Edgar Filing: HARLEYSVILLE SAVINGS FINANCIAL CORP

Form 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20429

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009


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

(Exact name of registrant as specified in its charter)


Pennsylvania		23-3028464

(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

271 Main Street, Harleysville, Pennsylvania 19438

(Address of principal executive offices)
(Zip Code)

(215) 256-8828

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regualtion S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Common Stock, $.01 Par Value, 3,614,903 shares outstanding as of August 14, 2009

HARLEYSVILLE SAVINGS FINANCIAL CORPORATION

Index


	PAGE(S)

Part I FINANCIAL INFORMATION

Item 1. Financial Statements

Unaudited Consolidated Statements of Financial Condition as of June 30, 2009, and September 30, 2008		1

Unaudited Consolidated Statements of Income for the Three and Nine Months Ended June 30, 2009 and 2008		2

Unaudited Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended June 30, 2009 and 2008		3

Unaudited Consolidated Statements of Stockholders’ Equity for the Nine Months Ended June 30, 2009 and 2008		4

Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2009 and 2008		5

Notes to Unaudited Consolidated Financial Statements		6 - 19

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20 - 22

Item 3. Quantitative and Qualitative Disclosures About Market Risk		22 - 23

Item 4. Controls and Procedures		24

Part II OTHER INFORMATION

Item 1. Legal Proceedings		25

Item 1A. Risk Factors		25

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		25

Item 3. Defaults upon Senior Securities		25

Item 4. Submission of Matters to a Vote of Security Holders		25

Item 5. Other information		25

Item 6. Exhibits		25

Signatures		26

Exhibit 31.1
Exhibit 31.2
Exhibit 32.0

Harleysville Savings Financial Corporation

Unaudited Consolidated Statements of Financial Condition


	June 30,			September 30,
(In thousands, except share data)	2009			2008

Assets
Cash and amounts due from depository institutions	$	2,645		$	2,217
Interest bearing deposits in other banks		20,481			7,157

Total cash and cash equivalents		23,126			9,374
Investment securities held to maturity (fair value — June 30, $77,672; September 30, $78,973)		77,337			79,254
Investment securities available-for-sale at fair value		19,827			854
Mortgage-backed securities held to maturity (fair value — June 30, $179,833; September 30, $211,814)		175,275			213,933
Mortgage-backed securities available-for-sale at fair value		816			758
Loans receivable (net of allowance for loan losses — June 30, $2,272; September 30, $1,988)		483,098			476,858
Accrued interest receivable		3,341			3,799
Federal Home Loan Bank stock — at cost		16,096			16,574
Real estate owned		567			—
Office properties and equipment, net		9,739			9,769
Prepaid expenses and other assets		15,928			14,502

TOTAL ASSETS	$	825,150		$	825,675


Liabilities and Stockholders’ Equity
Liabilities:
Deposits	$	450,997		$	425,513
Short-term borrowings		—			21,800
Long-term debt		316,088			326,046
Accrued interest payable		1,615			1,686
Advances from borrowers for taxes and insurance		5,583			1,483
Accounts payable and accrued expenses		1,484			1,938

Total liabilities		775,767			778,466


Stockholders’ equity:
Preferred Stock: $.01 par value; 12,500,000 shares authorized; none issued		—			—
Common stock: $.01 par value; 25,000,000 shares authorized; 3,921,177 shares issued; outstanding June 30, 2009 3,614,903 shares September 30, 2008 3,567,934 shares		39			39
Additional Paid-in capital		8,022			7,993
Treasury stock, at cost (June 30, 2009, 306,274 shares; September 30, 2008, 353,243)		(4,373	)		(5,017	)
Retained earnings — partially restricted		45,734			44,235
Accumulated other comprehensive loss		(39	)		(41	)

Total stockholders’ equity		49,383			47,209

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	825,150		$	825,675

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 Ended
	June 30,					June 30,
(In thousands, except per share data)	2009		2008			2009			2008
INTEREST INCOME:
Interest on mortgage loans	$	4,961	$	4,797		$	15,066		$	14,053
Interest on commercial loans		774		449			2,223			1,166
Interest on mortgage-backed securities		2,209		2,724			7,163			7,442
Interest on consumer and other loans		1,144		1,373			3,639			4,356
Interest on taxable investments		572		1,114			2,134			3,943
Interest on tax-exempt investments		312		345			968			1,043
Dividends on investment securities		1		10			10			32

Total interest income		9,973		10,812			31,203			32,035


Interest Expense:
Interest on deposits		2,642		3,685			8,356			11,997
Interest on borrowings		3,486		3,371			10,460			10,209

Total interest expense		6,128		7,056			18,816			22,206


Net Interest Income		3,845		3,756			12,387			9,829
Provision for loan losses		90		35			290			40

Net Interest Income after Provision for Loan Losses		3,755		3,721			12,097			9,789


Other Income:
Customer service fees		161		156			497			460
Impairment of equity securities		—		(252	)		(449	)		(252	)
Gain on sale of investments		—		—			(11	)		—
Loss on sale of investments		—		—			20			4
Income on bank-owned life insurance		121		120			364			372
Other income		178		177			534			583

Total other income		460		201			955			1,167


Other Expenses:
Salaries and employee benefits		1,523		1,437			4,719			4,195
Occupancy and equipment		299		289			900			817
Deposit insurance premiums		604		12			861			37
Data processing		146		186			409			434
Other		541		630			1,798			1,882

Total other expenses		3,113		2,554			8,687			7,365


Income before Income Taxes		1,102		1,368			4,365			3,591

Income tax expense		246		332			930			720


Net Income	$	856	$	1,036		$	3,435		$	2,871


Basic Earnings Per Share	$	0.24	$	0.29		$	0.96		$	0.78

Diluted Earnings Per Share	$	0.24	$	0.29		$	0.95		$	0.77


Dividends Per Share	$	0.18	$	0.17		$	0.54		$	0.51

See notes to unaudited consolidated financial statements.

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Harleysville Savings Financial Corporation

Unaudited Consolidated Statements of Comprehensive Income


	Three Months Ended
	June 30,
(In thousands)	2009			2008
Net Income	$	856		$	1,036
Other Comprehensive Income
Unrealized gain (loss) on securities available for sale, net of tax benefit — 2009, ($3); 2008, ($2) and reclassifications		6	(1)		4	(1)


Total Comprehensive Income	$	862		$	1,040


	2009			2008
(1) Disclosure of reclassification amount, net of tax for the three months ended:
Net unrealized gain (loss) arising during the three months ended	$	9		$	(246	)
Reclassification adjustment for net losses (gains) included in net income		—			252


	$	9			6
Tax (expense) benefit		(3	)		(2	)

Net unrealized gain on securities avalaible for sale	$	6		$	4


	Nine Months Ended
	June 30,
(In thousands)	2009			2008

Net Income	$	3,435		$	2,871

Other Comprehensive Income

Unrealized gain (loss) on securities available for sale, net of tax benefit — 2009, $1; 2008, $55 and reclassifications		2	(1)		(107	)(1)


Total Comprehensive Income	$	3,437		$	2,764


	2009			2008
(1) Disclosure of reclassification amount, net of tax for the nine months ended:
Net unrealized gain (loss) arising during the nine months ended	$	(437	)	$	(410	)
Reclassification adjustment for net losses (gains) included in net income		440			248


	$	3			(162	)
Tax (expense) benefit		(1	)		55

Net unrealized loss on securities available for sale	$	2		$	(107	)

See notes to unaudited consolidated financial statements.

