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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999.
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to .
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Commission file number 0-15237
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HARLEYSVILLE NATIONAL CORPORATION
---------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2210237
------------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
483 Main Street, Harleysville, Pennsylvania 19438
------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 256-8851
Securities registered pursuant to Section 12(b) of the Act: N/A
Name of each exchange
Title of each class on which registered
. N/A N/A.
---------------- ------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value
-----------------------------
Title of Class
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 X . No.
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
PAGE 1
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
$206,063,156 as of February 29, 2000
Indicate the number of shares outstanding of each class of the registrant's
classes of common stock, as of the latest practicable date.
7,915,552 shares of Common Stock, $1 par value per share, were outstanding as
of February 29, 1999.
DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 1999 are incorporated by reference into Parts I, II and
IV of this report.
2. Portions of the Registrant's Definitive Proxy Statement relating to the
Annual Meeting of Shareholders to be held April 11, 2000 are incorporated by
reference into Part III of this report.
PAGE 2
HARLEYSVILLE NATIONAL CORPORATION
INDEX TO FORM 10-K REPORT
PAGE
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I. . . . . . PART I.
Item 1. Business 4
Item 2. Properties 15
Item 3. Legal Proceedings 17
Item 4.. . Submission of Matters to a Vote of Security Holders . 18
II.. . . . . PART II.
Item 5. Market for Registrant's Common Stock and Related Shareholder Matters 19
Item 6. Selected Financial Data 19
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 19
Item 7.A.. Quantitative and Qualitative Disclosure about Market Risk 19
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 19
III. . . . . PART III.
Item 10. Directors and Executive Officers of the Registrant 20
Item 11. Executive Compensation 21
Item 12. Security Ownership of Certain Beneficial Owners and Management 21
Item 13. Certain Relationships and Related Transactions 21
IV.. . . . . PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 22
Signatures 25
PAGE 3
PART I
Item 1. Business.
- -------
History and Business
- ----------------------
Harleysville National Corporation, a Pennsylvania corporation (the
Corporation), was incorporated in June 1982. On January 1, 1983, the
Corporation became the parent bank holding company of Harleysville National Bank
and Trust Company (HNB), established in 1909, a wholly owned subsidiary of the
Corporation. On February 13, 1991, the Corporation acquired all of the
outstanding common stock of Citizens National Bank (CNB), established in 1903.
On June 1, 1992, the Corporation acquired all of the outstanding stock of Summit
Hill Trust Company (Summit Hill). On September 25, 1992, Summit Hill merged
into CNB and is now operating as a branch office of CNB. On July 1, 1994 the
Corporation acquired all of the outstanding stock of Security National Bank
(SNB), established in 1988. On March 1, 1996, the Corporation acquired all of
the outstanding common stock of Farmers & Merchants Bank ("F & M"). F & M was
merged into CNB and is now operating as a branch office of CNB. On March 17,
1997, the HNC Financial Company was incorporated as a Delaware Corporation. HNC
Financial Company's principal business function is to expand the investment
opportunities of the Corporation. On January 20, 1999, the Corporation acquired
all of the outstanding stock of Northern Lehigh Bancorp, Inc., parent company of
Citizens National Bank of Slatington. The Corporation is primarily a bank
holding company that provides financial services through its three bank
subsidiaries. Since commencing operations, the Corporation's business has
consisted primarily of managing HNB, CNB and SNB (collectively the Banks), and
its principal source of income has been dividends paid by the Banks. The
Corporation is registered as a bank holding company under the Bank Holding
Company Act of 1956.
The Banks are national banking associations under the supervision of the
Office of the Comptroller of the Currency (the OCC). The Corporation and HNB's
legal headquarters are located at 483 Main Street, Harleysville, Pennsylvania
19438. CNB's legal headquarters is located at 13-15 West Ridge Street,
Lansford, Pennsylvania 18232. SNB's legal headquarters is located at One
Security Plaza, Pottstown, Pennsylvania 19464. HNC Financial Company's legal
headquarters is located at 300 Delaware Avenue, Suite 1704, Wilmington, Delaware
19801.
In addition to historical information, this Form 10-K contains
forward-looking statements. We have made forward-looking statements in this
document, and in documents that we incorporate by reference, that are subject to
risks and uncertainties. Forward-looking statements include the information
concerning possible or assumed future results of operations of Harleysville
National Corporation and its subsidiaries. When we use words such as
"believes," "expects," "anticipates," or similar expressions, we are making
forward-looking statements.
Shareholders should note that many factors, some of which are discussed
elsewhere in this document and in the documents that we incorporate by
reference, could affect the future financial results of Harleysville National
Corporation and its subsidiaries and could cause actual results to differ
materially from those expressed in the forward-looking statements contained or
incorporated by reference in this document. These factors include the
following:
- - operating, legal and regulatory risks;
- - economic, political and competitive forces affecting our banking,
securities, asset management and credit services businesses; and
- - the risk that our analyses of these risks and forces could be incorrect
and/or that the strategies developed to address them could be unsuccessful.
As of December 31, 1999, the Corporation had total assets of
$1,635,679,000, total shareholders' equity of $129,660,000 and total deposits of
$1,231,265,000.
The Banks engage in the full-service commercial banking and trust
business, including accepting time and demand deposits, making secured and
unsecured commercial and consumer loans, financing commercial transactions,
making construction and mortgage loans and performing corporate pension and
personal trust services. Their deposits are insured by the Federal Deposit
Insurance Corporation to the extent provided by law. The Banks have 35 branch
offices located in Montgomery, Bucks, Carbon, Wayne, Chester, Lehigh,
Northampton and Schuylkill counties, Pennsylvania, 22 of which are owned by the
Banks and 13 of which are leased from third parties.
The Banks enjoy a stable base of core deposits and are leading community
banks in their service areas. The Banks believe they have gained their position
PAGE 4
as a result of a customer-oriented philosophy and a strong commitment to
service. Senior management has made the development of a sales orientation
throughout the Banks one of their highest priorities and emphasizes this
objective with extensive training and sales incentive programs that the
Corporation believes are unusual for community banks. The Banks maintain close
contact with the local business community to monitor commercial lending needs
and believe they respond to customer requests quickly and with flexibility.
Management believes these competitive strengths are reflected in the
Corporation's results of operations.
As of December 31, 1999, the Corporation and the Banks employed
approximately 517 full-time equivalent employees. The Corporation provides a
variety of employment benefits and considers its relationships with its
employees to be satisfactory.
Competition
- -----------
The Banks compete actively with other eastern Pennsylvania financial
institutions, many larger than the Banks, as well as with financial and
non-financial institutions headquartered elsewhere. The Banks are generally
competitive with all competing institutions in their service areas with respect
to interest rates paid on time and savings deposits, service charges on deposit
accounts, interest rates charged on loans, and fees and charges for trust
services. At December 31, 1999, HNB's legal lending limit to a single customer
was $14,426,000 and CNB's and SNB's legal lending limits to a single customer
were $3,246,000 and $1,441,000, respectively. Many of the institutions with
which the Banks compete are able to lend significantly more than these amounts
to a single customer.
