<TABLE>
<CAPTION>
FINANCIAL  RATIOS  AND  SUMMARY  OF  KEY  INFORMATION
=====================================================================================================================
HARLEYSVILLE  NATIONAL  CORPORATION  AND  SUBSIDIARIES

                                                                                     Year  Ended  December  31,
                                                                              ---------------------------------------
(Dollars in thousands, except per share data and average shares outstanding)      2001          2000          1999
                                                                              ---------------------------------------
<S>                                                                           <C>           <C>           <C>
PER SHARE INFORMATION
Basic* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $       1.57  $      1.38   $      1.25
Diluted* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          1.54         1.38          1.25
Cash dividends paid* . . . . . . . . . . . . . . . . . . . . . . . . . . . .          0.65         0.57          0.51
Book value (at year-end) . . . . . . . . . . . . . . . . . . . . . . . . . .         10.20         9.38          8.30
MARKET VALUE
Bid price of common stock (high)*. . . . . . . . . . . . . . . . . . . . . .  $      26.69        17.35         18.14
Bid price of common stock (low)* . . . . . . . . . . . . . . . . . . . . . .         16.94        11.31         15.00
Average basic shares outstanding*. . . . . . . . . . . . . . . . . . . . . .    18,305,956   18,537,362    18,546,794
AVERAGE BALANCE SHEET
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  1,264,750  $ 1,166,684   $ 1,031,055
Earning assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,944,961    1,739,068     1,566,194
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     2,058,738    1,843,525     1,639,041
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,599,515    1,436,781     1,267,936
Interest-bearing liabilities and deposits. . . . . . . . . . . . . . . . . .     1,825,762    1,655,592     1,462,823
Shareholders equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . .       182,178      154,547       148,636
SELECTED OPERATING RATIOS
Return on average assets . . . . . . . . . . . . . . . . . . . . . . . . . .         1.40%         1.39%         1.42%
Return on average shareholders equity. . . . . . . . . . . . . . . . . . . .        15.82%        16.57%        15.63%
Leverage (assets divided by shareholders equity) . . . . . . . . . . . . . .         11.67        11.15         12.05
Average shareholders equity as a percentage of:
     Average loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        14.40%        13.25%        14.42%
     Average deposits  . . . . . . . . . . . . . . . . . . . . . . . . . . .         11.39        10.76         11.72
     Average assets  . . . . . . . . . . . . . . . . . . . . . . . . . . . .          8.85         8.38          9.07
     Average earning assets  . . . . . . . . . . . . . . . . . . . . . . . .          9.37         8.89          9.49
Dividend payout ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . .         41.27        40.74         40.34
Average total loans as a percentage of average deposits and borrowed funds .         69.27        70.47         70.48
Net interest margin on average earning assets:
     Interest income** . . . . . . . . . . . . . . . . . . . . . . . . . . .         7.43%         7.92%         7.65%
     Interest expense  . . . . . . . . . . . . . . . . . . . . . . . . . . .        (3.34)        (3.78)        (3.23)
     Net interest margin** . . . . . . . . . . . . . . . . . . . . . . . . .         4.09          4.14          4.42
     Noninterest margin  . . . . . . . . . . . . . . . . . . . . . . . . . .        (1.69)        (1.87)        (2.01)

<FN>
*  Adjusted for 100% stock dividend effective 8/10/01 and 5% stock dividends effective 11/9/00 and 9/30/99.
** Tax-Equivalent Basis
</TABLE>


PAGE 1
<TABLE>
<CAPTION>
CONSOLIDATED  BALANCE  SHEETS
==========================================================================================================================
HARLEYSVILLE  NATIONAL  CORPORATION  AND  SUBSIDIARIES

(Dollars in thousands)                                                                                  December 31
                                                                                                  ------------------------
ASSETS                                                                                               2001         2000
                                                                                                  -----------  -----------
<S>                                                                                               <C>          <C>
Cash and due from banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   62,974   $   52,018
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      12,500            -
Interest-bearing deposits in banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       7,150        3,507
                                                                                                  -----------  -----------
          Total cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . .      82,624       55,525
                                                                                                  -----------  -----------
Investment securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . .     706,371      570,619
Investment securities held to maturity (fair value $26,782 and $31,601 respectively) . . . . . .      26,099       30,841
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1,313,934    1,209,605
Less: Deferred costs, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       2,675        2,450
      Allowance for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (15,558)     (15,210)
                                                                                                  -----------  -----------
          Net loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1,301,051    1,196,845
                                                                                                  -----------  -----------
Bank premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      21,439       21,870
Accrued interest receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      11,907       12,391
Net assets in foreclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         609          288
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1,360        1,697
Bank-owned life insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      45,942       37,471
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      11,569        7,666
                                                                                                  -----------  -----------
          Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $2,208,971   $1,935,213
                                                                                                  ===========  ===========
LIABILITIES AND SHAREHOLDERS EQUITY
Deposits:
     Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  254,638   $  227,446
     Interest-bearing:
          Checking accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     169,156      163,807
          Money market accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     419,890      333,622
          Savings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     179,284      161,233
          Time, under $100,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     489,345      430,074
          Time, $100,000 or greater. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     234,549      172,868
                                                                                                  -----------  -----------
          Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1,746,862    1,489,050
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      27,114       22,346
U.S. Treasury demand notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       2,677        2,055
Federal funds purchased                                                                                    -       44,500
Federal Home Loan Bank (FHLB) borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . .     127,750      110,750
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . . . . .      80,393       74,083
Guaranteed preferred beneficial interest in Corporation s subordinated debentures. . . . . . . .       5,000            -
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      29,826       18,893
                                                                                                  -----------  -----------
          Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2,019,622    1,761,677
                                                                                                  -----------  -----------
Shareholders equity:
     Series preferred stock, par value $1 per share; authorized 3,000,000 shares, none issued. .           -            -
     Common stock, par value $1 per share; authorized 30,000,000 shares; issued and outstanding
     18,570,971 shares in 2001 and 9,253,762 shares in 2000. . . . . . . . . . . . . . . . . . .      18,571        9,254
     Additional paid in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      71,419       79,869
     Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     100,171       83,244
     Treasury stock, at cost: 287,440 shares in 2001 and 8,500 shares in 2000. . . . . . . . . .      (5,346)        (253)
     Accumulated other comprehensive income. . . . . . . . . . . . . . . . . . . . . . . . . . .       4,534        1,422
                                                                                                  -----------  -----------
          Total shareholders equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     189,349      173,536
                                                                                                  -----------  -----------
          Total liabilities and shareholders equity .. . . . . . . . . . . . . . . . . . . . . .  $2,208,971   $1,935,213
                                                                                                  ===========  ===========
</TABLE>

See accompanying notes to consolidated financial statements.


PAGE 6
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME HARLEYSVILLE NATIONAL CORPORATION AND SUBSIDIARIES
===============================================================================================
HARLEYSVILLE  NATIONAL  CORPORATION  AND  SUBSIDIARIES

(Dollars in thousands except weighted average number of common shares and per share information)

                                                               Year Ended December 31
                                                         -------------------------------------
                                                            2001         2000         1999
                                                         -----------  -----------  -----------
<S>                                                      <C>          <C>          <C>
INTEREST INCOME
Loans, including fees . . . . . . . . . . . . . . . . .  $    90,294  $    87,131  $    76,350
Lease financing . . . . . . . . . . . . . . . . . . . .        9,717        9,013        6,960
Investment securities:
   Taxable. . . . . . . . . . . . . . . . . . . . . . .       27,376       24,205       19,485
   Exempt from federal taxes. . . . . . . . . . . . . .       10,478       10,870       10,570
Federal funds sold. . . . . . . . . . . . . . . . . . .          511          219          552
Deposits in banks . . . . . . . . . . . . . . . . . . .          303          373          250
                                                         -----------  -----------  -----------
   Total interest income. . . . . . . . . . . . . . . .      138,679      131,811      114,167
                                                         -----------  -----------  -----------
INTEREST EXPENSE
Savings deposits. . . . . . . . . . . . . . . . . . . .       17,258       18,337       14,272
Time, under $100,000. . . . . . . . . . . . . . . . . .       26,111       23,465       20,695
Time, $100,000 or greater . . . . . . . . . . . . . . .       11,105       11,282        6,017
Borrowed funds. . . . . . . . . . . . . . . . . . . . .       10,463       12,690        9,665
                                                         -----------  -----------  -----------
   Total interest expense . . . . . . . . . . . . . . .       64,937       65,774       50,649
                                                         -----------  -----------  -----------
   Net interest income. . . . . . . . . . . . . . . . .       73,742       66,037       63,518
Provision for loan losses . . . . . . . . . . . . . . .        3,930        2,312        2,153
                                                         -----------  -----------  -----------
   Net interest income after provision for loan losses.       69,812       63,725       61,365
                                                         -----------  -----------  -----------
OTHER OPERATING INCOME
Service charges . . . . . . . . . . . . . . . . . . . .        5,470        3,832        3,771
Security gains, net . . . . . . . . . . . . . . . . . .        4,629           52          495
Trust income. . . . . . . . . . . . . . . . . . . . . .        3,300        2,977        2,643
Bank-owned life insurance income. . . . . . . . . . . .        2,472        1,944          526
Other income. . . . . . . . . . . . . . . . . . . . . .        6,354        3,401        3,100
                                                         -----------  -----------  -----------
   Total other operating income . . . . . . . . . . . .       22,225       12,206       10,535
                                                         -----------  -----------  -----------
   Net interest income after provision for loan
     losses and other operating income. . . . . . . . .       92,037       75,931       71,900
                                                         -----------  -----------  -----------
OTHER OPERATING EXPENSES
Salaries, wages and employee benefits . . . . . . . . .       26,668       23,745       22,271
Occupancy . . . . . . . . . . . . . . . . . . . . . . .        3,294        2,927        2,684
Furniture and equipment . . . . . . . . . . . . . . . .        5,244        5,134        4,774
Other expenses. . . . . . . . . . . . . . . . . . . . .       19,837       12,871       12,247
                                                         -----------  -----------  -----------
Total other operating expenses. . . . . . . . . . . . .       55,043       44,677       41,976
                                                         -----------  -----------  -----------
   Income before income tax expense . . . . . . . . . .       36,994       31,254       29,924
   Income tax expense . . . . . . . . . . . . . . . . .        8,174        5,650        6,686
                                                         -----------  -----------  -----------
Net income. . . . . . . . . . . . . . . . . . . . . . .  $    28,820  $    25,604  $    23,238
                                                         ===========  ===========  ===========
Weighted average number of common shares:*
   Basic. . . . . . . . . . . . . . . . . . . . . . . .   18,305,956   18,537,362   18,546,794
                                                         ===========  ===========  ===========
   Diluted. . . . . . . . . . . . . . . . . . . . . . .   18,760,918   18,558,546   18,570,482
                                                         ===========  ===========  ===========
Net income per share information:*
   Basic. . . . . . . . . . . . . . . . . . . . . . . .  $      1.57  $      1.38  $      1.25
                                                         ===========  ===========  ===========
   Diluted. . . . . . . . . . . . . . . . . . . . . . .  $      1.54  $      1.38  $      1.25
                                                         ===========  ===========  ===========
Cash dividends per share* . . . . . . . . . . . . . . .  $      0.65  $      0.57  $      0.51
                                                         ===========  ===========  ===========
<FN>
*  Adjusted for 100% stock dividend effective 8/10/01 and 5% stock dividends effective
   11/9/00 and 9/30/99
</TABLE>

See accompanying notes to consolidated financial statements


PAGE 7
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
==================================================================================================================================
HARLEYSVILLE NATIONAL CORPORATION AND SUBSIDIARIES

(Dollars in thousands)

