EXHIBIT 13

EXCERPTS FROM THE 1999 ANNUAL REPORT TO SHAREHOLDERS

NATURE OF THE BUSINESS

        Hanover Bancorp, Inc., a Pennsylvania business corporation, is a
one-bank holding company with headquarters in Hanover, Pennsylvania.  Bank
of Hanover and Trust Company, the corporation's wholly-owned subsidiary, was
incorporated in 1835 and is Hanover's oldest financial institution.  The
corporation's full service commercial banking business, including trust and
investment services, is conducted through this subsidiary, which operates
eleven full service branch offices in York and Adams Counties, Pennsylvania,
a drive-up location at the bank's TeleServices Center and a trust and
investment office in a local retirement community.  Hanover Bancorp's income
is derived primarily from the operations of Bank of Hanover and Trust Company.
HOVB Investment Co., a wholly-owned subsidiary of the corporation, was
incorporated in Delaware in 1999.  It's principal activity is the holding of
and investing in equity securities.
                                         16
<PAGE>
<TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except ratios, per share data and statistics)
<CAPTION>
                                     Year-Ended December 31,
                                       1999      1998      1997      1996      1995
<S>                                  <C>       <C>       <C>       <C>       <C>
BALANCE SHEET
  Loans                               $298,975  $289,340  $277,475  $254,573  $213,869
  Total assets                         503,924   470,093   406,356   356,129   337,222
  Deposits                             396,509   364,008   329,951   297,004   278,234
  Shareholders' equity - core (1)       37,767    35,740    32,662    30,943    31,308
  Shareholders' equity - total          32,748    36,944    34,314    31,541    32,862
  Total average assets                 487,956   426,934   377,604   344,146   321,949
  Total average equity                  35,451    35,972    32,616    31,910    30,602

EARNINGS DATA
  Interest income                     $ 33,909  $ 31,239  $ 28,319  $ 25,420  $ 23,892
  Interest expense                      17,817    15,854    13,941    12,148    11,409
  Net interest income                   16,092    15,385    14,378    13,272    12,483
  Provision for loan losses                640     1,060       910       480       360
  Other income                           3,903     3,361     2,589     2,310     2,014
  Other expenses                        13,661    12,907    11,549    10,986    10,201
  Net income                             4,746     4,251     3,807     3,580     3,556
  Return on average assets                0.97%     1.00%     1.01%     1.04%     1.10%
  Return on average equity - core  (1    12.79%    12.32%    11.92%    11.41%    11.75%
  Return on average equity - total       13.39%    11.82%    11.67%    11.22%    11.62%
  Efficiency ratio (3)                   64.22%    64.40%    65.36%    67.10%    65.97%
CAPITAL
  Equity to assets (average)              7.27%     8.43%     8.64%     9.27%     9.51%
  Leverage ratio                          7.29%     8.04%     8.19%     8.79%     9.54%
  Cash dividends declared             $  1,799  $  1,644  $  1,472  $  1,390  $  1,274
  Dividend payout ratio                  37.91%    38.67%    38.67%    38.83%    35.83%

ASSET QUALITY
  Nonperforming assets to total loans     0.31%     0.35%     0.35%     0.21%     0.17%
  Allowance to nonperforming assets        403%      333%      302%      443%      597%

PER COMMON SHARE DATA (2)
  Net income - basic and diluted      $   1.21  $   1.08  $   0.97  $   0.88  $   0.86
  Cash dividends declared                 0.46      0.42      0.37      0.34      0.31
  Book value - core equity  (1)           9.73      9.07      8.35      7.82      7.56
  Book value - total equity               8.43      9.38      8.77      7.97      7.93
  Market value                           14.88     17.38     17.06     13.88     14.06

STATISTICS
  Full service branch offices               11        10        10        11        11
  Employees (full time equivalents)        198       196       202       205       198

<FN>
Certain reclassifications have been made in order to present a more accurate year-to-year comparison
(1)  Core equity includes all equity accounts except accumulated other comprehensive income.
(2)  All per common share data has been adjusted to give retroactive effect to the 4 for 3 stock split paid
  in June 1998 and the 3 for 2 stock split paid in April 1995.
(3)  Excluding the non-recurring expense related to the pension plan termination in 1998.
</FN>
</TABLE>
                                         17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS

        The following pages contain "Management's Discussion and Analysis" of
Hanover Bancorp, Inc.'s 1999 results of operations and financial condition,
including comparison with prior year's results and identification of possible
risks and trends.  This review should be read in conjunction with the
consolidated financial statements and related notes beginning on page 38.


SUMMARY OF EARNINGS AND FINANCIAL CONDITION

        The year of 1999 was a successful year of financial performance for
Hanover Bancorp, Inc. The corporation met or exceeded goals for accelerating
growth in both earnings per share and return on equity.  Total assets exceeded
the $500 million mark, further leveraging the capital base through the
combination of loan and deposit growth and implementation of investment
strategies.  Asset quality measures remained relatively strong, evidencing a
disciplined approach to growth.  The corporation remains well capitalized with
risk-adjusted core capital and total capital ratios above regulatory minimums.


RESULTS OF OPERATIONS

Net Income
        Net income for 1999 was $4.7 million, an increase of $495,000 or 11.6%
from 1998.  Earnings per share (EPS) was $1.21, an increase $.13 or 12.0% from
$1.08 in 1998.  Return on average equity (ROE) was 12.79% in 1999 versus 12.32%
in 1998, computed using core equity (total equity excluding accumulated other
comprehensive income).  These increases were driven primarily by continued
growth in total revenues, combining traditional balance sheet growth with an
expanding base of fee revenue generating products and services.


Net Interest Income

        Net interest income continues to be the largest component of the
corporation's operating revenues, contributing over 80% of total operating
revenues.  A portion of the corporation's interest income is tax-exempt,
therefore it is more appropriate to analyze net interest income on a fully
taxable equivalent basis.  This basis adjusts tax free income to an amount that
would have been earned if the income were fully taxable.  Table 10 reconciles
net interest income shown in the financial statements to a fully tax equivalent
basis.
        Net interest income increased by $1.1 million or 6.6% on a fully taxable
equivalent basis in 1999. This change in net interest income is the result of
variations in both the balances of earning assets and interest bearing
liabilities as well as the average rates received on earning assets and average
rates paid on interest bearing liabilities.  The impact of changes in the
balances of earning assets and interest bearing liabilities are referred to as
volume variances, while the impact of changes in average rates received or paid
are referred to as rate variances.  Table 1 summarizes these variances.
        The positive volume variance of $1.5 million reflects the $61.7 million
growth in the average volume of earning assets, resulting from loan and deposit
growth and increased investment security activity, as further discussed under
the headings for these balance sheet categories.   While this growth has
positively impacted net interest income, it has also contributed to the
continued decline in net interest margin, as the following explains.
                                         18
<PAGE>
        Net interest margin dropped 31 basis points from 1998 to 3.74%.  The
general interest rate environment has contributed in large part to the shrinking
margin. While favorable economic conditions, namely moderate growth and the low
threat of inflation, support a generally positive business climate, they
contribute to an interest rate environment which is challenging in terms of net
interest margin.  The treasury yield curve continued to be relatively flat in
1999 compared to historic standards. This flatness is measured by reference to
the shortest maturity (3 months) and the longest maturity (30 years) on the
yield curve.  The difference or spread between these two maturity points
averaged 88 basis points in 1998 and 1999, compared to 140 basis points from
1995 to 1997, and 331 basis points from 1991 to 1994.   While the corporation
has grown in this environment, the growth has been at narrower spreads between
assets and liabilities and thus has had a cumulative negative impact on net
interest margin. This is most clearly evidenced in the investment activity
conducted over the past several years which was funded by Federal Home Loan Bank
of Pittsburgh borrowings.  While these transactions were completed at relatively
narrow spreads, they have generated additional net interest income and have thus
positively impacted profitability.
        Of further note in analyzing net interest income are the rate variances
outlined in Table 1.  The long term trend in generally declining interest rates
was halted in mid-1999 as the market anticipated a change in Federal Reserve
monetary policy.  Despite this change in the second half of 1999, the results
for the year reflected a decline in the yield earned on assets of a greater
degree than the rate paid on liabilities.  Historically low levels of interest
rates brought about significant refinancing activity in 1998 which resulted in
accelerated prepayments of loans and investments and the impact continued to
carry over into 1999 results.  Also, though rates generally declined on new
deposits through the first part of 1999, the continued shift of the funding base
to relatively higher rate sources caused the overall cost of funds to decline
less than the yield on earning assets.
<TABLE>
Table 1
VOLUME - RATE ANALYSIS
(in thousands)
<CAPTION>
                                          1999 Compared to 1998         1998 Compared to 1997
                                          Increase (Decrease) Due To    Increase (Decrease) Due To
                                            Volume     Rate      Net      Volume     Rate      Net
<S>                                       <C>       <C>       <C>       <C>       <C>       <C>
INTEREST EARNING ASSETS
  Loans                                    $  912    $ (916)   $   (4)   $1,484    $  (99)   $1,385
  Investment securities                     2,654       (99)    2,555     2,164      (269)    1,895
  Federal funds sold and other                528       (36)      492      (154)       (6)     (160)
    TOTAL INTEREST INCOME                   4,095    (1,052)    3,043     3,494      (374)    3,120

INTEREST BEARING LIABILITIES
  Interest bearing demand deposits             93        (1)       92        60         -        60
  Savings deposits                            (22)        2       (20)      (50)        5       (45)
  Money market deposits                       361       (91)      270       611       160       771
  Time deposits                             1,067      (453)      614       491      (120)      371
  Borrowed funds                            1,111      (104)    1,007       784       (28)      756
    TOTAL INTEREST EXPENSE                  2,610      (647)    1,963     1,895        18     1,913
      NET INTEREST INCOME (FTE)            $1,485    $ (405)   $1,080    $1,599    $ (392)   $1,207

<FN>
Tax-exempt income is on a fully taxable equivalent basis using a tax rate of 34% for 1999, 1998
and 1997.  The change in interest due to both volume and rate has been allocated proportionately
between volume and rate based on the absolute dollar amounts of the change in each.
</FN>
</TABLE>
                                         19
<PAGE>


Provision For Loan Losses

        The corporation's loan loss provision during 1999 was $640,000, a
decrease of $420,000 from 1998.  The level of the provision and the decrease
from the prior year reflects a decrease in net charge-offs from 1998 of
$219,000, as well as the evaluation of numerous factors focused on maintaining
a loan loss allowance that adequately reflects the risk inherent in the loan
portfolio. The loan loss allowance and asset quality measures are more fully
discussed in the Risk Management section that follows.

Net Securities Gains

        Net securities gains totaled $384,000 in 1999, a decrease of $565,000
from 1998.  Gains on sales of equity securities comprised $373,000 of this total
in 1999 versus $876,000 for 1998.  These gains resulted from sales from the
corporation's financial sector stock holdings.  Management realized gains on
holdings where valuations were considered excessive or to have reached peak
levels.  The corporation holds these equity securities primarily for their
potential long-term market appreciation as the dividend yields are significantly
less than those of alternative debt securities.  Accordingly, management views
the gains from these holdings as the realization of deferred investment income.
In addition, gains for the year included $11,000 realized through debt
securities sales executed as part of ongoing portfolio and balance sheet
management strategies.  In 1998, $73,000 in net gains were realized from debt
securities sales.  All sales resulting in gains or losses were from available-
for-sale securities.

Other Income

        Other fee-based income has been an area of strategic focus and is
progressively making a more significant contribution to the corporation's
profitability.  During 1999 other income increased $542,000 or 16.1%. Trust and
investment services income increased $173,000 or 17.6% in 1999 in part due to
the growth in assets under management of 16.8%.  The corporation continues to
strategically position this division with personnel, technology, and marketing
initiatives to provide investment management products and services to businesses
and individuals.  Deposit service charges grew by $332,000 or 25.3%. This
increase is attributable to the overall growth in the deposit base. More
specifically, the increase was supported by the continued growth in the debit
card product introduced in 1998 and greater overdraft fees due to fee increases
implemented in the second half of 1998 and revisions to procedures related to
direct and ACH debit payments.

                                         20
<PAGE>
Other Expense

        Other expense increased $754,000 or 5.8% during 1999.  It should be
noted that 1998 included a non-recurring expense of $252,000 related to the
termination of the bank's pension plan, which had been frozen in 1996.
Adjusting for this item, other expense increased $1.0 million or 7.9% year
over year.  Personnel related expenses (salaries and benefits) increased
$195,000 or 2.9%.  Full time equivalents of 198 at year-end 1999 were up by 2
from the prior year-end.  Depreciation expense on equipment increased $74,000
in 1999 resulting from investments in technology enhancements such as a PC
network and various software systems. Professional and service fees increased
$413,000 or 43.3% due to payments to outside firms providing the PC help desk
and network administration and investment services record keeping functions,
costs related to other technology consulting services and increased ATM
processing, legal and recruiting expenses. Other operating expenses in 1998
included the expense related to the pension plan termination, noted above.
Other operating expense in 1999 reflects greater supply costs related to various
deposit account products.  The corporation's efficiency ratio (the cost to
generate one dollar of revenue) improved 18 basis points from 64.40% in 1998
to 64.22% in 1999.


Income Taxes

        The level of tax-free income is the primary factor impacting the
corporation's effective tax rate.  The corporation recognized an income tax
provision which resulted in an effective tax rate of 21.9% in 1999, down from
25.8% in 1998.  This decrease was the result of a higher level of tax-free
assets in 1999 relative to the prior year.