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Harleysville Savings Financial Corporation

Unaudited Consolidated Statements of Stockholders’ Equity


	Common							Retained			Accumulated
	Stock				Additional			Earnings-			Other						Total
	Shares		Common		Paid-in			Partially			Comprehensive			Treasury			Stockholders’
(In thousands, except share and per share data)	Outstanding		Stock		Capital			Restricted			(Loss) / Income			Stock			Equity

Balance at October 1, 2008		3,567,934	$	39	$	7,993		$	44,235		$	(41	)	$	(5,017	)	$	47,209

Net income									3,435									3,435
Dividends — $.54 per share									(1,936	)								(1,936	)
Stock option compensation						102												102
Treasury stock delivered under employee stock plan		10,000				(17	)								137			120
Treasury stock delivered under reinvestment plan		34,885				(47	)								478			431
Employee options exercised		2,084				(9	)								29			20
Change in unrealized holding loss on available-for-sale securities, net of tax												2						2


Balance at June 30, 2009		3,614,903	$	39	$	8,022		$	45,734		$	(39	)	$	(4,373	)	$	49,383


	Common								Retained			Accumulated
	Stock					Additional			Earnings-			Other						Total
	Shares			Common		Paid-in			Partially			Comprehensive			Treasury			Stockholders’
(In thousands, except share and per share data)	Outstanding			Stock		Capital			Restricted			(Loss) / Income			Stock			Equity

Balance at October 1, 2007		3,717,519		$	39	$	8,044		$	42,363		$	(89	)	$	(3,316	)	$	47,041

Net income										2,871									2,871
Dividends — $.51 per share										(1,868	)								(1,868	)
Stock option compensation							88												88
Treasury stock purchased		(205,358	)													(2,557	)		(2,557	)
Treasury stock delivered under employee stock plan		8,000					(26	)								133			107
Treasury stock delivered under reinvestment plan		31,122					(78	)								487			409
Employee options exercised		2,250					(19	)								38			19
Change in unrealized holding loss on available-for-sale securities, net of tax													(107	)					(107	)


Balance at June 30, 2008		3,553,533		$	39	$	8,009		$	43,366		$	(196	)	$	(5,215	)	$	46,003

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)	2009			2008
Operating Activities:
Net Income	$	3,435		$	2,871
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation		347			387
Provision for loan losses		290			40
Gain on sales of investments		(20	)		(4	)
Loss on sales of investments		11			—
Loss on impairment of equity securities		449			252
Amortization of deferred loan fees		47			12
Net amortization of premiums and discounts		107			122
Increase in cash surrender value		(364	)		(372	)
Compensation charge on stock options		102			88
Changes in assets and liabilities which provided (used) cash:
(Decrease) increase in accounts payable and accrued expenses		(453	)		284
Increase in prepaid expenses and other assets		(1,063	)		(1,189	)
Decrease in accrued interest receivable		458			41
(Decrease) increase in accrued interest payable		(71	)		11

Net cash provided by operating activities		3,275			2,543

Investing Activities:
Purchase of mortgage-backed securities held to maturity		—			(61,396	)
Purchase of investment securities held to maturity		(25,000	)		(20,997	)
Purchase of investment securities available-for-sale		(19,478	)		—
Net redemption of FHLB stock		478			(1,012	)
Proceeds from the sale of investment securities available-for-sale		—			422
Proceeds from maturities of investment securities held to maturity		1,365			31,818
Principal collected on mortgage-backed securities		64,112			39,172
Principal collected on long-term loans		101,726			66,039
Long-term loans originated or acquired		(108,870	)		(103,170	)
Purchases of premises and equipment		(317	)		(212	)

Net cash provided by (used in) investing activities		14,016			(49,336	)

Financing Activities:
Net increase in demand deposits, NOW accounts and savings accounts		17,606			5,302
Net increase in certificates of deposit		7,878			11,584
Cash dividends		(1,505	)		(1,459	)
Net decrease in short-term borrowings		(21,800	)		(19,000	)
Proceeds from long-term debt		24,500			93,000
Repayment of long-term debt		(34,458	)		(43,455	)
Acquisition of treasury stock		—			(2,557	)
Treasury stock delivered under employee stock plans		140			126
Net increase in advances from borrowers for taxes and insurance		4,100			4,423

Net cash (used in) provided by financing activities		(3,539	)		47,964


INCREASE IN CASH AND CASH EQUIVALENTS		13,752			1,171

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		9,374			8,317


CASH AND CASH EQUIVALENTS AT END OF YEAR	$	23,126		$	9,488


Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest (credited and paid)	$	12,887		$	22,195
Income taxes		1,203			683
Non — cash transfer of loans to real estate owned		567			—

See notes to consolidated financial statements.

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Harleysville Savings Financial Corporation

Notes to Unaudited Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation -The unaudited condensed consolidated financial statements include the accounts of Harleysville Savings Financial Corporation (the “Company”) and its subsidiary. Harleysville Savings Bank (the “Bank”) is the wholly owned subsidiary of the Company. The accompanying consolidated financial statements include the accounts of the Company, the Bank, and the Bank’s wholly owned subsidiaries, HSB Inc, a Delaware corporation which was formed in order to hold certain assets, Freedom Financial LLC that allows the Company to offer non deposit products and HARL LLC that allows the Bank to invest in equity investments. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore do not include information or footnotes necessary for a complete presentation of financial condition, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America. However, all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of the consolidated financial statements have been included. The results of operations for the three and six months ended June 30, 2009 are not necessarily indicative of the results which may be expected for the entire fiscal year ending September 30, 2009 or any other period. The financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the period ended September 30, 2008.

Use of Estimates in Preparation of Consolidated Financial Statements — The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. The most significant of these estimates is the allowance for loan losses, the determination of other-than-temporary impairment on securities and the valuation of deferred tax assets. Actual results could differ from those estimates.

Reclassifications

Certain amounts in the prior period’s financial statements have been reclassified to conform with the current year’s classifications. The reclassifications had no effect on net income.

Recent Accounting Pronouncements — In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115.” SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS No. 159 is effective for our Company October 1, 2008. The adoption of SFAS No. 159 did not have an impact on our consolidated financial statements.

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In September 2006, the Emerging Issues Task Force (EITF) of FASB issued EITF Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split Dollar Life Insurance Arrangements” (EITF 06-04). EITF 06-4 requires the recognition of a liability related to the postretirement benefits covered by an endorsement split-dollar life insurance arrangement. The consensus highlights that the employer (who is also the policyholder) has a liability for the benefit it is providing to its employee. As such, if the policyholder has agreed to maintain the insurance policy in force for the employee’s benefit during his or her retirement, then the liability recognized during the employee’s active service period should be based on the future cost of insurance to be incurred during the employee’s retirement. Alternatively, if the policyholder has agreed to provide the employee with a death benefit, then the liability for the future death benefit should be recognized by following the guidance in SFAS No. 106 or Accounting Principles Board (APB) Opinion No. 12, as appropriate. For transition, an entity can choose to apply the guidance using either of the following approaches: (a) a change in accounting principle through retrospective application to all periods presented or (b) a change in accounting principle through a cumulative-effect adjustment to the balance in retained earnings at the beginning of the year of adoption. The disclosures are required in fiscal years beginning after December 15, 2007, with early adoption permitted. The adoption of this new accounting standard did not have an impact to our consolidated financial statements.