                                Common Stock                                    Accumulated
                              ------------------                                   Other
                              Number of    Par      Additional      Retained   Comprehensive   Treasury              Comprehensive
                               Shares     Value   Paid in Capital   Earnings   Income Loss)     Stock       Total       Income
                              ----------------------------------------------------------------------------------------------------
<S>                           <C>        <C>      <C>              <C>         <C>            <C>         <C>        <C>
Balance, January 1, 1999 . .      7,536  $ 7,536  $       50,899   $  67,800   $      5,586            -  $131,821
Acquisition of Citizens
  Bank and Trust Company . .        920      920           5,180      11,283            186            -    17,569
Stock options. . . . . . . .          3        3              28           -              -            -        31
Stock dividends. . . . . . .        376      376          12,145     (12,570)             -            -       (49)
Stock awards . . . . . . . .          -        -               8           -              -            -         8
Net income for 1999. . . . .          -        -               -      23,238              -            -    23,238   $     23,238
Other comprehensive loss,
  net of reclassifications
    and tax. . . . . . . . .          -        -               -           -        (16,580)           -   (16,580)       (16,580)
Cash dividends . . . . . . .          -        -               -      (9,375)             -            -    (9,375)
                              ----------------------------------------------------------------------------------------------------
Comprehensive income . . . .                                                                                         $      6,658
                                                                                                                     =============
Balance, December 31, 1999 .      8,835    8,835          68,260      80,376        (10,808)          -    146,663
Stock options. . . . . . . .          4        4              30           -              -           -         34
Stock dividends. . . . . . .        415      415          11,566     (12,306)             -         325          -
Stock awards . . . . . . . .          -        -              13           -              -           -         13
Net income for 2000. . . . .          -        -               -      25,604              -           -     25,604   $     25,604
Other comprehensive income,
  net of reclassifications
    and tax. . . . . . . . .          -        -               -           -         12,230           -     12,230         12,230
Purchases of Treasury stock           -        -               -           -              -        (578)      (578)
Cash dividends . . . . . . .          -        -               -     (10,430)             -           -    (10,430)
                              ----------------------------------------------------------------------------------------------------
Comprehensive income . . . .                                                                                         $     37,834
                                                                                                                     =============
Balance, December 31, 2000 .      9,254    9,254          79,869      83,244          1,422        (253)   173,536
Stock options. . . . . . . .         44       44             812           -              -           -        856
Stock dividends. . . . . . .      9,273    9,273          (9,273)          -              -           -          -
Stock awards . . . . . . . .          -        -              11           -              -           -         11
Net income for 2001. . . . .          -        -               -      28,820              -           -     28,820   $     28,820
Other comprehensive income,
  net of reclassifications
    and tax. . . . . . . . .          -        -               -           -          3,112           -      3,112          3,112
Purchases of Treasury stock           -        -               -           -              -      (5,093)    (5,093)
Cash dividends . . . . . . .          -        -               -     (11,893)             -           -    (11,893)
                              ----------------------------------------------------------------------------------------------------
Comprehensive income . . . .                                                                                         $     31,932
                                                                                                                     =============
Balance, December 31, 2001 .     18,571  $18,571  $       71,419   $ 100,171   $      4,534   $ ( 5,346)  $189,349
                              ====================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements


PAGE 8
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
=====================================================================================================================
HARLEYSVILLE NATIONAL CORPORATION AND SUBSIDIARIES

(Dollars in thousands)                                                                  Year Ended December 31
                                                                                   ----------------------------------
                                                                                      2001        2000        1999
                                                                                   ----------  ----------  ----------
<S>                                                                                <C>         <C>         <C>
OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  28,820   $  25,604   $  23,238
Adjustments to reconcile net income to net cash provided by operating activities:
     Provision for loan losses. . . . . . . . . . . . . . . . . . . . . . . . . .      3,930       2,312       2,153
     Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . .      2,866       3,043       2,937
     Net amortization of investment securities discount/premiums. . . . . . . . .      1,046         391         961
     Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . .      2,034       3,337       3,646
     Net realized securities gains. . . . . . . . . . . . . . . . . . . . . . . .     (4,629)        (52)       (495)
     Decrease (increase) in accrued income receivable . . . . . . . . . . . . . .        484      (1,347)       (530)
     Increase in accrued interest payable . . . . . . . . . . . . . . . . . . . .      4,768       4,802       3,038
     Net increase in other assets . . . . . . . . . . . . . . . . . . . . . . . .     (3,903)       (184)     (2,106)
     Net increase (decrease) in other liabilities . . . . . . . . . . . . . . . .      7,223      (1,431)        517
     Decrease in unearned income. . . . . . . . . . . . . . . . . . . . . . . . .       (225)     (1,878)     (3,381)
     Write-down of other real estate owned. . . . . . . . . . . . . . . . . . . .         44          86         117
     Decrease (increase) in intangible assets . . . . . . . . . . . . . . . . . .        337         309         (70)
                                                                                   ----------  ----------  ----------
       Net cash provided by operating activities. . . . . . . . . . . . . . . . .     42,795      34,992      30,025
                                                                                   ----------  ----------  ----------
INVESTING ACTIVITIES
Proceeds from sales of investment securities available for sale . . . . . . . . .    468,270     133,208      77,177
Proceeds, maturity or calls of investment securities held to maturity . . . . . .      4,799       6,869      11,214
Proceeds, maturity or calls of investment securities available for sale . . . . .    150,555      32,238      78,403
Purchases of investment securities held to maturity                                        -     (19,740)    (10,632)
Purchases of investment securities available for sale . . . . . . . . . . . . . .   (746,263)   (204,688)   (221,056)
Net increase in loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (109,625)    (94,783)   (161,726)
Net increase in premises and equipment. . . . . . . . . . . . . . . . . . . . . .     (2,435)     (3,056)     (3,785)
Purchase of bank-owned life insurance . . . . . . . . . . . . . . . . . . . . . .     (8,471)    (11,944)    (25,527)
Proceeds from sales of other real estate. . . . . . . . . . . . . . . . . . . . .      1,349       2,495       1,765
                                                                                   ----------  ----------  ----------
       Net cash used in investing activities. . . . . . . . . . . . . . . . . . .   (241,821)   (159,401)   (254,167)
                                                                                   ----------  ----------  ----------
FINANCING ACTIVITIES
Net increase in deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . .    257,812     147,613     130,112
Increase (decrease) in U.S. Treasury demand notes . . . . . . . . . . . . . . . .        622      (1,177)        973
(Decrease) increase in federal funds purchased. . . . . . . . . . . . . . . . . .    (44,500)     35,000      (1,500)
Increase (decrease) in FHLB borrowings. . . . . . . . . . . . . . . . . . . . . .     17,000     (19,500)     36,750
Increase (decrease) in securities sold under agreement. . . . . . . . . . . . . .      6,310     (34,532)     63,746
Proceeds from issuance of guaranteed preferred beneficial interest
  in Corporation s subordinated debentures. . . . . . . . . . . . . . . . . . . .      5,000           -           -
Cash dividends and fractional shares. . . . . . . . . . . . . . . . . . . . . . .    (11,893)    (10,430)     (9,375)
Dividends reinvestment                                                                     -           -         (49)
Repurchase of common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . .     (5,093)       (578)       (183)
Stock options and awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . .        867          47          39
                                                                                   ----------  ----------  ----------
       Net cash provided by financing activities. . . . . . . . . . . . . . . . .    226,125     116,443     220,513
                                                                                   ----------  ----------  ----------
Net increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . . .     27,099      (7,966)     (3,629)
Cash and cash equivalents at beginning of year. . . . . . . . . . . . . . . . . .     55,525      63,491      67,120
                                                                                   ----------  ----------  ----------
Cash and cash equivalents at end of year. . . . . . . . . . . . . . . . . . . . .  $  82,624   $  55,525   $  63,491
                                                                                   ==========  ==========  ==========
Cash paid during the year for:
     Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  60,169   $  60,973   $  47,611
                                                                                   ==========  ==========  ==========
     Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      4,900       3,348       3,356
                                                                                   ==========  ==========  ==========
Supplemental disclosure of noncash investing and financing activities:
     Transfer of assets from loans to other real estate owned . . . . . . . . . .  $   1,714   $   1,433   $   2,186
                                                                                   ==========  ==========  ==========
     Transfer of securities from investment securities held to maturity to
     investment securities available for sale . . . . . . . . . . . . . . . . . .  $       -   $   7,574   $   7,530
                                                                                   ==========  ==========  ==========
</TABLE>

See accompanying notes to consolidated financial statements.


PAGE 9
NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS
================================================================================
HARLEYSVILLE  NATIONAL  CORPORATION  AND  SUBSIDIARIES


1 / SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

Business

     Harleysville  National Corporation (the Corporation) through its subsidiary
banks, Harleysville National Bank and Trust Company, Citizens National Bank, and
Security  National  Bank  (collectively  the  Banks),  provides  a full range of
banking  services  to  individual  and  corporate  customers  located in eastern
Pennsylvania. The Banks compete with other banking and financial institutions in
their  primary  market  communities,  including  financial  institutions  with
resources substantially greater than their own. Commercial banks, savings banks,
savings  and  loan  associations,  credit unions and money market funds actively
compete  for deposits and for various types of loans. Such institutions, as well
as  consumer  finance  and insurance companies, may be considered competitors of
the  Banks  with respect to one or more of the services they render. In addition
to being subject to competition from other financial institutions, the Banks are
subject  to  federal  and  state  laws  and  to  regulations  of certain federal
agencies,  and,  accordingly,they  are periodically examined by those regulatory
authorities.  HNC Financial Company and HNC Reinsurance Company are wholly-owned
subsidiaries  of  the  Corporation.  HNC  Financial Company s principal business
function  is  to  expand  the  investment  opportunities of the Corporation. The
Corporation  incorporated  HNC Reinsurance Company during March 2001 to function
as  a  reinsurer of consumer loan credit life and accident and health insurance.

Basis  of  Financial  Statement  Presentation

     The  accounting  and  reporting  policies  of  the  Corporation  and  its
Subsidiaries conform with accounting principles generally accepted in the United
States  of  America (US GAAP) applicable to banks. All significant inter-company
transactions  are  eliminated in consolidation and certain reclassifications are
made  when  necessary  to conform the previous years financial statements to the
current year s presentation. In preparing the consolidated financial statements,
management  is  required  to  make  estimates  and  assumptions  that affect the
reported amounts of assets and liabilities as of the dates of the balance sheets
and  revenues  and  expenditures  for  the  periods presented. Therefore, actual
results  could  differ  significantly  from  those  estimates.

Investment  Securities

     The  Corporation  accounts  for securities under the Statement of Financial
Accounting  Standards (SFAS) No. 115, Accounting for Certain Investments in Debt
and  Equity Securities, which requires, among other things, that debt and equity
securities  classified  as  available  for  sale  be reported at fair value with
unrealized  gains  and  losses  excluded  from  earnings  and  reported in other
comprehensive income, net of income taxes. The net effect of unrealized gains or
losses, caused by marking an available for sale portfolio to market, could cause
fluctuations  in  the  level of shareholders equity and equity-related financial
ratios  as  changes  in market interest rates cause the fair value of fixed-rate
securities  to  fluctuate.

     Investment  securities  are  classified  as  held  to  maturity  when  the
Corporation  and  its  Subsidiaries  have  the  ability and intent to hold those
securities  to  maturity.  These  investment  securities  are  carried  at cost,
adjusted  for  amortization  of  premiums  and  accretion  of  discounts.

     Investment  securities expected to be held for an indefinite period of time
are  classified  as  available  for  sale and are stated at fair value. Realized
gains  and  losses on the sale of investment securities are recognized using the
specific  identification  method and are included in the consolidated statements
of  income.

