##### 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 June 30, 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
June 30, 2010, and September 30, 2009
    
    
    1Unaudited Consolidated Statements of Income for the Three and Nine
Months Ended June 30, 2010 and 2009
    
    
    2Unaudited Consolidated Statements of Comprehensive Income
for the Three and Nine Months Ended June 30, 2010 and 2009
    
    
    3Unaudited Consolidated Statements of Stockholders Equity
for the Nine Months Ended June 30, 2010 and 2009
    
    
    4Unaudited Consolidated Statements of Cash Flows for the Nine Months
Ended June 30, 2010 and 2009
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6  17Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    18  20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20  21Item 4. Controls and Procedures
    
    
    22Part II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults upon Senior Securities
    
    
    23Item 4. (Removed and Reserved)
    
    
    23Item 5. Other Information
    
    
    23Item 6. Exhibits
    
    
    23Signatures
    
    
    24Exhibit 31.1Exhibit 31.2Exhibit 32.0




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##### Table of Contents



Harleysville Savings Financial Corporation
 
 Unaudited Consolidated Statements of Financial Condition
 June 30,
    
    
    September 30,(In thousands, except share data)
    
    2010
    
    
    2009AssetsCash and amounts due from depository institutions
    
    $
    3,646
    
    
    $
    3,222Interest bearing deposits
    
    
    11,014
    
    
    
    6,220Total cash and cash equivalents
    
    
    14,660
    
    
    
    9,442Investment securities held to maturity (fair value 
June 30, $141,123; September 30, $106,174)
    
    
    139,728
    
    
    
    105,194Investment securities available-for-sale at fair value
    
    
    3,516
    
    
    
    6,728Mortgage-backed securities held to maturity (fair value 
June 30, $150,851; September 30, $169,210)
    
    
    143,424
    
    
    
    162,430Mortgage-backed securities available-for-sale at fair value
    
    
    787
    
    
    
    785Loans receivable (net of allowance for loan losses 
June 30, $2,437; September 30, $2,094)
    
    
    515,809
    
    
    
    498,391Accrued interest receivable
    
    
    3,367
    
    
    
    3,719Federal Home Loan Bank stock  at cost
    
    
    16,096
    
    
    
    16,096Foreclosed real estate
    
    
    
    
    
    
    747Office properties and equipment, net
    
    
    12,229
    
    
    
    10,486Prepaid expenses and other assets
    
    
    17,493
    
    
    
    15,989TOTAL ASSETS
    
    $
    867,109
    
    
    $
    830,007Liabilities and Stockholders EquityLiabilities:Deposits
    
    $
    522,770
    
    
    $
    466,601Long-term debt
    
    
    283,730
    
    
    
    309,046Accrued interest payable
    
    
    1,475
    
    
    
    1,606Advances from borrowers for taxes and insurance
    
    
    5,737
    
    
    
    1,445Accounts payable and accrued expenses
    
    
    909
    
    
    
    1,170Total liabilities
    
    
    814,621
    
    
    
    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 June 30, 2010 3,674,187 shares
September 30, 2009 3,627,696 shares
    
    
    39
    
    
    
    39Additional paid-in capital
    
    
    8,085
    
    
    
    8,002Treasury stock, at cost (June 30, 2010, 246,990 shares;
September 30, 2009, 293,481 shares)
    
    
    (3,565
    )
    
    
    (4,202
    )Retained earnings  partially restricted
    
    
    47,940
    
    
    
    46,329Accumulated other comprehensive income (loss)
    
    
    (11
    )
    
    
    (29
    )Total stockholders equity
    
    
    52,488
    
    
    
    50,139TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    867,109
    
    
    $
    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 Nine Months EndedJune 30,
    
    
    June 30,(In thousands, except per share data)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Interest Income:Interest on mortgage loans
    
    $
    5,043
    
    
    $
    4,961
    
    
    $
    15,118
    
    
    $
    15,066Interest on commercial loans
    
    
    1,108
    
    
    
    774
    
    
    
    3,023
    
    
    
    2,223Interest on mortgage-backed securities
    
    
    1,657
    
    
    
    2,209
    
    
    
    5,335
    
    
    
