benefits
    
    
    1,762
    
    
    
    1,580
    
    
    
    3,431
    
    
    
    3,195Occupancy and equipment
    
    
    336
    
    
    
    291
    
    
    
    629
    
    
    
    601Deposit insurance premiums
    
    
    226
    
    
    
    239
    
    
    
    453
    
    
    
    257Data processing
    
    
    169
    
    
    
    127
    
    
    
    322
    
    
    
    263Other
    
    
    737
    
    
    
    582
    
    
    
    1,465
    
    
    
    1,256Total other expenses
    
    
    3,230
    
    
    
    2,819
    
    
    
    6,300
    
    
    
    5,572Income before Income Taxes
    
    
    1,597
    
    
    
    1,461
    
    
    
    3,266
    
    
    
    3,264Income tax expense
    
    
    437
    
    
    
    258
    
    
    
    892
    
    
    
    685Net Income
    
    $
    1,160
    
    
    $
    1,203
    
    
    $
    2,374
    
    
    $
    2,579Basic Earnings Per Share
    
    $
    0.32
    
    
    $
    0.33
    
    
    $
    0.65
    
    
    $
    0.72Diluted Earnings Per Share
    
    $
    0.32
    
    
    $
    0.33
    
    
    $
    0.65
    
    
    $
    0.72Dividends Per Share
    
    $
    0.19
    
    
    $
    0.18
    
    
    $
    0.38
    
    
    $
    0.36
 See notes to unaudited consolidated financial statements.
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Harleysville Savings Financial Corporation
 
 Unaudited Consolidated Statements of Comprehensive Income
 Three Months EndedMarch 31,(In thousands)
    
    2010
    
    
    2009Net Income
    
    $
    1,160
    
    
    $
    1,203Other Comprehensive IncomeUnrealized gain on securities available for sale, net of tax expense
2010, $28; 2009, ($66) and reclassifications
    
    
    56
    (1)
    
    
    128
    (1)Total Comprehensive Income
    
    $
    1,216
    
    
    $
    1,331
 2010
    
    
    2009(1) Disclosure of reclassification amount, net of tax for the three months ended:Net unrealized gain (loss) arising during the three months ended
    
    $
    84
    
    
    $
    (246
    )Reclassification adjustment for net losses (gains) included in net income
    
    
    
    
    
    
    44084
    
    
    
    194Tax expense
    
    
    (28
    )
    
    
    (66
    )Net unrealized gain on securities available for sale
    
    $
    56
    
    
    $
    128
 Six Months EndedMarch 31,(In thousands)
    
    2010
    
    
    2009Net Income
    
    $
    2,374
    
    
    $
    2,579Other Comprehensive IncomeUnrealized gain (loss) on securities available for sale, net of tax expense
(benefit)  2010, $29; 2009, ($2) and reclassifications
    
    
    57
    (1)
    
    
    (4)
    (1)Total Comprehensive Income
    
    $
    2,431
    
    
    $
    2,575
 2010
    
    
    2009(1) Disclosure of reclassification amount, net of tax for the six months ended:Net unrealized gain (loss) arising during the six months ended
    
    $
    86
    
    
    $
    (446
    )Reclassification adjustment for net losses included in net income
    
    
    
    
    
    
    44086
    
    
    
    (6
    )Tax (expense) benefit
    
    
    (29
    )
    
    
    2Net unrealized gain on securities available for sale
    
    $
    57
    
    
    $
    (4
    )
 See notes to unaudited consolidated financial statements.
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Harleysville Savings Financial Corporation
 
 Unaudited Consolidated Statements of Stockholders Equity
 Common
    
    
    
    
    
    
    
    
    
    
    Retained
    
    
    AccumulatedStock
    
    
    
    
    
    
    Additional
    
    
    Earnings-
    
    
    Other
    
    
    
    
    
    
    Total(In thousands, except share
    
    Shares
    
    
    Common
    
    
    Paid-in
    
    
    Partially
    
    
    Comprehensive
    
    
    Treasury
    
    
    Stockholdersand per share data)
    
    Outstanding
    
    
    Stock
    
    
    Capital
    
    
    Restricted
    
    
    (Loss) / Income
    
    
    Stock
    
    
    EquityBalance at October 1, 2009
    
    
    3,627,696
    
    
    $
    39
    
    
    $
    8,002
    
    
    $
    46,329
    
    
    $
    (29
    )
    
    $
    (4,202
    )
    
    $
    50,139Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,374
    
    
    