Loans

     Loans  that  management  intends  to  hold  to  maturity  are stated at the
principal  amount  outstanding.  Net  loans  represent the principal loan amount
outstanding  net  of  deferred  cost  and  unearned  income  and  reduced by the
allowance  for loan losses. Interest on loans is credited to income based on the
principal  amount  outstanding.

     Lease  financing  represents  automobile  and  equipment leasing. The lease
financing  receivable  included  in loans is stated at the gross amount of lease
payments  receivable  plus  the residual value less income to be earned over the
life  of the leases. Such income is recognized over the term of the leases using
the  level  yield  method.

     Loan  origination fees and direct loan origination costs of completed loans
are deferred and recognized over the life of the loan as an adjustment to yield.
The  net  loan origination fees recognized as yield adjustments are reflected in
total  interest  income  in  the  consolidated  statements  of  income,  and the
unamortized  balance  of  such  net  loan  origination  fees  is reported in the
consolidated  balance  sheets  as  part  of  deferred  costs,  net.

     Income  recognition  of  interest  is  discontinued when, in the opinion of
management,  the  collectibility  of  such  interest becomes doubtful. A loan is
generally  classified  as nonaccrual when principal or interest has consistently
been in default for a period of 90 days or more or because of a deterioration in
the  financial  condition  of  the borrower, and payment in full of principal or
interest  is  not  expected.  Loans  past due 90 days or more and still accruing
interest  are  loans that are generally well-secured and expected to be restored
to  a  current  status  in  the  near  future.

     The  Corporation accounts for impaired loans under SFAS No. 114, Accounting
by Creditors for Impairment of a Loan, as amended by SFAS No. 118, Accounting by
Creditors  for  Impairment  of  a Loan- Income Recognition and Disclosures. This
standard  requires that a creditor measure impairment based on the present value
of  expected future cash flows discounted at the loan s effective interest rate,
except that as a practical expedient, a creditor may measure impairment based on
a  loan  s  observable  market price, or the fair value of the collateral if the
loan  is  collateral dependent. Regardless of the measurement method, a creditor
must  measure  impairment  based  on  the  fair value of the collateral when the
creditor  determines  that  foreclosure  is  probable.

     The  Corporation  adopted  SFAS  No.  125,  Accounting  for  Transfers  and
Servicing  of Financial Assets and Extinguishments of Liabilities, as amended by
SFAS  No.  127,  Deferral  of  the  Effective Date of Certain Provisions of FASB
Statement No. 125 - An Amendment of FASB Statement No. 125. SFAS No. 125 applies
a  control-oriented,  financial  components approach to financial-asset-transfer
transactions  whereby the Corporation (1) recognizes the financial and servicing
assets  it  controls  and  the  liabilities  it  has  incurred, (2) derecognizes
financial  assets  when  control  has  been  surrendered,  and  (3)derecognizes
liabilities  once  they  are  extinguished.  Under  SFAS  No.  125,  control  is
considered  to  have  been  surrendered only if: (i) the transferred assets have
been isolated from the transferor and its creditors, even in bankruptcy or other
receivership  (ii)  the  transferee  has  the  right  to  pledge or exchange the
transferred  assets, or, is a qualifying special purpose entity (as defined) and
the  holders  of beneficial interests in that entity have the right to pledge or
exchange  those  interests; and (iii) the transferor does not maintain effective
control over the transferred assets through an agreement which both entitles and
obligates  it to repurchase or redeem those assets prior to maturity, or through
an  agreement which both entitles and obligates it to repurchase or redeem those
assets if they were not readily obtainable elsewhere. If any of these conditions
are  not  met, the Corporation accounts for the transfer as a secured borrowing.

     SFAS  No. 125 also requires that the Corporation derecognize a liability if
and  when  it  is  extinguished.  A  liability  is  considered  extinguished

PAGE 10
under  SFAS  No.  125  if  (1)  the  Corporation pays the creditor, and thus, is
relieved  of  it  obligation  for the liability, or (2) is legally released from
being  the  primary  obligor  under  the  liability, either judicially or by the
creditor.  The  adoption of this statement did not have a material impact on the
Corporation  s  consolidated  financial  position  or  results  of  operations.

     The  Corporation  adopted  SFAS  No.  140,  Accounting  for  Transfers  and
Servicing of Financial Assets and Extinguishments of Liabilities, which replaces
SFAS  No.  125,  Accounting  for  Transfers and Servicing of Financial Asset and
Extinguishments  of  Liabilities,  revises  the standards for accounting for the
securitizations and other transfers of financial assets and collateral. This new
standard  also  requires  certain  disclosures,  but  carries  over  most of the
provisions  of  SFAS  125.

     On  June  29,  2001, the Financial Accounting Standards Board (FASB) issued
Statement  of  Financial  Accounting  Standards  (SFAS)  No.  141,  Business
Combinations,  and  SFAS  No.  142, Goodwill and Intangible Assets. SFAS No. 141
requires  that  all business combinations initiated after June 30, 2001, must be
accounted  for under the purchase method of accounting. A plan of combination is
considered  to  be initiated on the earlier of the date that a combining company
(a)  announces  publicly  or  formally makes known to its shareholders the major
terms  of the plan, or (b) notifies its shareholders, in writing, of an exchange
offer.  SFAS  No.  141  was  adopted  upon  issuance.  SFAS  No.  142 prescribes
accounting for all purchased goodwill and intangible assets. The SFAS supersedes
APB  Opinion  17,  Intangible  Assets,  but  carries  over  guidance  related to
internally  developed  intangible  assets.  SFAS  No.  142  states that acquired
goodwill  is  not  amortized, but is tested for impairment at the reporting unit
level  annually and whenever an impairment indicator arises. A reporting unit is
at the same level or one level below an operating segment as defined by SFAS No.
131,  Disclosures  About Segments of an Enterprise and Related Information. SFAS
No.  142  is effective for fiscal years beginning after December 15, 2001. Until
the  adoption  of  SFAS No. 142, existing goodwill continues to be amortized and
tested  for impairment under previously existing standards. The adoption of SFAS
No.  141  and  SFAS  No.  142  is  not expected to have a material impact on the
Corporation  s  financial  position,  or  results  of  operations.

Allowance  for  Loan  Losses

     The  allowance  for  loan  losses  is maintained at a level that management
considers  adequate  to provide for potential losses based upon an evaluation of
known  and  inherent  risks  in the loan portfolio. Allowance for loan losses is
based on estimated net realizable value unless it is probable that loans will be
foreclosed,  in which case allowance for loan losses is based on fair value less
selling  costs. Management s periodic evaluation is based upon evaluation of the
portfolio,  past loss experience, current economic conditions and other relevant
factors.  While  management  uses  the  best  information available to make such
evaluations,  future  adjustments  to the allowance may be necessary if economic
conditions  differ  substantially  from  the  assumptions  used  in  making  the
evaluation.  In  addition,  various  regulatory agencies, as an integral part of
their  examination  process,  periodically  review the Banks allowances for loan
losses.  Such  agencies  may  require  the  Banks  to recognize additions to the
allowance  based  on their judgment of information available to them at the time
of  their  examination.

     On  July 6, 2001, the Securities and Exchange Commission (SEC) issued Staff
Accounting  Bulletin (SAB) No. 102, Selected Loan Loss Allowance Methodology and
Documentation  Issues.  SAB  No.  102  provides  guidance  on  the  development,
documentation,  and  application  of  a  systematic  methodology for determining
allowances  for  loans and leases in accordance with US GAAP.The adoption of SAB
No.  102 did not have a material impact on the Corporation s financial position,
or  results  of  operations.

Bank  Premises  and  Equipment

     Bank  premises  and  equipment  are  stated  at  cost  less  accumulated
depreciation.  Depreciation  is recorded using the straight-line and accelerated
depreciation  methods  over  the estimated useful lives of the assets. Leasehold
improvements are amortized over the term of the lease or estimated useful lives,
whichever  is  shorter.

Net Assets in Foreclosure

     Net  assets  in foreclosure include foreclosed real estate which is carried
at  the lower of cost (lesser of carrying value of loan or fair value at date of
acquisition)  or  estimated fair value less selling costs. Any write-down, at or
prior  to  the dates the real estate is considered foreclosed, is charged to the
allowance  for  loan  losses.  Subsequent  write-downs  are  recorded  in  other
expenses,  and  expenses incurred in connection with holding such assets and any
gains  or  losses upon their sale are included in other income and expenses. Net
assets in foreclosure also includes foreclosed leases which are carried at lower
of  cost (lesser of carrying value of loan or fair value at date of acquisition)
or  estimated  fair  value  less  selling  costs.

Intangible Assets

     Intangible assets consist of a core deposit intangible which represents the
present  value of the difference in costs between the acquired core deposits and
the  market alternative funding sources. Intangible assets also include mortgage
servicing  rights.  The  core  deposit  intangibles  are  being amortized over a
10-year life on an accelerated basis. The amortization charged to income related
to  the  core  deposit intangibles was $435,000 in 2001 and $325,000 for each of
the years ended December 31, 2000 and 1999, respectively. The mortgage servicing
rights  are  amortized  in  proportion  to  and over the period of estimated net
servicing  income.  Mortgage  servicing  rights  are  reported  at  fair  value.

Stock Options

     The  Corporation  adopted  SFAS  No.  123,  "Accounting  for  Stock-Based
Compensation,"  which contains a fair value-based method for valuing stock-based
compensation  that  entities  may  use,  which measures compensation cost at the
grant date based on the fair value of the award. Compensation is then recognized
over the service period, which is usually the vesting period. Alternatively, the
standard  permits entities to continue accounting for employee stock options and
similar  instruments  under  Accounting  Principles  Board (APB) Opinion No. 25,
"Accounting  for  Stock  Issued to Employees." Entities that continue to account
for  stock  options  using  APB  Opinion  No.  25 are required to make pro forma
disclosures  of  net  income  and earnings per share, as if the fair value-based
method of accounting defined in SFAS No. 123 had been applied. The Corporation's
employee  stock  option  plan  is  accounted  for  under  APB  Opinion  No.  25.

Income Taxes

     The  Corporation  accounts  for  income  taxes  under  the liability method
specified  by  SFAS  No. 109, "Accounting for Income Taxes." Under SFAS No. 109,
deferred  tax  assets  and  liabilities  are  measured  using  enacted tax rates
expected  to  apply  to  taxable  income  in  the years in which those temporary
differences  are  expected  to  be  recovered or settled. The effect on deferred
taxes  of  a  change  in  tax  rates  is recognized in income in the period that
includes  the  enactment  date.  The  principal  types of accounts, resulting in
differences  between  assets  and  liabilities  for  financial statement and tax
return  purposes,  are  the  allowance  for possible loan losses, leased assets,
deferred  loan  fees  and  compensation.

Pension Plans

     The  Corporation  has certain employee benefit plans covering substantially
all  employees.  The  Corporation  accrues  service  cost  as  incurred.

Restrictions on Cash and Due From Banks

     As  of  December  31, 2001, the Banks did not need to maintain reserves (in
the  form  of  deposits  with  the  Federal  Reserve  Bank)  to  satisfy federal
regulatory  requirements.

Bank Owned Life Insurance (BOLI)

     During  2001,  2000 and 1999, the Corporation entered into an investment of
bank owned life insurance (BOLI). BOLI involves the purchasing of life insurance
by  the Corporation on a chosen group of employees. The Corporation is the owner
and  beneficiary  of the policies. This pool of insurance, due to tax advantages


PAGE 11
to  the  Banks,  is profitable to the Corporation. This profitability is used to
offset a portion of future benefit cost increases. Banks' deposits fund BOLI and
the  earnings  from  BOLI  are  recognized  as  other  income.