Analysis of 1998 Compared to 1997

        Net income for 1998 was $4.3 million, an increase of $444,000 or 11.7%
from 1997.  Earnings per share increased $.11 or 11.3% in 1998 to $1.08
from $.97 in 1997.  Return on average equity was 12.32% in 1998 versus
11.92% in 1997, computed using core equity.  These increases were driven
primarily by marked growth in other income, helping to offset the continued
challenge to maintain traditional net interest margin.

        Net interest income increased by $1.2 million or 8.0% on a fully taxable
equivalent basis in 1998. This increase was principally due to $46.8 million
growth in the average volume of earning assets, resulting from loan and deposit
growth and increased investment security activity.        Net interest margin
dropped 19 basis points from 1997 to 4.05%.  The general interest rate
environment contributed in large part to the shrinking margin.  Declining
interest rates during 1998 contributed to the decline in the yield earned on
assets by a greater degree than the rate paid on liabilities.  Historically low
levels of interest rates brought about significant refinancing activity which
resulted in accelerated prepayments of loans and investments.  Also, though
rates generally declined on new deposits and borrowings, the continued shift of
the funding base to relatively higher rate sources caused the overall cost of
funds to decline less than the yield on earning assets.

        The corporation's loan loss provision during 1998 was $1.1 million, an
increase of $150,000 from 1997. The level of the provision and the increase over
the prior year reflected an increase in net charge-offs from 1997 of $158,000.

                                         21
<PAGE>
        Net securities gains totaled $949,000 in 1998, an increase of $279,000
from 1997.  Gains on sales of equity securities comprised $876,000 of this total
in 1998 versus $730,000 for 1997.  These gains resulted from sales from the
corporation's financial sector stock holdings. In addition, gains for the year
included $73,000 realized through debt securities sales executed as part of
ongoing portfolio and balance sheet management strategies.  In 1997, $60,000 in
net losses were realized from debt securities sales.  All sales resulting in
gains or losses were from available-for-sale securities.

        During 1998 other income increased $772,000 or 29.8%.  This increase
reflected the introduction of new fee generation sources as well as the
expansion of existing products and services.  Trust department income increased
$156,000 or 20.8% in 1998 in part due to the growth in assets under management
of 10.7%. Deposit service charges grew by $228,000 or 21.0%.  The introduction
of a debit card in early 1998 provided a new source of fee income which totaled
$105,000. The remaining increase in deposit service charges reflects a full year
of higher ATM fees generated by non-customer surcharging and an increased level
of overdraft fees.  Other operating income increased $388,000 or 51.5%,
principally as a result of increased residential mortgage activity.

        Other expense increased $1.4 million or 11.8% during 1998.  This
increase included a non-recurring expense of $252,000 related to the termination
of the bank's pension plan, which had been frozen in 1996.  Excluding this item,
other expense increased $1.1 million or 9.6% year over year.  Personnel related
expenses (salaries and benefits) increased $526,000 or 8.4%. Salaries for the
mortgage department were a primary contributor to this increase, resulting from
volume-based compensation of mortgage originators.  Also contributing to the
increase were additions to investment services and retail loan sales staffs.
However, full time equivalents of 196 at year-end 1998 were down by 6 from the
prior year-end.  Depreciation expense on equipment increased $113,000 in 1998
resulting from investments in technology enhancements such as a PC network and
various software systems. Professional and service fees increased $266,000 or
38.7% due to contracting the PC help desk and network administration functions,
costs related to other strategic technology consulting services and a full year
of outsourcing the ATM processing and courier services. Other operating expenses
included the expense related to the pension plan termination, noted above, and
was also impacted by an increase in telecommunication expenses resulting from
the full implementation of a wide area network.  The substantial increases in
operating revenues favorably impacted the corporation's efficiency ratio (the
cost to generate one dollar of revenue) which declined 96 basis points from
65.36% in 1997 to 64.40% in 1998.

                                         22
<PAGE>
FINANCIAL CONDITION

        The corporation's total assets were $503.9 million as of December 31,
1999, up $33.8 million or 7.2% from December 31, 1998. (Refer to Table 2.) In
1999, while loan outstandings grew at a rate of 3%, deposits grew at a faster
pace of 9%.  As a result, the excess funding was used to increase the investment
securities portfolio along with borrowings which supported specific investment
strategies.

<TABLE>
Table 2
Trends in Sources and Uses of Funds
(in thousands, except percentages)
<CAPTION>

                                                  December 31,              Change
                                                      1999         1998        $       %
<S>                                              <C>           <C>         <C>      <C>
Funding Sources
  Deposits                                        $    396,509  $  364,008  $32,501   8.9%
  Borrowed funds                                        70,321      64,787    5,534   8.5%
  Other liabilities                                      4,346       4,354       (8) (0.2%)
  Shareholders' equity                                  32,748      36,944   (4,196)(11.4%)
    TOTAL SOURCES                                 $    503,924  $  470,093  $33,831   7.2%

Funding Uses
  Loans                                           $    295,274  $  285,935  $ 9,339   3.3%
  Investment securities                                171,058     144,961   26,097  18.0%
  Federal funds sold and short-term investments            396       8,694   (8,298)(95.4%)
  Other assets                                          37,196      30,503    6,693  21.9%
    TOTAL USES                                    $    503,924  $  470,093  $33,831   7.2%

</TABLE>

Loans

        Loans outstanding increased by $9.6 million or 3.3% from year-end 1998
to year-end 1999, reaching $299.0 million.  (Refer to Table 3.)  It should be
noted that this loan growth was net of loans sold of $14.4 million.  The
commercial loan and commercial mortgage loan categories increased by $2.9
million and $3.9 million, respectively, evidencing the success of the
corporation's continued strategy of providing products and services to existing
business customers and attracting new relationships in our local markets. The
increase in the consumer category was principally the result of growth in
personal loans to individuals as part of an overall commercial account
relationship.

<TABLE>
Table 3
Loans
(in thousands, except percentages)
<CAPTION>
                                           December 31,         Change
                                             1999      1998       $         %
<S>                                        <C>       <C>       <C>      <C>
Commercial, financial and agricultural     $ 46,750  $ 43,803  $  2,947     6.7%
Real estate-construction                      5,714     5,429       285     5.2%
Real estate-commercial mortgage              48,663    44,750     3,913     8.7%
Real estate-residential mortgage            130,151   130,196       (45)     -
Consumer                                     67,697    65,162     2,535     3.9%
                                            298,975   289,340     9,635     3.3%
Allowance for loan losses                    (3,701)   (3,405)     (296)    8.7%
                                           $295,274  $285,935  $  9,339     3.3%

</TABLE>
                                         23
<PAGE>
Investment Securities

        During 1999 investment securities increased $35.5 million or 24.8% and
ended the year at $178.7 million, excluding the net unrealized gains (losses) on
securities available-for-sale.  (Refer to Table 4.)  This increase, in part,
reflects the trends in loans and deposits during 1999.  As deposit growth
outpaced loan growth during the year, excess funding was used in the investment
portfolio.  Much of the investment activity during 1999 was focused on fixed
rate mortgage-backed securities with intermediate average lives and tax-free
municipal securities.  These securities provided the appropriate characteristics
with respect to yield and maturity relative to the management of the overall
balance sheet.  In addition, the corporation continued a strategy to grow the
equity securities portfolio to position itself for long-term appreciation in
this segment of the market.
        The shift from net unrealized gains to unrealized losses on securities
available-for-sale of $9.4 million from year-end 1998 to 1999 principally
reflects the impact of higher market interest rates on the corporation's debt
securities portfolio.  Approximately 73% of the investment securities portfolio
is in fixed-rate mortgage-backed and municipal securities.  These relatively
longer-term securities have been part of various arbitrage strategies
(investments funded with specific borrowings with matching maturity or repricing
characteristics) as well as serving as surrogates for residential mortgage loan
production which is sold to generate fee income. However, due to their
relatively longer-term, call features and prepayment variability, the market
value on these types of securities are particularly sensitive to changes in
market rates of interest.
        The corporation manages its investment portfolio in accordance with
established policies which include guidelines for liquidity, earnings, rate
sensitivity and pledging needs.  These guidelines call for investment
securities to be held with long-term objectives and do not allow for gains
trading.  The guidelines do, however, permit prudent and reasonable sales of
investments before their maturity dates to support interest rate risk and
balance sheet management strategies, meet liquidity needs and carry out tax
planning objectives. The sales executed in 1999 were for these purposes. The
corporation had no concentrations of investment securities in any single issuer
that comprise 10% or more of shareholders' equity at December 31, 1999, with the
exception of the U.S. Government and U.S. Government-sponsored agencies.
        Investment securities are accounted for under Financial Accounting
Standards Board Statement No. 115, "Accounting for Certain Investments in
Debt and Equity Securities".  Primarily all of the holdings are classified as
available-for-sale in order to maintain flexibility with respect to managing
the portfolio.  The remaining holdings are classified as held-to-maturity.

                                         24
<PAGE>
<TABLE>
Table 4
Investment Securities
(In Thousands, Except Percentages)
<CAPTION>
                                                              December 31,           Change
                                                                1999       1998         $          %
<S>                                                           <C>        <C>        <C>       <C>
U.S. Treasury securities and obligations of the U.S.
  Government and its agencies                                 $  16,840  $  21,779  $  (4,939)    (22.7%)
Obligations of states and political subdivisions                 59,840     43,134     16,706      38.7%
Corporate securities                                             11,474      4,478      6,996     156.2%
Mortgage-backed securities                                       78,342     65,387     12,955      19.8%
  Total debt securities                                         166,496    134,778     31,718      23.5%
Equity securities                                                12,167      8,359      3,808      45.6%
                                                                178,663    143,137     35,526      24.8%
Net unrealized (losses) gains  on securities available-for-sa    (7,605)     1,824     (9,429)   (516.9%)
                                                              $ 171,058  $ 144,961  $  26,097      18.0%
</TABLE>

Deposits
        Deposits are the most important funding source and the primary support
for the corporation's growth.  Total outstanding deposits were $396.5 million at
December 31, 1999, an increase of $32.5 million or 8.9% from 1998.  (Refer to
Table 5.)  This overall growth came in nearly all categories of deposits.  Most
notable was the increase in demand or checking-type accounts.  Non-interest
bearing demand deposits grew $3.2 million or 9.6% while interest bearing demand
deposits grew $4.5 million or 11.4%.  This growth not only reflected success in
establishing new accounts with individuals, but also growth in business
relationships.   The increase in money market deposits was due to the continued
growth in the indexed money market account introduced in early 1997, as well as
an increase in traditional statement savings accounts.  These two categories
grew $4.4 million and $3.5 million in 1999, respectively.  Finally, the increase
in time deposits was achieved despite a relatively non-aggressive approach to
pricing in an environment of strong competitive pressures.

<TABLE>
Table 5
Deposits
(in thousands, except percentages)
<CAPTION>
                                      December 31,               Change
                                          1999         1998         $        %
<S>                                   <C>           <C>          <C>     <C>
Non-interest bearing demand deposits  $     37,072  $    33,827  $ 3,245     9.6%
Interest bearing demand deposits            43,921       39,418    4,503    11.4%
Savings deposits                            17,435       17,712     (277)   (1.6%)
Money market deposits                      102,096       92,515    9,581    10.4%
Time deposits:
  CDs under $100,000                       173,038      163,956    9,082     5.5%
  CDs over $100,000                         22,947       16,580    6,367    38.4%
                                      $    396,509  $   364,008  $32,501     8.9%

</TABLE>
                                         25
<PAGE>
Borrowed Funds

        Total borrowed funds increased $5.5 million or 8.5% during 1999 to a
level of $70.3 million at December 31, 1999.  (Refer to Table 6.) This increase
was the net result of $10 million in new borrowings during 1999 net of the
exercise of put options on $4 million of advances and payments on amortizing
advances.  The new borrowings included a fixed rate advance with features which
allow the FHLB to convert to a variable rate of interest.  These features are
described in greater detail in Note 7.  Also included in the new borrowings was
a short-term borrowing to meet year-end funding needs.  FHLB borrowings have
become an increasingly important source of funding for the corporation. In
addition to being a source for match-funding opportunities, they are used to
manage the balance sheet, liquidity, and interest rate risk.