Supervision and Regulation - The Registrant
- ------------------------------------------------
On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Act of 1999, the Financial Services Modernization Act. The
Financial Services Modernization Act repeals the two affiliation provisions of
the Glass-Steagall Act:
- - Section 20, which restricted the affiliation of Federal Reserve Member
Banks with firms "engaged principally" in specified securities activities; and
- - Section 32, which restricts officer, director or employee interlocks
between a member bank and any company or person "primarily engaged" in specified
securities activities.
In addition, the Financial Services Modernization Act also contains provisions
that expressly preempt any state law insurance. The general effect of the law
is to establish a comprehensive framework to permit affiliations among
commercial banks, insurance companies, securities firms and other financial
service providers by revising and expanding the Bank Holding Company Act
framework to permit a holding company system to engage in a full range of
financial activities through a new entity known as Financial Holding Company.
"Financial activities" is broadly defined to include not only banking, insurance
and securities activities, but also merchant banking and additional activities
that the Federal Reserve, in consultation with the Secretary of Treasury,
determines to be financial in nature, incidental to such financial activities,
or complementary activities that do not pose a substantial risk to the safety
and soundness of depository institutions or the financial system generally.
PAGE 5
Generally, the Financial Services Modernization Act:
- - Repeals historical restrictions on, and eliminates many federal and state
law barriers to, affiliations among banks, securities firms, insurance
companies, and other financial service providers;
- - Provides a uniform framework for the functional regulation of the
activities of banks, savings institutions and their holding companies;
- - Broadens the activities that may be conducted by national banks, banking
subsidiaries of bank holding companies, and their financial subsidiaries;
- - Provides an enhanced framework for protecting the privacy of consumer
information;
- - Adopts a number of provisions related to the capitalization, membership,
corporate governance and the other measures designed to modernize the Federal
Home Loan Bank system;
- - Modifies the laws governing the implementation of the Community
Reinvestment Act; and
- - Addresses a variety of other legal and regulatory issues affecting both
day-to-day operations and long-term activities of financial institutions.
In order for the Corporation to take advantage of the ability to affiliate
with other financial services providers, the Corporation must become a
"Financial Holding Company" as permitted under an amendment to the Bank Holding
Company Act. To become a Financial Holding Company, the Corporation would file
a declaration with the Federal Reserve, electing to engage in activities
permissible for Financial Holding Companies and certifying that it is eligible
to do so because all of its insured depository institution subsidiaries are
well-capitalized and well-managed. In addition, the Federal Reserve must
determine that each insured depository institution subsidiary of the Corporation
has at least a satisfactory CRA rating. The Corporation currently meets the
requirements to make an election to become a Financial Holding Company. The
Corporation's management has not determined at this time whether it will seek an
election to become a Financial Holding Company. The Corporation is examining
its strategic business plan to determine whether, based on market conditions,
the relative financial conditions of the Corporation and its subsidiaries,
regulatory requirements, general economic conditions, and other factors, the
Corporation desires to utilize any of its expanded powers provided in the
Financial Service Modernization Act.
The Financial Services Modernization Act also permits national banks to
engage in expanded activities through the formation of financial subsidiaries.
A national bank may have a subsidiary engaged in any activity authorized for
national banks directly or any financial activity, except for insurance
underwriting, insurance investments, real estate investment or development, or
merchant banking, which may only be conducted through a subsidiary of a
Financial Holding Company. Financial activities include all activities
permitted under new sections of the Bank Holding Company Act or permitted by
regulation.
A national bank seeking to have a financial subsidiary, and each of its
depository institution affiliates, must be "well-capitalized" and
"well-managed." The total assets of all financial subsidiaries may not exceed
the lesser of 45% of a bank's total assets or $50 billion. A national bank must
exclude from its assets and equity all equity investments, including retained
earnings, in a financial subsidiary. The assets of the subsidiary may not be
consolidated with risk and protect the bank from such risks and potential
liabilities.
The Corporation and the Banks do not believe that the Financial Services
Modernization Act will have a material adverse effect on our operations in the
near-term. However, to the extent that it permits banks, securities firms, and
insurance companies to affiliate, the financial services industry may experience
further consolidation. The Financial Services Modernization Act is intended to
grant to community banks certain powers as a matter of right that larger
institutions have accumulated on an ad hoc basis. Nevertheless, this act may
have the result of increasing the amount of competition that the company and the
bank face from larger institutions and other types of companies offering
financial products, many of which may have substantially more financial
resources than the company bank.
PAGE 6
From time to time, various types of federal and state legislation
have been proposed that could result in additional regulation of, and
restrictions on, the business of the Corporation and the Banks. We cannot
predict whether the legislation will be enacted or, if enacted, how the
legislation would affect the business of the Corporation and the Banks. As a
consequence of the extensive regulation of commercial banking activities in the
United States, the Corporation's and the Banks' business is particularly
susceptible to being affected by federal legislation and regulations that may
increase the costs of doing business. Except as specifically described above,
management believes that the effect of the provisions of the aforementioned
legislation on liquidity, capital resources and results of operations of the
Corporation will be immaterial.
Management is not aware of any other current specific
recommendations by regulatory authorities or proposed legislation, which if they
were implemented, would have a material adverse effect upon the liquidity,
capital resources, or results of operations, although the general cost of
compliance with numerous and multiple federal and state laws and regulations
does have, and in the future may have, a negative impact on the Corporation's
results of operations.
Further, the business of the Corporation is also affected by the
state of the financial services industry in general. As a result of legal and
industry changes, management predicts that the industry will continue to
experience an increase in consolidations and mergers as the financial services
industry strives for greater cost efficiencies and market share. Management
also expects increased diversification of financial products and services
offered by the Banks and its competitors. Management believes that such
consolidations and mergers, and diversification of products and services may
enhance the Banks' competitive position.
Pending Legislation
- --------------------
Management is not aware of any other current specific recommendations by
regulatory authorities or proposed legislation which, if they were implemented,
would have a material adverse effect upon the liquidity, capital resources, or
results of operations, although the general cost of compliance with numerous and
multiple federal and state laws and regulations does have, and in the future may
have, a negative impact on the Corporation's results of operations.
Effects of Inflation
- ----------------------
Inflation has some impact on the Corporation's and the Banks' operating
costs. Unlike many industrial companies, however, substantially all of the
Banks' assets and liabilities are monetary in nature. As a result, interest
rates have a more significant impact on the Corporation's and the Banks'
performance than the general level of inflation. Over short periods of time,
interest rates may not necessarily move in the same direction or in the same
magnitude as prices of goods and services.