Net Income Per Share

     The  Corporation  adopted  the  provisions  of  SFAS No. 128, "Earnings per
Share." SFAS No. 128 eliminates primary and fully diluted earnings per share and
requires  presentation  of  basic  and  diluted  earnings  per  share  (EPS)  in
conjunction  with  the  disclosure  of  the  methodology  used in computing such
earnings  per  share. Basic earnings per share excludes dilution and is computed
by  dividing  income  available  to  common shareholders by the weighted-average
common  shares  outstanding  during  the period. Diluted earnings per share take
into  account  the  potential  dilution  that could occur if securities or other
contracts  to issue common stock were exercised and converted into common stock.

     The  reconciliation  of  the  numerators  and denominators of the basic and
diluted  EPS  follows:

<TABLE>
<CAPTION>
                                     Year Ended December 31, 2001
                                  Income        Shares      Per Share
                               (Numerator)   (Denominator)    Amount
                               ------------  -------------  -------------
<S>                            <C>           <C>            <C>
Net income. . . . . . . . . .  $ 28,820,000
                               ============
Basic EPS
Income available to
common shareholders . . . . .  $ 28,820,000     18,305,956  $        1.57
                                                            =============
Effect of Dilutive Securities
Stock options . . . . . . . .             -        454,962
                               ------------  -------------
Diluted EPS
Income available to
common shareholders . . . . .  $ 28,820,000     18,760,918  $        1.54
                               ============  =============  =============
</TABLE>

There were no anti-dilutive weighted shares excluded in the computation of 2001
diluted EPS since options exercise prices were less than the average market
price of the common stock.

<TABLE>
<CAPTION>
                                       Year Ended December 31, 2000
                               ---------------------------------------------
<S>                            <C>             <C>            <C>
Net income. . . . . . . . . .  $   25,604,000
                               ==============
Basic EPS
Income available to
common shareholders . . . . .  $   25,604,000     18,537,362  $         1.38
                                                              ==============
Effect of Dilutive Securities
Stock options . . . . . . . .               -         21,184
                               --------------  -------------
Diluted EPS
Income available to
common shareholders . . . . .  $   25,604,000     18,558,546  $         1.38
                               ==============  =============  ==============
</TABLE>

297,954  anti-dilutive  weighted shares have been excluded in the computation of
2000  diluted  EPS since the options exercise price was greater than the average
market  price  of  the  common  stock.

<TABLE>
<CAPTION>
                                       Year Ended December 31, 2000
                               ---------------------------------------------
<S>                            <C>             <C>            <C>
Net income. . . . . . . . . .  $   23,238,000
                               ==============
Basic EPS
Income available to
common shareholders . . . . .  $   23,238,000     18,546,794  $         1.25
                                                              ==============
Effect of Dilutive Securities
Stock options . . . . . . . .               -         23,688
                               --------------  -------------
Diluted EPS
Income available to
common shareholders . . . . .  $   23,238,000     18,570,482  $         1.25
                               ==============  =============  ==============
</TABLE>

8,822  anti-dilutive  weighted  shares  have been excluded in the computation of
1999  diluted  EPS since the options exercise price was greater than the average
market  price  of  the  common  stock.

Comprehensive  Income

     The  Corporation  has  adopted SFAS No. 130, Reporting Comprehensive Income
which  establishes  standards  to  provide prominent disclosure of comprehensive
income  items.  Comprehensive  income  is  the  change  in  equity of a business
enterprise  during a period from transactions and other events and circumstances
from  non-owner  sources.  Other comprehensive income consists of net unrealized
gains  (losses)  on  investment securities available for sale.

     The components of other comprehensive income are as follows:

<TABLE>
<CAPTION>
(Dollars in thousands)              Before tax    Tax benefit    Net of tax
December 31, 2001                     amount       (expense)       amount
-----------------                  -----------------------------------------
<S>                                <C>           <C>            <C>
Unrealized gains on securities:
  Unrealized holding gains
    arising during period . . . .  $     9,416   $     (3,295)  $     6,121
Less reclassification
  adjustment for gains
  realized in net income. . . . .        4,629         (1,620)        3,009
                                   ------------  -------------  ------------
Other comprehensive
  income, net.. . . . . . . . . .  $     4,787   $     (1,675)  $     3,112
                                   ============  =============  ============

                                    Before tax    Tax benefit    Net of tax
December 31, 2000                     amount       (expense)        amount
-----------------                  -----------------------------------------
Unrealized gains on securities:
  Unrealized holding gains
    arising during period . . . .  $    18,845   $     (6,581)  $    12,264
Less reclassification
  adjustment for gains
  realized in net income. . . . .           52            (18)           34
                                   ------------  -------------  ------------
Other comprehensive
  income, net.. . . . . . . . . .  $    18,793   $     (6,563)  $    12,230
                                   ============  =============  ============

                                   Before tax    Tax benefit    Net of tax
December 31, 1999                   amount       (expense)        amount
-----------------                  -----------------------------------------
Unrealized losses on securities:
  Unrealized holding losses
    arising during period . . . .  $   (25,242)  $      8,835   $   (16,407)
Less reclassification
  adjustment for gains
  realized in net income. . . . .          495           (322)          173
                                   ------------  -------------  ------------
Other comprehensive
  loss, net . . . . . . . . . . .  $   (25,737)  $      9,157   $   (16,580)
                                   ============  =============  ============
</TABLE>

Other Information

     SFAS  No. 131 establishes standards for the way public business enterprises
report  information  about operating segments in annual financial statements and
requires  that  those  enterprises  report  selected information about operating
segments in subsequent interim financial reports issued to shareholders. It also
establishes  standards  for  related  disclosure  about  products  and services,
geographic  areas,  and  major  customers.  The statement requires that a public
business  enterprise  report  financial  and  descriptive  information about its
reportable  operating  segments.  Operating  segments  are  components  of  an
enterprise  about  which  separate  financial  information  is available that is
evaluated  regularly  by  the  chief operating decision maker in deciding how to
allocate  resources  and  assess  performance.  The statement also requires that
public  enterprises report a measure of segment profit or loss, certain specific
revenue  and expense items and segment assets. It also requires that information
be  reported  about revenues derived from the enterprises' products or services,
or  about the countries in which the enterprises earn revenues and holds assets,
and  about  major  customers,  regardless  of whether the information is used in
making  operating  decisions.

     The  company  has  one  reportable segment, "Community Banking." All of the
Corporation's  activities  are  interrelated, and each activity is dependent and


PAGE 12
assessed  based  on  how  each of the activities of the Corporation supports the
others.  For  example,  commercial  lending is dependent upon the ability of the
Banks to fund themselves with retail deposits and other borrowings and to manage
interest  rate  and credit risk. This situation is also similar for consumer and
residential  mortgage  lending. Accordingly, all significant operating decisions
are  based  upon  analysis  of the Corporation as one operating segment or unit.

     In  June  1998,  the  FASB  issued SFAS No. 133, "Accounting for Derivative
Instruments  and  Hedging  Activity"  as  amended in June 1999, by SFAS No. 137,
"Accounting  for Derivative Instruments and Hedging Activities - Deferral of the
Effective  Date  of  FASB  Statement  No.  133,"  and in June 2000, by SFAS 138,
"Accounting  for Certain Derivative Instruments and Certain Hedging Activities,"
(collectively  SFAS  133).  SFAS  No.  133  establishes accounting and reporting
standards  for  derivative instruments, including certain derivative instruments
imbedded  in  other  contracts,  and for hedging activities. It requires that an
entity  recognize  all  derivatives  as  either  assets  or  liabilities  in the
statement  of financial position and measure those instruments at fair value. If
certain  conditions  are  met,  a derivative may be specifically designated as a
hedge.  The  accounting  for  changes in the fair value of derivative (gains and
losses) depends on the intended use of the derivative and resulting designation.
On  January  1,  1999, the Corporation adopted SFAS No. 133. Concurrent with the
adoption,  the Corporation reclassified $7,530,000 of investment securities from
the  held  to  maturity category to the available for sale category and recorded
$221,000  net  of  taxes  of  unrealized  holding  gains  in  accumulated  other
comprehensive  income.

     During  July  2000,  the  Corporation reclassified $7,574,000 of investment
securities  from  the  held  to  maturity  category  to  the  available for sale
category, due to its acquisition of Citizens Bank and Trust Company. As a result
of  the  reclassification,  the  Corporation  recorded  $19,000  net  of  taxes
unrealized  holding  losses  in  accumulated  other  comprehensive  income.

     Statement  of  Financial  Accounting  Standards  No.  119 "Disclosure About
Derivative  Financial Instruments and Fair Value of Financial Instruments" (SFAS
No.  119) requires disclosures about financial instruments, which are defined as
futures,  forwards,  swap  and  option contracts and other financial instruments
with  similar  characteristics.  On  balance  sheet receivables and payables are
excluded  from  this  definition.  The  Corporation  did not hold any derivative
financial  instruments  as defined by SFAS No. 119 at December 31, 2001, 2000 or
1999.

2 / ACQUISITIONS

     On  April 28, 2000, the Corporation consummated its acquisition of Citizens
Bank  and  Trust  Company.  Under  the  terms  of the merger, accounted for as a
pooling-of-interest, Citizens Bank and Trust Company's shareholders received 166
shares  of  Harleysville  National  Corporation  common  stock for each share of
common  stock  of  Citizens  Bank  and Trust Company. Upon the completion of the
acquisition,  Citizens  Bank  and Trust Company's banking operations merged into
those  of  Citizens  National  Bank,  a  wholly-owned subsidiary of Harleysville
National  Corporation.

     On  January  20,  1999,  the  Corporation  consummated  its  acquisition of
Northern  Lehigh  Bancorp,  Inc.,  parent  company  of Citizens National Bank of
Slatington.  Northern  Lehigh Bancorp, Inc. shareholders received 3.57 shares of
Harleysville National Corporation common stock for each share of Northern Lehigh
Bancorp  common  stock.

     The acquisition was effected by the merger of Northern Lehigh Bancorp, Inc.
with  Harleysville  National Corporation North, Inc., a bank holding company and
wholly-owned  subsidiary of Harleysville National Corporation. Citizens National
Bank  of Slatington merged with and into The Citizens National Bank of Lansford,
a  national  banking  association  and  wholly-owned  subsidiary of Harleysville
National Bank North, Inc., under the name Citizens National Bank. The merger was
accounted  for  on  a pooling-of-interest basis, and all prior periods have been
restated  to  reflect  the  combination.

