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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, 2001.
-----------------
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 .
----------------
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.
$376,222,000 as of February 22, 2002
Indicate the number of shares outstanding of each class of the registrant's
classes of common stock, as of the latest practicable date.
18,586,503 shares of Common Stock, $1 par value per share, were outstanding as
of February 22, 2002.
DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 2001 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 9, 2002 are incorporated by
reference into Part III of this report.
PAGE 2
HARLEYSVILLE NATIONAL CORPORATION
INDEX TO FORM 10-K REPORT
PAGE
---------------------------------------------------------------
I.. . . . . . . . . . . . PART I.
Item 1. . . . . . . . . Business 4
Item 2. . . . . . . . . Properties 15
Item 3. . . . . . . . . Legal Proceedings 16
Item 4. . . . . . . . . Submission of Matters to a Vote of Security Holders 16
II. . . . . . . . . . . . PART II.
Item 5. . . . . . . . . Market for Registrant's Common Stock and Related Shareholder 17
Matters
Item 6. . . . . . . . . Selected Financial Data 17
Item 7. . . . . . . . . Management's Discussion and Analysis of Financial Condition and 17
Results of Operations
Item 7.A. . . . . . . . Quantitative and Qualitative Disclosure about Market Risk 17
Item 8. . . . . . . . . Financial Statements and Supplementary Data 17
Item 9. . . . . . . . . Changes in and Disagreements with Accountants on Accounting and 17
Financial Disclosure
III.. . . . . . . . . . . PART III.
Item 10.. . . . . . . . Directors and Executive Officers of the Registrant 18
Item 11.. . . . . . . . Executive Compensation 18
Item 12.. . . . . . . . Security Ownership of Certain Beneficial Owners and Management 18
Item 13.. . . . . . . . Certain Relationships and Related Transactions 18
IV. . . . . . . . . . . . PART IV.
Item 14.. . . . . . . . Exhibits, Financial Statement Schedules and Reports on Form 8-K 19
Signatures. . . . . . . 22
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. Citizens National Bank of Slatington was
merged into CNB. On April 28, 2000, the Corporation acquired all of the
outstanding common stock of Citizens Bank and Trust Company (CB & T). CB & T
was merged into CNB. On March 30, 2001, HNC Reinsurance Company was
incorporated as an Arizona Corporation. HNC Reinsurance Company functions as a
reinsurer of consumer loan credit life and accident and health insurance. 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 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 2751 Centerville Road, Suite 3164, Wilmington, Delaware 19808. HNC
Reinsurance Company's legal headquarters is located at 101 North First Avenue,
Suite 2460, Phoenix, AZ 85003.
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 the 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.
PAGE 4
As of December 31, 2001, the Corporation had total assets of
$2,208,971,000, total shareholders' equity of $189,349,000 and total deposits of
$1,746,862,000.
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 investment and trust services. Their deposits are insured by the
Federal Deposit Insurance Corporation to the extent provided by law. The Banks
have 39 branch offices located in Montgomery, Bucks, Chester, Berks, Carbon,
Wayne, Monroe, Lehigh, Northampton and Schuylkill counties, Pennsylvania, 22 of
which are owned by the Banks and 17 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
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. 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, 2001, the Corporation and the Banks employed
approximately 578 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, 2001, HNB's legal lending limit to a single customer
was $17,817,000 and CNB's and SNB's legal lending limits to a single customer
were $5,983,000 and $2,270,000, 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
- ------------------------------------------------
In November, 1999, the Gramm-Leach-Bliley Financial Modernization Act of
1999 (Modernization Act) became law. The Modernization Act allows bank holding
companies meeting management, capital and Community Reinvestment Act standards
to engage in a substantially broader range of nonbanking activities than was
permissible before enactment, including underwriting insurance and making
merchant banking investments in commercial and financial companies. It allows
insurers and other financial services companies to acquire banks; removes
various restrictions that currently apply to bank holding company ownership of
securities firms and mutual fund advisory companies; and establishes the overall
regulatory structure applicable to bank holding companies that also engage in
insurance and securities operations. The Corporation currently believes it
meets the requirements for the broader range of activities that will be
permitted by the Modernization Act.