Effect of Government Monetary Policies
- ------------------------------------------
The earnings of the Corporation are and will be affected by domestic
economic conditions and the monetary and fiscal policies of the United States
government and its agencies. An important function of the Federal Reserve is to
regulate the money supply and interest rates. Among the instruments used to
implement those objectives are open market operations in United States
government securities and changes in reserve requirements against member bank
deposits. These instruments are used in varying combinations to influence
overall growth and distribution of bank loans, investments and deposits, and
their use may also affect rates charged on loans or paid for deposits.
The Banks are members of the Federal Reserve and, therefore, the policies
and regulations of the Federal Reserve have a significant effect on its
deposits, loans and investment growth, as well as the rate of interest earned
and paid, and are expected to affect the Banks' operations in the future. The
PAGE 7
effect of such policies and regulations upon the future business and earnings of
the Corporation and the Banks cannot be predicted.
Environmental Regulations
- --------------------------
There are several federal and state statutes which regulate the obligations
and liabilities of financial institutions pertaining to environmental issues.
In addition to the potential for attachment of liability resulting from its own
actions, a bank may be held liable under certain circumstances for the actions
of its borrowers, or third parties, when such actions result in environmental
problems on properties that collateralize loans held by the bank. Further, the
liability has the potential to far exceed the original amount of a loan issued
by the bank. Currently, neither the Corporation nor the Banks are a party to
any pending legal proceeding pursuant to any environmental statute, nor are the
Corporation and the Banks aware of any circumstances that may give rise to
liability under any such statute.
Supervision and Regulation - Banks
- --------------------------------------
The operations of the Banks are subject to federal and state statutes
applicable to banks chartered under the banking laws of the United States, to
members of the Federal Reserve and to banks whose deposits are insured by the
FDIC. The Banks' operations are also subject to regulations of the OCC, the
Federal Reserve and the FDIC. The primary supervisory authority of the Banks is
the OCC, who regularly examines the Banks. The OCC has authority to prevent a
national bank from engaging in unsafe or unsound practices in conducting its
business.
Federal and state banking laws and regulations govern, among other things,
the scope of a bank's business, the investments a bank may make, the reserves
against deposits a bank must maintain, loans a bank makes and collateral it
takes, the activities of a bank with respect to mergers and consolidations and
the establishment of branches.
As a subsidiary bank of a bank holding company, the Banks are subject to
certain restrictions imposed by the Federal Reserve Act on any extensions of
credit to the bank holding company or its subsidiaries, or investments in the
stock or other securities as collateral for loans. The Federal Reserve Act and
Federal Reserve regulations also place certain limitations and reporting
requirements on extensions of credit by a bank to principal shareholders of its
parent holding company, among others, and to related interests of such principal
shareholders. In addition, such legislation and regulations may affect the terms
upon which any person becoming a principal shareholder of a holding company may
obtain credit from banks with which the subsidiary bank maintains a
correspondent relationship.
Under the Federal Deposit Insurance Act, the OCC possesses the power to
prohibit institutions regulated by it (such as the Banks) from engaging in any
activity that would be an unsafe and unsound banking practice or would otherwise
be in violation of the law.
Under the Community Reinvestment Act of 1977, the OCC is required to assess
the record of all financial institutions regulated by it to determine if these
institutions are meeting the credit needs of the community, including low and
moderate income neighborhoods, which they serve and to take this record into
account in its evaluation of any application made by any of such institutions
for, among other things, approval of a branch or other deposit facility, office
relocation, a merger or an acquisition of bank shares. The Financial
Institutions Reform, Recovery and Enforcement Act of 1989 amended the CRA to
require, among other things, that the OCC make publicly available the evaluation
of a bank's record of meeting the credit needs of its entire community,
including low and moderate income neighborhoods. This evaluation will include a
descriptive rating like "outstanding", "satisfactory", "needs to improve" or
"substantial noncompliance" and a statement describing the basis for the rating.
These ratings are publicly disclosed.
Under the Bank Secrecy Act, banks and other financial institutions are
required to report to the Internal Revenue Service currency transactions of more
than $10,000 or multiple transactions of which a bank is aware in any one day
that aggregate in excess of $10,000. Civil and criminal penalties are provided
under the Bank Secrecy Act for failure to file a required report, for failure to
supply information required by the Bank Secrecy Act or for filing a false or
fraudulent report.
PAGE 8
The Federal Deposit Insurance Corporation Improvement Act of 1991 requires
that institutions must be classified, based on their risk-based capital ratios
into one of five defined categories, as illustrated below, well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized.
Total Tier 1 Under a
Risk Risk Tier 1 Capital
Based Based Leverage Order or
Ratio Ratio Ratio Directive
----- ------ -------- ---------
CAPITAL CATEGORY
- ------------------------------
Well capitalized . . . . . . . > 10.0 > 6.0 > 5.0 NO
- ---- - ---- - ----
Adequately capitalized . . . . > 8.0 > 4.0 > 4.0*
- ---- - ---- - ----
Undercapitalized . . . . . . . < 8.0 < 4.0 < 4.0*
Significantly undercapitalized < 6.0 < 3.0 < 3.0
Critically undercapitalized. . < 2.0
*3.0 for those banks having the highest available regulatory rating.
In the event an institution's capital deteriorates to the undercapitalized
category or below, FDICIA prescribes an increasing amount of regulatory
intervention, including: the institution of a capital restoration plan and a
guarantee of the plan by a parent institution; and the placement of a hold on
increases in assets, number of branches or lines of business. If capital has
reached the significantly or critically undercapitalized levels, further
material restrictions can be imposed, including
restrictions on interest payable on accounts, dismissal of management and, in
critically undercapitalized situations, appointment of a receiver. For well
capitalized institutions, FDICIA provides authority for regulatory intervention
where the institution is deemed to be engaging in unsafe or unsound practices or
receives a less than satisfactory examination report rating for asset quality,
management, earnings or liquidity. All but well capitalized institutions are
prohibited from accepting brokered deposits without prior regulatory approval.
Under FDICIA, financial institutions are subject to increased regulatory
scrutiny and must comply with certain operational, managerial and compensation
standards to be developed by Federal Reserve Board regulations. FDICIA also
requires the regulators to issue new rules establishing certain minimum
standards to which an institution must adhere including standards requiring a
minimum ratio of classified assets to capital, minimum earnings necessary to
absorb losses and minimum ratio of market value to book value for publicly held
institutions. Additional regulations are required to be developed relating to
internal controls, loan documentation, credit underwriting, interest rate
exposure, asset growth and excessive compensation, fees and benefits.
Annual full-scope, on site regulatory examinations are required for all
the FDIC-insured institutions except institutions with assets under $100 million
which are well capitalized, well-managed and not subject to a recent change in
control, in which case, the examination period is every 18 months. Banks with
total assets of $500 million or more, as of the beginning of fiscal year 1993,
are required to submit to their supervising federal and state banking agencies a
publicly available annual audit report. The independent accountants of such bank
are required to attest to the accuracy of management's report regarding the
internal control structure of the bank. In addition, such banks also are
required to have an independent audit committee composed of outside directors
who are independent of management, to review with management and the independent
accountants, the reports that must be submitted to the bank regulatory agencies.