<TABLE>
Table 6
Borrowed Funds
(in thousands, except percentages)
<CAPTION>

                                              December 31,           Change
                                                1999       1998         $          %
<S>                                           <C>        <C>        <C>        <C>
Securities sold under repurchase agreements   $  13,572  $  13,227  $     345       2.6 %
FHLB borrowings                                  54,949     50,453      4,496       8.9 %
Other                                             1,800      1,107        693      62.6 %
                                              $  70,321  $  64,787  $   5,534       8.5 %

</TABLE>

Capital and Dividends
        At December 31, 1999, total shareholders' equity was $32.7 million, a
decrease of $4.2 million or 11.4% from December 31, 1998.  This change consisted
of an increase of $2.0 million in capital stock, surplus and undivided profits
(core equity) and a decrease of  $6.2 million in accumulated other comprehensive
income or specifically, net unrealized gains on available-for-sale securities
(net of tax effects).  The increase in core equity was primarily the result of
earnings retained.  The change in the net unrealized gains on
available-for-sale securities was due to the impact of the higher level of
market interest rates at December 31, 1999 compared to December 31, 1998, which
negatively influenced the debt securities portfolio valuations.
        The corporation has an ongoing strategic objective of maintaining a
capital base which supports the pursuit of profitable business opportunities,
provides resources to absorb the risks inherent in its activities and meets or
exceeds all regulatory requirements.  As reflected in Table 7, the corporation
continues to meet these objectives with strong year-end capital levels.  The
bank remains above the regulatory minimums for "well capitalized".  The decline
in the ratios from 1998 reflect the growth in total assets and stock repurchase
activity.
       On April 17, 1998, the Board of Directors approved a 4-for-3 stock split,
payable June 1, 1998.  This action was taken to enhance the marketability and
liquidity of the corporation's stock.
                                         26
<PAGE>
        During 1996, the Board of Directors approved a program to repurchase, in
open market and privately negotiated transactions, up to 200,000 shares of its
outstanding common stock.  During the second quarter of 1997, the corporation
completed this program.  The main goal of this buyback was to effectively deploy
capital in an effort to increase shareholder value.  Since its inception, the
resulting reduction in total capital and shares outstanding, in combination with
increased earnings (after absorbing the "cost" of reducing the capital base)
has translated into improved ROE and EPS.  Management views these performance
indicators as being two of the more important factors, under its control, that
drive shareholder value.  Based on this belief and the positive results achieved
through the first program, the Board of Directors, after carefully evaluating
the capital level necessary to satisfy the criteria described above, approved
another program to repurchase up to 186,667 shares of common stock on April 18,
1997. Buyback activity was suspended in 1998 due to the increased valuation in
the corporation's stock.  However, in 1999 this activity was reinstated as the
economics in consideration of a reduced stock price met the original goal of
this program.  During 1999, nearly 67,000 shares were repurchased for a total of
$1.1 million.  As of December 31, 1999, 90,996 shares remained under the 1997
authorization.
        The corporation continued to increase dividends to its shareholders in
1999.  Dividends per share for 1999, 1998 and 1997 were $.46, $.42 and $.37,
respectively.  The resulting dividend payout ratios for the same periods were
37.9%, 38.7% and 38.7%.  The dividend rate is determined by the Board of
Directors after considering the corporation's capital requirements and projected
level of earnings.
        In addition to earnings retained, capital is generated through several
other sources.  The dividend reinvestment plan allows existing shareholders to
reinvest their cash dividends and limited optional cash payments into shares of
Hanover Bancorp, Inc. common stock. Capital is also raised through an employee
stock purchase plan and through the bank's defined contribution 401(k) plan. In
1999, shares were also issued pursuant to the exercise of stock options. A total
of $147,000, $480,000 and $31,000 was raised through these sources in 1999, 1998
and 1997, respectively.

<TABLE>
Table 7
Capital Ratios
<CAPTION>
                                                           December 31,
                                                             1999    1998
<S>                                                        <C>     <C>
HANOVER BANCORP, INC.
  Tier 1 capital to risk-adjusted assets                     11.63%  12.02%
  Total capital to risk-adjusted assets                      12.79%  13.16%
  Leverage ratio                                              7.29%   8.04%

BANK OF HANOVER AND TRUST COMPANY
  Tier 1 capital to risk-adjusted assets                      9.72%  10.43%
  Total capital to risk-adjusted assets                      10.92%  11.60%
  Leverage ratio                                              6.03%   6.93%

</TABLE>
                                         27
<PAGE>
RISK MANAGEMENT

Asset Quality
        The corporation has policies and procedures designed to manage credit
risk and to maintain the quality of its loan portfolio.  These include prudent
underwriting standards for new loan originations, ongoing monitoring and
reporting of asset quality measures and the adequacy of the allowance for loan
losses.
        The corporation makes commercial, consumer and residential mortgage
loans principally to borrowers within York and Adams Counties, Pennsylvania,
where the bank operates full service branches.  The commercial loan portfolio is
well diversified with no industry comprising greater than 10% of total loans
outstanding.
        Nonperforming assets include non-accrual and restructured loans,
accruing loans past due 90 days or more, other real estate and other
repossessed assets.  The corporation generally classifies a loan as non-accrual
when full collection of principal or interest is doubtful and the loan becomes
90 days or more past due as to principal or interest.  When a loan is placed on
non-accrual status, unpaid interest credited to income in the current year is
reversed and unpaid interest accrued in prior years is charged to the allowance
for loan losses. Non-accrual loans are typically returned to performing status
when the loan is brought current and has performed in accordance with
contractual terms for a reasonable period of time. A loan is considered
restructured if the original interest rate, repayment terms or both were
modified due to the deterioration in the financial condition of the borrower.
Real estate loans are classified as other real estate following foreclosure
proceedings, a receipt of a deed in lieu of foreclosure or an in-substance
foreclosure involving actual possession of the collateral.
        The corporation's nonperforming assets remain low relative to total
loans and compare favorably to peer statistics. Nonperforming assets at December
31, 1999 were $918,000 compared to $1.0 million at December 31, 1998.  (Refer to
Table 8.).  As a percentage of total loans, nonperforming assets at December 31,
1999 were .31%, down from .35% at December 31, 1998.
        Potential problem loans are defined as performing loans which have
characteristics that cause management to have serious doubts as to the ability
of the borrower to perform under present loan repayment terms and which may
result in the reporting of these loans as nonperforming loans in the future. The
corporation's potential problem loans, or its "watchlist", consist primarily
of commercial loans which are less than 90 days past due and still accruing
interest.  These loans are rated according to their probability of
nonperformance. Those loans that management feels the likelihood of future
nonperformance is probable (as opposed to possible) are considered impaired
under FASB Statement No. 114, "Accounting by Creditors for Impairment of a
Loan". At December 31, 1999, total potential problem loans, as determined by the
corporation's internal loan review process, totaled $1.8 million compared to
$1.2 million at December 31, 1998. Of these amounts, $929,000 and $379,000
were considered impaired under FASB 114 at 1999 and 1998, respectively.
Management regularly monitors the status of these loans and their likelihood of
becoming nonperforming loans.

                                         28
<PAGE>
<TABLE>
Table 8
NON-ACCRUAL, PAST DUE AND RESTRUCTURED LOANS
(in thousands)
<CAPTION>
                                                   December 31,
                                                      1999      1998     1997    1996    1995
<S>                                                <C>        <C>      <C>     <C>     <C>
Non-accrual loans                                   $   446    $  517   $ 331   $  38   $  10
Accruing loans past due 90 days or more                 131       425     174     166      24
Restructured loans                                        -         -     221     242     292
Other real estate and
  other repossessed assets                              341        81     236      96      46
TOTAL NONPERFORMING ASSETS                          $   918    $1,023   $ 962   $ 542   $ 372

NON-ACCRUAL LOANS BY CATEGORY
  Commercial, financial and agricultural            $   126    $   81   $   -   $   -   $   -
  Real estate - construction                             80         -       -       -       -
  Real estate-mortgage                                  240       426     331      16       -
  Consumer                                                -        10       -      22      10
                                                    $   446    $  517   $ 331   $  38   $  10

PAST DUE LOANS BY CATEGORY
  Commercial, financial and agricultural            $   119    $  153   $   -   $  16   $   -
  Real estate-mortgage                                    -       204     153      65       -
  Consumer                                               12        68      21      85      24
                                                    $   131    $  425   $ 174   $ 166   $  24

RESTRUCTURED LOANS BY CATEGORY
  Commercial, financial and agricultural            $     -    $    -   $   -   $  12   $  13
  Real estate-mortgage                                    -         -     221     230     279
                                                    $     -    $    -   $ 221   $ 242   $ 292
</TABLE>
<TABLE>
<CAPTION>
                                                                       December 31,
                                                                         1999    1998    1997
<S>                                                                    <C>     <C>     <C>
Non-accrual loans and restructured loans                                $ 446   $ 517   $ 552
Interest income that would have been
  recorded under original terms                                            39         50      48
Interest income recorded during the period                                  8       21      39
Interest lost for the year                                                 31       29       9

</TABLE>


Allowance for Loan Losses

        Management believes that the allowance for loan losses is adequate to
absorb estimated credit losses within the overall loan portfolio. In evaluating
the adequacy of the allowance, management considers the overall growth in the
portfolio, ongoing analysis of individual credits, adverse situations that could
affect a borrower's ability to repay, prior and current loss experience, and
economic conditions and trends.  This methodology is described in detail in the
Allowance for Loan Losses section of Note 1.
                                         29
<PAGE>
        The allowance for loan losses at December 31, 1999 was $3.7 million
compared to $3.4 million at year-end 1998. The allowance as a percent of total
loans outstanding was 1.24% and 1.18% at December 31, 1999, and 1998,
respectively. In terms of coverage, the allowance measured as a ratio of
nonperforming assets was 403% and 333% at 1999 and 1998, respectively. The
increase from year to year is primarily due to Management's decision to make
continued provisions to maintain the loan loss allowance in recognition of the
level of charge-off activity, the level of potential problem loans and growth in
the commercial portion of the loan portfolio.
While asset quality measures remain relatively favorable, the higher proportion
of these larger commercial loans represents potentially greater risk of loss.
The corporation recognizes this exposure in establishing and maintaining its
loan loss allowance.
        Management charges the allowance for loan losses when it determines that
the prospects for recovering the principal have significantly diminished.
Subsequent recoveries, if any, are credited to the allowance.  In 1999, the
corporation realized net charge-offs of $344,000 in comparison to net
charge-offs of $563,000 during 1998, a decrease of $219,000.  (Refer to Table
9.). Net charge-offs to average loans outstanding decreased from .20% in 1998 to
 .12% in 1999. This decrease was primarily related to reduced losses incurred in
the bank's indirect lending portfolio.

<TABLE>
Table 9
Allowance For Loan Losses
 (in thousands, except ratios)
<CAPTION>

                                                      1999      1998     1997     1996     1995
<S>                                                <C>        <C>      <C>      <C>      <C>
Balance at beginning of year                        $ 3,405    $2,908   $2,403   $2,220   $2,498
CHARGE-OFFS
  Commercial, financial and agricultural                 70         4       72      119      575
  Real estate-commercial and residential mortgages      214       128        -        -       65
  Consumer                                              344       639      514      241      123
    TOTAL CHARGE-OFFS                                   628       771      586      360      763

RECOVERIES
  Commercial, financial and agricultural                137        49       87       31        9
  Real estate-commercial and residential mortgages       17         3        1        -       92
  Consumer                                              130       156       93       32       24
    TOTAL RECOVERIES                                    284       208      181       63      125

NET CHARGE-OFFS                                         344       563      405      297      638

  Provision charged to operations                       640     1,060      910      480      360

Balance at end of year                              $ 3,701    $3,405   $2,908   $2,403   $2,220

  Ratio of net charge-offs
    to average loans outstanding                         0.12%    0.20%    0.15%    0.13%    0.31%
  Ratio of allowance for loan losses
    to nonperforming assets                               403%     333%     302%     443%     597%

</TABLE>
                                         30
<PAGE>
Liquidity

        Liquidity is the ability to meet funding requirements of customers'
deposit withdrawals or credit needs at a reasonable cost.  The corporation's
Asset/Liability Management Committee has established policies and procedures to
control its liquidity position and to provide for potential future needs.
        The corporation's liquidity position is enhanced by a relatively stable
funding base. The ratio of deposits (excluding CDs of $100,000 or more) to total
assets at December 31, 1999 was 74.1% while the ratio of CDs of $100,000 or more
and other borrowed funds to total assets was 18.5%.  These same ratios were
73.9% and 17.3% at December 31, 1998.
        In addition to a stable deposit base, the investment portfolio provides
a consistent stream of cash flows and maturities to support liquidity needs.  At
December 31, 1999, $6.0 million of investment securities were scheduled to
mature in one year or less, while principal payments on mortgage-backed
securities averaged $1.2 million a month during 1999. Loan portfolio repayments
and maturities also provide funds for managing liquidity.  In 1999, the
corporation received an average of approximately $9.4 million in loan repayments
per month. In addition, the sale of portfolio loans provides an alternative for
the management of liquidity.  In 1999, $14.4 million of loans were sold by the
corporation.  Proceeds from these sales provided funding to meet customers'
ongoing credit needs.
        The corporation maintains short-term borrowing arrangements with several
correspondent banks and the discount window at the Federal Reserve Bank of
Philadelphia. Through these relationships, the corporation has available
short-term funding of approximately $8 million.  In addition, it has access to
the Federal Home Loan Bank for both short-term and long-term funding needs of
approximately $47 million.

