Back to GetFilings.com
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, 1996.
-----------------
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
-------
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. (X)
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.
$146,695,854 as of February 21, 1997
Indicate the number of shares outstanding of each class of the registrant's
classes of common stock, as of the latest practicable date.
6,657,001 shares of Common Stock, $1 par value per share, were outstanding
as of February 21, 1997.
DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of the Registrant's Annual Report to Shareholders for the
fiscal year ended December 31, 1996 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 8, 1997 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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . 11
II. PART II.
Item 5. Market for Registrant's Common Stock and Related Shareholder Matters. . . . . . . . . 12
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 12
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . 12
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 12
III. PART III.
Item 10. Directors and Executive Officers of the Registrant. . . . . . . . . . . . . . . . . . 13
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 12. Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . 14
Item 13. Certain Relationships and Related Transactions. . . . . . . . . . . . . . . . . . . . 14
IV. PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . 15
Signatures . 17
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 ("Harleysville"), a wholly-owned subsidiary of the
Corporation. On February 13, 1991, the Corporation acquired all of the
outstanding common stock of The Citizens National Bank of Lansford
("Citizens"). 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 Citizens and is now operating as a branch
office of Citizens. On July 1, 1994 the Corporation acquired all of the
outstanding stock of Security National Bank ("Security"). On March 1, 1996,
the Corporation acquired all of the outstanding common stock of Farmers &
Merchants Bank ("Farmers"). Farmers was merged into Citizens and is now
operating as a branch office of Citizens. The Corporation is a bank holding
company which provides financial services through its three bank subsidiaries.
Since commencing operations, the Corporation's business has consisted
primarily of managing Harleysville, Citizens and Security (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, as amended (the "Bank Holding Company Act").
Harleysville, which was established in 1909, Citizens, which was
established in 1903, and Security, which was established in 1988,
(collectively the "Banks"), are national banking associations under the
supervision of the Office of the Comptroller of the Currency (the "OCC"). The
Corporation's and Harleysville's legal headquarters are located at 483 Main
Street, Harleysville, Pennsylvania 19438. Citizens' legal headquarters is
located at 13-15 West Ridge Street, Lansford, Pennsylvania 18232. Security's
legal headquarters is located at One Security Plaza, Pottstown, Pennsylvania
19464.
As of December 31, 1996, the Banks had total assets of $1,026,128,000,
total shareholders' equity of $97,631,000 and total deposits of $847,699,000.
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 (FDIC) to the extent provided by law.
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 that the
Company 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.
The Banks have twenty-five (25) offices located in Montgomery, Bucks,
Carbon and Wayne counties, Pennsylvania, 15 of which are owned by the Banks
and 10 of which are leased from third parties.
As of December 31, 1996, the Corporation and the Banks employed
approximately 401 full-time equivalent employees. The Corporation provides a
variety of employment benefits and considers its relationships with its
employees to be satisfactory.
PAGE 4
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, 1996, Harleysville's legal lending limit to a
single customer was $11,100,000 and Citizens' and Security's legal lending
limits to a single customer were $3,100,000 and $630,000, 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
- ------------------------------------------------
The Corporation is a registered bank holding company subject to the
provisions of the Bank Holding Company Act of 1956, as amended (the "Bank
----------
Holding Company Act"), and to supervision by the Board of Governors of the
Federal Reserve system (the "Federal Reserve). The Bank Holding Company Act
requires the Registrant to secure the prior approval of the Federal Reserve
Board before it owns or controls, directly or indirectly, more than five
percent (5%) of the voting shares or substantially all of the assets of any
institution, including another bank. In addition, the Bank Holding Company
Act has been amended by the Riegle-Neal Interstate Banking and Branching
Efficiency Act which permits bank holding companies to acquire a bank located
in any state subject to certain limitation and restrictions which are more
fully described below.
A bank holding company is prohibited from engaging in or acquiring
direct or indirect control of more than five percent (5%) of the voting shares
of any company engaged in non-banking activities unless the Federal Reserve,
by order or regulation, has found such activities to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto.