    7,163Interest on consumer and other loans
    
    
    1,080
    
    
    
    1,144
    
    
    
    3,307
    
    
    
    3,639Interest on other taxable investments
    
    
    802
    
    
    
    572
    
    
    
    2,562
    
    
    
    2,134Interest on tax-exempt investments
    
    
    260
    
    
    
    312
    
    
    
    804
    
    
    
    968Dividends on investment securities
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    10Total interest income
    
    
    9,951
    
    
    
    9,973
    
    
    
    30,151
    
    
    
    31,203Interest Expense:Interest on deposits
    
    
    2,121
    
    
    
    2,642
    
    
    
    6,929
    
    
    
    8,356Interest on borrowings
    
    
    3,169
    
    
    
    3,486
    
    
    
    9,655
    
    
    
    10,460Total interest expense
    
    
    5,290
    
    
    
    6,128
    
    
    
    16,584
    
    
    
    18,816Net Interest Income
    
    
    4,661
    
    
    
    3,845
    
    
    
    13,567
    
    
    
    12,387Provision for loan losses
    
    
    150
    
    
    
    90
    
    
    
    450
    
    
    
    290Net Interest Income after Provision for Loan Losses
    
    
    4,511
    
    
    
    3,755
    
    
    
    13,117
    
    
    
    12,097Other Income:Customer service fees
    
    
    176
    
    
    
    161
    
    
    
    488
    
    
    
    497Impairment of equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (449
    )Gain on sale of investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11
    )Loss on sale of investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20Income on bank-owned life insurance
    
    
    122
    
    
    
    121
    
    
    
    365
    
    
    
    364Other income
    
    
    210
    
    
    
    178
    
    
    
    615
    
    
    
    534Total other income
    
    
    508
    
    
    
    460
    
    
    
    1,468
    
    
    
    955Other Expenses:Salaries and employee benefits
    
    
    1,743
    
    
    
    1,523
    
    
    
    5,174
    
    
    
    4,719Occupancy and equipment
    
    
    356
    
    
    
    299
    
    
    
    985
    
    
    
    900Deposit insurance premiums
    
    
    229
    
    
    
    604
    
    
    
    682
    
    
    
    861Data processing
    
    
    167
    
    
    
    146
    
    
    
    489
    
    
    
    409Other
    
    
    710
    
    
    
    541
    
    
    
    2,175
    
    
    
    1,798Total other expenses
    
    
    3,205
    
    
    
    3,113
    
    
    
    9,505
    
    
    
    8,687Income before Income Taxes
    
    
    1,814
    
    
    
    1,102
    
    
    
    5,080
    
    
    
    4,365Income tax expense
    
    
    500
    
    
    
    246
    
    
    
    1,392
    
    
    
    930Net Income
    
    $
    1,314
    
    
    $
    856
    
    
    $
    3,688
    
    
    $
    3,435Basic Earnings Per Share
    
    $
    0.36
    
    
    $
    0.24
    
    
    $
    1.01
    
    
    $
    0.96Diluted Earnings Per Share
    
    $
    0.36
    
    
    $
    0.24
    
    
    $
    1.01
    
    
    $
    0.95Dividends Per Share
    
    $
    0.19
    
    
    $
    0.18
    
    
    $
    0.57
    
    
    $
    0.54
 See notes to unaudited consolidated financial statements.
  page -2-




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Harleysville Savings Financial Corporation
 
 Unaudited Consolidated Statements of Comprehensive Income
 Three Months EndedJune 30,(In thousands)
    
    2010
    
    
    2009Net Income
    
    $
    1,314
    
    
    $
    856Other Comprehensive IncomeUnrealized (loss) gain on securities available for sale, net of tax (benefit)
expense 2010, $19; 2009, $3 and reclassifications
    
    
    (39
    )(1)
    
    
    6
    (1)Total Comprehensive Income
    
    $
    1,275
    
    
    $
    8622010
    
    
    2009(1) Disclosure of reclassification amount, net of tax for the three months ended:Net unrealized (loss) gain arising during the three months ended
    
    $
    (58
    )
    
    $
    9Reclassification adjustment for net losses (gains) included in net income
    
    
    
    
    