If the independent accountants resign or are dismissed, written notification
must be given to the bank's supervising government banking agencies. These
accounting and reporting reforms do not apply to an institution such as a bank
with total assets at the beginning of its fiscal year of less than $500 million,
such as CNB or SNB.
FDICIA also requires that banking agencies reintroduce loan-to-value
ratio regulations which were previously repealed by the 1982 Act.
Loan-to-values limit the amount of money a financial institution may lend to a
borrower, when the loan is secured by real estate, to no more than a percentage,
set by regulation, of the value of the real estate.
PAGE 9
A separate subtitle within FDICIA, called the "Bank Enterprise Act of
1991", requires "truth-in-savings" on consumer deposit accounts so that
consumers can make meaningful comparisons between the competing claims of banks
with regard to deposit accounts and products. Under this provision, a bank is
required to provide information to depositors concerning the terms of their
deposit accounts, and in particular, to disclose the annual percentage yield.
The operational cost of complying with the Truth-In-Savings law had no material
impact on liquidity, capital resources or reported results of operations.
While the overall impact of fully implementing all provisions of the
FDICIA cannot be accurately calculated, Management believes that full
implementation of the FDICIA had no material impact on liquidity, capital
resources or reported results of operation in future periods.
From time to time, various types of federal and state legislation have been
proposed that could result in additional regulation of, and restriction on, the
business of the Banks. It cannot be predicted whether any such legislation will
be adopted or, if adopted, how such legislation would affect the business of the
Banks. As a consequence of the extensive regulation of commercial banking
activities in the United States, the Banks' business is particularly susceptible
to being affected by federal legislation and regulations that may increase the
costs of doing business.
Year 2000
- ----------
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the change in the century. If not corrected, many computer
applications could fail or create erroneous results by or at the Year 2000
(Y2K). The Year 2000 issue affects virtually all companies and organizations.
The Corporation did not experience problems associated with the Y2K issue
and has not found Y2K problems with its related third parties, as of February
29, 2000. The Corporation's third parties include its vendors and commercial
customers. The Corporation continues to monitor its own computer systems for
Y2K problems and will continue to investigate any potential problems with its
related third parties.
The Corporation prepared a Y2K budget and has tracked expenses related to
the Y2K issue. As of December 31, 1999, the Corporation expensed $381,000 and
capitalized fixed assets of $116,000 during the last three years to address the
Y2K issue.
Statistical Data
- -----------------
The information for this item is listed below and is incorporated by
reference to pages 25 through 32 of the Corporation's Annual Report to
Shareholders for the year ended December 31, 1999 which pages are included at
Exhibit (13) to this Annual Report on Form 10-K.
INVESTMENT PORTFOLIO
The following shows the carrying value of the Corporation's investment
securities held to maturity:
(Dollars in Thousands) 1999 1998 1997
------- ------- -------
U. S. Treasury notes. . . . . . . . . . . . . . . $ 1,000 $ - $ -
Obligations of other U.S. Government agencies
and corporations . . . . . . . . . . . . . . - 6,816 21,707
Obligations of states and political subdivisions. 21,450 17,093 19,609
Mortgage-backed securities. . . . . . . . . . . . 568 1,039 2,048
Other securities. . . . . . . . . . . . . . . . . 1,253 16,572 5,323
------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . $24,271 $41,520 $48,687
======= ======= =======
PAGE 10
The following shows the carrying value of the Corporation's investment
securities available for sale:
(Dollars in Thousands) 1999 1998 1997
-------- -------- --------
U. S. Treasury notes. . . . . . . . . . . . . . . $ 46,553 $ 44,168 $ 46,614
Obligations of other U.S. Government agencies
And corporations . . . . . . . . . . . . . . 32,915 45,668 48,615
Obligations of states and political subdivisions. 149,213 164,226 94,488
Mortgage-backed securities. . . . . . . . . . . . 154,941 88,252 57,299
Other securities. . . . . . . . . . . . . . . . . 67,337 48,124 15,939
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . $450,959 $390,438 $262,955
======== ======== ========
There are no significant concentrations of securities (greater than 10% of
shareholders' equity) in any individual security issuer. The maturity analysis
of investment securities held to maturity, Including the weighted average yield
for each category as of December 31, 1999, is as follows:
Under 1 - 5 5 - 10 Over
1 year years years 10 years Total
- ---------------------------------- -------------- -------- ---------- -------- -----
(Dollars in thousands)
U.S. Treasury notes:
Carrying value . . . . . . $ 500 $ 500 $ - $ - $ 1,000
Weighted average yield.. . 6.24% 6.31% - % - % 6.28%
Weighted average maturity. 1 yr 0 mos
Obligations of states and
Political subdivisions:
Carrying value . . . . . . 771 596 1,915 18,168 21,450
Weighted average yield . . 9.03% 8.55% 9.46% 8.57% 8.66%
Weighted average maturity. 10 yrs 7 mos
Mortgage-backed securities:
Carrying value . . . . . . - - 568 - 568
Weighted average yield . . - % - % 6.63% - % 6.63%
Weighted average maturity. 2 yrs 0 mos
Other securities:
Carrying value . . . . . . 250 1,003 - - 1,253
Weighted average yield . . 9.07% 7.09% - % - % 7.49%
Weighted average maturity. 2 yrs 5 mos
Total:
Carrying value . . . . . . $ 1,521 $ 2,099 $ 2,483 $18,168 $24,271
Weighted average yield . . 8.12% 6.89% 8.82% 8.57% 8.45%
Weighted average maturity. 9 yrs 7 mos
The maturity analysis of securities available for sale, including the weighted
average yield for Each category, as of December 31, 1999 is as follows:
PAGE 11
Under 1 - 5 5 - 10 Over
(Dollars in thousands) 1 year years Years 10 years Total
------------ ----- ----- -------- --------
U.S. Treasury notes:
Amortized cost $17,526 $28,931 $ - $ - $ 46,457
Weighted average yield 5.89% 6.15% - % - % 6.05%
Weighted average maturity. 1 yr 8 mos
Obligations of other U.S.