In making this determination, the Federal Reserve considers whether the
performance of these activities by a bank holding company would offer benefits
to the public that outweigh possible adverse effects.
Federal law also prohibits acquisitions of control of a bank holding
company without prior notice to certain federal bank regulators. Control is
defined for this purpose as the power, directly or indirectly, to direct the
management or policies of the bank or bank holding company or to vote
twenty-five percent (25%) or more of any class of voting securities.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve Act on any extensions of credit to
the bank holding company or any of its subsidiaries, on investments in the
stock or other securities of the bank holding company and on taking of such
stock or securities of the bank holding company and on taking of such stock or
securities as collateral for loans to any borrower.
Permitted Activities
- ---------------------
The Federal Reserve permits bank holding companies to engage in certain
activities so closely related to banking or managing or controlling banks as
to be proper incident thereto. Other than making an equity investment in a
low to moderate income housing limited partnership, the Corporation does not
at this time engage in any other permissible activities, nor does the
Corporation have any current plans to engage in any other permissible
activities in the foreseeable future.
Legislation and Regulatory Changes
- -------------------------------------
From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities or affecting the competitive balance between banks and other
financial institutions. Proposals to change the laws and regulations governing
the operations and taxation of banks, bank holding companies and other
financial institutions are frequently made in Congress, and before various
bank regulatory agencies. No prediction can be made as to the likelihood of
any major changes or the impact such changes might have on the Corporation and
PAGE 5
its subsidiaries. Certain changes of potential significance to the
Corporation which have been enacted recently and others which are currently
under consideration by Congress or various regulatory or professional agencies
are discussed below.
The passage of the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 and the Riegle Community Development and Regulatory
Improvement Act may have a significant impact upon the Corporation. The key
provisions pertain to interstate banking and interstate branching as well as a
reduction in the regulatory burden on the banking industry. Since September
1995, bank holding companies may acquire banks in other states without regard
to state law. In addition, banks can merge with other banks in another state
beginning in June 1997. States may adopt laws preventing interstate branching
but, if so, no out-of-state bank can establish a branch in such state and no
banks in such state may branch outside the state. Pennsylvania recently
amended the provisions of its banking code to authorize full interstate
banking and branching under Pennsylvania law and to facilitate the operations
of interstate banks in Pennsylvania. As a result of legal and industry
changes, management predicts that consolidation will continue as the financial
services industry strives for greater cost efficiencies and market share.
Management believes that such consolidation may enhance its competitive
position as a community bank.
The Interstate Banking and Branching Act also amends the International
Banking Act to allow a foreign bank to establish and operate a federal branch
or agency upon approval of the appropriate federal and state banking
regulator. As a national bank, the Bank currently can relocate its main
office across state lines by utilizing a provision in the National Bank Act
which permits such relocation to a location not more than thirty miles from
its existing main office. In effect, a national bank can thereby move across
state lines as long as the relocation does not exceed thirty miles and also
retain as branches the offices located in the original state.
The Federal Reserve, the FDIC, and the OCC have issued certain
risk-based capital guidelines. See page 34 of Registrant's 1996 Annual
Report, which is incorporated by reference herein, for information concerning
the Corporation's capital.
Pending Legislation
- --------------------
There are numerous proposals before Congress to modify the financial
services industry and the way commercial banks and other financial
institutions operate. Some of these proposals include changes to the
ownership of financial companies and the types of products and services which
ma be offered by financial institutions. However, it is difficult to
determine at this time what effect such provisions may have until they are
enacted into law. Except as specifically described on page 34 of the 1996
Annual Report to Shareholders, management believes that the effect of the
provisions of the aforementioned legislation on the 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.
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
PAGE 6
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 which 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 maximum interest rates a bank may pay on deposits,
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, as amended ("CRA"), 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
PAGE 7
needs of its entire community, including low and moderate income
neighborhoods. This evaluation will include a descriptive rating
("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 ("BSA"), 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 the bank
is aware in any one day that aggregate in excess of $10,000. Civil and
criminal penalties are provided under the BSA for failure to file a required
report, for failure to supply information required by the BSA or for filing a
false or fraudulent report.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") 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: (1) the institution of a capital
restoration plan and a guarantee of the plan by a parent institution; and (2)
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 eighteen
(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
PAGE 8
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
Citizens or Security.