3 / INVESTMENT SECURITIES

     The  amortized  cost, unrealized gains and losses, and the estimated market
values of the Corporation's investment securities held to maturity and available
for  sale  are  as  follows:

<TABLE>
<CAPTION>
(Dollars in thousands)                                 DECEMBER 31, 2001
                                     ---------------------------------------------------
                                                     GROSS         GROSS      ESTIMATED
                                     AMORTIZED    UNREALIZED     UNREALIZED     MARKET
HELD TO MATURITY                        COST         GAINS        (LOSSES)      VALUE
----------------                     ---------------------------------------------------
<S>                                  <C>         <C>            <C>           <C>
OBLIGATIONS OF STATES AND
  POLITICAL SUBDIVISIONS. . . . . .  $   22,997  $         582  $        (3)  $   23,576
MORTGAGE-BACKED
  SECURITIES. . . . . . . . . . . .       2,552             94            -        2,646
OTHER SECURITIES. . . . . . . . . .         550             10            -          560
                                     ----------  -------------  ------------  ----------
  TOTALS. . . . . . . . . . . . . .  $   26,099  $         686  $        (3)  $   26,782
                                     ==========  =============  ============  ==========
AVAILABLE FOR SALE
------------------
U.S. TREASURY NOTES . . . . . . . .  $   29,832  $       1,261  $         -   $   31,093
OBLIGATIONS OF OTHER U.S.
  GOVERNMENT AGENCIES
  AND CORPORATIONS. . . . . . . . .      26,448            532            -       26,980
OBLIGATIONS OF STATES AND
  POLITICAL SUBDIVISIONS. . . . . .     181,443          1,175       (1,960)     180,658
MORTGAGE-BACKED
  SECURITIES. . . . . . . . . . . .     401,763          5,170         (755)     406,178
OTHER SECURITIES. . . . . . . . . .      59,910          2,251         (699)      61,462
                                     ----------  -------------  ------------  ----------
TOTALS. . . . . . . . . . . . . . .  $699,396 $         10,389  $    (3,414)  $  706,371
                                     ==========  =============  ============  ==========

                                                     December 31,  2000
                                     ---------------------------------------------------
                                                     Gross         Gross      Estimated
                                     Amortized    Unrealized     Unrealized     Market
Held To Maturity                        Cost         Gains        (Losses)      Value
----------------                     ---------------------------------------------------
U.S. Treasury Notes . . . . . . . .  $      500  $           -  $         -   $      500
Obligations of states and
  political subdivisions. . . . . .      25,803            701            -       26,504
Mortgage-backed
  securities. . . . . . . . . . . .       3,437             70            -        3,507
Other securities. . . . . . . . . .       1,101              3          (14)       1,090
                                     ----------  -------------  ------------  ----------
  Totals .. . . . . . . . . . . . .  $   30,841  $         774  $       (14)  $   31,601
                                     ==========  =============  ============  ==========
Available for Sale
------------------
U.S. Treasury notes . . . . . . . .  $   39,692  $         667  $         -   $   40,359
Obligations of other U.S.
  Government agencies
  and corporations. . . . . . . . .      38,508            214         (112)      38,610
Obligations of states and
  political subdivisions. . . . . .     193,269          3,252       (1,448)     195,073
Mortgage-backed
  securities. . . . . . . . . . . .     226,578          1,880         (975)     227,483
Other securities. . . . . . . . . .      70,384          2,086       (3,376)      69,094
                                     ----------  -------------  ------------  ----------
  Totals .. . . . . . . . . . . . .  $  568,431  $       8,099  $    (5,911)  $  570,619
                                     ==========  =============  ============  ==========
</TABLE>


                                                                     (continued)
PAGE 13
     There  are no significant concentrations of securities (greater than 10% of
shareholders'  equity)  in  any  individual  security  issuer.

     Securities  with  a  carrying  value  of  $457,964,000  and $393,656,000 at
December  31,  2001 and 2000, respectively, were pledged to secure public funds,
government  deposits  and  repurchase  agreements.

     The  amortized cost and estimated market value of investment securities, at
December 31, 2001, by contractual maturities, are shown below. Actual maturities
will  differ  from contractual maturities because issuers and borrowers may have
the  right  to  call  or  prepay  obligations with or without call or prepayment
penalties.

<TABLE>
<CAPTION>
(Dollars in thousands)     Held to Maturity       Available for Sale
                                     Estimated               Estimated
                         Amortized     Market    Amortized     Market
                            Cost       Value        Cost       Value
                         ----------------------------------------------
<S>                      <C>         <C>         <C>         <C>
Due in one year or less  $    2,351  $    2,414  $   34,389  $   34,883
Due after one year
  through five years. .      10,755      11,018      80,351      82,702
Due after five years
  through ten years . .       6,521       6,761      47,599      47,918
Due after ten years . .       3,920       3,943     135,294     134,690
                         ----------  ----------  ----------  ----------
                             23,547      24,136     297,633     300,193
Mortgage-backed
  securities. . . . . .       2,552       2,646     401,763     406,178
                         ----------  ----------  ----------  ----------
  Totals. . . . . . . .  $   26,099  $   26,782  $  699,396  $  706,371
                         ==========  ==========  ==========  ==========
</TABLE>

     Proceeds from sales of investment securities available for sale during 2001
were  $468,270,000.  Gross gains of $5,415,000 and gross losses of $786,000 were
realized  on these sales. Proceeds from sales of investment securities available
for sale during 2000 were $133,208,000. Gross gains of $953,000 and gross losses
of  $901,000  were  realized  on  these sales. Proceeds from sales of investment
securities  available  for  sale  during  1999  were $77,177,000. Gross gains of
$764,000  and  gross  losses  of  $269,000  were  realized  on  these  sales.

4 / LOANS

MAJOR CLASSIFICATIONS OF LOANS ARE AS FOLLOWS:

<TABLE>
<CAPTION>
(Dollars in thousands)           December 31,
                           ------------------------
                              2001         2000
                           ------------------------
<S>                        <C>          <C>
Real estate . . . . . . .  $  417,891   $  369,831
Commercial and industrial     349,138      296,168
Consumer loans. . . . . .     439,288      427,518
Lease financing . . . . .     107,617      116,088
                           -----------  -----------
     Total loans. . . . .   1,313,934    1,209,605
Deferred costs, net . . .       2,675        2,450
Allowance for loan losses     (15,558)     (15,210)
                           -----------  -----------
     Net loans. . . . . .  $1,301,051   $1,196,845
                           ===========  ===========
</TABLE>

     A loan is generally classified as nonaccrual when principal or interest has
consistently  been  in  default  for a period of 90 days or more or because of a
deterioration  in  the financial condition of the borrower or payment in full of
principal or interest is not expected. Delinquent loans past due 90 days or more
and  still  accruing  interest  are  loans  that  are generally well-secured and
expected  to  be  restored  to  a  current  status  in  the  near  future.

     On December 31, 2001, nonaccrual loans were $6,354,000 and loans 90 days or
more past due and still accruing interest were $1,926,000. On December 31, 2000,
nonaccrual  loans  were  $5,370,000 and loans 90 days or more past due and still
accruing  interest  were  $514,000.

     The balance of impaired loans was $3,721,000 at December 31, 2001, compared
to $3,322,000 at December 31, 2000. The Banks have identified a loan as impaired
when  it is probable that interest and principal will not be collected according
to  the  contractual  terms  of  the  loan  agreement.

     The allowance for loan loss associated with the impaired loans was $429,000
at  December  31,  2001, and $377,000 at December 31, 2000. The average impaired
loan  balance was $3,505,000 in 2001, compared to $2,965,000 in 2000. The income
recognized  on  impaired  loans  during  2001 and 2000 was $78,000 and $128,000,
respectively.  The  Banks'  policy  for  interest income recognition on impaired
loans is to recognize income on restructured loans under the accrual method. The
Banks  recognize  income on nonaccrual loans under the cash basis when the loans
are  both  current  and  the  collateral  on the loan is sufficient to cover the
outstanding  obligation  to  the  Banks.  The Banks will not recognize income if
these  factors  do  not  exist.

     The  Banks  have  no  concentration  of loans to individual borrowers which
exceeded  10%  of  total loans at December 31, 2001 and 2000. As of December 31,
2001,  the  Banks  have a concentration of indirect consumer loans (11% of total
loans)  included in the consumer loan classification. The Banks actively monitor
the  risk  of this loan concentration. The Banks continued to pursue new lending
opportunities  while  seeking  to  maintain  a  portfolio  that is diverse as to
industry  concentration, type and geographic distribution. The Banks' geographic
lending  area  is primarily concentrated in Montgomery, Carbon, Bucks, and Wayne
counties,  but  also  includes  Chester, Berks, Lehigh, Monroe, Northhampton and
Schuylkill  counties.

     Loans  to  directors,  executive officers and their associates, are made in
the  ordinary  course of business and on substantially the same terms, including
interest  rates  and  collateral, as those prevailing at the time for comparable
transactions  with  others.  Activity  of  these  loans  is  as  follows:

<TABLE>
<CAPTION>
(Dollars in thousands)                               Year Ended December 31,
                                                ------------------------------
                                                  2001      2000       1999
                                                ------------------------------
<S>                                             <C>       <C>        <C>
Balance, January 1 . . . . . . . . . . . . . .  $ 8,344   $  9,411   $  6,162
New loans. . . . . . . . . . . . . . . . . . .   68,011     68,009     30,064
Repayments . . . . . . . . . . . . . . . . . .  (59,872)   (69,076)   (26,815)
                                                --------  ---------  ---------
Balance, December 31 . . . . . . . . . . . . .  $16,483   $  8,344   $  9,411
                                                ========  =========  =========
</TABLE>

PAGE 14
5 / ALLOWANCE FOR LOAN LOSSES

     Transactions in the allowance for loan losses are as follows:

<TABLE>
<CAPTION>
(Dollars in thousands)        Year Ended December 31,
                            ----------------------------
                              2001      2000      1999
                            ----------------------------
<S>                         <C>       <C>       <C>
Balance, beginning of year  $15,210   $14,887   $14,245
                            --------  --------  --------
  Provision charged to
    operating expenses . .    3,930     2,312     2,153
                            --------  --------  --------
Loans charged off:
  Commercial
    and industrial . . . .     (494)     (123)     (108)
  Consumer . . . . . . . .   (2,594)   (1,470)     (632)
  Real estate. . . . . . .     (498)     (610)     (833)
  Lease financing. . . . .   (1,075)     (450)     (226)
                            --------  --------  --------
    Total charged off. . .   (4,661)   (2,653)   (1,799)
                            --------  --------  --------
Recoveries:
  Commercial
    and industrial . . . .       38        60        28
  Consumer . . . . . . . .      607       289       112
  Real estate. . . . . . .      328       274        96
  Lease financing. . . . .      106        41        52
                            --------  --------  --------
    Total recoveries . . .    1,079       664       288
                            --------  --------  --------
Balance, end of year . . .  $15,558   $15,210   $14,887
                            ========  ========  ========
</TABLE>

6 / BANK  PREMISES  AND  EQUIPMENT

     Bank premises and equipment consist of the following:

<TABLE>
<CAPTION>
(Dollars in thousands)          Estimated     December 31,
                                 Useful     ----------------
                                  Lives      2001     2000
                               -----------------------------
<S>                            <C>          <C>      <C>
Land                                        $ 3,190  $ 3,202
Buildings . . . . . . . . . .  15-39 years   22,215   21,419
Furniture, fixtures
  and equipment . . . . . . .   3-7 years    21,742   20,186
                                            -------  -------
    Total cost. . . . . . . .                47,147   44,807
Less accumulated depreciation
  and amortization. . . . . .                25,708   22,937
                                            -------  -------
    Total . . . . . . . . . .               $21,439  $21,870
                                            =======  =======
</TABLE>

7 / DEPOSITS  AND  BORROWINGS

     At  December  31, 2001, scheduled maturities of certificates of deposit are
as  follows:

<TABLE>
<CAPTION>
     Year Ended December 31,   Amount
     ---------------------------------
<S>                           <C>
     2002. . . . . . . . . .  $508,987
     2003. . . . . . . . . .    96,441
     2004. . . . . . . . . .    21,604
     2005. . . . . . . . . .    84,741
     2006. . . . . . . . . .    12,060
     Thereafter. . . . . . .        61
                              --------
     Total . . . . . . . . .  $723,894
                              ========
</TABLE>

     Federal  Home  Loan  Bank  (FHLB)  advances  at  December 31, 2001, totaled
$127,750,000.  The  advances  are collateralized by FHLB stock and certain first
mortgage  loans  and  mortgage-backed  securities.  First  mortgages  used  as
collateral  for  these  advances  totaled  $100,761,000.  These  advances  had a
weighted  average  interest rate of 4.96%. Advances are made pursuant to several
different credit programs offered from time to time by the FHLB. Unused lines of
credit  at  the FHLB were $112,436,000 at December 31, 2001, and $114,738,000 at
December  31,  2000.