    
    (58
    )
    
    
    9Tax benefit (expense)
    
    
    19
    
    
    
    (3
    )Net unrealized (loss) gain on securities available for sale
    
    $
    (39
    )
    
    $
    6
 Nine Months EndedJune 30,(In thousands)
    
    2010
    
    
    2009Net Income
    
    $
    3,688
    
    
    $
    3,435Other Comprehensive IncomeUnrealized gain on securities available for sale, net of tax expense
2010, $10; 2009, $1 and reclassifications
    
    
    18
    (1)
    
    
    2
    (1)Total Comprehensive Income
    
    $
    3,706
    
    
    $
    3,4372010
    
    
    2009(1) Disclosure of reclassification amount, net of tax for the six months ended:Net unrealized gain (loss) arising during the nine months ended
    
    $
    28
    
    
    $
    (437
    )Reclassification adjustment for net losses included in net income
    
    
    
    
    
    
    44028
    
    
    
    3Tax expense
    
    
    (10
    )
    
    
    (1
    )Net unrealized gain on securities available for sale
    
    $
    18
    
    
    $
    2
 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
    
    
    
    
    
    
    TotalShares
    
    
    Common
    
    
    Paid-in
    
    
    Partially
    
    
    Comprehensive
    
    
    Treasury
    
    
    Stockholders(In thousands, except share 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,688
    
    
    
    
    
    
    
    
    
    
    
    3,688Dividends  $.57 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,077
    )
    
    
    
    
    
    
    
    
    
    
    (2,077
    )Stock option compensation
    
    
    
    
    
    
    
    
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124Treasury Stock Purchase
    
    
    (5,659
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (77
    )
    
    
    (77
    )Treasury stock delivered under ESOP
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    137
    
    
    
    137Treasury stock delivered under reinvestment plan
    
    
    31,200
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    427
    
    
    
    430Employee options exercised
    
    
    10,950
    
    
    
    
    
    
    
    (44
    )
    
    
    
    
    
    
    
    
    
    
    150
    
    
    
    106Change in unrealized holding loss on
available-for-sale securities, net of
reclassification and tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    18Balance at June 30, 2010
    
    
    3,674,187
    
    
    $
    39
    
    
    $
    8,085
    
    
    $
    47,940
    
    
    $
    (11
    )
    
    $
    (3,565
    )
    
    $
    52,488
 Common
    
    
    
    
    
    
    
    
    
    
    Retained
    
    
    AccumulatedStock
    
    
    
    
    
    
    Additional
    
    
    Earnings-
    
    
    Other
    
    
    
    
    
    
    TotalShares
    
    
    Common
    
    
    Paid-in
    
    
    Partially
    
    
    Comprehensive
    
    
    Treasury
    
    
    Stockholders(In thousands, except share 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,435
    
    
    
    
    
    
    
    
    
    
    
    3,435Dividends  $.54 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,936
    )
    
    
    
    
    
    
    
    
    
    
    (1,936
    )Stock option compensation
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102Treasury stock delivered under ESOP
    
    
    10,000
    
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    137
    
    
    
    120Treasury stock delivered under reinvestment plan
    
    
    34,885
    
    
    
    
    
    
    
    (47
    )
    
    
    
    
    
    
    
    
    
    
    478
    
    
    
    431Employee options exercised
    
    
    2,084
    
    
    
    
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    29
    
    
    
    20Change in unrealized holding loss on available-for-sale securities, net of
reclassification and tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Balance at June 30, 2009
    
    
    3,614,903
    
    
    $
    39
    
    
    $
    8,022
    
    
    $
    45,734
    
    
    $
    (39
    )
    
    $
    (4,373
    )
    
    $
    49,383
 See notes to unaudited consolidated financial statements.
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Harleysville Savings Financial Corporation
 
 Unaudited Consolidated Statements of Cash Flows
 Nine Months Ended June 30,(In thousands)
    
    2010
    
    
    2009Operating Activities:Net Income
    
    $
    3,688
    
    
    $
    3,435Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation
    
    
    416
    
    
    
    347Provision for loan losses
    
    
    450
    
    
    
    290Realized net gains on securities
    
    
    
    
    