In March 2007, the FASB ratified Emerging Issues Task Force Issue No. 06-10 “Accounting for Collateral Assignment Split-Dollar Life Insurance Agreements” (EITF 06-10). EITF 06-10 provides guidance for determining a liability for the postretirement benefit obligation as well as recognition and measurement of the associated asset on the basis of the terms of the collateral assignment agreement. EITF 06-10 is effective for fiscal years beginning after December 15, 2007. The adoption of EITF 06-10 did not have an impact on the Company’s consolidated financial position and results of operations.

In December of 2007, FASB issued statement No. 141 (R) “Business Combinations”. This Statement establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The Statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The guidance will become effective as of the beginning of a company’s fiscal year beginning after December 15, 2008. The new pronouncement will impact the Company’s accounting for business combinations completed beginning October 1, 2009.

In December 2007, FASB issued statement No. 160 “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51”. This Statement establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance will become effective as of the beginning of a company’s fiscal year beginning after December 15, 2008. The Company believes that this new pronouncement will have an immaterial impact on the Company’s financial statements in future periods.

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In March 2008, the FASB issued Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133” (Statement 161). Statement 161 requires entities that utilize derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features contained within derivatives. Statement 161 also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of SFAS 133 have been applied, and the impact that hedges have on an entity’s financial position, financial performance, and cash flows. Statement 161 is effective for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is currently evaluating the potential impact the new pronouncement will have on its consolidated financial statements.

In September 2008, the FASB issued FSP 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” (FSP 133-1 and FIN 45-4). FSP 133-1 and FIN 45-4 amends and enhances disclosure requirements for sellers of credit derivatives and financial guarantees. It also clarifies that the disclosure requirements of SFAS No. 161 are effective for quarterly periods beginning after November 15, 2008, and fiscal years that include those periods. FSP 133-1 and FIN 45-4 is effective for reporting periods (annual or interim) ending after November 15, 2008. The implementation of this standard did not have a material impact on our consolidated financial position and results of operations.

In December 2008, the FASB issued FSP SFAS 140-4 and FASB Interpretation (FIN) 46(R)-8, “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities” (FSP SFAS 140-4 and FIN 46(R)-8). FSP SFAS 140-4 and FIN 46(R)-8 amends FASB SFAS 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”, to require public entities to provide additional disclosures about transfers of financial assets. It also amends FIN 46(R), “Consolidation of Variable Interest Entities”, to require public enterprises, including sponsors that have a variable interest in a variable interest entity, to provide additional disclosures about their involvement with variable interest entities. Additionally, this FSP requires certain disclosures to be provided by a public enterprise that is (a) a sponsor of a qualifying special purpose entity (SPE) that holds a variable interest in the qualifying SPE but was not the transferor of financial assets to the qualifying SPE and (b) a servicer of a qualifying SPE that holds a significant variable interest in the qualifying SPE but was not the transferor of financial assets to the qualifying SPE. The disclosures required by FSP SFAS 140-4 and FIN 46(R)-8 are intended to provide greater transparency to financial statement users about a transferor’s continuing involvement with transferred financial assets and an enterprise’s involvement with variable interest entities and qualifying SPEs. FSP SFAS 140-4 and FIN 46(R) is effective for reporting periods (annual or interim) ending after December 15, 2008. This new pronouncement will not have an impact on the Company’s consolidated financial statements.

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In January 2009, the FASB issued FSP EITF 99-20-1, “Amendments to the Impairment of Guidance of EITF Issue No. 99-20” (FSP EITF 99-20-1). FSP EITF 99-20-1 amends the impairment guidance in EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to Be Held by a Transferor in Securitized Financial Assets”, to achieve more consistent determination of whether an other-than-temporary impairment has occurred. FSP EITF 99-20-1 also retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements in SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, and other related guidance. FSP EITF 99-20-1 is effective for interim and annual reporting periods ending after December 15, 2008, and shall be applied prospectively. Retrospective application to a prior interim or annual reporting period is not permitted. This new pronouncement did not have an impact on the Company’s consolidated financial statements.

In November 2008, the SEC released a proposed roadmap regarding the potential use by U.S. issuers of financial statements prepared in accordance with International Financial Reporting Standards (IFRS). IFRS is a comprehensive series of accounting standards published by the International Accounting Standards Board (“IASB”). Under the proposed roadmap, the Company may be required to prepare financial statements in accordance with IFRS as early as 2014. The SEC will make a determination in 2011 regarding the mandatory adoption of IFRS. The Company is currently assessing the impact that this potential change would have on its consolidated financial statements, and it will continue to monitor the development of the potential implementation of IFRS.

In April 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS 157-4). FASB Statement 157, Fair Value Measurements, defines fair value as the price that would be received to sell the asset or transfer the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. FSP FAS 157-4 provides additional guidance on determining when the volume and level of activity for the asset or liability has significantly decreased. The FSP also includes guidance on identifying circumstances when a transaction may not be considered orderly.

FSP FAS 157-4 provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability. When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with Statement 157.

This FSP clarifies that when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly. In those situations, the entity must evaluate the weight of the evidence to determine whether the transaction is orderly. The FSP provides a list of circumstances that may indicate that a transaction is not orderly. A transaction price that is not associated with an orderly transaction is given little, if any, weight when estimating fair value.

page -9-

This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The adoption of this FSP effective June 30, 2009, did not have a material impact on the Company’s consolidated financial statements, although additional disclosures were required.

In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2 and FAS 124-2). FSP FAS 115-2 and FAS 124-2 clarifies the interaction of the factors that should be considered when determining whether a debt security is other-than-temporarily impaired. For debt securities, management must assess whether (a) it has the intent to sell the security and (b) it is more likely than not that it will be required to sell the security prior to its anticipated recovery. These steps are done before assessing whether the entity will recover the cost basis of the investment. Previously, this assessment required management to assert it has both the intent and the ability to hold a security for a period of time sufficient to allow for an anticipated recovery in fair value to avoid recognizing an other-than-temporary impairment. This change does not affect the need to forecast recovery of the value of the security through either cash flows or market price.

In instances when a determination is made that an other-than-temporary impairment exists but the investor does not intend to sell the debt security and it is not more likely than not that it will be required to sell the debt security prior to its anticipated recovery, FSP FAS 115-2 and FAS 124-2 changes the presentation and amount of the other-than-temporary impairment recognized in the income statement. The other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1 and APB 28-1). FSP FAS 107-1 and APB 28-1 amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods.

This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The adoption of these new provisions resulted in additional disclosure about the fair value of financial instruments in connection with the Company’s June 30, 2009 quarterly report, but did not have a material impact to our consolidated financial statements.

page -10-

In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140. This statement prescribes the information that a reporting entity must provide in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position, financial performance and cash flows; and a transferor’s continuing involvement in transferred financial assets. Specifically, among other aspects, SFAS 166 amends Statement of Financial Standard No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, or SFAS 140, by removing the concept of a qualifying special-purpose entity from SFAS 140 and removes the exception from applying FIN 46(R) to variable interest entities that are qualifying special-purpose entities. It also modifies the financial-components approach used in SFAS 140. SFAS 166 is effective for fiscal years beginning after November 15, 2009. The Company is currently reviewing the effect this new pronouncement will have on its consolidated financial statements.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R). This statement amends FASB Interpretation No. 46, Consolidation of Variable Interest Entities (revised December 2003) — an interpretation of ARB No. 51, or FIN 46(R), to require an enterprise to determine whether it’s variable interest or interests give it a controlling financial interest in a variable interest entity. The primary beneficiary of a variable interest entity is the enterprise that has both (1) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. SFAS 167 also amends FIN 46(R) to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. SFAS 167 is effective for fiscal years beginning after November 15, 2009. The Company is currently reviewing the effect this new pronouncement will have on its consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162. SFAS 168 replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, to establish the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in preparation of financial statements in conformity with generally accepted accounting principles in the United States. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The Company is currently reviewing the effect this new pronouncement will have on its consolidated financial statements.