Government agencies and
corporations:
Amortized cost - - 33,745 - 33,745
Weighted average yield - % - % 6.76% - % 6.76%
Weighted average maturity. 7 yrs 9 mos
Obligations of states and
political subdivisions:
Amortized cost 3,200 3,121 9,144 142,067 157,532
Weighted average yield 6.03% 8.04% 8.17% 7.72% 7.72%
Weighted average maturity. 14 yrs 0 mos
Mortgage-backed securities:
Amortized cost - - 15,325 143,343 158,668
Weighted average yield - % - % 6.43% 6.58% 6.56%
Weighted average maturity. 6 yrs 8 mos
Other securities:
Amortized cost - 5,828 26,356 37,385 69,569
Weighted average yield - % 6.44% 6.35% 6.90% 6.65%
Weighted average maturity. 12 yrs 4 mos
Total:
Amortized Cost $20,726 $37,880 $84,570 $322,795 $465,971
Weighted average yield 5.91% 6.35% 6.72% 7.12% 6.92%
Weighted average maturity. 9 yrs 7 mos
LOANS
The following table shows the composition of the Banks' Loans:
December 31,
-------------
(Dollars in thousands) 1999 1998 1997 1996 1995
---------- -------- -------- -------- --------
Real estate. . . . . . . . $ 337,260 $318,048 $259,801 $252,632 $241,048
Commercial and industrial. 280,136 245,648 233,187 199,970 194,152
Consumer loans . . . . . . 348,865 270,445 254,399 243,006 206,070
Lease financing. . . . . . 94,909 68,753 55,413 49,623 43,942
---------- -------- -------- -------- --------
Total loans. . . . $ 1,061,170 $902,894 $802,800 $745,231 $685,212
========== ======== ======== ======== ========
The following table details maturities and interest sensitivity of real
estate, commercial and industrial, consumer loans and lease financing at
December 31, 1999:
Within 1 - 5 Over
(Dollars in thousands). . . . . 1 year years 5 years Total
------ ----- ------- --------
Real estate $ 70,037 $139,309 $127,914 $ 337,260
Commercial and industrial 152,848 83,655 43,633 280,136
Consumer 84,690 195,983 68,192 348,865
Lease financing 31,380 63,529 - 94,909
-------- -------- -------- ----------
Total $338,955 $482,476 $239,739 $1,061,170
======== ======== ======== ==========
Loans with variable or
floating interest rates $229,944 $ 61,476 $ - $ 291,420
Loans with fixed predetermined
interest rates 109,011 421,000 239,739 769,750
-------- -------- -------- ----------
Total $338,955 $482,476 $239,739 $1,061,170
======== ======== ======== ==========
The following table details those loans that were placed on nonaccrual status,
were accounted for as troubled debt restructuring or were delinquent by 90 days
or more and still accruing interest:
PAGE 12
December 31,
(Dollars in thousands) 1999 1998 1997 1996 1995
------ ------ ------ ------ -------
Nonaccrual loans . . . . . . $3,690 $3,696 $3,730 $5,090 $10,635
Trouble debt restructurings. 465 583 1,099 1,717 1,183
Delinquent loans . . . . . . 269 1,350 2,341 2,053 1,911
------ ------ ------ ------ -------
Total . . . . . . . . $4,424 $5,629 $7,170 $8,860 $13,729
====== ====== ====== ====== =======
ALLOWANCE FOR LOAN LOSSES
A summary of the allowance for loan losses is as follows:
December 31,
(Dollars in thousands) 1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
Average loans. . . . . . . . . . . $973,398 $839,102 $763,000 $704,032 $651,955
========= ========= ========= ========= =========
Allowance, beginning of period . . $ 13,706 $ 12,592 $ 11,228 $ 10,353 $ 8,592
--------- --------- --------- --------- ---------
Loans charged off:
Commercial and industrial . 108 217 66 453 240
Consumer. . . . . . . . . . 627 630 1,057 615 286
Real estate . . . . . . . . 723 424 544 412 178
Consumer. . . . . . . . . . 226 145 78 33 39
--------- --------- --------- --------- ---------
Total loans charged off . . 1,684 1,416 1,745 1,513 743
--------- --------- --------- --------- ---------
Recoveries:
Commercial and industrial . 28 94 113 84 143
Consumer. . . . . . . . . . 105 100 124 59 82
Real estate . . . . . . . . 94 88 264 30 1
Lease financing . . . . . . 52 18 18 18 36
--------- --------- --------- --------- ---------
Total recoveries. . . . . . 279 300 519 191 262
--------- --------- --------- --------- ---------
Net loans charged off. . . . . . . 1,405 1,116 1,226 1,322 481
--------- --------- --------- --------- ---------
Provision for loan losses. . . . . 1,907 2,230 2,590 2,197 2,242
--------- --------- --------- --------- ---------
Allowance, end of period . . . . . $ 14,208 $ 13,706 $ 12,592 $ 11,228 $ 10,353
========= ========= ========= ========= =========
Ratio of net charge offs to
Average loans outstanding. 0.14% 0.13% 0.16% 0.19% 0.07%
========= ========= ========= ========= =========
The following table sets forth an allocation of the allowance for loan losses
by category. The specific allocations in any particular category may be
reallocated in the future to reflect then current conditions. Accordingly,
management considers the entire allowance to be available to absorb losses in
any category.
December 31,
----------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------- -------- --------- -------- ---------
(Dollars in thousands) Percent Percent Percent Percent Percent
Amount of Loans Amount of Loans Amount of Loans Amount of Loans Amount of Loans
- ---------------------- --------- -------- --------- -------- --------- ------- --------- ------- --------- ----------
Commercial
and industrial . $ 3,694 26% $ 3,729 27% $ 3,658 29% $ 3,013 27% $ 2,899 28%
Consumer . . . . . . . 4,689 33% 4,076 30% 3,959 31% 3,631 32% 3,106 30%
Real estate. . . . . . 4,547 32% 4,858 35% 4,107 33% 3,836 34% 3,727 36%
Lease financing. . . . 1,279 9% 1,044 8% 869 7% 748 7% 621 6%
-------- ------- -------- ------ ------ ----- ------- ------ ------ ----
Total . . . . . 14,208 100% 13,706 100% 12,592 100% 11,228 100% 10,353 100%
========= ======== ========= ======== ========= ======= ========= ======= ========= ====
PAGE 13
DEPOSIT STRUCTURE
The following table is a distribution of average balances and average rates paid on the
deposit categories for the last three years:
December 31,
------------------------------------------------------
1999 1998 1997
----------- -------- -------
(Dollars in thousands) Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----------
Demand - noninterest-bearing $ 181,147 --% $158,332 --% $142,358 --%
Demand -- interest-bearing 139,841 1.29% 121,873 1.57% 106,951 1.63%
Money market and savings 384,314 2.98% 343,954 3.16% 308,537 3.09%
Time -- under $100,000 343,657 5.35% 324,674 5.52% 316,799 5.54%
Time -- $100,000 or greater 110,418 5.11% 88,206 5.49% 66,093 5.50%
---------- -------- --------
Total $1,159,377 $1,037,039 $940,738
========== =========== ========
The maturity distribution of certificates of deposit of $100,000 and over
is as follows:
December 31,
(Dollars in thousands) 1999 1998 1997
-------- ------- -------
Three months or less. . . . . . . $ 71,708 $50,023 $45,098
Over three months to six months . 29,915 20,942 14,002
Over six months to twelve months. 17,961 10,047 7,812
Over twelve months. . . . . . . . 8,095 9,456 4,163
-------- ------- -------
Total. . . . . . . . . . . $127,679 $90,468 $71,075
======== ======= =======
NET INTEREST INCOME
For analytical purposes, the following table reflects tax-equivalent net
interest income in recognition of the income tax savings on tax-exempt items
such as interest on municipal securities and tax-exempt loans. Adjustments are
made using a statutory federal tax rate of 35%.