    
    (9
    )Loss on impairment of equity securities
    
    
    
    
    
    
    449Loss on sale of foreclosed real estate
    
    
    159
    
    
    
    Amortization of deferred loan fees
    
    
    62
    
    
    
    47Net amortization of premiums and discounts
    
    
    127
    
    
    
    107Increase in cash surrender value of bank owned life insurance
    
    
    (365
    )
    
    
    (364
    )Compensation charge on stock options
    
    
    124
    
    
    
    102Changes in assets and liabilities which provided (used) cash:Decrease in accounts payable and accrued expenses
    
    
    (261
    )
    
    
    (453
    )Increase in prepaid expenses and other assets
    
    
    (1,139
    )
    
    
    (1,063
    )Decrease in accrued interest receivable
    
    
    352
    
    
    
    458Decrease in accrued interest payable
    
    
    (131
    )
    
    
    (71
    )Net cash provided by operating activities
    
    
    3,482
    
    
    
    3,275Investing Activities:Purchase of mortgage-backed securities held to maturity
    
    
    (14,986
    )
    
    
    Purchase of investment securities held to maturity
    
    
    (84,956
    )
    
    
    (25,000
    )Purchase of investment securities available-for-sale
    
    
    (71,301
    )
    
    
    (55,050
    )Net purchase of FHLB stock
    
    
    
    
    
    
    478Proceeds from the redemption of investment securities available-for-sale
    
    
    74,529
    
    
    
    35,572Proceeds from maturities of investment securities held to maturity
    
    
    50,529
    
    
    
    1,365Proceeds from sale of foreclosed real estate
    
    
    588
    
    
    
    Principal collected on mortgage-backed securities
    
    
    33,758
    
    
    
    64,112Principal collected on loans receivable
    
    
    85,411
    
    
    
    101,726Loans originated or acquired
    
    
    (103,341
    )
    
    
    (108,870
    )Purchases of premises and equipment
    
    
    (2,159
    )
    
    
    (317
    )Net cash (used in) provided by investing activities
    
    
    (31,928
    )
    
    
    14,016Financing Activities:Net increase in demand deposits, NOW accounts
and savings accounts
    
    
    71,307
    
    
    
    17,606Net (decrease) increase in certificates of deposit
    
    
    (15,138
    )
    
    
    7,878Cash dividends
    
    
    (1,647
    )
    
    
    (1,505
    )Net decrease in short-term borrowings
    
    
    
    
    
    
    (21,800
    )Proceeds from long-term debt
    
    
    
    
    
    
    24,500Repayment of long-term debt
    
    
    (25,316
    )
    
    
    (34,458
    )Acquisition of treasury stock
    
    
    (77
    )
    
    
    Treasury stock delivered under employee stock plans
    
    
    243
    
    
    
    140Net increase in advances from borrowers for taxes and insurance
    
    
    4,292
    
    
    
    4,100Net cash provided by (used in) financing activities
    
    
    33,664
    
    
    
    (3,539
    )INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    5,218
    
    
    
    13,752CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    9,442
    
    
    
    9,374CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    14,660
    
    
    $
    23,126Supplemental Disclosure of Cash Flow InformationCash paid during the period for:Interest
    
    $
    16,715
    
    
    $
    12,887Income taxes
    
    
    1,175
    
    
    
    1,203Non  cash transfer of loans to real estate owned
    
    
    
    
    
    
    567
 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
  Form 10-K
 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.
  Receivables (Topic 310): Effect of a Loan Modification When the Loan Is Part of a Pool
That Is Accounted for as a Single Asset,
  page -8-




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##### Table of Contents



Receivables (Topic 310): Disclosures about the Credit Quality of Financing
Receivables and the Allowance for Credit Losses,
   ending beginning
  page -9-




---



##### Table of Contents



2. INVESTMENT SECURITIES HELD TO MATURITY
  June 30, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueU.S. Government AgenciesDue 1 year or less
    
    $
    14,978
    
    
    $
    9
    
    
    $
    
    
    
    $
    14,987Due after 1 year through 5 years
    
    
    13,000
    
    
    
    173
    
    
    
    
    
    
    