FDICIA also requires that banking agencies reintroduce loan-to-value
("LTV") ratio regulations which were previously repealed by the 1982 Act.
LTVs 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, the
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 incorporated by reference to pages 22
through 36 of the Company's Annual Report to Shareholders for the year ended
December 31, 1996 which pages are included at Exhibit (13) to this Annual
Report on Form 10-K.
Item 2. Properties.
- ----------------------
The principal executive offices of the Company and of Harleysville are
located in Harleysville, Pennsylvania in a two-story office building owned by
Harleysville, built in 1929. Harleysville also owns the buildings in which
ten of its branches are located and leases space for the other seven branches
from unaffiliated third parties under leases expiring at various times through
2036. The principal executive offices of Citizens are located in Lansford,
Pennsylvania in a two-story office building owned by Citizens. Citizens also
owns the buildings where its branches are located. The principal executive
offices of Security are located in Pottstown, Pennsylvania, in a building
leased by Security. Security leases its East End and North End branches, and
owns its Pottstown Center branch.
Office Office Location Owned/Leased
- ----------------- --------------- ------------
Harleysville 483 Main Street Owned
Harleysville Pa
Skippack Route 73 Owned
Skippack Pa
PAGE 9
Limerick Ridge Pike Owned
Limerick Pa
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
Red Hill 400 Main Street Owned
Red Hill PA
Audubon 2624 Egypt Road Owned
Audubon PA
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
PAGE 10
Pottstown One Security Plaza Leased
Pottstown PA
Pottstown 1450 East High Street Leased
Pottstown PA
Pottstown Charlotte & Mervine Sts. 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 and Security
National Bank. 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 1996 to a vote of
holders of the Corporation's Common Stock.
PAGE 11
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 7 and 18 of the Corporation's Annual Report to Shareholders for the year
ended December 31, 1996, 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
pages 22 and 36 of the Corporation's Annual Report to Shareholders for the
year ended December 31, 1996, 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 35 of the Corporation's Annual Report to Shareholders for the
year ended December 31, 1996, 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 7 through 21 of the Corporation's Annual Report to Shareholders for the
year ended December 31, 1996, 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 12
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 3 through 7 of the
Corporation's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held April 8, 1997.
Executive Officers of Registrant
- -----------------------------------
Name Age Position
- --------------------- --- --------
Walter E. Daller, Jr. 57 President and Chief Executive Officer
of the Company and of Harleysville
James W. Hamilton 50 Senior Vice President and Senior Trust
of Harleysville
Demetra M. Takes 46 Executive Vice President and Chief
Operating Officer of Harleysville
Frank J. Lochetto 49 Senior Vice President and Senior
Lending Officer of Harleysville
Vernon L. Hunsberger 48 Treasurer of the Company, Senior Vice
President/CFO and Cashier of Harleysville
Fred C. Reim, Jr. 53 Senior Vice President of Harleysville
since August 1993; Senior Vice
President of First Valley Bank from
December 1990 to August 1993
Dennis L. Detwiler 49 Senior Vice President of Harleysville
Mikkalya W. Brown 41 Senior Vice President of Loan
Administration of Harleysville since
July 1994; Vice President Security
National Bank September 1991 to June
1994; Assistant Vice President Mellon
Bank January 1990 to August 1991
Thomas D. Oleksa 43 President and Chief Executive Officer
of Citizens
Raymond H. Melcher 45 President and Chief Executive Officer
of Security since November 1994;
Executive Vice President, Chief
Operating Officer Hi-Tech Connections
1990 to 1994; Executive Vice President
Keystone Financial 1988 to 1990
PAGE 13
Item 11. Executive Compensation.
- ------------------------------------
The information required by this Item is incorporated by reference to
pages 7 through 12 of the Corporation's definitive Proxy Statement relating to
the Annual Meeting of Shareholders to be held April 8, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- -----------------------------------------------------------------------------
The information required by this Item is incorporated by reference to
pages 3 through 4 of the Corporation's definitive Proxy Statement relating to
the Annual Meeting of Shareholders to be held April 8, 1997.