The Modernization Act also modified law related to financial privacy and
community reinvestment. The privacy provisions generally prohibit financial
institutions, including the Corporation, from disclosing nonpublic financial
information to nonaffiliated third parties unless customers have the opportunity
to "opt out" of the disclosure.
PAGE 5
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
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.
PAGE 6
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.
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,
PAGE 7
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.
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.
Statistical Data
- -----------------
The information for this item is listed below and is incorporated by
reference to pages 22 through 30 of the Corporation's Annual Report to
Shareholders for the year ended December 31, 2001 which pages are included at
Exhibit (13) to this Annual Report on Form 10-K.
PAGE 8
INVESTMENT PORTFOLIO
The following shows the carrying value of the Corporation's investment
securities held to maturity:
(Dollars in Thousands) 2001 2000 1999
------- ------- -------
U. S. Treasury notes. . . . . . . . . . . . . . . $ - $ 500 $ 1,000
Obligations of states and political subdivisions. 22,997 25,803 21,450
Mortgage-backed securities. . . . . . . . . . . . 2,552 3,437 1,792
Other securities. . . . . . . . . . . . . . . . . 550 1,101 1,303
------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . $26,099 $30,841 $25,545
======= ======= =======
The following shows the carrying value of the Corporation's investment
securities available for sale:
(Dollars in Thousands) 2001 2000 1999
-------- -------- --------
U. S. Treasury notes. . . . . . . . . . . . . . . $ 31,093 $ 40,359 $ 48,567
Obligations of other U.S. Government agencies
and corporations . . . . . . . . . . . . . . 26,980 38,610 49,574
Obligations of states and political subdivisions. 180,659 195,073 172,172
Mortgage-backed securities. . . . . . . . . . . . 406,178 227,483 164,071
Other securities. . . . . . . . . . . . . . . . . 61,462 69,094 70,966
-------- -------- --------
Total . . . . . . . . . . . . . . . . . . . . $706,372 $570,619 $505,350
======== ======== ========
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, 2001, is as follows:
Under 1 - 5 5 - 10 Over
1 year Years Years 10 years Total
- ---------------------------- -------------- -------- ---------- ------- -------
(Dollars in thousands)
Obligations of states and
political subdivisions:
Carrying value . . . . . . $ 2,351 $10,205 $ 6,521 $3,920 $22,997
Weighted average yield . . 9.19% 8.57% 8.74% 8.10% 8.60%
Weighted average maturity. 6 yrs 3 mos
Mortgage-backed securities:
Carrying value . . . . . . - 1,277 - 1,275 2,552
Weighted average yield . . - % 7.31% -% 6.98% 7.14%
Weighted average maturity. 7 yrs 10 mos
Other securities:
Carrying value . . . . . . - 550 - - 550
Weighted average yield . . -% 6.83% - % - % 6.83%
Weighted average maturity. 1 yr 9 mos
Total:
Carrying value . . . . . . $ 2,351 $12,032 $ 6,521 $5,195 $26,099
Weighted average yield . . 9.19% 8.36% 8.74% 7.82% 8.42%
Weighted average maturity. 6 yrs 3mos
PAGE 9
The maturity analysis of securities available for sale, including the
weighted average yield for each category, as of December 31, 2001 is
follows:
Under 1 - 5 5 - 10 Over
(Dollars in thousands) 1 year Years years 10 years Total
-------- ----- ----- -------- --------
U.S. Treasury notes:
Amortized cost $11,938 $ 17,894 $ - $ - $ 29,832
Weighted average yield 6.68% 6.11% - % - % 6.34%
Weighted average maturity. 1 yr 2 mos
Obligations of other U.S.