Year ended December 31,
- ------------------------------------------------------
Dollars in thousands) 1999 1998 1997
-------- ------- -------
Interest income. . . . . . $106,117 $93,492 $85,827
Interest expense . . . . . 46,873 40,238 36,086
-------- ------- -------
Net interest income. . . . 59,244 53,254 49,741
Tax equivalent adjustment. 5,091 4,249 3,093
-------- ------- -------
Net interest income. . . . $ 64,335 $57,503 $52,834
======== ======= =======
The rate volume analysis set forth in the following table, which is
computed on a tax-equivalent basis (tax rate of 35%), analyzes changes in net
interest income for the last three years by their rate and volume components.
1999 over (under) 1998 1998 over (under) 1997
due to changes in due to changes in
-------------------- ---------------------
Dollars in thousands) Net Net
Change Rate Volume Change Rate Volume
-------- -------- -------- -------- -------- --------
INTEREST INCOME:
Investment securities (1) . . . $ 6,274 $ 301 $ 5,973 $ 4,182 $ (579) $ 4,761
Loans . . . . . . . . . . . . . 8,026 (2,924) 10,950 4,966 (1,505) 6,471
Other rate-sensitive assets . . (833) (115) (718) (327) (133) (194)
-------- -------- -------- -------- -------- --------
Total . . . . . . . . . . . 13,467 (2,738) 16,205 8,821 (2,217) 11,038
-------- -------- -------- -------- -------- --------
PAGE 14
INTEREST EXPENSE:
Savings deposits. . . . . . . . 466 (1,009) 1,475 1,517 135 1,382
Time deposits . . . . . . . . . 1,290 (891) 2,181 1,562 (90) 1,652
Borrowings and other interest-
bearing liabilities . . . . . 4,879 154 4,725 1,073 (192) 1,265
-------- -------- -------- -------- -------- --------
Total . . . . . . . . . . . 6,635 (1,746) 8,381 4,152 (147) 4,299
-------- -------- -------- -------- -------- --------
Changes in net interest income . . $ 6,832 $ (992) $ 7,824 $ 4,669 $(2,070) $ 6,739
======== ======== ======== ======== ======== ========
(1) The interest earned on nontaxable investment securities and loans is shown on a tax
equivalent basis.
Tax-equivalent net interest income was $64,335,000 for 1999, compared to
$57,503,000 for 1998, an increase of $6,832,000, or 11.9%. This increase in
tax-equivalent net interest income was primarily due to the net $7,824,000
increase related to volume, partially offset by a decrease related to interest
rates of $992,000. Total interest income increased $13,467,000, primarily the
result of higher volumes of loans and investment securities, in part offset by
the lower loan rates experienced during 1999. Tax-equivalent interest income on
loans grew 11.2% and tax-equivalent investment interest income increased 25.0%.
The 1999 average loan and investment volumes increased 16.0% and 23.5%
respectively. The Banks experienced growth throughout all loan portfolios. The
increase in investment securities was due to both the funding of a $25,000,000
of a capital leverage program during 1999 and the planned growth of related to
the increase in deposit funding.
Total interest expense grew $6,635,000 during 1999 or 16.5%, compared to
1998. This growth was the result of increases in all interest-bearing liability
categories. The volumes of savings deposits, time deposits and borrowings and
other interest-bearing liabilities grew 12.5%, 10.0% and 97.3%, respectively.
Borrowings and other interest-bearing liabilities include federal funds
purchased, FHLB borrowings, securities sold under agreements to repurchase and
U.S. Treasury notes. The increase in borrowings and other interest-bearing
liabilities was due to both the growth in the capital leverage program and the
loan portfolio during 1999.
The 1998 tax-equivalent net interest income was $57,503,000, a $4,669,000
increase compared to $52,834,000 for 1997. This increase in tax-equivalent net
interest income was primarily due to the $6,739,000 increase related to volumes,
partially offset by the $2,070,000 decrease in net interest income related to
rates. The growth in earning asset volumes was in investment securities and
loans and the interest-bearing liabilities volume growth was due to increases in
all categories.
Item 2. Properties.
- --------------------
The principal executive offices of the Corporation and of HNB are located
in Harleysville, Pennsylvania in a two-story office building owned by HNB, built
in 1929. HNB also owns the buildings in which thirteen of its branches are
located and leases space for the other ten branches from unaffiliated third
parties under leases expiring at various times through 2036. The principal
executive offices of CNB are located in Lansford, Pennsylvania in a two-story
office building owned by CNB. Citizens also owns the buildings where its
branches are located. The principal executive offices of SNB are located in
Pottstown, Pennsylvania, in a building leased by SNB. SNB leases its East End
and North End branches, and owns its Pottstown Center branch. HNC Investment
Company leases an office in Wilmington, Delaware.
Office Office Location Owned/Leased
- ----------------------------- ------------------------------ ------------
Harleysville. . . . . . . . . 483 Main Street Owned
Harleysville PA
Skippack. . . . . . . . . . . Route 73 Owned
Skippack PA
Limerick. . . . . . . . . . . Ridge Pike Owned
Limerick PA
PAGE 15
North Penn. . . . . . . . . . Welsh & North Wales Rd Owned
North Wales PA
Gilbertsville . . . . . . . . Gilbertsville Shopping Leased
Gilbertsville PA
Hatfield. . . . . . . . . . . Snyder Square Leased
Hatfield PA
North Broad . . . . . . . . . North Broad Street Owned
Lansdale PA
Marketplace . . . . . . . . . Marketplace Shopping Leased
Lansdale PA
Normandy Farms. . . . . . . . Morris Road Leased
Blue Bell PA
Horsham . . . . . . . . . . . Babylon Business Center Leased
Horsham PA
Meadowood . . . . . . . . . . Route 73 Leased
Worcester PA
Collegeville. . . . . . . . . 364 Main Street Owned
Collegeville PA
Sellersville. . . . . . . . . 209 North Main St. Owned
Sellersville PA
Trainers Corner . . . . . . . Trainers Corner Center Leased
Quakertown PA
Quakertown Main . . . . . . . 224 West Broad St. Owned
Quakertown PA
Spring House. . . . . . . . . 1017-1021 North Bethlehem Pike Owned
Spring House PA
Red Hill. . . . . . . . . . . 400 Main Street Owned
Red Hill PA
Doylestown. . . . . . . . . . 500 East State Road . . . . Leased
Doylestown PA
Audubon . . . . . . . . . . . 2624 Egypt Road Owned
Audubon PA
Chalfont. . . . . . . . . . . 251 West Butler Avenue Leased
Chalfont PA
Spring City . . . . . . . . . 44 North Main Street Owned
Spring City PA
PAGE 16
Royersford . . . . . . . . . . 440 W. Linfield-Trappe Road
Royersford PA Owned
Foulkeways . . . . . . . . . 1120 Meetinghouse Road
Gwynedd PA Leased
Citizens. . . . . . . . . . . 13-15 West Ridge Street Owned
Lansford PA
Summit Hill . . . . . . . . . 2 East Ludlow Street Owned
Summit Hill PA
Lehighton . . . . . . . . . . 904 Blakeslee Blvd. Owned
Lehighton PA
Farmers & Merchants . . . . . 1001 Main Street Owned
Honesdale PA
McAdoo. . . . . . . . . . . . 25 North Kennedy Drive Owned
McAdoo PA
Slatington . . . . . . . . . . 502 Main Street
Slatington PA Owned
Slatington Handi-Bank . . . . 705 Main Street
Slatington, PA Owned
Lehigh Township . . . . . . . 4421 Lehigh Drive
Walnutport PA Owned
Pottstown . . . . . . . . . . One Security Plaza Leased
Pottstown PA
Pottstown . . . . . . . . . . 1450 East High Street Leased
Pottstown PA
Pottstown . . . . . . . . . . 930 North Charlotte Street Leased
Pottstown PA
Pottstown . . . . . . . . . . Rte. 100 & Shoemaker Road Owned
Pottstown PA
In management's opinion, all of the above properties are in good condition
and are adequate for the Registrant's and the Banks' purposes.