    13,173Due after 5 years through 10 years
    
    
    25,000
    
    
    
    203
    
    
    
    
    
    
    
    25,203Due after 10 years through 15 years
    
    
    64,991
    
    
    
    348
    
    
    
    (3
    )
    
    
    65,336Due after 15 years
    
    
    2,432
    
    
    
    160
    
    
    
    
    
    
    
    2,592Tax Exempt Municipal ObligationsDue after 5 years through 10 years
    
    
    4,563
    
    
    
    111
    
    
    
    
    
    
    
    4,674Due after 10 years through 15 years
    
    
    12,752
    
    
    
    521
    
    
    
    (19
    )
    
    
    13,254Due after 15 years
    
    
    2,012
    
    
    
    
    
    
    
    (108
    )
    
    
    1,904Total Investment Securities
    
    $
    139,728
    
    
    $
    1,525
    
    
    $
    (130
    )
    
    $
    141,123
 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 Municipal 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
    
    $
    4,997
    
    
    $
    (3
    )
    
    $
    
    
    
    $
    
    
    
    $
    4,997
    
    
    $
    (3
    )Tax exempt
municipal
obligations
    
    
    
    
    
    
    
    
    
    
    3,268
    
    
    
    (127
    )
    
    
    3,268
    
    
    
    (127
    )Total
    
    $
    4,997
    
    
    $
    (3
    )
    
    $
    3,268
    
    
    $
    (127
    )
    
    $
    8,265
    
    
    $
    (130
    )
   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 municipal obligations
    
    
    1,000
    
    
    
    (3
    )
    
    
    3,036
    
    
    
    (150
    )
    
    
    4,036
    
    
    
    (153
    )Total
    
    $
    30,637
    
    
    $
    (361
    )
    
    $
    3,036
    
    
    $
    (150
    )
    
    $
    33,673
    
    
    $
    (511
    )
  page -10-




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3. INVESTMENT SECURITIES AVAILABLE-FOR-SALE
  June 30, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized(In Thousands)
    
    Cost
    
    
    Gain
    
    
    Losses
    
    
    Fair ValueEquity Securities of Financial Institutions
    
    $
    355
    
    
    $
    45
    
    
    $
    (63
    )
    
    $
    337Money Market Mutual Funds
    
    
    3,179
    
    
    
    
    
    
    
    
    
    
    
    3,179Total Investment Securities
    
    $
    3,534
    
    
    $
    45
    
    
    $
    (63
    )
    
    $
    3,516
 September 30, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized(In Thousands)
    
    Cost
    
    
    Gain
    
    
    Losses
    
    
    Fair ValueEquity Securities of Financial Institutions
    
    $
    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(In Thousands)
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized LossesEquity Securities of Financial Institutions
    
    $
    54
    
    
    $
    (3
    )
    
    $
    152
    
    
    $
    (60
    )
    
    $
    206
    
    
    $
    (63
    )
   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 of Financial Institutions
    
    $
    104
    
    
    $
    (43
    )
    
    $
    74
    
    
    $
    (49
    )
    
    $
    178
    
    
    $
    (92
    )
  page -11-




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4. MORTGAGE-BACKED SECURITIES HELD TO MATURITY
  June 30, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Approximate(In Thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueCollateralized mortgage obligations
    
    $
    22,509
    
    
    $
    162
    
    
    $
    (330
    )
    
    $
    22,341FHLMC pass-through certificates
    
    
    50,468
    
    
    
    3,267
    
    
    
    
    
    
    
    53,735FNMA pass-through certificates
    
    
    68,902
    
    
    
    4,290
    
    
    
    
    
    
    
    73,192GNMA pass-through certificates
    
    
    1,545
    
    
    
    38
    
    
    
    
    
    
    
    1,583Total residential mortgage-backed securities
    
    $
    143,424
    
    
    $
    7,757
    
    
    $
    (330
    )
    
    $
    150,851
 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 LossesCollateralized Mortgage Obligations
held to maturity
    
    $
    13,263
    
    
    $
    (250
    )
    
    $
    1,607
    
    
    $
    (80
    )
    