    
    
    
    
    
    
    
    
    2,374Dividends  $.38 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,382
    )
    
    
    
    
    
    
    
    
    
    
    (1,382
    )Stock option compensation
    
    
    
    
    
    
    
    
    
    
    81
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81Treasury Stock Purchase
    
    
    (5,659
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (77
    )
    
    
    (77
    )Treasury stock delivered under ESOP
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    137
    
    
    
    137Treasury stock delivered under reinvestment plan
    
    
    20,939
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    286
    
    
    
    280Employee options exercised
    
    
    7,916
    
    
    
    
    
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    109
    
    
    
    71Change in unrealized holding loss on
available-for-sale securities, net of
reclassification and tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    
    
    
    
    57Balance at March 31, 2010
    
    
    3,660,892
    
    
    $
    39
    
    
    $
    8,039
    
    
    $
    47,321
    
    
    $
    28
    
    
    $
    (3,747
    )
    
    $
    51,680
 Common
    
    
    
    
    
    
    
    
    
    
    Retained
    
    
    AccumulatedStock
    
    
    
    
    
    
    Additional
    
    
    Earnings-
    
    
    Other
    
    
    
    
    
    
    Total(In thousands, except share
    
    Shares
    
    
    Common
    
    
    Paid-in
    
    
    Partially
    
    
    Comprehensive
    
    
    Treasury
    
    
    Stockholdersand per share data)
    
    Outstanding
    
    
    Stock
    
    
    Capital
    
    
    Restricted
    
    
    (Loss) / Income
    
    
    Stock
    
    
    EquityBalance at October 1, 2008
    
    
    3,567,934
    
    
    $
    39
    
    
    $
    7,993
    
    
    $
    44,235
    
    
    $
    (41
    )
    
    $
    (5,017
    )
    
    $
    47,209Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,579
    
    
    
    
    
    
    
    
    
    
    
    2,579Dividends  $.36 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,287
    )
    
    
    
    
    
    
    
    
    
    
    (1,287
    )Stock option compensation
    
    
    
    
    
    
    
    
    
    
    70
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70Treasury stock delivered under ESOP
    
    
    10,000
    
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    137
    
    
    
    120Treasury stock delivered under reinvestment plan
    
    
    23,808
    
    
    
    
    
    
    
    (41
    )
    
    
    
    
    
    
    
    
    
    
    326
    
    
    
    285Employee options exercised
    
    
    1,667
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    16Change in unrealized holding loss
on available-for-sale securities, net of
reclassification and tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )Balance at March 31, 2009
    
    
    3,603,409
    
    
    $
    39
    
    
    $
    7,998
    
    
    $
    45,527
    
    
    $
    (45
    )
    
    $
    (4,531
    )
    
    $
    48,988
 See notes to unaudited consolidated financial statements.
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Harleysville Savings Financial Corporation
 
 Unaudited Consolidated Statements of Cash Flows
 Six Months Ended March 31,(In thousands)
    
    2010
    
    
    2009Operating Activities:Net Income
    
    $
    2,374
    
    
    $
    2,579Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    259
    
    
    
    224Provision for loan losses
    
    
    300
    
    
    
    200Realized gains on securities
    
    
    
    
    
    
    (9
    )Loss on impairment of equity securities
    
    
    
    
    
    
    449Loss on sale of foreclosed real estate
    
    
    159
    
    
    
    Amortization of deferred loan fees
    
    
    58
    
    
    
    25Net amortization of premiums and discounts
    
    
    65
    
    
    
    63Increase in cash surrender value of bank owned life insurance
    
    
    (243
    )
    
    
    (243
    )Compensation charge on stock options
    
    
    81
    
    
    
    70Changes in assets and liabilities which provided (used) cash:Decrease in accounts payable and accrued expenses
    
    
    (489
    )
    
    
    (980
    )Increase in prepaid expenses and other assets
    
    
    (3,277
    )
    
    
    (858
    )Decrease in accrued interest receivable
    
    
    108
    
    
    
    342Decrease in accrued interest payable
    
    
    (149
    )
    
    
    (129
    )Net cash (used in) provided by operating activities
    
    
    (754
    )
    
    
    1,733Investing Activities:Purchase of mortgage-backed securities held to maturity
    
    
    (1,571
    )
    
    
    Purchase of investment securities held to maturity
    
    
    (50,953
    )
    
    
    Purchase of investment securities available-for-sale
    
    
    (30,900
    )
    
    
    (10,563
    )Net purchase of FHLB stock
    
    
    