Government agencies and
corporations:
Amortized cost 18,158 8,290 - - 26,448
Weighted average yield 5.11% 7.63% -% -% 5.90%
Weighted average maturity. 0 yrs 7 mos
Obligations of states and
political subdivisions:
Amortized cost 4,293 31,395 39,527 106,228 181,443
Weighted average yield 8.33% 8.26% 7.74% 7.71% 7.81%
Weighted average maturity. 12 yrs 9 mos
Mortgage-backed securities:
Amortized cost 37,923 253,980 35,082 74,778 401,763
Weighted average yield 5.31% 5.97% 6.42% 6.25% 5.99%
Weighted average maturity. 5 yrs 4 mos
Other securities:
Amortized cost - 22,772 8,072 29,066 59,910
Weighted average yield -% 6.32% 6.51% 6.82% 6.62%
Weighted average maturity. 9 yrs 6 mos
Total:
Amortized Cost $72,312 $334,331 $82,681 $210,072 $699,396
Weighted average yield 5.65% 6.26% 7.06% 7.07% 6.52%
Weighted average maturity. 7 yrs 4 mos
LOANS
The following table shows the composition of the Banks' Loans:
(Dollars in thousands) December 31,
-------------
2001 2000 1999 1998 1997
---------- ---------- ---------- -------- --------
Real estate . . . . . . . $ 417,891 $ 369,831 $ 368,177 $338,332 $276,683
Commercial and industrial 349,138 296,168 282,799 259,161 247,811
Consumer loans. . . . . . 439,288 427,518 372,359 294,001 277,731
Lease financing . . . . . 107,617 116,088 94,909 68,753 55,413
---------- ---------- ---------- -------- --------
Total loans. . . . . $1,313,934 $1,209,605 $1,118,244 $960,247 $857,638
========== ========== ========== ======== ========
The following table details maturities and interest sensitivity of real
estate, commercial and industrial, consumer loans and lease financing at
December 31, 2001:
PAGE 10
Within 1 - 5 Over
(Dollars in thousands) 1 year Years 5 years Total
------ ----- ------- --------
Real estate $158,695 $200,817 $58,379 $ 417,891
Commercial and industrial 286,831 62,307 - 349,138
Consumer 245,297 193,991 - 439,288
Lease financing 75,452 32,165 - 107,617
-------- -------- ------- ----------
Total $766,275 $489,280 $58,379 $1,313,934
-------- -------- ------- ----------
Loans with variable or
Floating interest rates $335,983 $ 44,088 $ - $ 380,071
Loans with fixed predetermined
interest rates 430,292 445,192 58,379 933,863
-------- -------- ------- ----------
Total $766,275 $489,280 $58,379 $1,313,934
======== ======== ======= ==========
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:
(Dollars in thousands) December 31,
------------
2001 2000 1999 1998 1997
====== ====== ====== ====== ======
Nonaccrual loans $6,354 $5,370 $3,690 $3,741 $3,749
Delinquent loans 1,926 514 565 1,643 2,678
------ ------ ------ ------ ------
Total . . $8,280 $5,884 $4,255 $5,384 $6,427
====== ====== ====== ====== ======
ALLOWANCE FOR LOAN LOSSES
A summary of the allowance for loan losses is as follows:
(Dollars in thousands) December 31,
2001 2000 1999 1998 1997
----------- ----------- ----------- --------- ---------
Average loans. . . . . . . . . $1,264,750 $1,166,684 $1,031,055 $894,758 $815,891
=========== =========== =========== ========= =========
Allowance, beginning of period $ 15,210 $ 14,887 $ 14,245 $ 13,107 $ 11,684
----------- ----------- ----------- --------- ---------
Loans charged off:
Commercial and industrial. . 494 123 108 217 66
Consumer . . . . . . . . . . 2,594 1,470 632 647 1,064
Real estate. . . . . . . . . 498 610 833 442 544
Lease financing. . . . . . . 1,075 450 226 145 78
----------- ----------- ----------- --------- ---------
Total loans charged off. . . 4,661 2,653 1,799 1,451 1,752
----------- ----------- ----------- --------- ---------
Recoveries:
Commercial and industrial. . 38 60 28 94 113
Consumer . . . . . . . . . . 607 289 112 100 128
Real estate. . . . . . . . . 328 274 96 89 264
Lease financing. . . . . . . 106 41 52 18 18
----------- ----------- ----------- --------- ---------
Total recoveries . . . . . . 1,079 664 288 301 523
----------- ----------- ----------- --------- ---------
Net loans charged off. . . . . 3,582 1,989 1,511 1,150 1,229
----------- ----------- ----------- --------- --------
Provision for loan losses. . . 3,930 2,312 2,153 2,288 2,652
----------- ----------- ----------- --------- ---------
Allowance, end of period . . . $ 15,558 $ 15,210 $ 14,887 $ 14,245 $ 13,107
=========== =========== =========== ========= =========
Ratio of net charge offs to
Average loans outstanding. . 0.28% 0.17% 0.15% 0.13% 0.15%
=========== =========== =========== ========= =========
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.