     Outstanding borrowings mature as follows:

<TABLE>
<CAPTION>
(dollars in thousands)
<S>                                              <C>
     2002 . . . . . . . . . . . . . . . . . . .  $      -
     2003 . . . . . . . . . . . . . . . . . . .         -
     2004 . . . . . . . . . . . . . . . . . . .    24,000
     2005 . . . . . . . . . . . . . . . . . . .         -
     2006 and thereafter. . . . . . . . . . . .   103,750
                                                 --------
     Total. . . . . . . . . . . . . . . . . . .  $127,750
                                                 ========
</TABLE>

     The  Banks,  pursuant  to  a  designated cash management agreement, utilize
securities  sold  under agreements to repurchase as vehicles for customers sweep
and  term  investment  products.  Securitization  under  these  cash  management
agreements  are  in  U.S.  Treasury  Securities  and  obligations  of states and
political  subdivisions  securities.

     These  securities are held in a third-party custodian s account, designated
by  the Banks under a written custodial agreement that explicitly recognizes the
Banks interest in the securities. At December 31, 2001, these agreements matured
within  one-year.  The  average  balance  of securities sold under agreements to
repurchase  for  2001was  $88,418,000 and the maximum amounts outstanding at any
month-end  during  2001  was  $96,224,000.

     On  February  22,  2001,  the Corporation issued $5,000,000 of 10.2% junior
subordinate  deferrable  interest  debentures  (the  debentures) to Harleysville
Statutory  Trust  1  (the  Trust),  a  Connecticut  business trust, in which the
Corporation  owns all of the common equity. The debentures are the sole asset of
the Trust. The Trust issued $5,000,000 of preferred securities to investors. The
Corporation  s  obligations  under  the  debentures and related documents, taken
together,  constitute  a  full and unconditional guarantee by the Corporation of
the Trust s obligations under the preferred securities. The preferred securities
must  be  redeemed  upon  maturity of the subordinate debentures on February 22,
2031.

8 / FEDERAL  INCOME  TAXES

     Income  tax  expense  from current operations is composed of the following:

<TABLE>
<CAPTION>
(Dollars in thousands)                          Year Ended December 31,
                                                ----------------------
                                                 2001    2000    1999
                                                ----------------------
<S>                                             <C>     <C>     <C>
Current tax payable. . . . . . . . . . . . . .  $6,847  $2,379  $3,282
Deferred income tax. . . . . . . . . . . . . .   1,327   3,271   3,404
                                                ------  ------  ------
  Tax expense. . . . . . . . . . . . . . . . .  $8,174  $5,650  $6,686
                                                ======  ======  ======
</TABLE>

     The  effective income tax rates of 22.1% for 2001, 18.1% for 2000 and 22.3%
for  1999  were less than the applicable federal income tax rate of 35% for each
year.  The  reason  for  these  differences  follows:

<TABLE>
<CAPTION>
(Dollars in thousands)        Year Ended December 31,
                           ----------------------------
                             2001      2000      1999
                           ----------------------------
<S>                        <C>       <C>       <C>
Expected tax expense. . .  $12,946   $10,939   $10,464
Tax-exempt income net of
  expense disallowance. .   (4,749)   (5,432)   (3,885)
Other . . . . . . . . . .      (23)      143       107
                           --------  --------  --------
  Actual tax expense. . .  $ 8,174   $ 5,650   $ 6,686
                           ========  ========  ========
</TABLE>
                                                                     (continued)
PAGE 15
     The  tax  effect  of  temporary  differences  that give rise to significant
portions  of  deferred  tax  assets  and  liabilities  are  as  follows:

<TABLE>
<CAPTION>
(Dollars in thousands)         2001                2000
                        --------------------------------------
                        ASSET   LIABILITY   Asset   Liability
                        --------------------------------------
<S>                     <C>     <C>         <C>     <C>
Allowance for
credit losses. . . . .  $5,306  $        -  $5,184  $        -
Lease assets . . . . .       -      20,985       -      18,084
Deferred loan fees . .       -          12     132           -
Deferred compensation.   1,598           -   1,304           -
Unrealized gain
on securities. . . . .       -       2,442       -         766
Other. . . . . . . . .     282           -      98           -
                        ------  ----------  ------  ----------
Total deferred taxes .  $7,186  $   23,439  $6,718  $   18,850
                        ======  ==========  ======  ==========
</TABLE>

     The  exercise  of  stock  options  which  have  been  granted  under  the
Corporation's  various  stock  option plans gives rise to compensation, which is
includible  in  the taxable income of the applicable employees and deductible by
the  Corporation  for income tax purposes. Compensation resulting from increases
in  the  fair  market  value of the Corporation's common stock subsequent to the
date  of  grant  of the applicable exercised stock options is not recognized, in
accordance  with  APB  Opinion  No.  25,  as an expense for financial accounting
purposes  and  the related tax benefits are taken directly to additional paid in
capital.

9 / PENSION PLANS

     The  Corporation  has  two  noncontributory  defined  benefit pension plans
covering  substantially all employees. These plans are the Harleysville National
Corporation  Pension  Plan  and  the  Northern  Lehigh  Bancorp Pension Plan. On
January 20, 1999, the Corporation consummated its acquisition of Northern Lehigh
Bancorp,  Inc.  These  plans  were not consolidated, as of December 31, 2001 and
2000.

     The  Harleysville National Corporation Pension Plan's Benefits are based on
years  of  service  and  the  employee's  average  compensation  during any five
consecutive  years  within  the  10-year  period  preceding  retirement.  The
Harleysville  National  Corporation  Pension  Plan's  funded  status and amounts
recognized  in  the  financial  statements  follow:

<TABLE>
<CAPTION>
(Dollars in thousands)                       2001     2000
                                           -----------------
<S>                                        <C>       <C>
Change in benefit obligation:
-----------------------------
Benefit obligation at beginning of year .  $ 6,367   $5,579
Service cost. . . . . . . . . . . . . . .      524      448
Interest cost . . . . . . . . . . . . . .      364      327
Actual gain . . . . . . . . . . . . . . .      799      288
Benefits paid . . . . . . . . . . . . . .     (567)    (275)
Change in assumptions . . . . . . . . . .        -        -
                                           --------  -------
Benefits obligation at end of year. . . .  $ 7,487   $6,367
                                           ========  =======
Change in plan assets:
----------------------
Fair value of plan assets
  at beginning of year. . . . . . . . . .  $ 5,744   $6,155
Actual return on plan assets. . . . . . .     (271)    (136)
Employer contribution . . . . . . . . . .      467        -
Benefits paid . . . . . . . . . . . . . .     (567)    (275)
                                           --------  -------
Fair value of plan assets at end of year.  $ 5,373   $5,744
                                           ========  =======

Funded status . . . . . . . . . . . . . .  $(2,114)  $ (622)
Unrecognized transition (asset) . . . . .     (155)    (172)
Unrecognized prior service cost . . . . .     (328)    (439)
Unrecognized net loss . . . . . . . . . .    2,898    1,536
Minimum liability recognized. . . . . . .   (1,115)       -
                                           --------  -------
(Accrued) prepaid benefit cost. . . . . .  $  (814)  $  303
                                           ========  =======
</TABLE>

<TABLE>
<CAPTION>
Weighted-average assumptions
----------------------------
as of December 31,                     2001    2000    1999
-----------------                     ----------------------
<S>                                   <C>     <C>     <C>
Discount rate. . . . . . . . . . . .   6.00%   6.00%   6.00%
Expected return on plan assets . . .   7.00%   7.00%   7.00%
Rate of compensation increase. . . .   4.50%   4.50%   4.50%

Components of net periodic
--------------------------
benefit cost                           2001    2000    1999
------------                          ----------------------
Service cost . . . . . . . . . . . .  $ 524   $ 447   $ 365
Interest cost. . . . . . . . . . . .    364     326     291
Expected return on plan assets . . .   (402)   (421)   (410)
Amortization of prior service cost .   (111)   (111)   (111)
Recognized net actuarial loss (gain)     95      (6)    (17)
                                      ------  ------  ------
  Net periodic benefit cost. . . . .  $ 470   $ 235   $ 118
                                      ======  ======  ======
</TABLE>

     As  of December 31, 2001, Harleysville National Corporation's Pension Plans
had  an  investment  in the Corporation's stock with a market value of $316,000.

     The  Northern  Lehigh  Bancorp  Pension Plan's Benefits are based primarily
upon  years  of  service  and  compensation  rates near retirement. The Northern
Lehigh  Bancorp  Pension  Plan's  funded  status  and  amounts recognized in the
financial  statements  follow:

<TABLE>
<CAPTION>
(Dollars in thousands)                            2001    2000
                                                 ------  ------
<S>                                              <C>     <C>
Change in benefit obligation:
-----------------------------
Benefit obligation at beginning of year . . . .  $ 819   $ 744
Service cost. . . . . . . . . . . . . . . . . .      -       -
Interest cost . . . . . . . . . . . . . . . . .     52      51
Actual (loss) gain. . . . . . . . . . . . . . .    (25)     21
Benefits paid . . . . . . . . . . . . . . . . .    (43)    (43)
Effect of curtailment . . . . . . . . . . . . .     51      46
                                                 ------  ------
Benefits obligation at end of year. . . . . . .  $ 854   $ 819
                                                 ======  ======
Change in plan assets:
----------------------
Fair value of plan assets at beginning of year.    841     886
Actual return on plan assets. . . . . . . . . .    (73)      3
Employer contribution . . . . . . . . . . . . .      -       -
Plan expenses . . . . . . . . . . . . . . . . .      -       -
Benefits paid . . . . . . . . . . . . . . . . .    (43)    (48)
                                                 ------  ------
Fair value of plan assets at end of year. . . .    725     841
                                                 ======  ======
Funded status . . . . . . . . . . . . . . . . .   (129)     22
Unrecognized transition (asset) . . . . . . . .    (38)    (42)
Unrecognized prior service cost . . . . . . . .      -       -
Unrecognized net loss or (gain) . . . . . . . .     47    (112)
Minimum liability recognized. . . . . . . . . .     (9)      -
                                                 ------  ------
(Accrued) prepaid benefit cost. . . . . . . . .  $(129)  $(132)
                                                 ======  ======
</TABLE>

<TABLE>
<CAPTION>
Weighted-average assumptions
----------------------------
  as of December 31,                  2001    2000    1999
  ------------------                 ----------------------
<S>                                  <C>     <C>     <C>
Discount rate . . . . . . . . . . .   6.00%   6.50%   7.00%
Expected return on plan assets. . .   7.00%   8.00%   8.00%
Rate of compensation increase . . .   0.00%   0.00%   5.00%

Components of net periodic
--------------------------
  benefit cost                        2001    2000    1999
  ------------                       ----------------------
Service cost. . . . . . . . . . . .  $   -   $   -   $  55
Interest cost . . . . . . . . . . .     52      51      51
Expected return on plan assets. . .    (57)    (69)    (67)
Amortization of prior service cost.     (7)    (16)    (15)
                                     ------  ------  ------
  Net periodic benefit cost . . . .  $ (12)  $ (34)  $  24
                                     ======  ======  ======
</TABLE>

                                                                     (continued)
PAGE 16
     A  401(k)  deferred  savings  plan  covers eligible employees of the Banks.
Employees may contribute up to a maximum of 15% of salary on a pretax basis with
a  50%  employer match up to a maximum of 3% of salary. Contributions charged to
earnings  were  $371,000,  $353,000,  and  $284,000  for  2001,  2000  and 1999,
respectively.

     The  Corporation  has  a  Supplemental Executive Retirement Plan (SERP) for
certain  individuals.  The  SERP  provides  for  payments  based  on  a  certain
percentage  of  salary for a period of 10 years after retirement. As of December
31,  2001,  and  2000, the Corporation had accrued a liability of $2,440,000 and
$1,832,000,  respectively,  for  the  SERP.

10 / SHAREHOLDERS' EQUITY

     On  August  10, 2001, the Corporation paid a two-for-one stock split on its
common stock in the form of a 100% stock dividend to shareholders of record July
27,  2001.

     On November 9, 2000, the Corporation paid a 5% stock dividend on its common
stock  to  shareholders  of  record  as  of  October  26,  2000.