    
    
    
    478Proceeds from the redemption of investment securities available-for-sale
    
    
    33,780
    
    
    
    9,912Proceeds from maturities of investment securities held to maturity
    
    
    40,429
    
    
    
    1,365Proceeds from sale of foreclosed real estate
    
    
    588
    
    
    
    Principal collected on mortgage-backed securities
    
    
    22,125
    
    
    
    22,928Principal collected on loans receivable
    
    
    55,161
    
    
    
    64,116Loans originated or acquired
    
    
    (68,623
    )
    
    
    (70,854
    )Purchases of premises and equipment
    
    
    (1,894
    )
    
    
    (257
    )Net cash (used in) provided by investing activities
    
    
    (1,858
    )
    
    
    17,125Financing Activities:Net increase in demand deposits, NOW accounts
and savings accounts
    
    
    44,219
    
    
    
    8,941Net (decrease) increase in certificates of deposit
    
    
    (19,246
    )
    
    
    5,039Cash dividends
    
    
    (1,102
    )
    
    
    (1,002
    )Net decrease in short-term borrowings
    
    
    
    
    
    
    (21,800
    )Proceeds from long-term debt
    
    
    
    
    
    
    24,500Repayment of long-term debt
    
    
    (18,648
    )
    
    
    (32,399
    )Acquisition of treasury stock
    
    
    (77
    )
    
    
    Treasury stock delivered under employee stock plans
    
    
    208
    
    
    
    136Net increase in advances from borrowers for taxes and insurance
    
    
    3,039
    
    
    
    3,106Net cash provided by (used in) financing activities
    
    
    8,393
    
    
    
    (13,479
    )INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    5,781
    
    
    
    5,379CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    9,442
    
    
    
    9,374CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    15,223
    
    
    $
    14,753Supplemental Disclosure of Cash Flow InformationCash paid during the period for:Interest (credited and paid)
    
    $
    11,444
    
    
    $
    12,817Income taxes
    
    
    925
    
    
    
    1,203Securities purchased and not settled
    
    $
    2,800
    
    
    $
    
 See notes to consolidated financial statements.
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##### Table of Contents



Harleysville Savings Financial Corporation
 
 Notes to Unaudited Consolidated Financial Statements
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   Use of Estimates in Preparation of Consolidated Financial Statements
  Reclassifications
  Subsequent Events
   page -6-




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##### Table of Contents



New Accounting Standards
 Transfers and Servicing (Topic 860)  Accounting
for Transfers of Financial Assets. Accounting for Transfers of Financial Assets-an amendment of FASB Statement No.
140
 Consolidations (Topic 810)  Improvements to
Financial Reporting by Enterprises Involved with Variable Interest Entities Amendments to FASB Interpretation No.
46(R)
  page -7-




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##### Table of Contents



Fair Value Measurements and Disclosures (Topic 820): Improving
Disclosures about Fair Value Measurements.
 
    
    A reporting entity to disclose separately the amounts of significant transfers in
and out of Level 1 and Level 2 fair value measurements and describe the reasons for the
transfers; and
 
    
    In the reconciliation for fair value measurements using significant unobservable
inputs, a reporting entity should present separately information about purchases, sales,
issuances, and settlements.
  
    
    For purposes of reporting fair value measurement for each class of assets and
liabilities, a reporting entity needs to use judgment in determining the appropriate
classes of assets and liabilities; and
 
    
    A reporting entity should provide disclosures about the valuation techniques and inputs
used to measure fair value for both recurring and nonrecurring fair value measurements.
  Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure
Requirements.
   page -8-




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2. INVESTMENT SECURITIES HELD TO MATURITY
  March 31, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueU.S. Government AgenciesDue 1 year or less
    
    $
    11,966
    
    
    $
    12
    
    
    $
    (8
    )
    
    $
    11,970Due after 1 year through 5 years
    
    
    13,000
    
    
    
    83
    
    
    
    (11
    )
    
    
    13,072Due after 5 years through 10 years
    
    
    7,999
    
    
    
    
    
    
    
    (34
    )
    
    
    7,965Due after 10 years through 15
years
    
    
    59,990
    
    
    
    215
    
    
    
    (274
    )
    
    
    59,931Due after 15 years
    
    
    2,432
    
    
    
    134
    
    
    
    
    
    
    
    2,566Tax Exempt ObligationsDue after 5 years through 10 years
    
    
    4,535
    
    
    
    149
    
    
    