Market Risk

        In January 1997, the Securities and Exchange Commission issued new
disclosure rules related to derivatives and exposures to market risk from
derivative financial instruments, other financial instruments and certain
derivative commodity instruments.  These rules became effective for the
corporation's December 31, 1997 financial statements.  Market risk includes
interest rate risk, foreign currency exchange rate risk, commodity price risk
and equity price risk.  The new disclosure rules have two parts: quantitative
and qualitative market risk disclosures outside the financial statements, and
accounting policy disclosures about derivatives in the notes to the financial
statements.  As further discussed within, the corporation's primary market risk
is interest rate risk from its financial assets and liabilities.  There is no
material use of financial instruments which would be classified as derivatives
and thus the expanded policy disclosures are not applicable.
        Interest rate risk is the exposure to fluctuations in the corporation's
current and future net interest income from movements in interest rates.  This
exposure results from differences between the amounts of interest earning assets
and interest bearing liabilities that reprice within a specified time period.
        The primary objective of the corporation's asset/liability management
process is to maximize current and future net interest income within acceptable
levels of interest rate risk while satisfying liquidity and capital
requirements. Management recognizes that a certain amount of interest rate risk
is inherent and appropriate yet is not essential to the corporation's
profitability. Thus the goal of interest rate risk management is to maintain a
balance between risk and reward such that net interest income is maximized while
risk is maintained at a tolerable level.
                                         31
<PAGE>
        The corporation uses gap and simulation analyses for measuring interest
rate risk.  These methods allow management to regularly monitor both the
direction and magnitude of the corporation's risk exposure.  The corporation
primarily uses the securities portfolio and FHLB advances to manage its interest
rate risk position.  Additionally, pricing, promotion and product development
activities are directed in an effort to emphasize the term or repricing
characteristics that best meet current interest rate risk objectives.
At present, off-balance sheet instruments are not used by the corporation.
        Gap analysis assigns each interest earning asset and interest bearing
liability to a time frame reflecting its next repricing or maturity date.
Incorporated into this process are the trends in prepayments on loan balances
and mortgage-backed securities. The difference between total interest-sensitive
assets and liabilities at each time frame represents the interest sensitivity
gap for that interval.  A positive gap generally indicates that rising interest
rates during a particular interval will increase net interest income, since more
assets will reprice than liabilities.  The opposite is true for a negative gap
position. The corporation had a cumulative gap within one year at December 31,
1999 of negative $14.0 million or 2.79% of total assets.   At December 31, 1998,
the corporation had a positive gap of $19.5 million or 4.15% of total assets.
This shift to a negative gap position from 1998 to 1999 was largely the result
of lengthening of maturities in the investment portfolio, the rolling down of
maturities of certificates of deposit, growth in rate sensitive deposit products
and a decrease in anticipated prepayments on loans and mortgage-backed
securities.  These factors were in part offset by growth in more rate sensitive
commercial loans.
        Simulation analysis prospectively evaluates the effect of upward and
downward changes in interest rates on net interest income. This process is
largely dependent on the underlying assumptions.  Key assumptions in the model
include maturity and repricing characteristics of the financial assets and
liabilities, prepayments on amortizing  assets, other imbedded options,
nonmaturity deposit sensitivity and loan and deposit growth and pricing.  These
assumptions are inherently uncertain due to the timing, magnitude and frequency
of rate changes and changes in market conditions and management strategies,
among other factors.  In addition, the corporation has not yet developed
alternative prepayment or balance sheet growth assumptions for the various rate
scenarios. Therefore the model cannot precisely estimate net interest income or
predict the impact of higher or lower interest rates on net interest income.
However, the model is useful in that it helps to quantify interest rate risk and
it provides a relative gauge of the corporation's interest rate risk position
over time.
        Based on the results of the simulation model as of December 31, 1999,
the corporation would expect net interest income to decrease over the next
twelve months by 4.3% assuming an immediate upward shift in market interest
rates of 200 basis points, and to increase by 1.1% if rates shifted downward in
the same manner. At December 31, 1998, annual net interest income was expected
to decrease by .9% in the upward scenario and to decrease by 1.5% in the
downward scenario. Consistent with the gap results, the change from year to year
reflects the shift to a more liability sensitive position.  The simulation
results are largely affected by the corporation's holdings of approximately $44
million of convertible FHLB borrowings. These borrowings contain features which
allow the FHLB to convert them from fixed rate to variable rate after a
specified time period.  The model assumes that in the upward scenario the FHLB
would exercise these options as soon as they become available.  The conversion
feature of these advances cannot be reflected in the gap analysis.
                                         32
<PAGE>
YEAR 2000

        During 1999, the corporation completed preparations for the Year 2000
date change. All software, hardware and systems were inventoried and assessed
for Year 2000 readiness. Any non-compliant items were upgraded or replaced.
Testing ensured that all mission-critical systems would function correctly in
the Year 2000 and beyond, properly handling all date-sensitive data.
        Utilizing information from written vendor surveys, Internet sites and
internal testing, the corporation assessed the Year 2000 readiness of vendors
and service providers. Through a written survey and loan officer contact, the
corporation assessed the Year 2000 readiness of customers holding significant
commercial loans. The corporation established Year 2000 compliance as a factor
in its credit decisions and loan documentation.
        To date, the corporation has successfully managed the transition to the
Year 2000 and experienced no significant problems. Limited exposure exists with
certain specific future dates. However, those dates have already been tested and
verified as part of the overall Year 2000 assessment. Management will continue
monitoring all areas to ensure that business will not be disrupted.
        The corporation's contingency plans continue to be maintained in the
event of unexpected Year 2000 problems.  The corporation has updated its
disaster recovery plan and assigned corporate-wide team leaders. This plan
encompasses contingencies for mission-critical mainframe and PC-based
applications, third-party relationships and environmental systems. A Year 2000
contingency plan was also developed. This plan addresses aspects outside of the
locus of control such as telecommunications, electric companies and other
utility companies.  The procedures in the disaster recovery and Year 2000
contingency plans are reassessed for thoroughness and validity on a regular
basis.
        The cost of becoming Year 2000 compliant has been insignificant to date
and management believes that any remaining costs will not have a material impact
on future results of operations.
        Failure of the corporation or third parties to correct Year 2000 issues
could cause disruption of operations resulting in increased operating costs and
other adverse effects. In addition, to the extent customers' financial positions
are weakened as a result of Year 2000 issues, credit quality could be affected.
It is not possible to predict with certainty all of the adverse effects that may
result from a failure of the corporation or third parties to become fully Year
2000 compliant or whether such effects could have a material impact on the
corporation.
        On October 19, 1998, Congress enacted the Year 2000 Information and
Readiness Disclosure Act (the "Act"). The purpose of the Act is (1) to promote
the free disclosure and exchange of information related to Year 2000 readiness;
(2) to assist in effectively and rapidly responding to Year 2000 problems; and
(3) to establish uniform legal principles in connection with the disclosure and
exchange of information related to Year 2000 readiness. In accordance with the
Act, all of the corporation's communications regarding Year 2000 readiness
efforts are designated as Year 2000 Readiness Disclosures.
                                         33
<PAGE>
<TABLE>
Table 10
COMPARATIVE AVERAGE BALANCE SHEETS AND NET INTEREST INCOME/MARGIN ANALYSIS
(In Thousands, Except Ratios)
<CAPTION>
                                  Year-Ended December 31,
                                     1999                             1998                             1997
                                   Average               Average    Average               Average    Average               Average
                                    Balance    Interest    Rate     Balance     Interest    Rate     Balance     Interest    Rate
<S>                                <C>         <C>       <C>       <C>          <C>       <C>       <C>          <C>       <C>
ASSETS
INTEREST EARNING ASSETS
   Loans (1) (2)                   $293,427    $24,237      8.26%  $282,590     $24,241      8.58%  $265,293     $22,856      8.62%
   Investment securities:
      Taxable                       109,601      6,619      6.04%    86,796       5,332      6.14%    61,089       3,839      6.28%
      Tax-exempt (2)                 44,095      3,479      7.89%    26,517       2,211      8.34%    19,882       1,809      9.10%
   Federal funds sold and other as   17,010        850      5.00%     6,495         358      5.51%     9,286         518      5.58%
      TOTAL INTEREST EARNING
      ASSETS                        464,133     35,185      7.58%   402,398      32,142      7.99%   355,550      29,022      8.16%

NON-INTEREST EARNING ASSETS
   Cash and due from banks           15,411                          12,675                           10,953
   Premises and equipment             7,117                           7,312                            7,045
   Other assets                       4,934                           7,782                            6,593
   Allowance for loan losses         (3,639)                         (3,233)                          (2,537)
      TOTAL ASSETS                 $487,956                        $426,934                         $377,604

LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST BEARING LIABILITIES
   Demand deposits                 $ 40,537        538      1.33%  $ 33,552         446      1.33%  $ 29,062         386      1.33%
   Savings deposits                  18,845        391      2.07%    19,899         411      2.07%    22,346         456      2.04%
   Money market deposits             98,161      3,418      3.48%    87,843       3,148      3.58%    70,577       2,377      3.37%
   Time deposits                    191,978     10,104      5.26%   171,974       9,490      5.52%   163,107       9,119      5.59%
   Borrowed funds                    62,369      3,366      5.40%    41,863       2,359      5.64%    27,959       1,603      5.73%
      TOTAL INTEREST BEARING
      LIABILITIES                   411,890     17,817      4.33%   355,131      15,854      4.46%   313,051      13,941      4.45%
NON-INTEREST BEARING LIABILITIES
   Demand deposits                   35,687                          31,168                           27,994
   Other liabilities                  4,928                           4,663                            3,943
      TOTAL LIABILITIES             452,505                         390,962                          344,988
SHAREHOLDERS' EQUITY                 35,451                          35,972                           32,616
      TOTAL LIABILITIES AND
      SHAREHOLDERS' EQUITY         $487,956                        $426,934                         $377,604

NET INTEREST SPREAD                                         3.26%                            3.52%                            3.71%
NET INTEREST INCOME (FTE)/
   NET INTEREST MARGIN                          17,368      3.74%                16,288      4.05%                15,081      4.24%
Taxable-equivalent adjustment  (2)              (1,276)                            (903)                            (703)
NET INTEREST INCOME PER
   FINANCIAL  STATEMENTS                       $16,092                          $15,385                          $14,378

<FN>
(1)   Non-accrual loans have been included within this category.
(2)  The taxable-equivalent adjustment for tax-exempt assets has been computed assuming a tax rate of 34% for 1999, 1998 and 1997.
</FN>
</TABLE>
                                         34
<PAGE>
COMMON STOCK MARKET PRICES AND DIVIDENDS

      As of February 29, 2000, the approximate number of shareholders of record
of the corporation's common stock was 1,528. The accompanying table sets forth
the range of bid-asked prices for the common stock and dividends declared by
Hanover Bancorp, Inc. during the most recent eight quarters ended December 31,
1999.  The bid price for Hanover Bancorp, Inc. common stock for the period
indicated here represents inter-dealer prices without adjustment for retail
mark-up, mark-down or commission and does not necessarily represent actual
transactions.

<TABLE>
Bid-Asked Prices For Common Stock And Dividends Declared
<CAPTION>
                            1999                               1998
                         Stock Price                Cash     Stock Price            Cash
                            Range                 Dividend     Range              Dividend
<S>                      <C>           <C>        <C>        <C>         <C>      <C>
QUARTER ENDED
   March 31               $ 16.00    -  $ 17.75    $ 0.11     $16.69   -  $21.00   $ 0.10
   June 30                  15.75    -    17.00      0.11      19.22   -   22.50     0.10
   September 30             15.00    -    17.00      0.12      17.75   -   23.00     0.11
   December 31              14.63    -    15.38      0.12      17.00   -   20.00     0.11

<FN>
   Stock prices and cash dividends have been adjusted retroactivley to reflect the impact
of the 4 for 3 stock split effective June 1, 1998, rounded to the nearest cent.
</FN>
</TABLE>
______________________________________________________________________________

     The corporation expects to continue its policy of paying regular quarterly
dividends although there is no assurance as to future dividends because they are
dependent on future earnings, capital requirements and financial condition.  The
corporation has no restrictions affecting the payment of dividends except those
presented in Note 14 of the Notes to Consolidated Financial Statements.

        Hanover Bancorp, Inc. is quoted under the symbol "HOVB" on the O.T.C.
Electronic Bulletin Board, an automated quotation service, made available
through, and governed by, the NASDAQ system. Hanover Bancorp, Inc. common stock
trades in the local over-the-counter market and current price information is
available from account executives at most brokerage firms as well as the
following firms which are designated market makers of Hanover Bancorp, Inc.'s
common stock:


F.J. Morrissey & Co., Inc.
1700 Market Street
Suite 1420
Philadelphia, PA 19103
(215) 563-8500

Ryan, Beck & Company
220 South Orange Avenue
Head Trader
Livingston, NJ 07039
(800) 395-7936
                                         35
<PAGE>
Janney Montgomery Scott, Inc.
Times Building
Suburban Square, Suite 400
Ardmore, PA 19003
(215) 665-6000

Monroe Securities, Inc.
47 State Street, 2nd Floor
Rochester, NY 14614
(800) 766-5560

Sandler O'Neill & Partners, L.P.
Two World Trade Center
104th Floor
New York, NY 10048
(212) 466-7800

Tucker Anthony, Inc.
1World Financial Center, Tower A
New York, NY 10281
(212) 225-8000

GVR Co.
One Financial Place
440 South La Salle Street
Suite 3030
Chicago, IL 60605
(800) 638-8602

Hill, Thompson Magid & Co.
15 Exchange Place, 8th Floor
Jersey City, NJ 07302
(800) 631-3083
                                         36
<PAGE>

REPORT OF INDEPENDENT AUDITORS

THE SHAREHOLDERS AND BOARD OF DIRECTORS
HANOVER BANCORP, INC.

        We have audited the accompanying consolidated balance sheets of Hanover
Bancorp, Inc. and its wholly-owned subsidiaries as of December 31, 1999 and 1998
and the related consolidated statements of income, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the corporation's
management.  Our responsibility is to express an opinion on these financial
statements based on our audits.
        We conducted our audits in accordance with auditing standards generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Hanover
Bancorp, Inc. and its wholly-owned subsidiaries at December 31, 1999 and 1998,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.