PAGE 11
(Dollars in thousands) December 31,
-------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Percent Percent Percent Percent Percent
Amount of Loans Amount of Loans Amount of Loans Amount of Loans Amount of Loans
------- --------- ------- --------- ------- --------- ------- --------- ------- ---------
Real estate. . . $ 2,874 32% $ 3,116 31% $ 2,661 33% $ 3,059 35% $ 3,246 32%
Commercial
and industrial 5,482 26% 7,021 24% 6,775 25% 5,999 27% 6,029 29%
Consumer . . . . 5,432 34% 4,450 35% 4,634 33% 4,635 31% 3,461 32%
Lease financing. 1,770 8% 623 10% 817 9% 552 7% 371 7%
------- ------- -------- -------- -------- -------- -------- --------- ------- ---------
Total . . $15,558 100% $15,210 100% $14,887 100% $14,245 100% $13,107 100%
======= ========= ======= ========= ======= ========= ======= ========= ======= =========
Allowance for Credit Losses:
The Bank uses the reserve method of accounting for credit losses. The balance in
the allowance for loan and lease losses is determined based on management's
review and evaluation of the loan portfolio in relation to past loss experience,
the size and composition of the portfolio, current economic events and
conditions, and other pertinent factors, including management's assumptions as
to future delinquencies, recoveries and losses. Increases to the allowance for
loan and lease losses are made by charges to the provision for credit losses.
Credit exposures deemed to be uncollectible are charged against the allowance
for credit losses. Recoveries of previously charged-off amounts are credited to
the allowance for credit losses.
While management considers the allowance for loan and lease losses to be
adequate based on information currently available, future additions to the
allowance may be necessary due to changes in economic conditions or management's
assumptions as to future delinquencies, recoveries and losses and management's
intent with regard to the disposition of loans and leases. In addition, the OCC
as an integral part of their examination process, periodically review the Bank's
allowance for loan losses. The OCC may require the Bank to recognize additions
to the allowance for credit losses based on their judgements about information
available to them at the time of their examination.
The Bank's allowance for loan and lease losses is the accumulation of various
components that are calculated based on various independent methodologies. All
components of the allowance for credit losses are an estimation. Management
bases its recognition and estimation of each allowance component on certain
observable data that it believes is the most reflective of the underlying credit
losses being estimated. The observable data and accompanying analysis is
directionally consistent, based upon trends, with the resulting component amount
for the allowance for loan and lease losses. The Bank's allowance for loan and
lease losses components include the following: historical loss estimation by
loan product type and by risk rating within each product type, payment (past
due) status, industry concentrations, internal and external variables such as
economic conditions, credit policy and underwriting changes, competence of the
loan review process and other historical loss model imprecision. The Bank's
historical loss component is the most significant component of the allowance for
loan and lease losses, and all other allowance components are based on the
inherent loss attributes that management believes exist within the total
portfolio that are not captured in the historical loss component.
The historical loss components of the allowance represents the results of
analyses of historical charge-offs and recoveries within pools of homogeneous
loans, within each risk rating and broken down further by segment, within the
portfolio.