    
    
    
    
    4,684Due after 10 years through 15
years
    
    
    13,838
    
    
    
    579
    
    
    
    (44
    )
    
    
    14,373Due after 15 years
    
    
    2,013
    
    
    
    
    
    
    
    (159
    )
    
    
    1,854Total Investment Securities
    
    $
    115,773
    
    
    $
    1,172
    
    
    $
    (530
    )
    
    $
    116,415
 September 30, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueU.S. Government AgenciesDue 1 year or less
    
    $
    5,000
    
    
    $
    98
    
    
    $
    
    
    
    $
    5,098Due after 1 year through 5 years
    
    
    8,000
    
    
    
    34
    
    
    
    
    
    
    
    8,034Due after 5 years through 10 years
    
    
    10,996
    
    
    
    4
    
    
    
    (80
    )
    
    
    10,920Due after 10 years through 15
years
    
    
    56,175
    
    
    
    299
    
    
    
    (278
    )
    
    
    56,196Due after 15 years
    
    
    2,431
    
    
    
    178
    
    
    
    
    
    
    
    2,609Tax Exempt ObligationsDue after 5 years through 10 years
    
    
    3,898
    
    
    
    170
    
    
    
    
    
    
    
    4,068Due after 10 years through 15
years
    
    
    16,303
    
    
    
    708
    
    
    
    (3
    )
    
    
    17,008Due after 15 years
    
    
    2,391
    
    
    
    
    
    
    
    (150
    )
    
    
    2,241Total Investment Securities
    
    $
    105,194
    
    
    $
    1,491
    
    
    $
    (511
    )
    
    $
    106,174
  Less than 12 Months
    
    
    12 Months or Longer
    
    
    Total
    
    
    Total(In Thousands)
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized LossesUS Government agencies
    
    $
    45,638
    
    
    $
    (327
    )
    
    $
    
    
    
    $
    
    
    
    $
    45,638
    
    
    $
    (327
    )Tax exempt obligations
    
    
    1,205
    
    
    
    
    
    
    
    3,988
    
    
    
    (203
    )
    
    
    5,193
    
    
    
    (203
    )Total
    
    $
    46,843
    
    
    $
    (327
    )
    
    $
    3,988
    
    
    $
    (203
    )
    
    $
    50,831
    
    
    $
    (530
    )
   Less than 12 Months
    
    
    12 Months or Longer
    
    
    Total
    
    
    Total(In Thousands)
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized LossesUS Government agencies
    
    $
    29,637
    
    
    $
    (358
    )
    
    $
    
    
    
    $
    
    
    
    $
    29,637
    
    
    $
    (358
    )Tax exempt obligations
    
    
    1,000
    
    
    
    (3
    )
    
    
    3,036
    
    
    
    (150
    )
    
    
    4,036
    
    
    
    (153
    )Total
    
    $
    30,637
    
    
    $
    (361
    )
    
    $
    3,036
    
    
    $
    (150
    )
    
    $
    33,673
    
    
    $
    (511
    )
  page -9-




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3. INVESTMENT SECURITIES AVAILABLE-FOR-SALE
  March 31, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized(In Thousands)
    
    Cost
    
    
    Gain
    
    
    Losses
    
    
    Fair ValueEquity Securities
    
    $
    355
    
    
    $
    66
    
    
    $
    (41
    )
    
    $
    380Money Market Mutual Funds
    
    
    3,508
    
    
    
    
    
    
    
    
    
    
    
    3,508Total Investment Securities
    
    $
    3,863
    
    
    $
    66
    
    
    $
    (41
    )
    
    $
    3,888
 September 30, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized(In Thousands)
    
    Cost
    
    
    Gain
    
    
    Losses
    
    
    Fair ValueEquity Securities
    
    $
    355
    
    
    $
    48
    
    
    $
    (92
    )
    
    $
    311Money Market Mutual Funds
    
    
    6,417
    
    
    
    
    
    
    
    
    
    
    
    6,417Total Investment Securities
    
    $
    6,772
    
    
    $
    48
    
    
    $
    (92
    )
    
    $
    6,728
  Less than 12 Months
    
    
    12  Months or Longer
    
    
    Total
    
    
    Total(In Thousands)
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized LossesEquity Securities
    
    $
    67
    
    
    $
    (22
    )
    
    $
    137
    
    
    $
    (19
    )
    
    $
    204
    
    
    $
    (41
    )
   Less than 12 Months
    
    
    12 Months or Longer
    
    
    Total
    
    
    Total(In Thousands)
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized LossesEquity Securities
    