                                                       /S/ Ernst & Young LLP
Harrisburg, Pennsylvania
February 1, 2000


                                         37
<PAGE>
<TABLE>
Consolidated Balance Sheets
(in thousands of dollars, except per share data)
<CAPTION>

                                                                             December 31,
                                                                          1999         1998
<S>                                                                    <C>          <C>
ASSETS
 Cash and due from banks                                               $  20,251    $  17,539
 Federal funds sold                                                            -        8,635
   Cash and cash equivalents                                              20,251       26,174
 Interest bearing deposits with other banks                                  367           59
 Short-term investments                                                       29            -
 Investment securities:
   Available-for-sale                                                    169,388      143,202
   Held-to-maturity (market value - $1,673 and $1,794, respectively)       1,670        1,759
                                                                         171,058      144,961
 Loans:
   Commercial, financial and agricultural                                 46,750       43,803
   Real estate-construction                                                5,714        5,429
   Real estate-commercial mortgage                                        48,663       44,750
   Real estate-residential mortgage                                      130,151      130,196
   Consumer                                                               67,697       65,162
                                                                         298,975      289,340
 Less: Allowance for loan losses                                          (3,701)      (3,405)
   Net loans                                                             295,274      285,935
 Premises and equipment                                                    6,984        7,236
 Accrued interest receivable                                               3,466        2,938
 Other assets                                                              6,495        2,790
     TOTAL ASSETS                                                      $ 503,924    $ 470,093

LIABILITIES AND SHAREHOLDERS' EQUITY
 Liabilities
   Deposits:
     Non-interest bearing                                              $  37,072    $  33,827
     Interest bearing                                                    359,437      330,181
                                                                         396,509      364,008
   Borrowed Funds:
     Short-term                                                           21,266       15,651
     Long-term                                                            49,055       49,136
                                                                          70,321       64,787
   Accrued interest payable                                                2,386        2,453
   Other liabilities                                                       1,494        1,468
   Dividends payable                                                         466          433
     TOTAL LIABILITIES                                                   471,176      433,149

 Shareholders' Equity
   Preferred stock, $2.50 par value; authorized, 2,000,000 shares;
     no shares issued or outstanding                                           -            -
   Common Stock, $.83 par value; authorized, 9,000,000 shares;
     issued and outstanding: 1999-3,883,272 shares;
     1998-3,940,375 shares                                                 3,223        3,270
   Surplus                                                                18,271       19,144
   Accumulated other comprehensive income                                 (5,019)       1,204
   Retained earnings                                                      16,273       13,326
     TOTAL SHAREHOLDERS' EQUITY                                           32,748       36,944
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                        $ 503,924    $ 470,093

BOOK VALUE PER SHARE                                                   $    8.43    $    9.38

<FN>
 See accompanying notes.
</FN>
</TABLE>
                                         38
<PAGE>
<TABLE>
Consolidated Statements of Income
(in thousands of dollars, except per share data)
<CAPTION>


                                                           Year-Ended December 31,
                                                  1999            1998              1997
<S>                                             <C>             <C>               <C>
INTEREST INCOME
  Interest and fees on loans                     $24,144         $24,090           $22,768
  Interest on federal funds sold                     780             352               370
  Interest on short-term investments                  70               6               148
  Interest on investment securities:
    Taxable                                        6,619           5,332             3,839
    Tax-exempt                                     2,296           1,459             1,194
                                                   8,915           6,791             5,033
     TOTAL INTEREST INCOME                        33,909          31,239            28,319

INTEREST EXPENSE
  Interest on deposits                            14,450          13,495            12,338
  Interest on borrowed funds                       3,367           2,359             1,603
     TOTAL INTEREST EXPENSE                       17,817          15,854            13,941
     NET INTEREST INCOME                          16,092          15,385            14,378
PROVISION FOR LOAN LOSSES                            640           1,060               910
     NET INTEREST INCOME AFTER PROVISION
       FOR LOAN LOSSES                            15,452          14,325            13,468

NET SECURITIES GAINS                                 384             949               670

OTHER INCOME
  Trust and investment services income             1,155             982               776
  Service charges on deposit accounts              1,645           1,313             1,085
  Other operating income                           1,103           1,066               728
   TOTAL OTHER INCOME                              3,903           3,361             2,589

OTHER EXPENSE
  Salaries                                         5,786           5,697             5,198
  Employee benefits                                1,162           1,056             1,029
  Occupancy expense                                  951             895               942
  Equipment expense                                1,219           1,113             1,009
  Marketing and advertising                          416             432               485
  Professional and service fees                    1,367             954               688
  Other operating expense                          2,760           2,760             2,198
   TOTAL OTHER EXPENSE                            13,661          12,907            11,549
     INCOME BEFORE INCOME TAXES                    6,078           5,728             5,178

INCOME TAXES                                       1,332           1,477             1,371
     NET INCOME                                  $ 4,746         $ 4,251           $ 3,807

PER SHARE DATA
  Net income - basic and diluted                 $  1.21         $  1.08           $  0.97
  Cash dividends declared                           0.46            0.42              0.37

<FN>
See accompanying notes.
</FN>
</TABLE>
                                         39
<PAGE>
<TABLE>
Consolidated Statements of Shareholders' Equity
(in thousands, except shares and per share data)
<CAPTION>
                                                                                Accumulated Other
                                                   Shares     Common            Comprehensive   Retained
                                                 Outstanding   Stock   Surplus      Income      Earnings  Total
<S>                                              <C>          <C>      <C>      <C>             <C>      <C>
Balance, January 1, 1997                           3,959,255  $ 3,296  $18,659  $          598  $ 8,988  $31,541

Comprehensive income:
  Net income for 1997                                      -        -        -               -    3,807    3,807
  Other comprehensive income
    Change in net unrealized gains on securities
    available-for-sale, net of tax effects and
    reclassification adjustment (1)                        -        -        -           1,054        -    1,054
Comprehensive income                                                                                       4,861
Cash dividends declared: $.37 per share                    -        -        -               -   (1,472)  (1,472)
Issue of common stock                                  2,602        3       28               -        -       31
Repurchase and retirement of common stock            (49,904)     (42)       -               -     (605)    (647)

Balance, December 31, 1997                         3,911,953    3,257   18,687           1,652   10,718   34,314

Comprehensive income:
  Net income for 1998                                      -        -        -               -    4,251    4,251
  Other comprehensive income
    Change in net unrealized gains on securities
    available-for-sale, net of tax effects and
    reclassification adjustment (1)                        -        -        -            (448)       -     (448)
Comprehensive income                                                                                       3,803
Cash dividends declared: $.42 per share                    -        -        -               -   (1,644)  (1,644)
Cash paid in lieu of fractional shares and other        (437)     (10)       -               -        1       (9)
Issue of common stock                                 28,859       23      457               -        -      480

Balance, December 31, 1998                         3,940,375    3,270   19,144           1,204   13,326   36,944

Comprehensive income:
  Net income for 1999                                      -        -        -               -    4,746    4,746
  Other comprehensive income
    Change in net unrealized gains (losses) on securities
    available-for-sale, net of tax effects and
    reclassification adjustment (1)                        -        -        -          (6,223)       -   (6,223)
Comprehensive income                                                                                      (1,477)
Cash dividends declared: $.46 per share                    -        -        -               -   (1,799)  (1,799)
Cash paid in lieu of fractional shares and other         (23)       -        -               -        -        -
Issue of common stock                                  9,851        8      139               -        -      147
Repurchase and retirement of common stock            (66,931)     (55)  (1,012)              -        -   (1,067)

Balance, December 31, 1999                         3,883,272  $ 3,223  $18,271  $       (5,019) $16,273  $32,748

<FN>
(1) The components of other comprehensive income are shown separately in Note 10.

See accompanying notes.
</FN>
</TABLE>
                                         40
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
(in thousands)
<CAPTION>


                                                                           Year-Ended December 31,
                                                                              1999      1998     1997
<S>                                                                        <C>       <C>       <C>
OPERATING ACTIVITIES

Net income                                                                  $  4,746  $  4,251  $  3,807
Adjustments to reconcile net income to net
  cash provided by operating activities:
    Provision for loan losses                                                    640     1,060       910
    Provision for depreciation and amortization                                1,095     1,008       883
    Securities gains                                                            (384)     (949)     (670)
    Increase in net deferred tax assets                                          (39)     (200)      (27)
    Increase in interest receivable                                             (528)     (294)     (296)
    Increase (decrease) in interest payable                                      (67)      119       218
    (Increase) decrease in other assets                                         (460)      436      (905)
    Increase in other liabilities                                                 58       441       135
    Increase (decrease) in accrued taxes                                         (32)     (107)      189
    Loans originated for sale                                                (12,975)  (21,256)   (6,324)
    Proceeds from sale of loans originated for sale                           14,442    19,948     5,930
      NET CASH PROVIDED BY
      OPERATING ACTIVITIES                                                     6,496     4,457     3,850

INVESTING ACTIVITIES

Net increase in loans                                                        (11,446)  (22,509)  (29,553)
Proceeds from sale of loans                                                        -    11,389     6,640
Proceeds from sale of avaliable-for-sale investment securities                28,516    10,690    16,420
Proceeds from maturities of investment securities                             17,900    21,710     8,288
Purchases of investment securities                                           (81,558)  (79,450)  (43,980)
Proceeds from maturities of short-term investments                             8,000     1,600    32,000
Purchases of short-term investments                                           (8,337)      (40)  (33,547)
Purchases of premises and equipment                                             (843)   (1,228)     (824)
      NET CASH USED IN
      INVESTING ACTIVITIES                                                   (47,768)  (57,838)  (44,556)

FINANCING ACTIVITIES

Net increase in demand deposits, NOW accounts,
  money market accounts, and savings accounts                                 17,052    19,345    28,321
Net increase in certificates of deposit and other time deposits               15,449    14,712     4,626
Net increase in borrowed funds                                                 5,534    26,902    13,585
Cash dividends paid                                                           (1,766)   (1,593)   (1,447)
Cash paid in lieu of fractional shares                                             -        (9)        -
Proceeds from issuance of common stock                                           147       480        31
Repurchase and retirement of common stock                                     (1,067)        -      (647)
      NET CASH PROVIDED BY
      FINANCING ACTIVITIES                                                    35,349    59,837    44,469

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              (5,923)    6,456     3,763

Cash and cash equivalents at beginning of year                                26,174    19,718    15,955
  CASH AND CASH EQUIVALENTS AT END OF YEAR                                  $ 20,251  $ 26,174  $ 19,718

<FN>
See accompanying notes.
</FN>
</TABLE>
                                         41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles Of Consolidation:  The consolidated financial statements include the
accounts of the corporation and its wholly-owned subsidiaries, Bank of Hanover
and Trust Company and HOVB Investment Co. All significant intercompany
transactions and accounts have been eliminated.

Investment Securities:  The corporation accounts for its investment securities
under Financial Accounting Standards Board (FASB) Statement No. 115, "Accounting
for Certain Investments in Debt and Equity Securities".  Management determines
the appropriate classification of securities at the time of purchase and
reevaluates such designation as of each balance sheet date.  Debt securities are
classified as held-to-maturity when the corporation has the ability and
positive intent to hold the securities to maturity.  Securities
held-to-maturity are carried at cost and adjusted for amortization of premiums
and accretion of discounts.  Declines in value judged to be other than temporary
are included in net securities gains (losses).
        Debt securities not classified as held-to-maturity and equity securities
are classified as available-for-sale.  Securities available-for-sale are
stated at fair value, with the net unrealized gains and losses reported as a
separate component of shareholders' equity, net of tax effect. The cost of debt
securities classified as available-for-sale is adjusted for amortization of
premiums and accretion of discounts.  Realized gains and losses on securities
available-for-sale and declines in value judged to be other than temporary are
included in net securities gains (losses).  The decision to sell such securities
is based on management's assessment of changes in economic or financial market
conditions, interest rate risk and the corporation's financial position and
liquidity.
        Interest and dividends are included in interest income from investments.
Premiums are amortized to call and discounts are accreted to maturity under the
interest method except for mortgage-backed securities where the recognition
period is based on the estimated lives.  Such amortization and accretion is
included in interest income from investments.  The cost of securities sold is
determined principally under the specific identification method.

Loans:  Loans for which the corporation does not have the ability or intent to
hold for the foreseeable future or until maturity are classified as held for
sale.  These loans are carried at the lower of cost or market value.  Market
value is determined by reference to secondary market pricing.  Interest on loans
is recognized based upon the amount of principal outstanding.  The accrual of
interest is generally discontinued for a loan when full collection of the
principal or interest is doubtful and a loan becomes 90 days or more past due.
Subsequent payments received on these non-accrual loans are either applied
against principal or reported as interest income, according to management's
judgment as to the collection of principal. Loan origination fees, net of
certain direct origination costs, are deferred and recognized over the life of
the related loan as a yield adjustment.
                                         42
<PAGE>
Allowance For Loan Losses: The allowance for loan losses is maintained at a
level believed adequate by management to absorb estimated credit losses within
the overall loan portfolio. Management's methodology in evaluating the adequacy
of the allowance considers the overall growth in the portfolio, ongoing analysis
of individual credits, adverse situations that could affect a borrower's ability
to repay, prior and current loss experience, and economic conditions and trends.
     Loans that are identified as impaired are reported at the present value of
expected future cash flows, or as a practical expedient, at the loan's
observable market price, or the fair value of the collateral if
collateral-dependent. Large groups of smaller balance homogeneous loans are
evaluated collectively such as consumer or residential mortgage loans.
Generally, loans considered impaired are the corporation's non-homogeneous,
non-performing loans.  In addition, certain potential problem loans may be
considered impaired.
     Each loan identified as impaired is evaluated periodically to estimate any
potential losses for which a specific allowance should be established.  Since
most of these loans are collateral-dependent, this estimate is normally based on
the lower of the most recently appraised value of the collateral or the recorded
investment in the loan. If the loan is not collateral-dependent, the same
procedure would be followed except that the present value of the expected future
cash flows would replace the collateral value. In addition to these specific
individual allowances, allocated allowances are established for the commercial,
mortgage and consumer portfolios.  These allocations are based on the overall
level of loans identified as problem or potential problem, current charge-off
trends, historical loss experience in each category, recent portfolio growth,
loan composition changes and economic trends.  As a supplement to the specific
individual and allocated allowances, an unallocated general allowance is also
established.  The determination of this unallocated portion inherently involves
a higher degree of uncertainty and is based on judgments regarding risk of error
in specific allocations, other potential exposures due to possibly incomplete
knowledge of the loan portfolio, economic conditions and trends, and other
factors.
The allowance for loan losses is charged when management determines the
prospects for recovering the principal have significantly diminished. Subsequent
recoveries, if any, are credited to the allowance.  Loans identified as impaired
are charged-off when management has concluded, after ongoing evaluation of the
impaired loans, that repayment is unlikely. Installment loans that are 90 to 120
days past due are charged-off, unless current scheduled payments are being
received.  Real estate loans are written down to fair value upon the earlier of
management's determination that the underlying collateral value has declined,
foreclosure proceedings, a receipt of a deed in lieu of foreclosure or an
in-substance foreclosure involving actual possession of the collateral.