page -11-

2. INVESTMENT SECURITIES HELD TO MATURITY

A comparison of amortized cost and approximate fair value of investment securities with gross unrealized gains and losses, by maturities, is as follows:

June 30, 2009

Gross

Amortized

Unrealized

(In Thousands)

Cost

Gains

Losses

Fair Value

U.S. Government Agencies

Due after 1 year through 5 years

13,000

149

(53

)

13,096

Due after 5 years through 10 years

6,000

—

(85

)

5,915

Due after 10 years through 15 years

32,000

252

(172

)

32,080

Due after 15 years

2,430

181

—

2,611

Tax Exempt Obligations

Due after 5 years through 10 years

2,668

—

2,753

Due after 10 years through 15 years

18,848

509

(208

)

19,149

Due after 15 years

2,391

—

(323

)

2,068

Total Investment Securities

77,337

1,176

(841

)

77,672


	September 30, 2008
			Gross		Gross
	Amortized		Unrealized		Unrealized
(In Thousands)	Cost		Gains		Losses			Fair Value
U.S. Government Agencies
Due after 1 year through 5 years	$	5,000	$	67	$	—		$	5,067
Due after 5 years through 10 years		2,000		5		—			2,005
Due after 10 years through 15 years		38,497		11		(341	)		38,167
Due after 15 years		8,818		64		(44	)		8,838
Tax Exempt Obligations
Due after 10 years through 15 years		21,544		592		(109	)		22,027
Due after 15 years		3,395		—		(526	)		2,869


Total Investment Securities	$	79,254	$	739	$	(1,020	)	$	78,973

A summary of investments with unrealized losses, aggregated by category, at June 30, 2009 is as follows:


	Less than 12 Months					12 Months or Longer					Total		Total
(In Thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
US Government agencies	$	24,690	$	(310	)	$	—	$	—		$	24,690	$	(310	)
Tax exempt obligations		4,453		(208	)		2,068		(323	)		6,521		(531	)

Total	$	29,143	$	(518	)	$	2,068	$	(323	)	$	31,211	$	(841	)

At June 30, 2009, investment securities in a gross unrealized loss position for twelve months or longer consisted of 4 Tax Exempt Obligations that at such date had an aggregate depreciation of 13.5% from the Company’s amortized cost basis. Management believes that the estimated fair value of the securities disclosed above is primarily dependent upon the movement in market interest rates. Management evaluated the length of time and the extent to which the market value has been less than cost; the financial condition and near term prospects of the issuer, including any specific events which may influence the operations of the issuer. The Company does not have the intention to sell and does not believe it will be required to sell any of the securities in an unrealized loss position prior to a recovery at amortized cost. Management does not believe any individual unrealized loss as of June 30, 2009 represents an other-than-temporary impairment.

A summary of investments with unrealized losses, aggregated by category, at September 30, 2008 is as follows:


	Less than 12 Months					12 Months or Longer					Total		Total
(In Thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
US Government agencies	$	34,501	$	(385	)	$	—	$	—		$	34,501	$	(385	)
Tax exempt obligations		4,502		(298	)		1,675		(337	)		6,177		(635	)

Total	$	39,003	$	(683	)	$	1,675	$	(337	)	$	40,678	$	(1,020	)

page -12-

3. INVESTMENT SECURITIES AVAILABLE-FOR-SALE

A comparison of amortized cost and approximate fair value of investment securities with gross unrealized gains and losses, by maturities, is as follows:

June 30, 2009

Gross

Amortized

Unrealized

(In Thousands)

Cost

Gain

Losses

Fair Value

Equity Securities

452

(111

)

362

Money Market Mutual Funds

19,465

—

19,465

Total Investment Securities

19,917

(111

)

19,827


	September 30, 2008
			Gross		Gross
	Amortized		Unrealized		Unrealized
(In Thousands)	Cost		Gain		Losses			Fair Value

Equity Securities	$	877	$	46	$	(81	)	$	842
Money Market Mutual Funds		12		—		—			12


Total Investment Securities	$	889	$	46	$	(81	)	$	854

A summary of investments with unrealized losses, aggregated by category, at June 30, 2009 is as follows:


	Less than 12 Months					12 Months or Longer					Total		Total
(In Thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Equity Securities	$	131	$	(32	)	$	211	$	(79	)	$	342	$	(111	)

During the nine month period ended June 30,2009, the Company recognized an impairment charge of $449,000 on the equity securities of four financial institutions. In addition for the nine month period ended June 30, 2008, the Company recognized an impairment charge of $252,000 on the equity securities of two financial institutions. In total the Company has recognized an impairment charge of $701,000 on equity securities.

As of June 30, 2009 there were four equity securities in an unrealized loss position. Management evaluated the length of time and the extent to which the fair value has been less than cost; the financial condition and near term prospects of the issuer, including any specific events which may influence the operations of the issuer such as changes in technology that may impair the earnings potential of the investment or the discontinuance of a segment of the business that may effect the future earnings potential. The Company has the ability and intent to hold these securities for a reasonable period of time until the anticipated recovery of fair value occurs. Management does not believe any individual unrealized loss as of June 30, 2009 represents an other-than-temporary impairment.

A summary of investments with unrealized losses, aggregated by category, at September 30, 2008 is as follows:


	Less than 12 Months					12 Months or Longer					Total		Total
(In Thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Equity Securities	$	258	$	(14	)	$	339	$	(67	)	$	597	$	(81	)

page -13-

4. MORTGAGE-BACKED SECURITIES HELD TO MATURITY

A comparison of amortized cost and approximate fair value of mortgage-backed securities with gross unrealized gains and losses, is as follows:

June 30, 2009

Gross

Amortized

Unrealized

Approximate

Cost

Gains

Losses

Fair Value

Collateralized mortgage obligations

12,419

120

(486

)

12,053

FHLMC pass-through certificates

70,452

2,200

—

72,652

FNMA pass-through certificates

92,404

2,724

—

95,128

Total mortgage-backed securities

175,275

5,044

(486

)

179,833


	September 30, 2008
			Gross		Gross
	Amortized		Unrealized		Unrealized			Approximate
	Cost		Gains		Losses			Fair Value

Collateralized mortgage obligations	$	14,708	$	8	$	(624	)	$	14,092
FHLMC pass-through certificates		88,594		283		(826	)		88,051
FNMA pass-through certificates		110,431		99		(1,061	)		109,469
GNMA pass-through certificates		200		2		—			202

Total mortgage-backed securities	$	213,933	$	392	$	(2,511	)	$	211,814

A summary of securities with unrealized losses, aggregated by category, at June 30, 2009 is as follows:

Less than 12 Months

12 Months or Longer

Total

(In Thousands)

Fair Value

Unrealized Losses

Fair Value

Unrealized Losses

Fair Value

Unrealized Losses

Mortgage-backed securities held to maturity

—

7,999

(486

)

7,999

(486

)

At June 30, 2009, mortgage-related securities in a gross unrealized loss position for twelve months or longer consisted of 6 securities that at such date had an aggregate depreciation of 5.7% from the Company’s amortized cost basis. Management believes that the estimated fair value of the securities disclosed above is primarily dependent upon the movement in market interest rates. Management evaluated the length of time and the extent to which the fair value has been less than cost; the financial condition and near term prospects of the issuer. All of the debt securities are highly rated as investment grade and Management believes that it will not incur any losses. The Company does not have the intention to sell and does not believe it will be required to sell any of the securities in an unrealized loss position prior to a recovery of amortized cost. Management does not believe any individual unrealized loss as of June 30, 2009 represents an other-than-temporary impairment.