    $
    104
    
    
    $
    (43
    )
    
    $
    74
    
    
    $
    (49
    )
    
    $
    178
    
    
    $
    (92
    )
  page -10-




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4. MORTGAGE-BACKED SECURITIES HELD TO MATURITY
  March 31, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Approximate(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueCollateralized mortgage obligations
    
    $
    10,219
    
    
    $
    93
    
    
    $
    (128
    )
    
    $
    10,184FHLMC pass-through certificates
    
    
    55,088
    
    
    
    2,804
    
    
    
    
    
    
    
    57,892FNMA pass-through certificates
    
    
    74,894
    
    
    
    3,287
    
    
    
    
    
    
    
    78,181GNMA pass-through certificates
    
    
    4,355
    
    
    
    
    
    
    
    (3
    )
    
    
    4,352Total residential mortgage-backed
securities
    
    $
    144,556
    
    
    $
    6,184
    
    
    $
    (131
    )
    
    $
    150,609
 September 30, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Approximate(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueCollateralized mortgage obligations
    
    $
    11,681
    
    
    $
    54
    
    
    $
    (271
    )
    
    $
    11,464FHLMC pass-through certificates
    
    
    65,005
    
    
    
    3,270
    
    
    
    
    
    
    
    68,275FNMA pass-through certificates
    
    
    85,744
    
    
    
    3,728
    
    
    
    (1
    )
    
    
    89,471Total residential mortgage-backed securities
    
    $
    162,430
    
    
    $
    7,052
    
    
    $
    (272
    )
    
    $
    169,210
  Less than 12 Months
    
    
    12 Months or Longer
    
    
    Total
    
    
    Total(In Thousands)
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized LossesMortgage-backed securities
held to maturity
    
    $
    4,584
    
    
    $
    (24
    )
    
    $
    1,707
    
    
    $
    (107
    )
    
    $
    6,291
    
    
    $
    (131
    )
   Less than 12 Months
    
    
    12 Months or Longer
    
    
    Total
    
    
    Total(In Thousands)
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized LossesMortgage-backed securities
held to maturity
    
    $
    2,264
    
    
    $
    (49
    )
    
    $
    6,576
    
    
    $
    (223
    )
    
    $
    8,840
    
    
    $
    (272
    )
  page -11-




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5. MORTGAGE-BACKED SECURITIES AVAILABLE-FOR-SALE
  March 31, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueFNMA pass-through certificates
    
    $
    785
    
    
    $
    17
    
    
    $
    
    
    
    $
    802Total Residential
Mortgage-Backed Securities
    
    $
    785
    
    
    $
    17
    
    
    $
    
    
    
    $
    802
 September 30, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueFNMA pass-through certificates
    
    $
    785
    
    
    $
    
    
    
    $
    
    
    
    $
    785Total Residential
Mortgage-Backed Securities
    
    $
    785
    
    
    $
    
    
    
    $
    
    
    
    $
    785
 6. LOANS RECEIVABLE
  (In thousands)March 31, 2010
    
    
    September 30, 2009Residential Mortgages
    
    $
    344,701
    
    
    $
    346,202Construction
    
    
    5,856
    
    
    
    2,912Home Equity
    
    
    89,963
    
    
    
    92,434Commercial Mortgages
    
    
    60,210
    
    
    
    48,958Commercial Business Loans
    
    
    14,163
    
    
    
    10,389Consumer Non-Real Estate
    
    
    2,085
    
    
    
    2,242Total
    
    
    516,978
    
    
    
    503,137Undisbursed portion of loans in process
    
    
    (2,364
    )
    
    
    (1,873
    )Deferred loan fees
    
    
    (789
    )
    
    
    (779
    )Allowance for loan losses
    
    
    (2,330
    )
    
    
    (2,094
    )Loans Receivable  net
    
    $
    511,495
    
    
    $
    498,391
   Three Months Ended
    
    
    Six Months Ended(In thousands)
    
    March 31, 2010
    
    
    March 31, 2009
    
    
    March 31, 2010
    
    
    March 31, 2009Balance, beginning of period
    
    $
    2,194
    
    
    $
    2,097
    
    
    $
    2,094
    
    
    $
    1,988Provision for loan losses
    
    
    150
    
    
    
    100
    
    
    
    300
    
    
    
    200Recoveries
    
    
    4
    
    
    
    2
    
    
    