Premises And Equipment:  Premises and equipment are stated at cost less
accumulated depreciation and amortization, which is computed on the
straight-line method.  Costs related to designing software configuration and
interfaces, and installing software to hardware are capitalized.

Income Taxes:  The corporation accounts for income taxes pursuant to the
provisions of FASB Statement No. 109, "Accounting for Income Taxes".  Under
FASB 109, the liability method is used in accounting for income taxes.  Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
                                         43
<PAGE>
Use Of Estimates:  The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes.  Actual results could differ from those estimates.

Cash Flow Information:  For purposes of the statements of cash flows, the
corporation considers cash and due from banks and federal funds sold as cash and
cash equivalents.  Generally, federal funds are purchased and sold for one-day
periods.
        Cash paid for interest and income taxes was $17,884,000 and $1,317,000,
respectively, during the year-ended December 31, 1999; $15,735,000 and
$1,430,000, respectively, during the year-ended December 31, 1998; and
$13,723,000 and $1,444,000, respectively, during the year-ended December 31,
1997.
        The decrease in net unrealized gains on available-for-sale securities of
$6,223,000 (net of $3,206,000 in deferred tax effects) during the period ended
December 31, 1999, the decrease of $448,000 (net of $231,000 in deferred tax
effects) during the period ended December 31, 1998 and the increase of
$1,054,000 (net of $543,000 in deferred tax effects) during the period ended
December 31, 1997 are non-cash transactions for purposes of the statements of
cash flows.

Reclassifications:  Certain reclassifications have been made to the 1998 and
1997 financial statements and accompanying notes to conform with the 1999
presentation.

NOTE 2--RESTRICTIONS ON CASH AND DUE FROM BANK BALANCES

        The banking subsidiary is required to maintain reserve balances with the
Federal Reserve Bank.  The average amount of those balances for the year-ended
December 31, 1999, approximated $6,361,000.


NOTE 3--INVESTMENT SECURITIES
<TABLE>
  The following is a summary of the investment portfolio by respective security category  (in thousands):
<CAPTION>


                                                              December 31, 1999
                                                                             Gross       Gross     Estimated
                                                               Amortized   Unrealized  Unrealized    Market
                                                                  Cost       Gains       Losses      Value
<S>                                                           <C>         <C>         <C>         <C>
AVAILABLE-FOR-SALE SECURITIES
  U.S. Treasury securities and obligations of the U.S.
    Government and its agencies                                $   16,840  $      121  $     (196) $   16,765
  Obligations of states and political subdivisions                 58,352         290      (3,386)     55,256
  Corporate securities                                             11,474           -        (331)     11,143
  Mortgage-backed securities                                       78,160           3      (3,017)     75,146
    Total debt securities                                         164,826         414      (6,930)    158,310
  Equity securities                                                12,167         196      (1,285)     11,078
    TOTAL AVAILABLE-FOR-SALE SECURITIES                        $  176,993  $      610  $   (8,215) $  169,388



HELD-TO-MATURITY SECURITIES
  Obligations of states and political subdivisions             $    1,488  $       17  $      (10) $    1,495
  Mortgage-backed securities                                          182           -          (4)        178
    TOTAL HELD-TO-MATURITY SECURITIES                          $    1,670  $       17  $      (14) $    1,673

</TABLE>
                                         44
<PAGE>
<TABLE>
<CAPTION>

                                                              December 31, 1998
                                                                             Gross       Gross     Estimated
                                                               Amortized   Unrealized  Unrealized    Market
                                                                  Cost       Gains       Losses      Value
<S>                                                              <C>         <C>         <C>         <C>
AVAILABLE-FOR-SALE SECURITIES
  U.S. Treasury securities and obligations of the U.S.
    Government and its agencies                                $   21,779  $      319  $      (15) $   22,083
  Obligations of states and political subdivisions                 41,646       1,293        (184)     42,755
  Corporate securities                                              4,478           -        (233)      4,245
  Mortgage-backed securities                                       65,116         589        (127)     65,578
    Total debt securities                                         133,019       2,201        (559)    134,661
  Equity securities                                                 8,359         641        (459)      8,541
    TOTAL AVAILABLE-FOR-SALE SECURITIES                        $  141,378  $    2,842  $   (1,018) $  143,202


HELD-TO-MATURITY SECURITIES
  Obligations of states and political subdivisions             $    1,488  $       43  $        -  $    1,531
  Mortgage-backed securities                                          271           -          (8)        263
    TOTAL HELD-TO-MATURITY SECURITIES                          $    1,759  $       43  $       (8) $    1,794

</TABLE>
<TABLE>
  The amortized cost and estimated market value of debt securities at December 31, 1999, by contractual maturity, are
shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.  (in thousands)
<CAPTION>
                                                                                                   Estimated
                                                                                       Amortized     Market
                                                                                          Cost       Value
<S>                                                                                       <C>         <C>
AVAILABLE-FOR-SALE
  Due in one year or less                                                              $    6,024  $    6,032
  Due after one year through five years                                                     2,025       2,024
  Due after five years through ten years                                                    5,315       5,089
  Due after ten years                                                                      73,302      70,019
                                                                                           86,666      83,164
  Mortgage-backed securities                                                               78,160      75,146
  Equity securities                                                                        12,167      11,078
                                                                                       $  176,993  $  169,388



HELD-TO-MATURITY
  Due in one year or less                                                              $        -  $        -
  Due after one year through five years                                                         -           -
  Due after five years through ten years                                                        -           -
  Due after ten years                                                                       1,488       1,495
                                                                                            1,488       1,495
  Mortgage-backed securities                                                                  182         178
                                                                                       $    1,670  $    1,673

</TABLE>
                                         45
<PAGE>
        Proceeds from the sale of investments in debt and equity securities
during 1999, 1998 and 1997 were $28,516,000, $10,690,000 and $16,420,000,
respectively. Gross gains realized on these sales were $620,000, $949,000 and
$882,000, respectively.  Gross losses realized on these sales were $236,000 in
1999 and $212,000 in 1997.  There were no gross losses realized during 1998. Net
unrealized losses on securities available-for-sale, net of the related deferred
tax effects, included as a separate component of shareholders' equity, were
$5,019,000 at December 31, 1999.  Net unrealized gains on securities
available-for-sale, net of the related deferred tax effects, included as a
separate component of shareholder's equity, were  $1,204,000 at December 31,
1998.
        Securities, having a carrying value of $67,143,000 at December 31, 1999
and $49,472,000 at December 31, 1998  were pledged to secure public deposits,
repurchase agreements and other purposes required by law.

NOTE 4-LOANS AND ALLOWANCE FOR LOAN LOSSES

  Residential mortgage loans originated for sale had a carrying value
of $284,000 and $1,751,000 at December 31, 1999 and 1998, respectively.
<TABLE>

  Transactions in the allowance for loan losses were as follows (in thousands):
<CAPTION>
                                                             1999       1998      1997
<S>                                                       <C>        <C>        <C>
Balance at beginning of year                               $ 3,405    $ 2,908    $2,403
Recoveries on loans                                            284        208       181
Provision charged to operations                                640      1,060       910
Loans charged-off                                             (628)      (771)     (586)
Balance at end of year                                     $ 3,701    $ 3,405    $2,908
</TABLE>
<TABLE>

  The following table provides information relating to the corporation's impaired loans (in thousands):
<CAPTION>
                                                                     December 31,
                                                                        1999      1998
<S>                                                                  <C>        <C>
Impaired loans with no related allowance due to write-downs           $   277    $  379
Impaired loans with a related allowance                                 1,213       537
  Recorded investment in impaired loans                               $ 1,490    $  916


Impaired loans on non-accrual status                                  $   442    $  468

Allowance related to impaired loans                                   $   427    $   25

Average recorded investment in impaired loans during the period       $ 1,014    $1,050

Related amount of interest income recognized on impaired loans        $    85    $   73

Amount of interest income on impaired loans using the cash
  basis method of accounting                                          $    39    $   10

</TABLE>
                                         46
<PAGE>
NOTE 5--PREMISES AND EQUIPMENT
<TABLE>
  Premises and equipment includes the following at December 31 (in thousands):
<CAPTION>
                                                                                                 1999       1998
<S>                                                                                           <C>        <C>
  Premises                                                                                     $ 6,929    $ 6,822
  Equipment                                                                                      7,808      7,080
                                                                                                14,737     13,902
  Less accumulated depreciation and amortization                                                (7,753)    (6,666)
                                                                                               $ 6,984    $ 7,236
</TABLE>
 The corporation recognized depreciation and amortization expense of $1,095,000,
$1,008,000 and $883,000 for 1999, 1998 and 1997, respectively.
<TABLE>
  The corporation and its subsidiaries occupy certain facilities under lease arrangements and lease certain equipment.  Rentals
amounted to $327,000, $294,000 and $295,000 in 1999, 1998 and 1997, respectively.  Minimum annual rental commitments at
December 31, 1999, under noncancelable leases, principally for real estate and equipment, are payable as follows (in thousands):
<CAPTION>
                                                                                              Annual Rental
                                                                                               Payments
  <S>                                                                                         <C>
  2000                                                                                         $   297
  2001                                                                                             303
  2002                                                                                             277
  2003                                                                                             279
  2004                                                                                             284
  2005 and thereafter                                                                            1,894
    Total minimum lease payments                                                               $ 3,334

</TABLE>


NOTE 6--SHORT-TERM BORROWINGS

<TABLE>
  Short-term borrowings and weighted average interest rates outstanding at December 31, 1999 and 1998 are summarized as follows
 (in thousands, except percentages):
<CAPTION>
                                                1999                1998
<S>                                         <C>         <C>      <C>       <C>
Federal funds purchased                      $    300     6.00%   $     -    -
Securities sold under repurchase agreements    13,572     4.57%    13,227    4.01%
FHLB borrowings                                 5,894     5.78%     1,317    7.30%
Other                                           1,500     4.54%     1,107    4.12%
                                             $ 21,266     4.92%   $15,651    4.29%

<FN>
  The securities sold under repurchase agreements represent collateral to the lending party and are
primarily U.S. Treasury and agency securities.  These securities are maintained under the
corporation's control.
</FN>
</TABLE>
                                         47
<PAGE>
NOTE 7--LONG-TERM BORROWINGS

<TABLE>
The following table presents the annual maturities and weighted average rates of long-term borrowings at December 31, 1999
(in thousands):
<CAPTION>
                                           Annual          Weighted
                                         Maturities      Average Rate
<S>                                     <C>              <C>
        2001                             $   1,763           6.67%
        2002                                16,092           5.92%
        2003                                 1,200           6.75%
        2004                                     -               -
        2005 and thereafter                 30,000           5.42%
                                         $  49,055           5.66%
</TABLE>

     The bank utilizes the services of the Federal Home Loan Bank of Pittsburgh
(FHLB) by periodically borrowing funds to manage interest rate risk and to
provide match funding for specific loan and investment activities.  The advances
are fully collateralized as specified by the FHLB.  Qualifying collateral
includes U.S. Treasury, agency and mortgage-backed securities and residential
real estate loans.  The carrying value of the eligible collateral pledged at
December 31, 1999 was $102,353,000 and $105,295,000 at December 31, 1998.  These
advances are subject to restrictions or penalties related to prepayment.
        Interest expense on long-term borrowings was $2,758,000, $1,808,000 and
$1,059,000 during 1999, 1998 and 1997, respectively.
        Included in long-term borrowings at December 31, 1999, were $2.2 million
of amortizing advances with remaining amortization periods ranging from 8 to 28
months and final maturities through 2002.  Also, $44.0 million of advances had
conversion features whereby the FHLB may convert the advances to variable rates
with subsequent quarterly resets.  Upon conversion, the corporation has the
option of putting the advances back to the FHLB.  The conversion features extend
between 1 and 71 months from December 31, 1999, and the advances have final
maturities through 2014.  At December 31, 1999, all advances had fixed rates of
interest.