    $
    14,870
    
    
    $
    (330
    )
   Less than 12 Months
    
    
    12 Months or Longer
    
    
    Total
    
    
    Total(In Thousands)
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized LossesCollateralized Mortgage Obligations
held to maturity
    
    $
    2,264
    
    
    $
    (49
    )
    
    $
    6,576
    
    
    $
    (223
    )
    
    $
    8,840
    
    
    $
    (272
    )
  page -12-




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5. MORTGAGE-BACKED SECURITIES AVAILABLE-FOR-SALE
  June 30, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized(In thousands)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueFNMA pass-through certificates
    
    $
    785
    
    
    $
    2
    
    
    $
    
    
    
    $
    787Total Residential Mortgage-Backed Securities
    
    $
    785
    
    
    $
    2
    
    
    $
    
    
    
    $
    787
 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)June 30, 2010
    
    
    September 30, 2009Residential Mortgages
    
    $
    349,639
    
    
    $
    346,202Construction
    
    
    4,269
    
    
    
    2,912Home Equity
    
    
    89,633
    
    
    
    92,434Commercial Mortgages
    
    
    58,304
    
    
    
    48,958Commercial Business Loans
    
    
    17,239
    
    
    
    10,389Consumer Non-Real Estate
    
    
    1,993
    
    
    
    2,242Total
    
    
    521,077
    
    
    
    503,137Undisbursed portion of loans in process
    
    
    (1,989
    )
    
    
    (1,873
    )Deferred loan fees
    
    
    (842
    )
    
    
    (779
    )Allowance for loan losses
    
    
    (2,437
    )
    
    
    (2,094
    )Loans Receivable  net
    
    $
    515,809
    
    
    $
    498,391
   Three Months Ended
    
    
    Nine Months Ended(In thousands)
    
    June 30, 2010
    
    
    June 30, 2009
    
    
    June 30, 2010
    
    
    June 30, 2009Balance, beginning of period
    
    $
    2,330
    
    
    $
    2,193
    
    
    $
    2,094
    
    
    $
    1,988Provision for loan losses
    
    
    150
    
    
    
    90
    
    
    
    450
    
    
    
    290Recoveries
    
    
    1
    
    
    
    9
    
    
    
    8
    
    
    
    26Charge offs
    
    
    (44
    )
    
    
    (20
    )
    
    
    (115
    )
    
    
    (32
    )Balance, end of period
    
    $
    2,437
    
    
    $
    2,272
    
    
    $
    2,437
    
    
    $
    2,272
 7. Federal Home Loan Bank Stock
     page -13-




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##### Table of Contents



8. DEPOSITS
  (In thousands)June 30, 2010
    
    
    September 30, 2009Non-interest bearing checking accounts
    
    $
    15,706
    
    
    $
    12,364NOW accounts
    
    
    26,699
    
    
    
    16,818Interest bearing checking accounts
    
    
    31,624
    
    
    
    29,282Money market demand accounts
    
    
    132,645
    
    
    
    77,432Passbook and club accounts
    
    
    3,469
    
    
    
    2,940Certificate of deposit accounts
    
    
    312,627
    
    
    
    327,765Total deposits
    
    $
    522,770
    
    
    $
    466,601
  9. COMMITMENTS
  (In thousands)Letters of credit
    
    $
    466Commitments to originate loans
    
    
    13,383Unused portion of home equity lines of credits
    
    
    52,883Unused portion of commercial lines of credits
    
    
    5,398Undisbursed portion of construction loans in process
    
    
    1,776Total
    
    $
    73,906
   page -14-




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##### Table of Contents



10. EARNINGS PER SHARE
  For the Three Months Ended
    
    
    For the Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Basic
    
    
    3,667,319
    
    
    
    3,608,620
    
    
    
    3,651,495
    
    
    
    3,591,380Diluted
    
    
    3,700,510
    
    
    
    3,622,751
    
    
    
    3,671,977
    
    
    
    3,602,169
  11. LONG-TERM DEBT
  June 30,
    
    
    September 30,2010
    
    
    2009(In thousands)Weighted
    
    
    
    
    
    
    WeightedInterest
    
    
    
    
    
    
    InterestMaturing Period
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate1 to 12 months
    
    $
    15,000
    
    
    