    6
    
    
    
    17Charge offs
    
    
    (18
    )
    
    
    (6
    )
    
    
    (70
    )
    
    
    (12
    )Balance, end of period
    
    $
    2,330
    
    
    $
    2,193
    
    
    $
    2,330
    
    
    $
    2,193
 7. Federal Home Loan Bank Stock
     page -12-




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##### Table of Contents



8. DEPOSITS
  (In thousands)March 31, 2010
    
    
    September 30, 2009Non-interest bearing checking accounts
    
    $
    14,309
    
    
    $
    12,364NOW accounts
    
    
    21,859
    
    
    
    16,818Interest bearing checking accounts
    
    
    32,012
    
    
    
    29,282Money market demand accounts
    
    
    111,699
    
    
    
    77,432Passbook and club accounts
    
    
    3,176
    
    
    
    2,940Certificate of deposit accounts
    
    
    308,519
    
    
    
    327,765Total deposits
    
    $
    491,574
    
    
    $
    466,601
  9. COMMITMENTS
  (In thousands)Letters of credit
    
    $
    456Commitments to originate loans
    
    
    11,740Unused portion of home equity lines of credits
    
    
    51,077Unused portion of commercial lines of credits
    
    
    5,243Undisbursed portion of construction loans in process
    
    
    2,169Total
    
    $
    70,685
   page -13-




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##### Table of Contents



10. EARNINGS PER SHARE
  For the Three Months Ended
    
    
    For the Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009
    
    
    2010
    
    
    2009Basic
    
    
    3,654,047
    
    
    
    3,592,286
    
    
    
    3,643,583
    
    
    
    3,582,760Diluted
    
    
    3,670,280
    
    
    
    3,600,292
    
    
    
    3,658,087
    
    
    
    3,592,571
  11. LONG-TERM DEBT
  March 31,
    
    
    September 30,2010
    
    
    2009(In thousands)Weighted
    
    
    
    
    
    
    WeightedInterest
    
    
    
    
    
    
    InterestMaturing Period
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate1 to 12 months
    
    $
    19,999
    
    
    
    4.52
    %
    
    $
    30,358
    
    
    
    4.37
    %13 to 24 months
    
    
    31,945
    
    
    
    4.42
    %
    
    
    16,849
    
    
    
    4.34
    %25 to 36 months
    
    
    46,184
    
    
    
    4.30
    %
    
    
    55,793
    
    
    
    4.49
    %37 to 48 months
    
    
    53,797
    
    
    
    4.14
    %
    
    
    37,189
    
    
    
    4.00
    %49 to 60 months
    
    
    3,697
    
    
    
    3.58
    %
    
    
    29,856
    
    
    
    4.07
    %61 to 72 months
    
    
    15,000
    
    
    
    3.89
    %
    
    
    19,031
    
    
    
    3.82
    %73 to 84 months
    
    
    35,000
    
    
    
    4.86
    %
    
    
    10,000
    
    
    
    4.71
    %85 to 120 months
    
    
    84,776
    
    
    
    4.30
    %
    
    
    109,970
    
    
    
    4.42
    %Total
    
    $
    290,398
    
    
    
    4.33
    %
    
    $
    309,046
    
    
    
    4.31
    %
  12. REGULATORY CAPITAL REQUIREMENTS
    To Be Considered WellCapitalized UnderFor Capital
    
    
    Prompt CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action ProvisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio(In thousands)As of March 31, 2010Tier 1 Capital (to assets)
    
    $
    51,638
    
    
    
    6.18
    %
    
    $
    33,411
    
    
    
    4.00
    %
    
    $
    41,763
    
    
    
    5.00
    %Tier 1 Capital (to risk weighted assets)
    
    
    51,638
    
    
    
    11.13
    %
    
    
    18,566
    
    
    
    4.00
    %
    
    
    27,849
    
    
    
    6.00
    %Total Capital (to risk weighted assets)
    
    
    53,979
    
    
    
    11.63
    %
    
    
    37,132
    
    
    
    8.00
    %
    
    
    46,415
    
    
    
    10.00
    %As of September 30, 2009Tier 1 Capital (to assets)
    
    $
    50,149
    
    
    
    6.06
    %
    
    $
    33,103
    
    
    
    4.00
    %
    
    $
    41,459
    
    
    
    5.00
    %Tier 1 Capital (to risk weighted assets)
    
    
    50,149
    
    
    
    11.26
    %
    
    
    17,809
    
    
    