The historical loss components of the allowance for commercial loans is based
principally on current risk ratings, historical loss rates adjusted, by
adjusting the risk window, to reflect current events and conditions, as well as
analyses of other factors that may have affected the collectibility of loans in
the commercial portfolio. The Bank analyzes all commercial loans that are being
monitored as potential credit problems, via Watchlist Memorandum, to determine
whether such loans are individually impaired, with impairment measured by
reference to the collateral coverage and / or debt service coverage. The
historical loss component of the allowance for consumer loans is based
principally on loan payment status, retail classification and historical loss
rates adjusted, by adjusting the risk window, to reflect current events and
conditions.
PAGE 12
The industry concentration component is recognized as a possible factor in the
estimation of credit losses. Two industries represent possible concentrations:
commercial real estate and automobile dealers. No specific loss-related
observable data is recognized by management currently, therefore no specific
factor is calculated in the reserve solely for the impact of these
concentrations, although management continues to carefully consider relevant
data for possible future sources of observable data.
The historic loss model imprecision component (soft factors and unallocated
portion) reflects management's belief that there are additional inherent credit
losses based on loss attributes not adequately captured in the statistical /
historical loss component and is an assessment of information delay and its
impact on the timeliness of the risk rating process and loss recognition. The
principal observable data utilized by management as the driver of the loss
recognition and measurement of this component is an internal management measure
of the age of financial information used in the borrower debt service analysis.
This is also a key judgmental component, as experiential data confirms that
measurable losses lag the empirical model as a downward credit cycle begins.
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,
------------
(Dollars in thousands) 2001 2000 1999
---- ---- ----
Amount Rate Amount Rate Amount Rate
---------- ----------- ---------- ----- -------- -----
Demand - noninterest-bearing $ 219,368 --% $ 204,778 --% $192,659 --%
Demand - interest-bearing. . 158,666 1.03% 155,925 1.30% 152,298 1.34%
Money market and savings . . 543,153 2.88% 470,003 3.47% 415,018 2.95%
Time -- under $100,000 . . . 463,455 5.63% 421,692 5.56% 390,340 5.30%
Time -- $100,000 or greater. 214,873 5.17% 184,383 6.12% 117,621 5.12%
---------- ---------- --------
Total . . . . . . . $1,599,515 $1,436,781 $1,267,936
========== =========== ==========
The maturity distribution of certificates of deposit of $100,000 and over
as of December 31, 2001, 2000 and 1999, is as follows:
(Dollars in thousands) December 31,
-------------
2001 2000 1999
-------- -------- --------
Three months or less . . . . . . $111,896 $ 80,221 $ 73,530
Over three months to six months. 76,491 45,877 31,432
Over six months to twelve months 21,369 21,626 20,055
Over twelve months . . . . . . . 24,793 25,144 9,962
-------- -------- --------
Total . . . . . . . . . . $234,549 $172,868 $134,979
======== ======== ========
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%.
PAGE 13
(Dollars in thousands) Year ended December 31,
2001 2000 1999
-------- -------- --------
Interest income . . . . . $138,679 $131,811 $114,167
Interest expense. . . . . 64,937 65,774 50,649
-------- -------- --------
Net interest income . . . 73,742 66,037 63,518
Tax equivalent adjustment 5,792 5,844 5,671
-------- -------- --------
Net interest income . . . $ 79,534 $ 71,881 $ 69,189
======== ======== ========
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.
2001 over (under) 2000 2000 over (under) 1999
due to changes in due to changes in
--------------------- ---------------------
(Dollars in thousands) Net Net
Change Rate Volume Change Rate Volume
-------- -------- ------- -------- -------- --------
INTEREST INCOME:
Investment securities (1) . . . $ 2,621 $(3,754) $ 6,375 $ 5,069 $ 1,677 $ 3,392
Loans (1) . . . . . . . . . . . 3,973 (3,848) 7,821 12,958 1,694 11,264
Other rate-sensitive assets . . 222 (174) 396 (210) 405 (615)
-------- -------- ------- -------- -------- --------
Total . . . . . . . . . . . 6,816 (7,776) 14,592 17,817 3,776 14,041
-------- -------- ------- -------- -------- --------
INTEREST EXPENSE:
Savings deposits. . . . . . . . (1,079) (2,945) 1,866 4,065 2,348 1,717
Time deposits . . . . . . . . . 2,469 (1,495) 3,964 8,035 2,410 5,625
Borrowings and other interest-
bearing liabilities . . . . . (2,227) (2,571) 344 3,025 1,638 1,387
-------- -------- ------- -------- -------- --------
Total . . . . . . . . . . . (837) (7,011) 6,174 15,125 6,396 8,729
-------- -------- ------- -------- -------- --------
Changes in net interest income . . $ 7,653 $ (765) $ 8,418 $ 2,692 $(2,620) $ 5,312
======== ======== ======= ======== ======== ========
(1) The interest earned on nontaxable investment securities and loans is shown
on a tax equivalent basis.