    4.71
    %
    
    $
    30,358
    
    
    
    4.37
    %13 to 24 months
    
    
    53,635
    
    
    
    4.57
    %
    
    
    16,849
    
    
    
    4.34
    %25 to 36 months
    
    
    32,877
    
    
    
    3.79
    %
    
    
    55,793
    
    
    
    4.49
    %37 to 48 months
    
    
    44,014
    
    
    
    4.25
    %
    
    
    37,189
    
    
    
    4.00
    %49 to 60 months
    
    
    3,527
    
    
    
    3.58
    %
    
    
    29,856
    
    
    
    4.07
    %61 to 72 months
    
    
    20,000
    
    
    
    4.13
    %
    
    
    19,031
    
    
    
    3.82
    %73 to 84 months
    
    
    30,000
    
    
    
    4.86
    %
    
    
    10,000
    
    
    
    4.71
    %85 to 120 months
    
    
    84,677
    
    
    
    4.27
    %
    
    
    109,970
    
    
    
    4.42
    %Total
    
    $
    283,730
    
    
    
    4.34
    %
    
    $
    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 June 30, 2010Tier 1 Capital (to assets)
    
    $
    52,487
    
    
    
    6.13
    %
    
    $
    34,234
    
    
    
    4.00
    %
    
    $
    42,792
    
    
    
    5.00
    %Tier 1 Capital (to risk weighted assets)
    
    
    52,487
    
    
    
    11.21
    %
    
    
    18,726
    
    
    
    4.00
    %
    
    
    28,089
    
    
    
    6.00
    %Total Capital (to risk weighted assets)
    
    
    54,924
    
    
    
    11.73
    %
    
    
    37,452
    
    
    
    8.00
    %
    
    
    46,815
    
    
    
    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 -15-




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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
    
    
    SignificantJune 30,
    
    
    for Identical
    
    
    Observable
    
    
    UnobservableDescription
    
    2010
    
    
    Assets
    
    
    Inputs
    
    
    InputsInvestment securities available for sale
    
    $
    3,516
    
    
    $
    3,516
    
    
    $
    
    
    
    $
    Mortgage-backed securities available for sale
    
    
    787
    
    
    
    
    
    
    
    787
    
    
    
    $
    4,303
    
    
    $
    3,516
    
    
    $
    787
    
    
    $
    
 (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
    
    
    UnobservableJune 30,
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Impaired Loans
    
    $
    186
    
    
    $
    
    
    
    $
    
    
    
    $
    186
   Cash and Cash Equivalents (Carried at Cost)
  Securities
   page -16-




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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)
    June 30, 2010
    
    
    September 30, 2009Carrying
    
    
    Estimated Fair
    
    
    Carrying
    
    
    Estimated Fair(In Thousands)
    
    Amount
    
    
    Value
    
    
    Amount
    
    
    ValueAssets:Cash and cash equivalents
    
    $
    14,660
    
    
    $
    14,660
    
    
    $
    9,442
    
    
    $
    9,442Investment securities held to maturity
    
    
    139,728
    
    
    
    141,123
    
    
    
    105,194
    
    
    
    106,174Investment securities available-for-sale
    
    
    3,516
    
    
    
    3,516
    
    
    
    6,728
    
    
    
    6,728Mortgage-backed securities held to maturity
    
    
    143,424
    
    
    
    150,851
    
    
    
    162,430
    
    
    
    169,210Mortgage-backed securities available-for-sale
    
    
    785
    
    
    
    787
    
    
    
    785
    
    
    
    785Loans receivable  net
    
    
    515,809
    
    
    
    540,410
    
    
    
    498,391
    
    
    
    512,512Federal Home Loan Bank Stock
    
    
    16,096
    
    
    
    16,096
    
    
    
    16,096
    
    
    
    16,096Accrued interest receivable
    
    
    3,367
    
    
    
    3,367
    
    
    
    3,719
    
    
    
    3,719Liabilities:Checking, Passbook, Club and NOW accounts
    
    
    77,498
    
    
    
    77,498
    
    
    
    61,404
    
    
    
    61,404Money Market Demand accounts
    
    
    132,645
    
    
    
    132,645
    
    
    