    4.00
    %
    
    
    26,714
    
    
    
    6.00
    %Total Capital (to risk weighted assets)
    
    
    52,242
    
    
    
    11.73
    %
    
    
    35,618
    
    
    
    8.00
    %
    
    
    44,523
    
    
    
    10.00
    %
  page -14-




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##### Table of Contents



13. FAIR VALUES MEASUREMENTS AND DISCLOSURES
          (Level 1)
    
    
    (Level 2)Quoted Prices in
    
    
    Significant
    
    
    (Level 3)Active Markets
    
    
    Other
    
    
    SignificantMarch 31,
    
    
    for Identical
    
    
    Observable
    
    
    UnobservableDescription
    
    2010
    
    
    Assets
    
    
    Inputs
    
    
    InputsInvestment securities available for sale
    
    $
    3,888
    
    
    $
    3,888
    
    
    $
    
    
    
    $
    Mortgage-backed securities available for sale
    
    
    802
    
    
    
    
    
    
    
    802
    
    
    
    $
    4,690
    
    
    $
    3,888
    
    
    $
    802
    
    
    $
    
 (Level 1)
    
    
    (Level 2)Quoted Prices in
    
    
    Significant
    
    
    (Level 3)Active Markets
    
    
    Other
    
    
    SignificantSeptember 30,
    
    
    for Identical
    
    
    Observable
    
    
    UnobservableDescription
    
    2009
    
    
    Assets
    
    
    Inputs
    
    
    InputsInvestment securities available for sale
    
    $
    6,728
    
    
    $
    6,728
    
    
    $
    
    
    
    $
    Mortgage-backed securities available for sale
    
    
    785
    
    
    
    
    
    
    
    785
    
    
    
    $
    7,513
    
    
    $
    6,728
    
    
    $
    785
    
    
    $
    
  Fair Value Measurements UsingQuoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableMarch 31,
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Impaired Loans
    
    $
    266
    
    
    $
    
    
    
    $
    
    
    
    $
    266
   Cash and Cash Equivalents (Carried at Cost)
  Securities
   page -15-




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##### Table of Contents



Loans Receivable (Carried at Cost)
   Federal Home Loan Bank Stock (Carried at Cost)
  Accrued Interest Receivable and Payable (Carried at Cost)
  Deposit Liabilities (Carried at Cost)
  Borrowings (Carried at Cost)
  Off-Balance Sheet Financial Instruments (Disclosed at Cost)
    March 31,
    
    
    September 30,2010
    
    
    2009Carrying
    
    
    Estimated Fair
    
    
    Carrying
    
    
    Estimated Fair(In Thousands)
    
    Amount
    
    
    Value
    
    
    Amount
    
    
    ValueAssets:Cash and cash equivalents
    
    $
    15,223
    
    
    $
    15,223
    
    
    $
    9,442
    
    
    $
    9,442Investment securities held to maturity
    
    
    115,773
    
    
    
    116,415
    
    
    
    105,194
    
    
    
    106,174Investment securities available-for-sale
    
    
    3,888
    
    
    
    3,888
    
    
    
    6,728
    
    
    
    6,728Mortgage-backed securities held to
maturity
    
    
    144,556
    
    
    
    150,609
    
    
    
    162,430
    
    
    
    169,210Mortgage-backed securities
available-for-sale
    
    
    802
    
    
    
    802
    
    
    
    785
    
    
    
    785Loans receivable  net
    
    
    511,495
    
    
    
    524,359
    
    
    
    498,391
    
    
    
    512,512Federal Home Loan Bank Stock
    
    
    16,096
    
    
    
    16,096
    
    
    
    16,096
    
    
    
    16,096Accrued interest receivable
    
    
    3,611
    
    
    
    3,611
    
    
    
    3,719
    
    
    
    3,719Liabilities:Checking, Passbook, Club and NOW
accounts
    
    
    71,356
    
    
    
    71,356
    
    
    
    61,404
    
    
    
    61,404Money Market Demand accounts
    
    
    111,699
    
    
    
    111,699
    
    
    
    77,432
    
    
    
    77,432Certificate of deposit accounts
    
    
    308,519
    
    
    
    313,217
    
    
    
    327,765
    
    
    
    332,733Borrowings
    
    
    290,398
    
    
    
    309,837
    
    
    
    309,046
    
    
    
    331,330Accrued interest payable
    
    
    1,457
    
    
    
    1,457
    
    
    
    1,606
    
    
    