A summary of securities with unrealized losses, aggregated by category, at September 30, 2008 is as follows:


	Less than 12 Months					12 Months or Longer					Total		Total
(In Thousands)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Mortgage-backed securities held to maturity	$	159,415	$	(2,412	)	$	4,615	$	(99	)	$	164,030	$	(2,511	)

page -14-

5. MORTGAGE-BACKED SECURITIES AVAILABLE-FOR-SALE

A comparison of amortized cost and approximate fair value of mortgage-backed securities with gross unrealized gains and losses, is as follows:


	June 30, 2009
			Gross		Gross
	Amortized		Unrealized		Unrealized
(In thousands)	Cost		Gains		Losses		Fair Value

FNMA pass-through certificates	$	785	$	31	$	—	$	816


Total Mortgage-Backed Securities	$	785	$	31	$	—	$	816


	September 30, 2008
			Gross		Gross
	Amortized		Unrealized		Unrealized
(In thousands)	Cost		Gains		Losses			Fair Value

FNMA pass-through certificates	$	785	$	—	$	(27	)	$	758


Total Mortgage-Backed Securities	$	785	$	—	$	(27	)	$	758

6. LOANS RECEIVABLE

Loans receivable consist of the following:


	(In thousands)
	June 30, 2009			September 30, 2008
Residential Mortgages	$	336,923		$	337,316
Commercial Mortgages		54,201			44,407
Construction		3,042			8,346
Savings Account		1,075			955
Home Equity		52,635			66,280
Automobile and other		1,066			1,000
Home Equity Line of Credit		38,264			26,103


Total		487,206			484,407
Undisbursed portion of loans in process		(1,164	)		(5,109	)
Deferred loan fees		(672	)		(452	)
Allowance for loan losses		(2,272	)		(1,988	)


Loans Receivable — net	$	483,098		$	476,858

The total amount of loans being serviced for the benefit of others was approximately $2,568,000 and $2,918,000 at June 30, 2009 and September 30, 2008, respectively.

The following schedule summarizes the changes in the allowance for loan losses:


	Three Months Ended						Nine Months Ended
	June 30, 2009			June 30, 2008			June 30, 2009			June 30, 2008
	(In thousands)						(In thousands)
Balance, beginning of period	$	2,193		$	1,924		$	1,988		$	1,933
Provision for loan losses		90			35			290			40
Recoveries		9			3			26			9
Charge offs		(20	)		(2	)		(32	)		(22	)

Balance, end of period	$	2,272		$	1,960		$	2,272		$	1,960

page -15-

7. Federal Home Loan Bank Stock

Federal law requires a member institution of the Federal Home Loan Bank (FHLB) to hold stock of its district FHLB according to a predetermined formula. The restricted stock is carried at cost. In December 2008, the FHLB of Pittsburgh notified member banks that it was suspending dividend payments and the repurchase of capital stock.

Management evaluates the restricted stock for impairment in accordance with Statement of Position (SOP) 01-6, Accounting by Certain Entities (Including Entities With Trade Receivables) That Lend to or Finance the Activities of Others. Management’s determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the FHLB.

Management believes no impairment charge is necessary related to the FHLB or restricted stock as of June 30, 2009.

8. DEPOSITS

Deposits are summarized as follows:


	(In thousands)
	June 30, 2009		September 30, 2008
Non-interest bearing checking accounts	$	11,820	$	10,963
NOW accounts		17,863		14,315
Interest bearing checking accounts		30,422		27,888
Money market demand accounts		62,455		52,005
Passbook and club accounts		2,858		2,641
Certificate of deposit accounts		325,579		317,701

Total deposits	$	450,997	$	425,513

The aggregate amount of certificate accounts in denominations of more than $100,000 at June 30, 2009 and September 30, 2008 amounted to approximately $59.1 million and $53.4 million, respectively.

9. COMMITMENTS

At June 30, 2009, the following commitments were outstanding:


	(In thousands)
Letters of credit	$	534
Commitments to originate loans		21,383
Unused portion of home equity lines of credits		46,476
Unused portion of commercial lines of credits		4,347
Undisbursed portion of construction loans in process		842


Total	$	73,582

page -16-

10. EARNINGS PER SHARE

The following shares were used for the computation of earnings per share:

For the Three Months Ended

For the Nine Months Ended

June 30,

2009

2008

2009

2008

Basic

3,608,620

3,555,039

3,591,380

3,669,262

Diluted

3,622,751

3,598,927

3,602,169

3,713,388

The difference between the number of shares used for computation of basic earnings per share and diluted earnings per share represents the dilutive effect of stock options.

11. SHORT-TERM BORROWINGS AND LONG-TERM DEBT

Advances consists of the following:


	June 30,					September 30,
	2009					2008
	(In thousands)
			Weighted					Weighted
			Interest					Interest
Maturing Period	Amount		Rate			Amount		Rate

1 to 12 months	$	25,778		4.39	%	$	35,855		3.18	%
13 to 24 months		15,000		4.71	%		31,405		4.36	%
25 to 36 months		54,855		4.56	%		17,739		4.33	%
37 to 48 months		36,062		3.79	%		57,090		4.48	%
49 to 60 months		45,131		4.23	%		39,282		3.97	%
61 to 72 months		4,196		3.58	%		26,444		4.05	%
73 to 84 months		20,000		4.13	%		19,683		3.81	%
85 to 120 months		115,066		4.37	%		120,348		4.25	%


Total	$	316,088		4.31	%	$	347,846		4.12	%

Federal Home Loan Bank (FHLB) advances are collateralized by Federal Home Loan Bank (“FHLB”) stock and substantially all first mortgage loans. The Company has a line of credit with the FHLB of which $0 out of $75.0 million was used at June 30, 2009 and $21.8 million was used as of September 30, 2008, for general purposes. Included in the table above at June 30, 2009 and September 30, 2008 are convertible advances whereby the FHLB has the option at a predetermined strike rate to convert the fixed interest rate to an adjustable rate tied to London Interbank Offered Rate (“LIBOR”). The Company then has the option to repay these advances if the FHLB converts the interest rate. These advances are included in the periods in which they mature. The Company has a total FHLB borrowing capacity of $501.1 million of which $266.1 million was used as of June 30, 2009. In addition, there are three long-term advances from other financial institutions totaling $50 million that are secured by investment and mortgage-backed securities.

12. REGULATORY CAPITAL REQUIREMENTS

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory — and possibly additional discretionary — actions by regulators that, if undertaken, could have a direct material effect on the Companie’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and of Tier 1 capital (as defined) to assets (as defined). Management believes, as of June 30, 2009, that the Bank meets all capital adequacy requirements to which it is subject.

As of June 30, 2009, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank’s actual capital amounts and ratios are also presented in the table. The Company’s capital ratios are not significantly different than the Bank’s ratios disclosed below.