Item 13. Certain Relationships and Related Transactions.
- ---------------------------------------------------------------
The information required by this Item is incorporated by reference to
page 17 of the Corporation's definitive Proxy Statement relating to the Annual
Meeting of Shareholders to be held April 8, 1997, and to page 15 of the
Corporation's Annual Report to Shareholders for the year ended December 31,
1996, which page is included at Exhibit (13) to this Annual Report on Form
10-K.
PAGE 14
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, 1996 and 1995 8*
Consolidated Statements of Income for the
Years Ended December 31, 1996, 1995
and 1994 9*
Consolidated Statements of Shareholders'
Equity for the Years Ended
December 31, 1996, 1995 and 1994 10*
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1996,
1995 and 1994 11*
Notes to Consolidated Financial Statements 12-21*
Independent Auditors' Report 7*
(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 7 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 15
(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.)
(11) Computation of Earnings per Common Share. The information
for this Exhibit is incorporated by reference to page
9 of the Corporation's Annual Report to Shareholders for
the year ended December 31, 1996, which is included as
Exhibit (13) to this Form 10-K Report.
(13) Excerpts from the Corporation's 1996 Annual Report to
Shareholders. (This excerpt includes only pages 7
through 36 which are incorporated in this Report by
reference.)
(21) Subsidiaries of Registrant
(23) (a) Consent of Grant Thornton LLP Independent Certified Public
Accountants
(b) Consent of KPMG Peat Marwick LLP Independent Certified
Public Accountants
(27) Financial Data Schedule.
(99) Additional Exhibits
(a) Report of Independent Certified Public Accountants -
Grant Thornton LLP
(b) Report of Independent Certified Public Accountants -
KPMG Peat Marwick LLP
(b) Reports on Form 8-K
During the quarter ended December 31, 1996, the Registrant did not file
any reports on Form 8-K.
PAGE 16
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 13, 1997 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.
Signatures Title Date
---------- ----- ----
Director March 13, 1997
- -------------------
John W. Clemens
/s/ Walter E. Daller, Jr. President, Chief March 13, 1997
- -------------------------
Walter E. Daller, Jr. Executive Officer
and Director (Principal
Executive Officer)
/s/ Martin E. Fossler Director March 13, 1997
- -------------------------
Martin E. Fossler
/s/ Harold A. Herr Director March 13, 1997
- ----------------------
Harold A. Herr
/s/ Vernon L. Hunsberger Treasurer (Principal March 13, 1997
- -------------------------
Vernon L. Hunsberger Financial and
Accounting Officer)
PAGE 17
Signatures Title Date
- ---------- ----- ----
Director March 13, 1997
- -----------------------
Thomas S. McCready
/s/ Bradford W. Mitchell Director March 13, 1997
- ----------------------------
Bradford W. Mitchell
/s/ Henry M. Pollak Director March 13, 1997
- -----------------------
Henry M. Pollak
/s/ Palmer E. Retzlaff Director March 13, 1997
- --------------------------
Palmer E. Retzlaff
/s/ Walter F. Vilsmeier Director March 13, 1997
- ---------------------------
Walter F. Vilsmeier
/s/ William M. Yocum Director March 13, 1997
- ------------------------
William M. Yocum
PAGE 18
EXHIBIT INDEX
- --------------
Exhibit
-------
(13) Excerpts from the Corporation's 1996 Annual Report to Shareholders
(This excerpt includes only pages 7 through 36 which are
incorporated in this Report by reference.)
(21) Subsidiaries of Registrant
(23) (a) Consent of Grant Thornton LLP Independent Certified
Public Accountants
(b) Consent of KPMG Peat Marwick LLP Independent
Certified Public Accountants
(99) Additional Exhibits
(a) Report of Independent Certified Public Accountants-
Grant Thornton LLP
(b) Report of Independent Certified Public Accountants-
KPMG Peat Marwick LLP
PAGE 19