     On  September  30,  1999,  the  Corporation paid a 5% stock dividend on its
common  stock  to  shareholders  of  record  as  of  September  17,  1999.

11 / STOCK OPTIONS

     The  Corporation has fixed stock option plans that allow the Corporation to
grant  options  up  to  1,736,780  shares  of  common stock to key employees and
directors.  The  options have a term of ten years when issued and are completely
vested  over  a  five-year  period. The exercise price of each option equals the
market  price  of  the  Corporation's  stock  on  the  date  of  grant.

     The  Corporation has elected to account for its stock option plan under APB
Opinion  No.  25,  "Accounting  for  Stock Issued to Employees." Accordingly, no
compensation  cost  has  been  recognized  for  its  stock  option  plan.  Had
compensation  cost  for  the plan been determined based on the fair value of the
options  at  the  grant  dates  consistent  with  the  method  of  SFAS No. 123,
"Accounting  for  Stock-Based  Compensation,"  the  Corporation's net income and
earnings  per  share  would  have  been:

<TABLE>
<CAPTION>
                                   2001     2000     1999
                                  -------------------------
<S>                  <C>          <C>      <C>      <C>
Net income           As reported  $28,820  $25,604  $23,238
  (in thousands)     Pro forma    $27,268  $23,236  $22,527

Earnings per share   As reported  $  1.57  $  1.38  $  1.25
  (Basic)            Pro forma    $  1.49  $  1.26  $  1.22

Earnings per share   As reported  $  1.54  $  1.38  $  1.25
  (Diluted)          Pro forma    $  1.45  $  1.25  $  1.22
</TABLE>

     The fair value of each option grant is estimated on the date of grant using
the  Black-Scholes  option-pricing  model  with  the  following weighted-average
assumptions used for grants in 2001, 2000 and 1999, respectively: dividend yield
of  3.00%,  3.26%  and  3.30%;  expected  volatility  of 3.61%, 2.58% and 2.84%;
risk-free  interest rate of 4.90%, 5.96% and 7.06%; and an expected life of 8.55
years,  9.82  years  and  9.42  years.

     Information  about  stock  options  outstanding  at  December  31, 2001, is
summarized  as  follows:

<TABLE>
<CAPTION>
                                     Weighted-Average
                     Outstanding      Exercise Price
                  -----------------  ---------------
<S>               <C>                <C>
Balance 1/1/99             203,060   $         13.75
Granted                     78,842             15.57
Exercised                   (7,872)             3.95
Cancelled                   (4,412)            17.37
                  -----------------  ---------------
Balance 1/1/00             269,618             14.51
Granted                  1,186,366             13.97
Exercised                   (7,872)             4.24
Cancelled                   (3,308)            15.87
                  -----------------  ---------------
BALANCE 12/31/00         1,444,804             14.12
GRANTED                      8,816             17.27
EXERCISED                  (63,123)            13.67
CANCELLED                  (68,308)            13.97
                  -----------------  ---------------
BALANCE 12/31/01         1,322,189   $         14.17
                  =================  ===============
</TABLE>

     The  weighted  average  fair value of options granted during 2001, 2000 and
1999  were  $17.27,  $13.97  and  $15.57,  respectively.

<TABLE>
<CAPTION>
                                         OPTIONS  OUTSTANDING
-----------------------------------------------------------------------------------------------------------
   RANGE OF        NUMBER          WEIGHTED-AVERAGE       WEIGHTED-AVERAGE     NUMBER     WEIGHTED-AVERAGE
EXERCISE PRICE   OUTSTANDING  REMAINING CONTRACTUAL LIFE   EXERCISE PRICE    EXERCISABLE   EXERCISE PRICE
-----------------------------------------------------------------------------------------------------------
<S>              <C>          <C>                         <C>                <C>          <C>
$  4.63 - $6.95       15,744                   1.0 YEARS  $            4.76       15,744  $            4.76
$ 11.59 - $13.90   1,037,600                   8.9 YEARS  $           13.88      308,240  $           13.88
$ 13.90 - $16.22     251,207                   7.3 YEARS  $           15.67      242,881  $           15.67
$ 16.22 - $18.54       8,816                   9.0 YEARS  $           17.27        8,816  $           17.27
$ 18.54 - $20.85       8,822                   6.3 YEARS  $           19.28        5,292  $           19.28
                 -----------                                                 -----------  -----------------
                   1,322,189                                                     580,973  $           14.48
                 ===========                                                 ===========  =================
</TABLE>

12 / COMMITMENTS AND CONTINGENT LIABILITIES

     Based  on  consultation with the Corporation's legal counsel, management is
not  aware  of  any  litigation that would have a material adverse effect on the
consolidated  financial  position  of  the Corporation. There are no proceedings
pending  other  than the ordinary routine litigation incident to the business of
the  Corporation  and its Subsidiaries. In addition, no material proceedings are
pending or are known to be threatened or contemplated against the Corporation or
its  Subsidiaries  by  government  authorities.

     Lease commitments for equipment and banking locations expire intermittently
over  the years through 2036. Most banking location leases require the lessor to
pay  insurance, maintenance costs and property taxes. Approximate minimum rental
commitments  for existing operating leases at December 31, 2001, are as follows:

<TABLE>
<CAPTION>
                                 Total
                            Operating Leases
                           -----------------
<S>                        <C>
           2002 . . . . .  $       1,919,000
           2003 . . . . .          1,967,000
           2004 . . . . .          1,684,000
           2005 . . . . .          1,188,000
           2006 . . . . .            646,000
         Thereafter . . .          3,915,000
                           -----------------
           Tota . . . . .  $      11,319,000
                           =================
</TABLE>

     Total  lease expense amounted to $2,109,000 in 2001, $1,889,000 in 2000 and
$1,796,000  in  1999.
                                                                     (continued)
PAGE 17
13 / FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

     The  Banks  have  not entered into any interest rate swaps, caps, floors or
collars and are not a party to any forward or futures transactions. However, the
Banks  are  a  party to various other financial instruments at December 31, 2001
and  2000,  which are not included in the consolidated financial statements, but
are required in the normal course of business to meet the financing needs of its
customers  and  to assist in managing its exposure to changes in interest rates.

     Management  does  not  expect  any material losses from these transactions,
which  include  standby  letters  of  credit  at  December 31, 2001 and 2000, of
$8,373,000  and  $6,829,000,  respectively;  commitments  to  extend  credit  of
$62,870,000  and  $51,409,000,  respectively  for  revolving  home equity lines;
$144,237,000  and  $120,610,000,  respectively  for  commercial  and real estate
loans;  $40,200,000  and  $33,534,000,  respectively,  for  consumer  loans.

     The  Banks'  exposure  to credit loss in the event of nonperformance by the
other  party  to  the  financial instrument for commitments to extend credit and
standby  letters of credit is represented by the contractual or notional amounts
of  those  instruments.  The  Banks  use  the  same stringent credit policies in
extending  these  commitments  as they do for recorded financial instruments and
control  their  exposure  to  loss  through  credit  approval  and  monitoring
procedures.  These  commitments are generally issued for one year or less, often
expire  without  being  drawn  upon,  and  often  are  secured  with appropriate
collateral.

     The  Banks offer commercial, mortgage and consumer credit products to their
customers  in  the normal course of business,which are detailed in note 4. These
products  represent  a  diversified credit portfolio and are generally issued to
borrowers  within  the Banks' branch office systems in eastern Pennsylvania. The
ability  of  the  customers to repay their credits is, to some extent, dependent
upon  the  economy  in  the  Banks'  market  areas.
--------------------------------------------------------------------------------

14 / REGULATORY CAPITAL

<TABLE>
<CAPTION>
(Dollars in thousands)                                                              TO BE WELL
                                                                                 CAPITALIZED UNDER
                                                                FOR CAPITAL      PROMPT CORRECTIVE
                                                  ACTUAL      ADEQUACY PURPOSES  ACTION PROVISION
AS OF DECEMBER 31, 2001                      AMOUNT    RATIO    AMOUNT   RATIO    AMOUNT   RATIO
-------------------------------------------------------------------------------------------------
<S>                                         <C>       <C>      <C>       <C>     <C>       <C>
TOTAL CAPITAL (TO RISK WEIGHTED ASSETS):
----------------------------------------
CORPORATION. . . . . . . . . . . . . . . .  $205,743   13.23%  $124,445   8.00%  $      -      -
HARLEYSVILLE NATIONAL BANK AND TRUST CO. .   118,782   10.46%    90,862   8.00%   113,578  10.00%
CITIZENS NATIONAL BANK . . . . . . . . . .    39,888   13.91%    22,936   8.00%    28,669  10.00%
SECURITY NATIONAL BANK . . . . . . . . . .    15,132   12.53%     9,661   8.00%    12,076  10.00%
TIER 1 CAPITAL (TO RISK WEIGHTED ASSETS):
-----------------------------------------
CORPORATION. . . . . . . . . . . . . . . .  $189,423   12.18%  $ 62,222   4.00%  $      -      -
HARLEYSVILLE NATIONAL BANK AND TRUST CO. .   108,939    9.59%    45,431   4.00%    68,147   6.00%
CITIZENS NATIONAL BANK . . . . . . . . . .    36,297   12.66%    11,468   4.00%    17,202   6.00%
SECURITY NATIONAL BANK . . . . . . . . . .    13,622   11.28%     4,830   4.00%     7,246   6.00%
TIER 1 CAPITAL (TO AVERAGE ASSETS):
-----------------------------------
CORPORATION. . . . . . . . . . . . . . . .  $189,423    8.71%  $ 87,040   4.00%  $      -      -
HARLEYSVILLE NATIONAL BANK AND TRUST CO. .   108,939    6.91%    63,024   4.00%    78,780   5.00%
CITIZENS NATIONAL BANK . . . . . . . . . .    36,297    8.45%    17,182   4.00%    21,477   5.00%
SECURITY NATIONAL BANK . . . . . . . . . .    13,622    8.44%     6,455   4.00%     8,069   5.00%


(Dollars in thousands)                                                              To Be Well
                                                                                 Capitalized Under
                                                                For Capital      Prompt Corrective
                                                  Actual      Adequacy Purposes  Action Provision
AS OF DECEMBER 31, 2000                      AMOUNT    RATIO    AMOUNT   RATIO    AMOUNT   RATIO
-------------------------------------------------------------------------------------------------
Total Capital (to risk weighted assets):
----------------------------------------
Corporation. . . . . . . . . . . . . . . .  $186,989   13.35%  $112,063   8.00%  $      -      -
Harleysville National Bank and Trust Co. .   106,549   10.46%    81,461   8.00%   101,826  10.00%
Citizens National Bank . . . . . . . . . .    37,622   14.36%    20,955   8.00%    26,193  10.00%
Security National Bank . . . . . . . . . .    13,553   12.65%     8,572   8.00%    10,715  10.00%
Tier 1 Capital (to risk weighted assets):
-----------------------------------------
Corporation. . . . . . . . . . . . . . . .  $171,226   12.22%  $ 56,031   4.00%  $      -      -
Harleysville National Bank and Trust Co. .    95,980    9.43%    40,731   4.00%    61,096   6.00%
Citizens National Bank . . . . . . . . . .    34,344   13.11%    10,477   4.00%    15,716   6.00%
Security National Bank . . . . . . . . . .    12,509   11.67%     4,286   4.00%     6,429   6.00%
Tier 1 Capital (to average assets):
-----------------------------------
Corporation. . . . . . . . . . . . . . . .  $171,226    8.97%  $ 76,313   4.00%  $      -      -
Harleysville National Bank and Trust Co. .    95,980    7.12%    53,932   4.00%    67,415   5.00%
Citizens National Bank . . . . . . . . . .    34,344    8.51%    16,147   4.00%    20,183   5.00%
Security National Bank . . . . . . . . . .    12,509    8.70%     5,754   4.00%     7,193   5.00%
</TABLE>
                                                                     (continued)
PAGE 18
     The  Banks  are  subject  to  various  regulatory  capital  requirements
administered  by  the  federal banking agencies. Failure to meet minimum capital
requirements  can  initiate  certain  mandatory-and  possibly  additional
discretionary-actions  by  regulators  that,  if undertaken, could have a direct
material  affect  on  the  Corporation's  financial  statements.  Under  capital
adequacy  guidelines  and the regulatory framework for prompt corrective action,
the  Banks  must  meet  specific  capital  guidelines  that involve quantitative
measures  of the Banks' assets, liabilities, and certain off-balance-sheet items
as  calculated under regulatory accounting practices. The Banks' capital amounts
and  classification  are also subject to qualitative judgments by the regulators
about  components,  risk  weightings,  and  other  factors.