Item 3. Legal Proceedings.
- ----------------------------
Management, based on consultation with the Corporation's legal counsel, is
not aware of any litigation that would have a material adverse effect on the
consolidated financial position of the Corporation. There are no proceedings
pending other than the ordinary routine litigation incident to the business of
the Corporation and its subsidiaries - Harleysville National Bank and Trust
Company, The Citizens National Bank of Lansford, Security National Bank and HNC
Financial Company. In addition, no material proceedings are pending or are
known to be threatened or contemplated against the Corporation and the Banks by
government authorities.
PAGE 17
Item 4. Submission of Matters to a Vote of Security Holders.
- ---------------------------------------------------------------------
No matter was submitted during the fourth quarter of 1999 to a vote of
holders of the Corporation's Common Stock.
PAGE 18
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder
- --------------------------------------------------------------------------------
Matters.
- --------
The information required by this Item is incorporated by reference to pages
8 and 20 of the Corporation's Annual Report to Shareholders for the year ended
December 31, 1999, which pages are included at Exhibit (13) to this Annual
Report on Form 10-K.
Item 6. Selected Financial Data.
- ------------------------------------
The information required by this Item is incorporated by reference to page
25 of the Corporation's Annual Report to Shareholders for the year ended
December 31, 1999, which pages are included at Exhibit (13) to this Annual
Report on Form 10-K.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations.
- --------------
The information required by this Item is incorporated by reference to pages
25 through 32 of the Corporation's Annual Report to Shareholders for the year
ended December 31, 1999, which pages are included at Exhibit (13) to this Annual
Report on Form 10-K.
Item 7.A. Quantitative and Qualitative Disclosure about Market Risk.
- ----------------------------------------------------------------------------
The information required by this Item is incorporated by reference to
pages 29 and 30 of the Corporation's Annual Report to Shareholders for the year
ended December 31, 1999, which pages are included at Exhibit (13) to this Annual
Report on Form 10-K.
Item 8. Financial Statements and Supplementary Data.
- ---------------------------------------------------------
The information required by this Item is incorporated by reference to pages
8 through 24 of the Corporation's Annual Report to Shareholders for the year
ended December 31, 1999, which pages are included at Exhibit (13) to this Annual
Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- --------------------------------------------------------------------------------
Financial Disclosure.
- ---------------------
None.
PAGE 19
PART III
Item 10. Directors and Executive Officers of the Registrant.
- -------------------------------------------------------------------
The information required by this Item with respect to the Corporation's
directors is incorporated by reference to pages 6 through 9 of the Corporation's
Proxy Statement relating to the Annual Meeting of Shareholders to be held April
11, 2000.
Executive Officers of Registrant
- -----------------------------------
Name Age Position
- ----------------------------------------------------------------------------
S>
Walter E. Daller, Jr. . . . 60 Chairman of the Board, President and Chief
Executive Officer of the Corporation.
Demetra M. Takes . . . . . 49 President and Chief Operating Officer of
Harleysville since 1998, prior position was
Executive Vice President and Chief Operating
Officer of Harleysville.
Fred C. Reim, Jr. . . . . . 56 President and Chief Executive Officer of
Security National Bank since 1998, prior
position was Senior Vice President of
Harleysville.
Thomas D. Oleksa . . . . . 46 President and Chief Executive Officer of
Citizens.
Vernon L. Hunsberger . . . 51 Treasurer of the Company, Senior Vice
President/CFO and Cashier of Harleysville.
Geoffrey D. Brandon . . . . 34 Senior Vice President of Branch Administra-
tion for Harleysville since 1998, prior
position was Vice President of Harleysville.
David Crews . . . . . . . . 48 Senior Vice President of Harleysville since
1998, prior position was Vice President of
Business Development.
Dennis L. Detwiler . . . . 52 Senior Vice President of Harleysville.
Bruce D. Fellman. . . . . . 53 Senior Vice President of Harleysville since
1998, prior position was Vice President.
James W. Hamilton . . . . . 53 Senior Vice President of Harleysville.
Clay T. Henry . . . . . . . 39 Senior Vice President and Senior Trust
Officer of Harleysville since 1998, prior
position was Director of Investment Services
for the Pridate Brank of PNC Financial
Corporation.
Linda C. Lockhart . . . . . 48 Senior Vice President of Customer Support of
Harleysville since 1998, Vice President of
Customer Support since 1997, Vice President
of First Sterling Bank (1991 - 1996).
PAGE 20
Mikkayla B. Murray. . . . . 44 Senior Vice President of Loan Administra-
tion of Harleysville.
Gregg J. Wagner . . . . . . 39 Senior Vice President of Finance of Harleys-
ville since 1998, prior position was Vice
President & Comptroller of Harleysville.
Harry T. Weierbach . . . . 55 Senior Vice President and Chief Investment
Officer of Harleysville since 1998, Vice
President (1996 to 1998), Assistant Vice
President (1994 to 1998).
Item 11. Executive Compensation.
- ----------------------------------
The information required by this Item is incorporated by reference to pages
10 through 15 of the Corporation's Proxy Statement relating to the Annual
Meeting of Shareholders to be held April 11, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- -------------------------------------------------------------------------------
The information required by this Item is incorporated by reference to pages
6 through 7 of the Corporation's Proxy Statement relating to the Annual Meeting
of Shareholders to be held April 11, 2000.