Tax-equivalent net interest income was $79,534,000 for 2001, compared to
$71,881,000 for 2000, an increase of $7,653,000, or 10.6%. This increase in
tax-equivalent net interest income was primarily due to the net $8,418,000
increase related to volume, partially offset by a decrease related to interest
rates of $765,000. Total interest income increased $6,816,000, the result of
higher volumes in each earning asset category, partially offset by lower rates.
The 2001 average investment and loan volumes increased 17.5% and 8.4%
respectively. The growth in the loan portfolio was primarily in commercial and
real estate loans. The increase in investment securities was funded by the
strong growth in deposits.
Total interest expense decreased $837,000 during 2001 or 1.3%, compared
to 2000. This decrease was the result of the Federal Reserve lowering interest
rates 475 basis points during 2001, partially offset by increased volumes in all
interest-bearing liability categories. The average volumes of savings deposits,
time deposits and borrowings and other interest-bearing liabilities grew 12.1%,
11.9% and 3.4%, 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 2000 tax-equivalent net interest income was $71,881,000, a $2,692,000
increase compared to $69,189,000 for 1999. This increase in tax-equivalent net
interest income was primarily due to the $5,312,000 increase related to volumes,
partially offset by the $2,620,000 decrease in net interest income related to
rates. The growth in earning asset volumes was in loans and investment
securities. The interest-bearing liabilities volume growth was due to increases
in all categories.
PAGE 14
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 twelve of its branches are
located and leases space for the other eleven 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 owns nine of the buildings where its
branches are located and leases two branches. The principal executive offices
of SNB are located in Pottstown, Pennsylvania, in a building leased by SNB. SNB
leases four branches, and owns its Pottstown Center branch. HNC Investment
Company leases an office in Wilmington, Delaware. HNC Reinsurance Company
leases an office in Phoenix, Arizona.
OFFICE OFFICE LOCATION OWNED/LEASED
Harleysville. . . . . 483 Main Street, Harleysville, PA Owned
Skippack. . . . . . . Route 73, Skippack, PA Owned
Limerick. . . . . . . Ridge Pike, Limerick, PA Owned
North Penn. . . . . . Welsh & North Wales Rd., North Wales, PA Owned
Gilbertsville . . . . Gilbertsville Shopping Center, Gilbertsville, PA Leased
Hatfield. . . . . . . Snyder Square, Hatfield, PA Leased
North Broad . . . . . North Broad Street, Lansdale, PA Owned
Marketplace . . . . . Marketplace Shopping Center, Lansdale, PA Leased
Normandy Farms. . . . Morris Road, Blue Bell, PA Leased
Horsham . . . . . . . Babylon Business Center, Horsham, PA Leased
Meadowood . . . . . . Route 73, Worcester, PA Leased
Collegeville. . . . . 364 Main Street, Collegeville, PA Owned
Sellersville. . . . . 209 North Main Street, Sellersville, PA Owned
Trainers Corner . . . Trainers Corner Center, Quakertown, PA Leased
Quakertown Main . . . 224 West Broad Street, Quakertown, PA Owned
Spring House. . . . . 1017-1031 N. Bethlehem Pike, Spring House, PA Owned
Red Hill. . . . . . . 400 Main Street, Red Hill, PA Owned
Doylestown. . . . . . 500 East State Road, Doylestown, PA Leased
Audubon . . . . . . . 2624 Egypt Road, Audubon, PA Owned
PAGE 15
Chalfont. . . . . . . 251 West Butler Avenue, Chalfont, PA Leased
Royersford. . . . . . 440 W. Linfield-Trappe Road, Royersford, PA Owned
Souderton . . . . . . 702 Route 113, Souderton, PA Leased
Foulkeways. . . . . . 1120 Meetinghouse Road, Gwynedd, PA Leased