											To Be Considered Well
											Capitalized Under
						For Capital					Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(In thousands)
As of June 30, 2009
Tier 1 Capital (to assets)	$	49,372		6.04	%	$	32,691		4.00	%	$	40,864		5.00	%
Tier 1 Capital (to risk weighted assets)		49,372		11.31	%		17,466		4.00	%		26,199		6.00	%
Total Capital (to risk weighted assets)		51,644		11.83	%		34,932		8.00	%		43,665		10.00	%

As of September 30, 2008
Tier 1 Capital (to assets)	$	47,191		5.69	%	$	33,167		4.00	%	$	41,459		5.00	%
Tier 1 Capital (to risk weighted assets)		47,191		10.97	%		17,203		4.00	%		25,804		6.00	%
Total Capital (to risk weighted assets)		49,179		11.44	%		34,406		8.00	%		43,007		10.00	%

page -17-

13. FAIR VALUES OF FINANCIAL INSTRUMENTS

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value under GAAP, and expands disclosures about fair value measurements. SFAS 157 applies to other accounting pronouncements that require or permit fair value measurements. The new standard is effective for financial statements issued for fiscal years beginning after November 15, 2007, and for interim periods within those fiscal years. The Company adopted SFAS 157 effective for its fiscal year beginning October 1, 2008.

In December 2007, the FASB issued FASB Staff Position 157-2, “Effective Date of FASB Statement No. 157” (“FSP 157-2”). FSP 157-2 delays the effective date of SFAS 157 for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. In October 2008, the FASB issued FASB Staff Position 157-3, “Determining the Fair Value of a Financial Asset When the Market for that Asset is Not Active” (“FSP 157-3”), to clarify the application of the provisions of SFAS 157 in an inactive market and how an entity would determine fair value in an inactive market. FSP 157-3 is effective immediately and applies to our December 31, 2008 financial statements. The adoption of SFAS 157 and FSP 157-3 had no impact on the amounts reported in the consolidated financial statements.

The primary effect of SFAS 157 on the Company was to expand the required disclosures pertaining to the methods used to determine fair values.

SFAS 157 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under SFAS 157 are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2009 are as follows:


			(Level 1)		(Level 2)
			Quoted Prices in		Significant		(Level 3)
			Active Markets		Other		Significant
	June 30,		for Identical		Observable		Unobservable
Description	2009		Assets		Inputs		Inputs
Investment securities available for sale	$	19,827	$	19,827	$	—	$	—
Mortgage-backed securities available for sale		816		—		816		—

	$	20,643	$	19,827	$	816	$	—

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at June 30, 2009 are as follows:

Fair Value Measurements Using

Quoted Prices

Significant

in Active

Other

Significant

Markets for

Observable

Unobservable

June 30,

Identical Assets

Inputs

Description

2009

(Level 1)

(Level 2)

(Level 3)

Impaired Loans

998

—

998

On April 9, 2009 the Financial Accounting Standards Board (FASB) provided additional guidance on FASB Statement 107, Disclosures about Fair Value of Financial Instruments, in staff position FAS 107-1. FAS 107-1 requires publicly traded companies (to include companies registered with the Securities and Exchange Commission) to disclose in the notes of interim financial statements the fair value and carrying value of assets and liabilities as of the statement date. An entity also shall disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments and any changes in the method(s) and significant assumptions during the period. FAS 107-1 is effective for interim reporting periods ending after June 15, 2009. FAS 107-1 does not require disclosure for earlier periods presented for comparative purposes at initial adoption. In periods after initial adoption, FAS 107-1 requires comparative disclosures only for periods ending after initial adoption

The following valuation techniques were used to measure fair value of the Company’s financial instruments in the tables above and below:

Cash and Cash Equivalents (Carried at Cost)

The carrying amounts reported in the balance sheet for cash and short-term instruments approximate those assets’ fair values.

Securities

The fair value of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices. For certain securities which are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments are generally based on available market evidence (Level 3). In the absence of such evidence, management’s best estimate is used. Management’s best estimate consists of both internal and external support on certain Level 3 investments. Internal cash flow models using a present value formula that includes assumptions market participants would use along with indicative exit pricing obtained from broker/dealers (where available) were used to support fair values of certain Level 3 investments.

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Loans Receivable (Carried at Cost)

The fair values of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans. Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal. Generally, for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values.

Impaired loans are those that are accounted for under FASB Statement No. 114, “Accounting by Creditors for Impairment of a Loan” (“SFAS 114”), in which the Company has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements. The fair value consists of the loan balances of $1,256 million less their specific valuation allowances of $258,000 as determined under SFAS 114.

Federal Home Loan Bank Stock (Carried at Cost)

The carrying amount of this restricted investment in bank stock approximates fair value, and considers the limited marketability of such securities.

Accrued Interest Receivable and Payable (Carried at Cost)

The carrying amount of accrued interest receivable and accrued interest payable approximates its fair value.

Deposit Liabilities (Carried at Cost)

The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of a aggregated expected monthly maturities on time deposits.

Borrowings (Carried at Cost)

Fair values of borrowings are estimated using discounted cash flow analysis, based on quoted prices for new advances with similar credit risk characteristics, terms and remaining maturity. These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party.

Off-Balance Sheet financial Instruments (Disclosed at Cost)

Fair values for the Company’s off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing. The fair value of these off-balance sheet financial instruments are not considered material as of June 30, 2009.

The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required to interpret the market data to develop the estimates.

The carrying amounts and estimated fair values of financial instruments are as follows:


	June 30,
	2009
	Carrying		Estimated Fair
(In Thousands)	Amount		Value

Assets:
Cash and cash equivalents	$	23,126	$	23,126
Investment securities held to maturity		77,337		77,672
Investment securities available-for-sale		19,827		19,827
Mortgage-backed securities held to maturity		175,275		179,833
Mortgage-backed securities available-for-sale		816		816
Loans receivable — net		483,098		493,793
Federal Home Loan Bank Stock		16,096		16,096
Accrued interest receivable		3,341		3,341

Liabilities:
Checking, Passbook, Club and NOW accounts		63,055		63,055
Money Market Demand accounts		62,463		62,463
Certificate accounts		325,579		330,538
Borrowings		316,088		336,676
Accrued interest payable		1,615		1,615

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

14. EVENTS OR TRANSACTIONS SUBSEQUENT TO THE BALANCE SHEET DATE

In May 2009, the Financial Accounting Standards Board (FASB) issued statement of Financial Accounting Standards No. 165, Subsequent Events. This new standard applies to interim and annual financial periods ending after June 15, 2009. The statement establishes principles setting forth the period after the balance sheet date during which management shall evaluate events and transactions that may occur for potential recognition or disclosure in the financial statements. For the purposes of this accounting standard, the Company has evaluated subsequent events through August 14, 2009; the date financial statements were issued.

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Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

This report contains certain forward-looking statements and information relating to the Company that are based on the beliefs of management as well as assumptions made by and information currently available to management. In addition, in those and other portions of this document, the words “anticipate,” “believe,” “estimate,” “intend,” “should” and similar expressions, or the negative thereof, as they relate to the Company or the Company’s management, are intended to identify forward-looking statements. Such statements reflect the current views of the Company with respect to future-looking events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does not intend to update these forward-looking statements.

The Company’s business consists of attracting deposits from the general public through a variety of deposit programs and investing such deposits principally in first mortgage loans secured by residential properties, commercial loans and commercial lines of credit in the Company’s primary market area. The Company also originates a variety of consumer loans, predominately home equity loans and lines of credit also secured by residential properties in the Company’s primary lending area. The Company serves its customers through its full-service branch network as well as through remote ATM locations, the internet and telephone banking.

Critical Accounting Policies and Judgments

The Company’s consolidated financial statements are prepared based on the application of certain accounting policies. Certain of these policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variations and may significantly affect the Company’s reported results and financial position for the period or in future periods. Changes in underlying factors, assumptions, or estimates in any of these areas could have a material impact on the Company’s future financial condition and results of operations. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of the consolidated financial statements: allowance for loan losses, other-than-temporary security impairment and valuation of deferred tax assets.