Item 13. Certain Relationships and Related Transactions.
- -------------------------------------------------------------
The information required by this Item is incorporated by reference to page
20 of the Corporation's Proxy Statement relating to the Annual Meeting of
Shareholders to be held April 11, 2000, and to page 17 of the Corporation's
Annual Report to Shareholders for the year ended December 31, 1999, which page
is included at Exhibit (13) to this Annual Report on Form 10-K.
PAGE 21
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- ----------------------------------------------------------------------------
(a) Financial Statements, Financial Statement Schedules and Exhibits Filed:
(1) Consolidated Financial Statements
Page
- ----------------------------------------------------------------------------
Harleysville National Corporation and Subsidiary:
Consolidated Balance Sheets as of
December 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . 9*
Consolidated Statements of Income for the
Years Ended December 31, 1999, 1998
and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10*
Consolidated Statements of Shareholders'
Equity for the Years Ended
December 31, 1999, 1998 and 1997 . . . . . . . . . . . . . . . . . 11*
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1999,
1998 and 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . 12*
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . 13-24*
Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . . 8*
(2) Financial Statement Schedules
Financial Statements Schedules are omitted because the required
information is either not applicable, not required, or the information is
included in the consolidated financial statements or notes thereto.
*Refers to the respective page of the Annual Report to Shareholders. The
Consolidated Financial Statements and Notes to Consolidated Financial Statements
and Auditor's Report thereon on pages 8 to 24 of the Annual Report to
Shareholders, are incorporated herein by reference and attached at Exhibit 13 to
this Annual Report on Form 10-K. With the exception of the portions of such
Annual Report specifically incorporated by reference in this Item and in Items
1, 5, 6, 7 and 8, such Annual Report shall not be deemed filed as part of this
Annual Report on Form 10-K or otherwise subject to the liabilities of Section 18
of the Securities Exchange Act of 1934.
PAGE 22
(3) Exhibits
Exhibit No. Description of Exhibits
- ---------------------------------------
(3.1) Harleysville National Corporation Articles of Incorporation,
as amended. (Incorporated by reference to Exhibit 3(a) to the
Corporation's Registration Statement No. 33-65021 on Form
S-4, as filed on December 14, 1995.)
(3.2) Harleysville National Corporation By-laws. (Incorporated by
reference to Exhibit 3(b) to the Corporation's Registration
Statement No. 33-65021 on Form S-4, as filed on December 14,
1995.)
(10.1) Harleysville National Corporation 1993 Stock Incentive Plan.
(Incorporated by Reference to Exhibit 4.3 of Registrant's
Registration Statement No. 33-57790 on Form S-8, filed with
the Commission on October 1, 1993.)
(10.2) Harleysville National Corporation Stock Bonus Plan.
(Incorporated by Reference to Exhibit 99A of Registrant's
Registration Statement No. 33-17813 on Form S-8, filed with
the Commission on December 13, 1996.)
(10.3) Supplemental Executive Retirement Plan. (Incorporated by
Reference to Exhibit 10.3 of Registrant's Annual Report in
Form 10-K for the year ended December 31, 1997, filed with
the Commission on March 27, 1998.
(10.4) Walter E. Daller, Jr., Chairman, President and Chief
Executive Officer's employment agreement. (Incorporated by
Reference to Registrant's Current Report on Form 8-K, filed
with the Commission on March 25, 1999.)
(10.5) Demetra M. Takes, President and Chief Operating Officer of
Harleysville employment agreement. (Incorporated by Reference
to the Registrant's Curent Report on Form 8-K, filed with the
Commission on March 25, 1999.)
(10.6) Vernon L. Hunsberger. Senior Vice President/CFO and Cashier's
employment agreement. (Incorporated by Reference to
Registrant's Current Report on Form 8-K, filed with the
Commission on March 25, 1999.)
(11) Computation of Earnings per Common Share. The information for
this Exhibit is incorporated by reference to page 15 of the
Corporation's Annual Report to Shareholders for the year
ended December 31, 1999, which is included as Exhibit (13) to
this Form 10-K Report.
(12) Statements Re: Computation of Ratios. The information for
this exhibit is incorporated by reference to page 1 of the
Corporation's Annual Report to Shareholders for the year ended
December 31, 1999, which is included as Exhibit (13) to this
Form 10-K Report.
(13) Excerpts from the Corporation's 1999 Annual Report to
Shareholders. (This excerpt includes only page 1 and pages 8
through 32 which are incorporated in this Report by reference.)
(21) Subsidiaries of Registrant.
(23) Consent of Grant Thornton LLP, Independent Certified Public
Accountants.
(27) Financial Data Schedule.
PAGE 23
(99) Additional Exhibits.
None.
(b) Reports on Form 8-K
During the quarter ended December 31, 1999, the Registrant did
not file any reports on Form 8-K.
PAGE 24
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15 (d) 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 NATIONAL CORPORATION
Date: March 3, 2000 By: /s/ Walter E. Daller, Jr.
- -------------------------------------------------------------------------------
Walter E. Daller, Jr.
President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Signature Title Date
- -------------------------------- -------------------------------- -------------
/s/ LeeAnn Bergy . . . . . . . . Director March 9, 2000
- --------------------------------
LeeAnn Bergy
/s/ Walter E. Daller, Jr.. . . . Chairman of the Board, President March 3, 2000
- -------------------------------- and Chief Executive Officer and
Walter E. Daller, Jr.. . . . . . Director (Principal Executive
Officer)
__________________________
- --------------------------------
Martin E. Fossler Director March 9, 2000
/s/ Harold A. Herr Director
- --------------------------------
Harold A. Herr March 9, 2000
/s/ Vernon L. Hunsberger . . . . Treasurer (Principal Financial March 9, 2000
- -------------------------------- and Accounting Officer)
Vernon L. Hunsberger
/s/ Thomas S. McCready Director
- --------------------------------
Thomas S. McCready March 9, 2000
/s/ Henry M. Pollak Director
- --------------------------------
Henry M. Pollak March 9, 2000
/s/ Palmer E. Retzlaff Director
- --------------------------------
Palmer E. Retzlaff March 9, 2000
PAGE 25
/s/ Walter F. Vilsmeier Director
- --------------------------------
Walter F. Vilsmeier March 9, 2000
_________________________
- --------------------------------
William M. Yocum . . . . . . . . Director March 9, 2000
PAGE 26
EXHIBIT INDEX
- --------------
Exhibit
- -----------------------------------------------------------------------------
(13) Excerpts from the Corporation's 1999 Annual Report to Shareholders
(This excerpt includes only page 1 and pages 8 through 32,
which are incorporated in this Report by reference.)
(21) Subsidiaries of Registrant.
(23) Consent of Grant Thornton LLP, Independent Certified
Public Accountants.
(99) Additional Exhibits.
None.
PAGE 27