Citizens. . . . . . . 13-15 West Ridge Street, Lansford, PA Owned
Summit Hill . . . . . 2 East Ludlow Street, Summit Hill, PA Owned
Lehighton . . . . . . 904 Blakeslee Blvd, Lehighton, PA Owned
Farmers & Merchants . 1001 Main Street, Honesdale, PA Owned
McAdoo. . . . . . . . 25 North Kennedy Drive, McAdoo, PA Owned
Slatington. . . . . . 502 Main Street, Slatington, PA Owned
Slatington Handi-Bank 705 Main Street, Slatington, PA Owned
Lehigh Township . . . 4421 Lehigh Drive, Walnutport, PA Owned
Palmerton . . . . . . 372 Delaware Avenue, Palmerton, PA Owned
Kresgeville . . . . . Route 209, Kresgeville, PA Leased
Allentown . . . . . . 1602-1604 Allen Street, Allenton, PA Leased
Pottstown . . . . . . One Security Plaza, Pottstown, PA Leased
Pottstown . . . . . . 1450 East High Street, Pottstown, PA Leased
Pottstown . . . . . . 930 North Charlotte Street, Pottstown, PA Leased
Pottstown . . . . . . Rt. 100 and Shoemaker Road, Pottstown, PA Owned
Boyertown . . . . . . Rt. 100 and Baus Road, Boyertown, PA Leased
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, HNC
Financial Company and HNC Reinsurance 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.
Item 4. Submission of Matters to a Vote of Security Holders.
- ----------------------------------------------------------------------
No matter was submitted during the fourth quarter of 2001 to a vote of
holders of the Corporation's Common Stock.
PAGE 16
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 17 and 31 of the Corporation's Annual Report to Shareholders for the year
ended December 31, 2001, 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 22 of the Corporation's Annual Report to Shareholders for the year ended
December 31, 2001, 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 22 through 30 of the Corporation's Annual Report to Shareholders for the
year ended December 31, 2001, 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 26, 27 and 28 of the Corporation's Annual Report to Shareholders for the
year ended December 31, 2001, 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 6 through 21 of the Corporation's Annual Report to Shareholders for the
year ended December 31, 2001, 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 17
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 8 through 11 of the
Corporation's Proxy Statement relating to the Annual Meeting of Shareholders to
be held April 9, 2002.
Executive Officers of Registrant
- -----------------------------------
Name Age Position
- ------------------------------- --- ----------------------------------------------------------
Walter E. Daller, Jr.. . . . . 62 Chairman of the Board, President and Chief Executive
Officer of the Corporation.
Demetra M. Takes . . . . . . . 51 President and Chief Operating Officer of Harleysville
since 1998, prior position was Executive Vice
President and Chief Operating Officer of Harleysville.
Thomas D. Oleksa . . . . . . . 48 President and Chief Executive Officer of Citizens.
Fred C. Reim, Jr.. . . . . . . 58 President and Chief Executive Officer of Security
National Bank since 1998, prior position was Senior
Vice President of Harleysville.
Gregg J. Wagner. . . . . . . . 41 Executive Vice President and Chief Financial Officer since
2000, prior position was Senior Vice President of Finance.
Mikkalya B. Murray . . . . . . 46 Executive Vice President and Chief Credit Officer since.
2000, prior position was Senior Vice President of Loan
Administration
The rules of the Securities and Exchange Commission require that the
Corporation disclose late filings of reports of stock ownership (and changes in
stock ownership) by its directors and executive officers. To the best of the
Corporation's knowledge, there were no late filings during 2001.