NOTE 8--SHAREHOLDERS' EQUITY
        On April 17, 1998, the Board of Directors declared a 4 for 3 stock split
payable June 1, 1998, to shareholders of record May 1, 1998.  Related to this
split, the Board of Directors also approved an amendment to the Articles of
Incorporation to increase the number of authorized shares of common stock from
6,750,000 shares to 9,000,000 shares and to reduce the par value per share from
$1.11 to $.83.  All per share data was retroactively adjusted to reflect these
actions.
        The corporation maintains a dividend reinvestment plan which allows
existing shareholders to reinvest cash dividends into additional shares of the
corporation's common stock.  The corporation has reserved 130,000 shares of
common stock for issuance under this plan.  As of December 31, 1999, 94,586
shares were available.
        The bank offers shares of the corporation's stock as one of several
investment options in its defined contribution 401(k) plan.  The corporation has
reserved 25,000 shares of common stock for issuance to participants in the
401(k) plan.  As of December 31, 1999, 21,045 shares were available.
                                         48
<PAGE>
        The corporation also maintains an employee stock purchase plan.  This
plan is intended to encourage employees of the corporation and its subsidiary to
acquire a stake in the future of the corporation.  The plan provides for the
purchase of stock at 90% of the fair market value.  The corporation has reserved
63,000 shares of common stock for issuance under the plan.  As of December 31,
1999, 45,644 shares were available.
     The corporation adopted an omnibus stock plan effective January 15, 1993.
This plan is intended to provide incentive compensation opportunities for
selected officers and key employees of the corporation and its subsidiary.  The
corporation has reserved 252,000 shares of common stock for issuance pursuant to
awards under this plan which must be granted within ten years from the effective
date.  As of December 31, 1999, 109,980 shares were available for the granting
of additional awards.  To date, only awards of stock options have been made from
the plan.
     Financial Accounting Standards Board (FASB) Statement No. 123, "Accounting
for Stock Based Compensation", became effective in 1996.  This statement
encourages companies to recognize compensation expense for stock-based awards
based on their fair value.  The statement allows companies to continue to follow
the existing intrinsic value method under Accounting Principles Board (APB)
Opinion No. 25 "Accounting for Stock Issued to Employees", with the requirement
that disclosures be provided which present pro forma net income and earnings per
share, had the new fair value method been used.  The corporation has elected to
continue to follow APB 25 to account for its employee stock purchase plan and
employee stock options.  No compensation expense was recognized under APB 25 for
these plans.
        The pro forma compensation expense for employee stock options under the
fair value method was determined with the aid of a Black-Scholes option pricing
model.   This option pricing model, like other models, requires the input of
subjective assumptions.  The weighted-average assumptions for 1999, 1998 and
1997, respectively, were: risk free interest rates of 6.41%, 4.87% and 5.77%;
dividend yields of 3.23%, 2.48% and 2.30%; volatility factors of .160, .146 and
 .134; and a weighted average expected life of ten years.  For purposes of pro
forma disclosures, the discount related to the shares issued is considered
compensation expense, whereas the estimated fair value of the options is
amortized to expense over the options' vesting period.  Furthermore, these
disclosures are required to be applied prospectively from 1995.  Therefore, the
initial impact on pro forma net income may not be representative of future
compensation expense since the impact of option awards prior to 1995 are not
considered.


<TABLE>
The corporation's pro forma information for the years-ended December 31 is as follows (in thousands, except per share data):
<CAPTION>
                                                                               1999       1998       1997
<S>                                                                         <C>        <C>        <C>
Pro forma net income                                                         $  4,648   $  4,169   $  3,762
Pro forma net income per share-basic and diluted                             $   1.18   $   1.06   $   0.96
</TABLE>
                                         49
<PAGE>
<TABLE>
  A summary of the corporation's stock option activity, and related information is as follows:
<CAPTION>
                                              1999                  1998                  1997
                                                       Weighted-             Weighted-             Weighted-
                                                        Average               Average               Average
                                                       Exercise              Exercise              Exercise
                                            Options      Price     Options     Price     Options     Price
<S>                                       <C>         <C>        <C>        <C>        <C>        <C>
Outstanding at beginning of year             99,322    $  15.87     97,555   $  15.30     61,481   $  14.19
Granted                                      31,315       15.37     30,193      17.31     42,616      16.74
Exercised                                    (3,960)      14.06    (13,903)     14.37          -        -
Forfeited                                    (2,520)      17.31    (14,523)     16.48     (6,542)     14.23

Outstanding at end of year                  124,157    $  15.77     99,322   $  15.87     97,555   $  15.30

Exercisable at end of year                   37,369    $  14.15     34,289   $  14.20     24,897   $  14.38
Weighted-average fair value of
  options granted during the year          $   3.55               $   3.82              $   4.35
</TABLE>

  Options granted under the plan have ten-year terms and vest and become fully
exercisable at the end of three years of continued employment.  Exercise prices
for options outstanding as of December 31, 1999 ranged from $13.88 to $17.38.
The weighted average remaining contractual life of those options is 7.95 years.

<TABLE>
  The following table sets forth capital ratios for the corporation and its bank subsidiary at December 31:
<CAPTION>
HANOVER BANCORP, INC.                                                                     1999       1998
<S>                                                                                    <C>        <C>
  Tier 1 capital to risk-adjusted assets                                                    11.63%     12.02%
  Total capital to risk-adjusted assets                                                     12.79%     13.16%
  Leverage ratio                                                                             7.29%      8.04%

BANK OF HANOVER AND TRUST COMPANY
  Tier 1 capital to risk-adjusted assets                                                     9.72%     10.43%
  Total capital to risk-adjusted assets                                                     10.92%     11.60%
  Leverage ratio                                                                             6.03%      6.93%

</TABLE>
                                         50
<PAGE>
        The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") created a framework for supervisory actions in an effort to reduce
the risks of possible long-term losses to the deposit insurance funds.  It
established five levels of capital at which insured depository institutions will
be "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized".  In 1992,
the regulators adopted regulations to implement the requirements of FDICIA.
Under the regulations, the required minimum capital ratios for each category of
institutions are, with certain exceptions, as follows:

                                                  Tier I
                            Total Capital         Capital to
                            to Risk-Adjusted      Risk-Adjusted
                            Assets                Assets             Leverage

Well capitalized            10% or above and      6% or above and    5% or above
Adequately
        capitalized         8% or above and       4% or above and    4% or above
Undercapitalized            under 8% or           under 4% or        under 4%
Significantly
        undercapitalized    under 6% or           under 3% or        under 3%
Critically
       undercapitalized                                              2% or under

      The appropriate federal bank regulatory agency has authority to downgrade
an institution's capital designation by one category if it determines that an
institution is in an unsafe or unsound condition or is engaging in unsafe or
unsound practices.
    FDICIA provides for increased supervision for banks not rated in one of the
highest categories under the "CAMELS" composite bank rating system.
Undercapitalized institutions are required to submit capital restoration plans
to the appropriate federal banking regulator and are subject to restrictions on
operations, including prohibitions on branching, engaging in new activities,
paying management fees, making capital distributions such as dividends, and
growing without regulatory approval.
        The bank has been deemed "well capitalized".

NOTE  9 - NET INCOME PER SHARE
<TABLE>
The computation of basic and diluted net income per share is as follows:
<CAPTION>
                                                                  Year-Ended December 31,
                                                                       1999              1998             1997
<S>                                                              <C>                <C>              <C>
NUMERATOR:
  Numerator for basic and diluted
    net income per share-net income                               $  4,746,000       $4,251,000       $3,807,000

DENOMINATOR:
  Denominator for basic net income per share-
    weighted average shares outstanding                              3,922,144        3,933,587        3,930,705

  Effect of dilutive securities:
    Employee stock options                                               1,119           17,959              731

  Denominator for diluted net income per share-
    adjusted weighted average shares outstanding                     3,923,263        3,951,546        3,931,436

  Basic net income per share                                      $       1.21       $     1.08       $     0.97
  Diluted net income per share                                    $       1.21       $     1.08       $     0.97

</TABLE>
                                         51
<PAGE>

        For additional disclosures regarding the outstanding employee stock
options, see Note 8.  The weighted average shares outstanding have been
retroactively restated to reflect the stock split of June 1998.


Note 10 --OTHER COMPREHENSIVE INCOME
<TABLE>


The components of other comprehensive income are as follows (in thousands):
<CAPTION>
                                                       Before-Tax    Tax     Net-of-Tax
                                                        Amount     Effects    Amount
<S>                                                    <C>        <C>        <C>
Year-ended December 31, 1997
  Change in net unrealized gains on securities
    available-for-sale                                 $   2,267  $     771  $   1,496
  Less: reclassification adjustment for net gains
    realized in net income                                  (670)      (228)      (442)
  Other comprehensive income                           $   1,597  $     543  $   1,054


Year-ended December 31, 1998
  Change in net unrealized gains on securities
    available-for-sale                                 $     270  $      92  $     178
  Less: reclassification adjustment for net gains
    realized in net income                                  (949)      (323)      (626)
  Other comprehensive income                           $    (679) $    (231) $    (448)


Year-ended December 31, 1999
  Change in net unrealized gains (losses) on securities
    available-for-sale                                 $  (9,045) $  (3,075) $  (5,970)
  Less: reclassification adjustment for net gains
    realized in net income                                  (384)      (131)      (253)
  Other comprehensive income                           $  (9,429) $  (3,206) $  (6,223)

</TABLE>
                                         52
<PAGE>
NOTE 11- INCOME TAXES
<TABLE>
  The significant components of the corporation's deferred tax assets and liabilities as of December 31, 1999 and 1998,
respectively, which are included in other assets are as follows (in thousands):
<CAPTION>
                                                         1999      1998
<S>                                                   <C>       <C>
DEFERRED TAX ASSETS
  Net unrealized securities losses                     $2,586    $    -
  Loan loss reserve                                     1,001       901
  Deferred loan fees                                       75        96
  Deferred compensation                                   221       212
  Other                                                    48        43
    Total deferred tax assets                           3,931     1,252

DEFERRED TAX LIABILITIES
  Net unrealized securities gains                           -       620
  Depreciation                                            222       198
  Accretion                                               115        80
  Other                                                    98       103
    Total deferred tax liabilities                        435     1,001
      Net deferred tax assets                          $3,496    $  251
</TABLE>
<TABLE>
  The provision for income taxes included in the accompanying Statements of Income consists of the following (in thousands):
<CAPTION>

                                                         1999      1998      1997
<S>                                                   <C>       <C>       <C>
Current                                                $1,434    $1,660    $1,502
Deferred                                                 (102)     (183)     (131)
                                                       $1,332    $1,477    $1,371


</TABLE>
<TABLE>
  A reconciliation of the federal statutory corporate income tax rate to the corporation's effective tax rate is as
follows:
<CAPTION>
                                                         1999      1998      1997
<S>                                                      <C>       <C>       <C>
Federal statutory tax rate                                34.0 %    34.0 %    34.0 %
Tax-exempt interest income                               (13.7)%   (10.3)%    (8.8)%
Other                                                      1.6 %     2.1 %     1.3 %
Effective tax rate                                        21.9 %    25.8 %    26.5 %
</TABLE>
  Income taxes applicable to realized net securities gains included in the
  provision for income taxes totaled $131,000 in 1999, $323,000 in 1998 and
  $228,000 in 1997.
                                         53
<PAGE>
NOTE 12-RETIREMENT PLANS

      The bank provides a defined contribution 401(k) plan to all employees who
have completed at least one year of employment as defined in the plan and are 21
years of age.  In each pay period a participant may elect to defer up to 15% of
base salary/wages for contribution to the plan up to the maximum allowable
contribution as established by the Internal Revenue Service.  The bank matches,
in cash, 50% of the participant's contribution up to 4% of the participant's
base salary/wages.  Beginning in 1996, the bank started making a discretionary
annual contribution to all eligible employees.  The corporation's expense for
the defined contribution plan, including the discretionary contribution, was
$216,000, $212,000 and $205,000  in 1999, 1998 and 1997, respectively.
     The bank's defined benefit pension plan was curtailed on January 19, 1996.
Under the curtailment, pension benefits were frozen as of March 31, 1996.  On
September 16, 1996, approximately two-thirds of the plan's benefit obligation
was settled via the purchase of annuity contracts.  The Plan was administered in
frozen status until the termination date of July 24, 1998.  As of December 31,
1998, all benefit obligations were settled through the distribution of plan
assets.
      In 1996, as a result of the plan curtailment and the partial settlement,
the corporation recognized a curtailment gain and a settlement loss.  In 1998,
as a result of the termination and final settlement, a settlement loss was
recognized.  These events were accounted for in accordance with Financial
Accounting Standards Board Statement No. 88, "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits".

<TABLE>
    The following table sets forth the plan's funded status and amounts recognized in the corporation's
balance sheet at December 31, 1999 and 1998 (in thousands):
<CAPTION>
                                                                                         1999      1998
<S>                                                                                    <C>      <C>
Change in benefit obligation
Benefit obligation at beginning of year                                                 $  -     $ 1,041
Interest cost                                                                              -          73
Actuarial loss                                                                             -          93
Allocation of surplus to plan participants                                                 -          13
Benefits paid                                                                              -      (1,220)
Benefit obligation at end of year                                                          -         -

Change in plan assets
Fair value of plan assets at beginning of year                                             -       1,174
Actual return on plan assets                                                               -          46
Benefits paid                                                                              -      (1,220)
Fair value of plan assets at end of year                                                   -         -

Funded status                                                                              -         -
Unrecognized net actuarial loss                                                            -         -

    Prepaid benefit cost                                                                $  -     $   -
</TABLE>
                                         54
<PAGE>
<TABLE>
<CAPTION>
                                                                              Year-Ended December 31,
                                                                                1999     1998      1997
<S>                                                                           <C>      <C>      <C>
Components of net periodic benefit cost
Interest cost                                                                  $  -     $   73   $    73
Actual return on plan assets                                                      -        (46)     (100)
Net amortization and deferral                                                     -        (36)       21
    Net periodic pension cost before settlement                                   -         (9)       (6)
Settlement loss                                                                   -        261       -
    Net pension cost after settlement                                          $  -     $  252   $    (6)

</TABLE>






NOTE 13--RELATED PARTY TRANSACTIONS

The bank has granted loans to the officers and directors of the corporation
and its subsidiaries and to their associates.  Related party loans are made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unrelated persons and do
not involve more than normal risk of collection.  The aggregate dollar amount of
these loans was $4,656,000 and $4,037,000 at December 31, 1999 and 1998,
respectively.  During 1999, $997,000 of new loans were made and repayments
totaled $378,000.
        In addition, the bank has securities sold under repurchase agreements to
the directors of the corporation and its subsidiaries and to their associates.
Related party securities sold under repurchase agreements are on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with unrelated persons.  The aggregate
dollar amount of these agreements was $167,000 and $5,218,000 at December 31,
1999 and 1998, respectively.
                                         55
<PAGE>
NOTE 14--HANOVER BANCORP, INC. (PARENT COMPANY ONLY) FINANCIAL INFORMATION
(in thousands)
<TABLE>
<CAPTION>