    77,432
    
    
    
    77,432Certificate of deposit accounts
    
    
    312,627
    
    
    
    317,799
    
    
    
    327,765
    
    
    
    332,733Borrowings
    
    
    283,730
    
    
    
    307,217
    
    
    
    309,046
    
    
    
    331,330Accrued interest payable
    
    
    1,475
    
    
    
    1,475
    
    
    
    1,606
    
    
    
    1,606
 Limitations
    page -17-




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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 -18-




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Other-than-Temporary Impairment of Investment Securities
  Changes in Financial Position for the Nine-Month Period Ended June 30, 2010
   Comparisons of Results of Operations for the Three Month and Nine Month Period Ended June 30,
2010 with the Three Month and Nine Month Period Ended June 30, 2009
 Net Interest Income
  Non-Interest Income
  Non-Interest Expenses
   page -19-




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##### Table of Contents



Income Taxes
   Liquidity and Capital Recourses
     
 Item 3 Quantitative and Qualitative Disclosures About Market Risk
   page -20-




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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
    
    $
    52,984
    
    
    $
    58,837
    
    
    $
    47,049
    
    
    $
    190,769
    
    
    $
    349,639Commercial loans
    
    
    31,631
    
    
    
    8,345
    
    
    
    20,903
    
    
    
    14,664
    
    
    
    75,543Mortgage-backed securities
    
    
    56,799
    
    
    
    44,581
    
    
    
    21,844
    
    
    
    20,987
    
    
    
    144,211Consumer and other loans
    
    
    62,555
    
    
    
    15,287
    
    
    
    7,030
    
    
    
    11,023
    
    
    
    95,895Investment securities and other investments
    
    
    93,880
    
    
    
    47,460
    
    
    
    23,266
    
    
    
    5,748
    
    
    
    170,354Total interest-earning assets
    
    
    297,849
    
    
    
    174,510
    
    
    
    120,092
    
    
    
    243,191
    
    
    
    835,642Interest-bearing liabilities:Passbook and Club accounts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,469
    
    
    
    3,469NOW and checking accounts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,323
    
    
    
    58,323Consumer Money Market Deposit accounts
    
    
    46,522
    
    
    
    
    
    
    
    
    
    
    
    55,009
    
    
    
    101,531Business Money Market Deposit accounts
    
    
    23,335
    
    
    
    
    
    
    
    
    
    
    
    7,779
    
    
    
    31,114Certificate accounts
    
    
    131,514
    
    
    
    117,011
    
    
    
    64,102
    
    
    
    
    
    
    
    312,627Borrowed money
    
    
    21,829
    
    
    
    86,697
    
    
    
    42,733
    
    
    
    132,471
    
    
    
    283,730Total interest-bearing liabilities
    
    
    223,200
    
    
    
    203,708
    
    
    
    106,835
    
    
    
    257,051
    
    
    
    790,794Repricing GAP during the period
    
    $
    74,649
    
    
    $
    (29,198
    )
    
    $
    13,257
    
    
    $
    (13,860
    )
    
    $
    44,848Cumulative GAP
    
    $
    74,649
    
    
    $
    45,451
    
    
    $
    58,708
    
    
    $
    44,848Ratio of GAP during the period to total assets
    
    
    8.61
    %
    
    
    -3.37
    %
    
    
    1.53
    %
    
    
    -1.60
    %Ratio of cumulative GAP to total assets
    
    
    8.61
    %
    
    
    5.24
    %
    
    
    6.77
    %
    
    
    5.17
    %
  page -21-




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##### Table of Contents



Item 4. Controls and Procedures
    page -22-




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##### Table of Contents



Part II OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 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 Operating and Finance Officer32.0
    
    
    Section 1350 Certification of Chief Executive Officer and Chief
Operating and Finance Officer
  page -23-




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##### Table of Contents



Signatures
  HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
 Date: August 13, 2010
    
    By:
    
    /s/ Ronald B. Geib

Ronald B. GeibChief Executive OfficerDate: August 13, 2010
    
    By:
    
    /s/ Brendan J. McGill

Brendan J. McGillExecutive Vice PresidentTreasurer and Chief Financial Officer
  page -24-