    1,606
 Limitations
    page -16-




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Critical Accounting Policies and Judgments
  Allowance for Loan Losses
 Analysis and Determination of the Allowance for Loan Losses
  Specific Allowance Required for Certain Impaired Loans
 General Valuation Allowance on Certain Identified Problem Loans
 General Valuation Allowance on the Remainder of the Loan Portfolio
  page -17-




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Other-than-Temporary Impairment of Investment Securities
  Changes in Financial Position for the Six-Month Period Ended March 31, 2010
   Comparisons of Results of Operations for the Three Month and Six Month Period Ended March 31,
2010 with the Three Month and Six Month Period Ended March 31, 2009
 Net Interest Income
  Non-Interest Income
  Non-Interest Expenses
   page -18-




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##### Table of Contents



Income Taxes
   Liquidity and Capital Recourses
     
 Item 3 Quantitative and Qualitative Disclosures About Market Risk
   page -19-




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##### Table of Contents



1 Year
    
    
    1 to 3
    
    
    3 to 5
    
    
    Over 5or less
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    TotalInterest-earning assets:Mortgage loans
    
    $
    52,713
    
    
    $
    58,309
    
    
    $
    46,583
    
    
    $
    187,096
    
    
    $
    344,701Commercial loans
    
    
    31,116
    
    
    
    8,221
    
    
    
    20,131
    
    
    
    14,905
    
    
    
    74,373Mortgage-backed securities
    
    
    48,330
    
    
    
    49,485
    
    
    
    24,247
    
    
    
    23,296
    
    
    
    145,358Consumer and other loans
    
    
    61,176
    
    
    
    16,224
    
    
    
    7,471
    
    
    
    13,033
    
    
    
    97,904Investment securities and other investments
    
    
    71,054
    
    
    
    24,288
    
    
    
    42,256
    
    
    
    10,316
    
    
    
    147,914Total interest-earning assets
    
    
    264,389
    
    
    
    156,527
    
    
    
    140,688
    
    
    
    248,646
    
    
    
    810,250Interest-bearing liabilities:Passbook and Club accounts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,176
    
    
    
    3,176NOW and checking accounts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,871
    
    
    
    53,871Consumer Money Market Deposit accounts
    
    
    35,527
    
    
    
    
    
    
    
    
    
    
    
    48,295
    
    
    
    83,822Business Money Market Deposit accounts
    
    
    20,908
    
    
    
    
    
    
    
    
    
    
    
    6,969
    
    
    
    27,877Certificate accounts
    
    
    126,603
    
    
    
    121,121
    
    
    
    60,795
    
    
    
    
    
    
    
    308,519Borrowed money
    
    
    26,765
    
    
    
    78,316
    
    
    
    52,725
    
    
    
    132,592
    
    
    
    290,398Total interest-bearing liabilities
    
    
    209,803
    
    
    
    199,437
    
    
    
    113,520
    
    
    
    244,903
    
    
    
    767,663Repricing GAP during the period
    
    $
    54,586
    
    
    $
    (42,910
    )
    
    $
    27,168
    
    
    $
    3,743
    
    
    $
    42,587Cumulative GAP
    
    $
    54,586
    
    
    $
    11,676
    
    
    $
    38,844
    
    
    $
    42,587Ratio of GAP during the period to total assets
    
    
    6.47
    %
    
    
    -5.09
    %
    
    
    3.22
    %
    
    
    0.44
    %Ratio of cumulative GAP to total assets
    
    
    6.47
    %
    
    
    1.38
    %
    
    
    4.61
    %
    
    
    5.05
    %
  page -20-




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##### Table of Contents



Item 4. Controls and Procedures
    page -21-




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##### Table of Contents



Part II OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 Form 10-K
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
  
 Item 4. (Removed and Reserved)
 
 Item 5. Other information
  
 Item 6. Exhibits and Reports on Form 8-K
 No.31.1
    
    
    Certification of Chief
Executive Officer31.2
    
    
    Certification of Chief
Financial Officer32.0
    
    
    Section 1350
Certification of Chief
Executive Officer and
Chief Financial Officer
  page -22-




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##### Table of Contents



Signatures
  HARLEYSVILLE SAVINGS FINANCIAL CORPORATIONDate: May 14, 2010
    By:
    /s/ Ronald B. GeibRonald B. GeibChief Executive OfficerDate: May 14, 2010
    By:
    /s/ Brendan J. McGillBrendan J. McGillExecutive Vice President
Treasurer and Chief Financial Officer  page -23-