                                                                         December 31,
BALANCE SHEETS                                                              1999      1998
<S>                                                                      <C>       <C>
ASSETS
  Cash                                                                    $   123   $   134
  Investment securities:
    Available-for-sale                                                        152     5,821
  Accrued interest receivable                                                   3         2
  Other assets                                                                165         -
  Investment in subsidiaries:
    Bank of Hanover and Trust Company                                      25,997    31,568
    HOVB Investment Co.                                                     6,774         -
      TOTAL ASSETS                                                        $33,214   $37,525

LIABILITIES AND SHAREHOLDERS' EQUITY
  Liabilities:
    Other liabilities                                                     $     -   $   148
    Dividends payable                                                         466       433
      TOTAL LIABILITIES                                                       466       581
  Shareholders' Equity:
    Common stock                                                            3,223     3,270
    Surplus                                                                18,271    19,144
    Accumulated other comprehensive income                                 (5,019)    1,204
    Retained earnings                                                      16,273    13,326
      TOTAL SHAREHOLDERS' EQUITY                                           32,748    36,944
      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                          $33,214   $37,525

</TABLE>

<TABLE>
<CAPTION>
                                                                              Year-Ended December 31,
STATEMENTS OF INCOME                                                             1999           1998       1997
<S>                                                                           <C>        <C>        <C>
INTEREST INCOME
  Interest on investment securities:
    Taxable                                                                    $    85    $    64    $    60
    Tax-exempt                                                                      13         13         29
      TOTAL INTEREST INCOME                                                         98         77         89
NET SECURITIES GAINS                                                               101        725        526
OTHER EXPENSE
  Other operating expense                                                          128        135        130
  Income before applicable income taxes and equity in undistributed
    income of subsidiaries                                                          71        667        485
INCOME TAXES                                                                        (1)       248        169
  Income before equity in undistributed income of subsidiaries                      72        419        316

EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES
  Bank of Hanover and Trust Company                                              4,466      3,832      3,491
  HOVB Investment Co.                                                              208          -          -
      NET INCOME                                                               $ 4,746    $ 4,251    $ 3,807

</TABLE>
                                         56
<PAGE>
<TABLE>
<CAPTION>

                                                                                       Year-Ended December 31,
STATEMENTS OF CASH FLOWS                                                       1999       1998      1997
<S>                                                                         <C>        <C>        <C>
OPERATING ACTIVITIES
  Net income                                                                 $ 4,746    $ 4,251    $3,807
    Adjustments to reconcile net income to
     net cash provided by operating activities:
       Net securities gains                                                     (101)      (725)     (526)
       (Increase) decrease in interest receivable                                 (1)         9        (1)
       Increase in other assets                                                 (165)         -         -
       Increase (decrease) in other liabilities                                  (80)       124       (10)
       Increase (decrease) in accrued taxes                                      (23)      (201)      146
       Equity in undistributed income of subsidiaries                         (4,674)    (3,832)   (3,491)
         NET CASH USED IN OPERATING ACTIVITIES                                  (298)      (374)      (75)


INVESTING ACTIVITIES
  Proceeds from sales of available-for-sale investment securities              1,469      1,273     1,230
  Proceeds from maturities of investment securities                                -        200         -
  Purchases of investment securities                                          (2,496)    (4,239)     (894)
  Cash contributions to subsidiaries                                            (650)         -         -
  Cash dividends received from subsidiaries                                    4,650      3,660     1,677
     NET CASH PROVIDED BY INVESTING ACTIVITIES                                 2,973        894     2,013


FINANCING ACTIVITIES
  Cash dividends paid                                                         (1,766)    (1,593)   (1,447)
  Cash paid in lieu of fractional shares                                           -         (9)        -
  Proceeds from issuance of common stock                                         147        480        31
  Repurchase and retirement of common stock                                   (1,067)         -      (647)
     NET CASH USED IN FINANCING ACTIVITIES                                    (2,686)    (1,122)   (2,063)

DECREASE IN CASH                                                                 (11)      (602)     (125)
Cash at beginning of year                                                        134        736       861
CASH AT END OF YEAR                                                          $   123    $   134    $  736

</TABLE>


     The corporation relies on dividends from Bank of Hanover and Trust Company
to fund dividends paid to shareholders of the corporation.  Under Pennsylvania
statutes, the bank is restricted, unless prior regulatory approval is obtained,
in the amount of dividends which it may declare in relation to its accumulated
profits, less any required transfer to surplus.  At December 31, 1999, retained
earnings of the bank available for dividends were $21,486,000.  These
restrictions have not had, nor are they expected to have any impact on the
corporation's dividend policy.  Other regulatory restrictions limit the ability
of the bank to transfer net assets to the corporation.  At December 31, 1999,
these restricted net assets amounted to $7,783,000.
                                         57
<PAGE>
NOTE 15--FAIR VALUE OF FINANCIAL INSTRUMENTS
(in thousands)
<TABLE>
<CAPTION>

                                                                     December 31,
                                                          1999                        1998
                                                        Carrying        Fair        Carrying     Fair
                                                         Amount        Value         Amount      Value
<S>                                                   <C>          <C>             <C>        <C>
FINANCIAL ASSETS
  Cash and short-term investments                      $  20,647    $   20,647      $ 26,233   $ 26,233
  Investment securities                                  171,058       171,061       144,961    144,996
  Loans                                                  298,975                     289,340
    Less: Allowance for loan losses                       (3,701)                     (3,405)
  Net loans                                              295,274       295,224       285,935    293,749
      TOTAL FINANCIAL ASSETS                           $ 486,979    $  486,932      $457,129   $464,978

FINANCIAL LIABILITIES
  Deposits                                             $ 396,509    $  394,589      $364,008   $367,016
  Short-term borrowings                                   21,266        21,266        15,651     15,651
  Long-term borrowings                                    49,055        47,884        49,136     51,380
      TOTAL FINANCIAL LIABILITIES                      $ 466,830    $  463,739      $428,795   $434,047

</TABLE>


        Financial Accounting Standards Board (FASB) Statement No. 107,
"Disclosures about Fair Value of Financial Instruments", requires disclosure of
fair value information about financial instruments, whether or not recognized in
the balance sheet, for which it is practicable to estimate that value.  In cases
where quoted market prices are not available, fair values are based on estimates
using present value or other valuation techniques.  Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows.  In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the instrument.
FASB 107 excludes certain financial instruments and all nonfinancial instruments
from its disclosure requirements.  Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the corporation.
        The following methods and assumptions were used by the corporation in
estimating its fair value disclosures for financial instruments.

Cash and short-term investments:  The carrying amounts reported in the balance
sheet for cash and short-term investments approximate those assets' fair
values.

Investment securities (including mortgage-backed securities):  Fair values for
investment securities are based on quoted market prices, where available.  If
quoted market prices are not available, fair values are based on quoted market
prices of comparable instruments.

Loans:  Fair values for loans are estimated using discounted cash flow
calculation using interest rates based on U.S. Government security yields for
similar terms adjusted for appropriate risks associated with each instrument.
                                         58
<PAGE>
Deposits:  The fair values disclosed for non-maturity deposits (e.g., interest
and non-interest checking, passbook savings and certain types of money market
accounts) are, by definition, equal to the amount payable on demand at the
reporting date (i.e., their carrying amounts).  Fair values for certificates of
deposit are estimated using a discounted cash flow calculation that applies
interest rates based on U.S. Government security yields to a schedule of
aggregated expected maturities on time deposits.

Short-term borrowings:  The carrying amounts of federal funds purchased,
borrowings under repurchase agreements and other short-term borrowings
approximate their fair values.

Long-term borrowings:  Fair values for long-term borrowings are estimated using
a discounted cash flow calculation that applies interest rates based on U.S.
Government security yields to a schedule of aggregated expected maturities.

Off-balance sheet items:  The estimated fair value of unfunded loan commitments
and standby letters of credit approximate the notional amounts due to the
predominating variable rate and short-term nature of these items.  The notional
amounts of these items totaled $52,204,000 and $61,146,000 at December 31, 1999
and 1998, respectively.


NOTE 16 - COMMITMENTS AND CONTINGENCIES

        As of December 31, 1999, the bank had commitments outstanding to extend
credit totaling $50,053,000 and commitments under outstanding standby letters of
credit totaling $2,151,000.  Credit commitments generally require the customers
to maintain certain credit standards and are funded at rates and terms
prevailing at the time of extension.  Management does not anticipate any
material losses as a result of these credit commitments.
     The corporation is party to various legal proceedings generally incidental
to its business.  Based on evaluation of these matters and discussions with
counsel, management believes that liabilities to the corporation arising from
these matters will not have a material adverse effect on the financial condition
of the corporation.


NOTE 17--CONCENTRATIONS OF CREDIT RISK

        Most of the corporation's business activity, including loans and loan
commitments, is with customers located within York and Adams Counties,
Pennsylvania, where it has full service branches.  The corporation's commercial,
consumer and mortgage portfolios are principally to borrowers in this market
area and are generally collateralized.  The commercial loan portfolio is well
diversified with no industry comprising greater than 10% of total loans
outstanding.
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<PAGE>
NOTE 18--ACCOUNTING CHANGES

        In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information".  This statement establishes standards for the reporting of
financial information from operating segments in annual and interim financial
statements. It requires that segment financial information be reported on the
basis that it is reported internally. FASB 131 is effective for fiscal years
beginning after December 15, 1997. Management does not currently utilize
discrete financial information to assess the performance of individual operating
segments. However, a profitability management system is currently under
development and will provide a means to further assess this reporting standard.
Possible future implementation of these disclosure requirements will have no
impact on the corporation's financial condition or results of operations.
        In June 1998, FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities".  This statement requires the recognition of
derivative instruments as assets or liabilities, measured at fair value. In July
1999, FASB issued Statement No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133 -
an amendment of FASB Statement No. 133".  This standard delayed the effective
date for FASB 133 to fiscal years beginning after June 15, 2000.  Based upon the
corporation's preliminary review, FASB 133 is not expected to have an impact on
its liquidity, capital resources or results of operations.
      In October 1998, FASB issued Statement No. 134, " Accounting for Mortgage
Backed Securities Retained after the Securitization of Mortgage Loans Held for
Sale by a Mortgage Banking Enterprise".  This statement amends FASB Statement
No. 65, "Accounting for Certain Mortgage Banking Activities" to require that
after the securitization of mortgage loans, the classification of the resulting
mortgage-backed securities be based on the ability and intent to sell or hold
the securities.  This standard was effective on January 1, 1999. The corporation
is not currently involved in any transactions which fall under the definitions
of this standard, therefore it has not had an impact on the corporation's
liquidity, capital resources or results of operations.
        During the fourth quarter of 1999, FASB issued an Exposure Draft on
Business Combinations and Intangible Assets.  Under the proposed draft,
companies would: account for all business combinations using the purchase
method; amortize goodwill over its useful economic life, but in no event over a
period longer than 20 years; present goodwill charges on a net-of-tax basis as
the last component of continuing operations on the income statement; recognize
negative goodwill as an extraordinary gain; and recognize all reliably
measurable identifiable intangible assets at their fair value, among other
recommendations.  The FASB expects to issue a final statement in the fourth
quarter of 2000, applicable to business combinations and to intangible assets
acquired in transactions initiated after the issuance date of the final
statement.


NOTE 19 - SUBSEQUENT EVENT

        On January 25, 2000, the corporation entered into an agreement to merge
with Sterling Financial Corporation.  Sterling is a two-bank holding company
with assets of over $1 billion and is headquartered in Lancaster, PA.  It is the
parent company for Bank of Lancaster County, N.A., in Lancaster, PA and First
National Bank of North East, in North East, MD.
        Under the terms of the agreement, Hanover Bancorp shareholders will
receive .93 shares of Sterling Financial Corp. common stock for each share of
Hanover Bancorp common stock in a tax-free exchange.  The merger, which is
subject to shareholder and regulatory approvals, is expected to be accounted for
as a pooling of interests.  The Bank of Hanover and Trust Co. and HOVB
Investment Co. will operate as subsidiaries of Sterling after the merger is
completed.
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<PAGE>
NOTE 20 - QUARTERLY FINANCIAL INFORMATION (Unaudited)
<TABLE>
The following is a summary of the corporation's quarterly results (in thousands, except per share data):
<CAPTION>
                                                                                            Full
                                                       First   Second    Third   Fourth     Year
<S>                                                  <C>      <C>      <C>      <C>      <C>
1999
  Interest income                                     $8,058   $8,346   $8,654   $8,851   $33,909
  Interest expense                                     4,199    4,320    4,573    4,725    17,817
  Net interest income                                  3,859    4,026    4,081    4,126    16,092
  Provision for loan losses                              195      195      150      100       640
  Net securities gains                                    76       85       90      133       384
  Other income                                         1,015      960      969      959     3,903
  Other expense                                        3,388    3,423    3,461    3,389    13,661
  Income taxes                                           303      309      329      391     1,332
  Net income                                           1,064    1,144    1,200    1,338     4,746

  Net income per share-basic and diluted                0.27     0.29     0.31     0.34      1.21


1998
  Interest income                                     $7,477   $7,804   $7,976   $7,982   $31,239
  Interest expense                                     3,732    3,933    4,113    4,076    15,854
  Net interest income                                  3,745    3,871    3,863    3,906    15,385
  Provision for loan losses                              445      210      210      195     1,060
  Net securities gains                                   348      384      142       75       949
  Other income                                           728      814      807    1,012     3,361
  Other expense                                        3,094    3,455    3,134    3,224    12,907
  Income taxes                                           341      371      379      386     1,477
  Net income                                             941    1,033    1,089    1,188     4,251

  Net income per share-basic and diluted                0.24     0.26     0.28     0.30      1.08

</TABLE>
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