Item 11. Executive Compensation.
- ----------------------------------
The information required by this Item is incorporated by reference to
pages 12 through 20 of the Corporation's Proxy Statement relating to the Annual
Meeting of Shareholders to be held April 9, 2002.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- -------------------------------------------------------------------------------
The information required by this Item is incorporated by reference to
pages 8 and 9 of the Corporation's Proxy Statement relating to the Annual
Meeting of Shareholders to be held April 9, 2002.
Item 13. Certain Relationships and Related Transactions.
- -------------------------------------------------------------
The information required by this Item is incorporated by reference to
page 23 of the Corporation's Proxy Statement relating to the Annual Meeting of
Shareholders to be held April 9, 2002, and to page 14 of the Corporation's
Annual Report to Shareholders for the year ended December 31, 2001, which page
is included at Exhibit (13) to this Annual Report on Form 10-K.
PAGE 18
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, 2001 and 2000 . . . . . . . . . . . . . . . 6*
Consolidated Statements of Income for the Years Ended December 31, 2001, 2000 and 1999. . . 7*
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2001, 2000 8*
and 1999
Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999. 9*
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . 10-21*
Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21*
(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 6 to 21 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 19
(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 Registration Statement 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 Registrant's Registration Statement 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 Registration Statement on Form 8-K, filed with the
Commission on March 25, 1999.)
(10.7) Harleysville National Corporation 1998 Stock Incentive Plan. (Incorporated by Reference to
Registrant's Registration Statement No. 333-79971 on Form S-8 filed with the Commission on June
4, 1999.)
(10.8) Harleysville National Corporation 1998 Independent Directors Stock Option Plan. (Incorporated by
Reference to Registrant's Registration Statement No. 333-79973 on Form S-8 filed with the
Commission on June 4, 1999.)
(11) Computation of Earnings per Common Share. The information for this Exhibit is incorporated by
reference to page 12 of the Corporation's Annual Report to Shareholders for the year ended.
December 31, 2001, 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, 2001, which is included as Exhibit (13) to this Form 10-K Report.
(13) Excerpts from the Corporation's 2001 Annual Report to Shareholders. (This excerpt includes
only page 1 and pages 6 through 31 which are incorporated in this Report by reference.)
PAGE 20
(21) Subsidiaries of Registrant.
(23) Consent of Grant Thornton LLP, Independent Certified Public Accountants.
(b)
During the quarter ended December 31, 2001, the Registrant filed a Form 8-K containing the third
quarter of 2001 earnings press release.
PAGE 21
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 8, 2002. . . 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 Bergey . . . . . . . . Director March 14, 2002
- --------------------------------
LeeAnn Bergey
/s/ Walter E. Daller, Jr.. . . . Chairman of the Board, President March 8, 2002
- --------------------------------
Walter E. Daller, Jr.. . . . . . and Chief Executive Officer and
Director (Principal Executive
Officer)
/s/ Harold A. Herr . . . . . . . Director March 14, 2002
- --------------------------------
Harold A. Herr
/s/ Vernon L. Hunsberger . . . . Treasurer (Principal Financial March 14, 2002
- --------------------------------
Vernon L. Hunsberger . . . . . . and Accounting Officer)
/s/ Thomas S. McCready . . . . . Director March 14, 2002
- --------------------------------
Thomas S. McCready
/s/ Henry M. Pollak. . . . . . . Director March 14, 2002
- --------------------------------
Henry M. Pollak
/s/ Palmer E. Retzlaff . . . . . Director March 14, 2002
- --------------------------------
Palmer E. Retzlaff
/s/ James A. Wimmer. . . . . . . Director March 14, 2002
- --------------------------------
James A. Wimmer
/s/ William M. Yocum . . . . . . Director March 14, 2002
- --------------------------------
William M. Yocum
PAGE 22
EXHIBIT INDEX
- --------------
Exhibit
----------------------------------------------------------------------------------
(13) . . . . . Excerpts from the Corporation's 2001 Annual Report to Shareholders
(This excerpt includes only page 1 and pages 6 through 31, 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 23