Allowance for Loan Losses

Analysis and Determination of the Allowance for Loan Losses - The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. The Company evaluates the need to establish allowances against losses on loans on a monthly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings.

Our methodology for assessing the appropriateness of the allowance for loan losses consists of three key elements: (1) specific allowances for certain impaired loans; (2) a general valuation allowance on certain identified problem loans; and (3) a general valuation allowance on the remainder of the loan portfolio. Although we determine the amount of each element of the allowance separately, the entire allowance for loan losses is available for the entire portfolio.

Specific Allowance Required for Certain Impaired Loans: We establish an allowance for certain impaired loans for the amounts by which the collateral value, present value of future cash flows or observable market price are lower than the carrying value of the loan. Under current accounting guidelines, a loan is defined as impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due under the contractual terms of the loan agreement.

General Valuation Allowance on Certain Identified Problem Loans - We also establish a general allowance for classified loans that do not have an individual allowance. We segregate these loans by loan category and assign allowance percentages to each category based on inherent losses associated with each type of lending and consideration that these loans, in the aggregate, represent an above-average credit risk and that more of these loans will prove to be uncollectible compared to loans in the general portfolio.

General Valuation Allowance on the Remainder of the Loan Portfolio - We establish another general allowance for loans that are not classified to recognize the inherent losses associated with lending activities, but which, unlike specific allowances, has not been allocated to particular problem assets. This general valuation allowance is determined by segregating the loans by loan category and assigning allowance percentages based on our historical loss experience, delinquency trends and management’s evaluation of the collectibility of the loan portfolio. The allowance may be adjusted for significant factors that, in management’s judgment, affect the collectability of the portfolio as of the evaluation date. These significant factors may include changes in lending policies and procedures, changes in existing general economic and business conditions affecting our primary lending areas, credit quality trends, collateral value, loan volumes and concentrations, seasoning of the loan portfolio, recent loss experience in particular segments of the portfolio, duration of the current business cycle and bank regulatory examination results. The applied loss factors are reevaluated monthly to ensure their relevance in the current economic environment.

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Other-than-Temporary Impairment of Investment Securities

Securities are evaluated periodically to determine whether a decline in their value is other-than-temporary. Management utilizes criteria such as the magnitude and duration of the decline, in addition to the reasons underlying the decline, to determine whether the loss in value is other-than-temporary. The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value are not necessarily favorable, or that there is a lack of evidence to support realizable value equal to or greater than the carrying value of the investment.

Changes in Financial Position for the Nine-Month Period Ended June 30, 2009

Total assets at June 30, 2009 were $825.1 million, a decrease of $525,000 for the nine-month period then ended. The decrease was primarily due to mortgage-backed securities’ pay-downs totaling $38.6 million. The decrease in assets was offset by the retail growth in mortgage and commercial loans, resulting in an overall increase in loans receivable of approximately $6.2 million.

In addition, the decrease was offset by an increase in investment securities and cash in combination, totaling approximately $30.8 million.

During the nine-month period ended June 30, 2009, the total deposits increased by $25.5 million to $451 million. The increase was offset by a decrease in borrowings of $31.8 million. Advances from borrowers for taxes and insurance also increased by $4.1 million due to the timing of property tax payments.

Comparisons of Results of Operations for the Three Month and Nine Month Period Ended June 30, 2009 with the Three Month and Nine Month Period Ended June 30, 2008

Net Interest Income

Net interest income was $3.8 million for the three-month periods ended June 30, 2009 and June 30, 2008. Net interest income for the three-month period ended June 30, 2009 remained the same when compared to the same period in 2008. The interest rate spread decreased from 1.84% in 2008 to 1.72% in 2009, this was offset by an increase in the difference between the average interest earning assets in relation to the average interest bearing liabilities in comparable periods. The increase in the net interest income for the nine-month period ended June 30, 2009 when compared to the same period in 2008 can be attributed to the increase in interest rate spread from 1.32% in 2008 to 1.85% in 2009. Net interest income was $12.4 million for the nine-month period ended June 30, 2009 compared to $9.8 million for the comparable period in 2008.

Non-Interest Income

Non-interest income increased to $460,000 for the three-month period ended June 30, 2009 from $201,000 for the comparable period in 2008. The increase is primarily due to an impairment write down of equity securities resulting in a loss of $252,000 in the June 30, 2008 period. Non-interest income decreased to $955,000 for the nine-month period ended June 30, 2009 from $1.17 million for the comparable period in 2008. The decrease is primarily due to a difference in impairment write downs of equity securities resulting in losses of $449,000 and $252,000 in the June 30, 2009 and June 30, 2008 periods, respectively.

Non-Interest Expenses

For the three-month period ended June 30, 2009, non-interest expenses increased by $559,000 or 21.9% to $3.1 million compared to $2.6 million for the same period in 2008. For the nine month period ended June 30, 2009, non-interest expenses increased by $1.3 million or 18.0% to $8.7 million compared to $7.4 million for the same period in 2008. These increased costs are primarily due to the increase in FDIC insurance, normal salary increases and increases in healthcare costs. Management believes that these are reasonable increases in the cost of operations after considering the impact of additional expenses related to the Company’s new commercial loan department business banking and additional FDIC premiums. The annualized ratio of non-interest expenses to average assets for the three and nine month periods ended June 30, 2009 and 2008 were 1.52%,1.41% and 1.25%, 1.22%, respectively.

On October 16, 2008, the Federal Deposit Insurance Corporation published a restoration plan designed to replenish the Deposit Insurance Fund over a period of five years and to increase the deposit insurance reserve ratio to the statutory minimum of 1.15% of insured deposits by December 31, 2013. In order to implement the restoration plan, the Federal Deposit Insurance Corporation proposes to change both its risk-based assessment system and its base assessment rates. Assessment rates would increase by seven basis points across the range of risk weightings of depository institutions. Changes to the risk-based assessment system would include increasing premiums for institutions that rely on excessive amounts of brokered deposits, including CDARS, increasing premiums for excessive use of secured liabilities, including Federal Home Loan Bank advances, lowering premiums for smaller institutions with very high capital levels, and adding financial ratios and debt issuer ratings to the premium calculations for banks with over $10 billion in assets, while providing a reduction for their unsecured debt.

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FDIC insurance expense increased to $604,000 for the three-month period ended June 30, 2009 from $12,000 for the comparable period in 2008. The $592,000 increase was due to a $382,000 special assessment, in addition to an increase in assessment rates, which was effective January 1, 2009. FDIC insurance premiums were reduced by $54,000 for one-time credits in the three-month period ended June 30, 2008.

For the nine month period ended June 30, 2009, FDIC insurance expense increased $824,000 to $861,000 compared to $37,000 for the same period in 2008. The increase is due to the $382,000 special assessment, in addition to an increase in assessment rates, which was effective January 1, 2009. FDIC insurance premiums were reduced by $88,000 and $166,000 for one-time credits in the nine-month period ended June 30, 2009 and 2008, respectively.

Income Taxes

The Company made provisions for income taxes of $246,000 and $930,000 for the three-month period and nine-month period ended June 30, 2009, respectively, compared to $332,000 and $720,000 for the comparable periods in 2008. These provisions are based on the levels of pre-tax income, adjusted primarily for tax-exempt interest income on investments.

In evaluating our ability to recover deferred tax assets, management considers all available positive and negative evidence, including our past operating results and our forecast of future taxable income. In determining future taxable income, management makes assumptions for the amount of taxable income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies. These assumptions require us to make judgments about our future taxable income and are consistent with the plans and estimates we use to manage our business. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. An increase in the valuation allowance would result in additional income tax expense in the period and could have a significant impact on our future earnings.

Liquidity and Capital Resources

For a financial institution, liquidity is a measure of the ability to fund customers’ needs for loans and deposit withdrawals. Harleysville Savings Bank regularly evaluates economic conditions in order to maintain a strong liquidity position. One of the most significant factors considered by management when evaluating liquidity requirements is the stability of the Bank’s core deposit base. In addition to cash, the Bank maintains a portfolio of short-term investments to meet its liquidity requirements. Harleysville Savings also relies upon cash flow from operations and other financing activities, generally short-term and long-term debt. Liquidity is also provided by investing activities including the repayment and maturity of loans and investment securities as well as the management of asset sales when considered necessary. The Bank also has access to and sufficient assets to secure lines of credit and other borrowings in amounts adequate to fund any unexpected cash requirements.

As of June 30, 2009, the Company had $73.6 million in commitments to fund loan originations, disburse loans in process and meet other obligations. Management anticipates that the majority of these commitments will be funded within the next six months by means of normal cash flows and new deposits.

The Company invests excess funds in overnight deposits and other short-term interest-earning assets, which provide liquidity to meet lending requirements. The Company also has available borrowings with the Federal Home Loan Bank of Pittsburgh up to the Company’s maximum borrowing capacity, which was $501.1 million at June 30, 2009 of which $266.1 million was outstanding at June 30, 2009.

The Bank’s net income for the nine months ended June 30, 2009 is $3.4 million compared to $2.9 million for the comparable period in 2008. This increased the Bank’s stockholder’s equity to $49.3 million or 5.98% of total assets. This amount is well in excess of the Bank’s minimum regulatory capital requirement.


Item 3.		Quantitative and Qualitative Disclosures About Market Risk

The Company has instituted programs designed to decrease the sensitivity of its earnings to material and prolonged increases in interest rates. The principal determinant of the exposure of the Company’s earnings to interest rate risk is the timing difference between the repricing or maturity of the Company’s interest-earning assets and the repricing or maturity of its interest-bearing liabilities. If the maturities of such assets and liabilities were perfectly matched, and if the interest rates borne by its assets and liabilities were equally flexible and moved concurrently, neither of which is the case, the impact on net interest income of rapid increases or decreases in interest rates would be minimized. The Company’s asset and liability management policies seek to decrease the interest rate sensitivity by shortening the repricing intervals and the maturities of the Company’s interest-earning assets. Although management of the Company believes that the steps taken have reduced the Company’s overall vulnerability to increases in interest rates, the Company remains vulnerable to material and prolonged increases in interest rates during periods in which its interest rate sensitive liabilities exceed its interest rate sensitive assets. The authority and responsibility for interest rate management is vested in the Company’s Board of Directors. The Chief Executive Officer implements the Board of Directors’ policies during the day-to-day operations of the Company. Each month, the Chief Financial Officer (“CFO”) presents the Board of Directors with a report, which outlines the Company’s asset and liability “gap” position in various time periods. The “gap” is the difference between interest- earning assets and interest-bearing liabilities which mature or reprice over a given time period.

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The CFO also meets weekly with the Company’s other senior officers to review and establish policies and strategies designed to regulate the Company’s flow of funds and coordinate the sources, uses and pricing of such funds. The first priority in structuring and pricing the Company’s assets and liabilities is to maintain an acceptable interest rate spread while reducing the effects of changes in interest rates and maintaining the quality of the Company’s assets.

The following table summarizes the amount of interest-earning assets and interest-bearing liabilities outstanding as of June 30, 2009, which are expected to mature, prepay or reprice in each of the future time periods shown. Except as stated below, the amounts of assets or liabilities shown which mature or reprice during a particular period were determined in accordance with the contractual terms of the asset or liability. Adjustable and floating-rate assets are included in the period in which interest rates are next scheduled to adjust rather than in the period in which they are due, and fixed-rate loans and mortgage-backed securities are included in the periods in which they are anticipated to be repaid.

The passbook accounts, negotiable order of withdrawal (“NOW”) accounts, interest bearing accounts, and money market deposit accounts, are included in the “Over 5 Years” categories based on management’s beliefs that these funds are core deposits having significantly longer effective maturities based on the Company’s retention of such deposits in changing interest rate environments.

Generally, during a period of rising interest rates, a positive gap would result in an increase in net interest income while a negative gap would adversely affect net interest income. Conversely, during a period of falling interest rates, a positive gap would result in a decrease in net interest income while a negative gap would positively affect net interest income. However, the following table does not necessarily indicate the impact of general interest rate movements on the Company’s’ net interest income because the repricing of certain categories of assets and liabilities is discretionary and is subject to competitive and other pressures. As a result, certain assets and liabilities indicated as repricing within a stated period may in fact reprice at different rate levels.


	1 Year			1 to 3			3 to 5			Over 5
	or less			Years			Years			Years			Total
Interest-earning assets:
Mortgage loans	$	56,495		$	56,325		$	44,842		$	179,261		$	336,923
Commercial loans		23,962			5,746			12,225			12,268			54,201
Mortgage-backed securities		58,028			60,213			29,503			28,347			176,091
Consumer and other loans		55,236			19,752			9,206			11,888			96,082
Investment securities and other investments		90,843			18,759			18,020			6,119			133,741


Total interest-earning assets		284,564			160,795			113,796			237,883			797,038


Interest-bearing liabilities:
Passbook and Club accounts		—			—			—			2,858			2,858
NOW and checking accounts		—			—			—			48,285			48,285
Consumer Money Market Deposit accounts		14,057			—			—			35,772			49,829
Business Money Market Deposit accounts		9,470			—			—			3,156			12,626
Certificate accounts		209,842			76,078			39,659			—			325,579
Borrowed money		32,358			79,965			70,219			133,546			316,088


Total interest-bearing liabilities		265,727			156,043			109,878			223,617			755,265


Repricing GAP during the period	$	18,837		$	4,752		$	3,918		$	14,266		$	41,773


Cumulative GAP	$	18,837		$	23,589		$	27,507		$	41,773


Ratio of GAP during the period to total assets		2.28	%		0.58	%		0.47	%		1.73	%


Ratio of cumulative GAP to total assets		2.28	%		2.86	%		3.33	%		5.06	%

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Item 4.		Controls and Procedures

Our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and are operating in an effective manner.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II OTHER INFORMATION


Item 1.		Legal Proceedings

Not applicable.


Item 1A.		Risk Factors

There are no material changes to the risk factors set forth in Part 1, Item 1A, Risk Factors’” of the Company’s Form 10-K for the year ended September 30, 2008. Please refer to that section for disclosures regarding the risk and uncertainties related to the Company’s business.


Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.


Item 3.		Defaults upon Senior Securities

Not applicable.


Item 4.		Submission of Matters to a Vote of Security Holders

Not applicable.


Item 5.		Other information

Not applicable.


Item 6.		Exhibits and Reports on Form 8-K


No.
	31.1	Certification of Chief Executive Officer
	31.2	Certification of Chief Financial Officer
	32.0	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
Date: August 14, 2009	By:	/s/ Ronald B. Geib
		Ronald B. Geib
		Chief Executive Officer

Date: August 14, 2009	By:	/s/ Brendan J. McGill
		Brendan J. McGill
		Senior Vice President Treasurer and Chief Financial Officer

page -26-

Exhibit Index


Exhibit No.		Description
	31.1	Certification of Chief Executive Officer
	31.2	Certification of Chief Financial Officer
	32.0	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

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