     Quantitative  measures established by regulation to ensure capital adequacy
require  the  Banks  to  maintain  minimum  amounts and ratios (set forth in the
table) of total and Tier 1 capital to risk-weighted assets. Management believes,
as  of  December 31, 2001, that the Banks meet all capital adequacy requirements
to which they are subject. To be categorized as well capitalized, the Banks must
maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios
as  set forth in the table. There are no conditions or events that have occurred
that  management  believes  have  changed  the  institutions'  category.

     The  National  Banking  Laws  require  the  approval  of  the Office of the
Comptroller of the Currency if the total of all dividends declared by a national
bank  in  any  calendar year exceed the net profits of the bank (as defined) for
that  year combined with its retained net profits for the preceding two calendar
years.  Under  this  formula,  the  Banks  may  declare  dividends  in  2002  of
approximately  $32,000,000  plus an amount equal to the net profits of the Banks
in  2002  up  to  the  date  of  any  such  dividend  declaration.

     Additionally,  banking  regulations limit the amount of investments, loans,
extensions  of  credit  and  advances  that  one subsidiary bank can make to the
Corporation  at  any  time to 10% and in the aggregate 20% of the Banks' capital
stock  and  surplus.  These  regulations  also require that any such investment,
loan,  extension  of  credit or advance be secured by securities having a market
value  in  excess  of  the  amount  thereof. At December 31, 2001, there were no
investments,  loans,  extensions  of credit or advances from any of the Banks to
the  Corporation.

15 / FAIR VALUE OF FINANCIAL INSTRUMENTS

     SFAS  No.  107  "Disclosures  about  Fair Values of Financial Instruments,"
requires  disclosure  of  the  estimated  fair  value  of an entity's assets and
liabilities  considered to be financial instruments. For the Corporation, as for
most  financial  institutions,  the  majority  of its assets and liabilities are
considered  financial instruments as defined in SFAS No. 107. However, many such
instruments  lack  an  available  trading  market, as characterized by a willing
buyer  and  seller  engaging  in  an  exchange  transaction.  Also,  it  is  the
Corporation's  general  practice and intent to hold its financial instruments to
maturity  and  not  to engage in trading or sales activities, except for certain
loans  and  investments.  Therefore,  the  Corporation  had  to  use significant
estimates  and  present  value  calculations  to  prepare  this  disclosure.

     Changes  in  the  assumptions or methodologies used to estimate fair values
may  materially affect the estimated amounts. Also, management is concerned that
there  may  not be reasonable comparability between institutions due to the wide
range  of  permitted  assumptions  and  methodologies  in  the absence of active
markets.  This lack of uniformity gives rise to a high degree of subjectivity in
estimating  financial  instrument  fair  values.

     Estimated  fair  values  have  been determined by the Corporation using the
best  available data and an estimation methodology suitable for each category of
financial  instruments.  The  estimation  methodologies used, the estimated fair
values  and recorded book balances at December 31, 2001 and 2000 are outlined as
follows:

     For cash and due from banks, interest-bearing deposits in banks and federal
funds  sold, the recorded book values of $82,624,000 and $55,525,000 at December
31,  2001  and  2000,  respectively, approximate fair values. The estimated fair
values of investment securities are based on quoted market prices, if available.
Estimated  fair  values  are  based  on  quoted  market  prices  of  comparable
instruments  if  quoted  market  prices  are  not  available.

     The  loan portfolio, net of unearned income, at December 31, 2001 and 2000,
has been valued using a present value discounted cash flow analysis where market
prices  were  not available. The discount rate used in these calculations is the
estimated  current  market  rate  adjusted  for  credit risk. The carrying value
approximates  its  fair  value.

<TABLE>
<CAPTION>
                                     2001
                       ------------------------------
                          CARRYING       ESTIMATED
                           AMOUNT        FAIR VALUE
                       ------------------------------
<S>                    <C>             <C>
INVESTMENT SECURITIES  $  732,470,000  $  733,153,000
LOANS, NET. . . . . .  $1,316,609,000  $1,353,400,000

                                    2000
                       ------------------------------
                          Carrying       Estimated
                           Amount        Fair Value
                       ------------------------------
Investment securities  $  601,460,000  $  602,220,000
Loans, net. . . . . .  $1,212,055,000  $1,207,034,000
</TABLE>

     The  estimated  fair  values  of  demand  deposits  (i.e.,  interest  and
noninterest-  bearing  checking  accounts,  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). The carrying amounts of
variable  rate,  fixed-term  money  market  accounts and certificates of deposit
approximate  their  fair  values  at  the reporting date. The carrying amount of
accrued  interest  receivable  and  payable  approximates  fair  value.

<TABLE>
<CAPTION>
                                   2001
                       ------------------------------
                          CARRYING       ESTIMATED
                           AMOUNT        FAIR VALUE
                       ------------------------------
<S>                    <C>             <C>
TIME DEPOSITS . . . .  $  723,894,000  $  744,810,000

                                   2000
                       ------------------------------
                          Carrying       Estimated
                           Amount        Fair Value
                       ------------------------------
Time deposits . . . .  $  602,942,000  $  604,664,000
</TABLE>

     The  fair  values  of  demand  notes, borrowings, and securities sold under
agreements  to  repurchase of $210,820,000 and $231,388,000 at December 31, 2001
and  2000,  respectively,  approximate  their  recorded  book  balances.

     The  fair  value  of commitments to extend credit is estimated based on the
amount  of  unamortized deferred loan commitment fees. The fair value of letters
of  credit  is  based  on the amount of unearned fees plus the estimated cost to
terminate  the  letters  of  credit.  Fair  values  of  unrecognized  financial
instruments including commitments to extend credit and the fair value of letters
of  credit  are  considered  immaterial.
                                                                     (continued)
PAGE 19
16 / CONDENSED FINANCIAL INFORMATION PARENT COMPANY ONLY

     Condensed financial statements of Harleysville National Corporation follow:

<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
(Dollars in thousands)                    December 31,
                                       --------------------
                                         2001       2000
                                       --------------------
<S>                                    <C>        <C>
Assets:
  Cash. . . . . . . . . . . . . . . .  $  1,526   $    651
  Investments in subsidiaries . . . .   192,821    172,880
  Other assets. . . . . . . . . . . .       144          -
                                       ---------  ---------
    Total assets. . . . . . . . . . .  $194,491   $173,531
                                       =========  =========
Liabilities and shareholders' equity:
  Guaranteed preferred beneficial
    interest in Corporation's
    subordinated debentures . . . . .  $  5,000   $      -
  Other liabilities . . . . . . . . .       142         (5)
                                       ---------  ---------
    Total liabilities . . . . . . . .     5,142         (5)
                                       ---------  ---------
Shareholders' equity:
  Common stock. . . . . . . . . . . .    18,571      9,254
  Additional paid in capital. . . . .    71,419     79,869
  Retained earnings . . . . . . . . .   100,171     83,244
  Treasury stock. . . . . . . . . . .    (5,346)      (253)
  Net unrealized gain on investment
    securities available for sale . .     4,534      1,422
                                       ---------  ---------
    Total shareholders' equity. . . .   189,349    173,536
                                       ---------  ---------
    Total liabilities and
    shareholders' equity. . . . . . .  $194,491   $173,531
                                       =========  =========
</TABLE>


<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME

(Dollars in thousands)          Year Ended December 31,
                              ----------------------------
                                2001      2000      1999
                              ----------------------------
<S>                           <C>       <C>       <C>
Dividends from banks . . . .  $12,293   $14,575   $21,650
Investment income. . . . . .        8         -         -
                              --------  --------  --------
  Total operating income . .   12,301    14,575    21,650
                              --------  --------  --------
Interest on subordinate debt      451         -         -
Other expenses . . . . . . .       22        14        19
                              --------  --------  --------
  Total operating expenses .      473        14        19
                              --------  --------  --------
Income before income tax
  expense and equity in
  undistributed net income
  of banks . . . . . . . . .   11,828    14,561    21,631
Income tax expense . . . . .     (163)       (5)       (7)
                              --------  --------  --------
Income before equity in
  undistributed net income
  of banks . . . . . . . . .   11,991    14,566    21,638
Equity in undistributed
  net income of banks. . . .   16,829    11,038     1,600
                              --------  --------  --------
  Net income . . . . . . . .  $28,820   $25,604   $23,238
                              ========  ========  ========
</TABLE>


<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)               Year Ended December 31,
                                 -------------------------------
                                   2001       2000       1999
                                 -------------------------------
<S>                              <C>        <C>        <C>
Operating activities:
  Net income. . . . . . . . . .  $ 28,820   $ 25,604   $ 23,238
  Adjustments to reconcile
    net income to net cash
    provided by operating
    activities:
    Equity in undistributed
      net income of banks . . .   (16,829)   (11,038)    (1,600)
    Net increase in assets. . .      (144)         -          -
    Net increase (decrease) in
      other liabilities . . . .       147         (5)      (446)
                                 ---------  ---------  ---------
Net cash provided by
  operating activities. . . . .    11,994     14,561     21,192
                                 ---------  ---------  ---------
Investing activities:
Capital contributions
  made to the banks . . . . . .         -     (3,000)   (12,000)
                                 ---------  ---------  ---------
Net cash (used in) provided
  by investing activities . . .         -     (3,000)   (12,000)
                                 ---------  ---------  ---------
Financing activities:
  Proceeds from issuance of
    Long-term debt. . . . . . .     5,000          -          -
  Cash dividends and
    fractional shares . . . . .   (11,893)   (10,430)    (9,375)
  Dividend reinvestment . . . .         -          -        (49)
  Repurchase of common stock       (5,093)      (578)         -
  Stock options and awards. . .       867         47         39
                                 ---------  ---------  ---------
Net cash used in
  financing activities. . . . .   (11,119)   (10,961)    (9,385)
                                 ---------  ---------  ---------
Net increase (decrease) in cash       875        600       (193)
Cash and cash equivalents at
  beginning of year . . . . . .       651         51        244
                                 ---------  ---------  ---------
Cash and cash equivalents at
  end of year.. . . . . . . . .  $  1,526   $    651   $     51
                                 =========  =========  =========
</TABLE>
                                                                     (continued)
PAGE 20
17 / QUARTERLY  FINANCIAL  DATA  (UNAUDITED)

     The  following  is  the  summarized  (unaudited)  consolidated  quarterly
financial  data of the Corporation which, in the opinion of management, reflects
all  adjustments, consisting only of normal recurring adjustments, necessary for
fair  presentation  of  the  Corporations  results  of  operations:

(Dollars in thousands, except per share information)

<TABLE>
<CAPTION>
                                  THREE MONTHS ENDED
                        ----------------------------------------
2001:                   MARCH 31   JUNE 30    SEPT.30   DEC. 31
                        ----------------------------------------
<S>                     <C>        <C>       <C>        <C>
  INTEREST INCOME. . .  $  34,509  $ 34,537  $  35,009  $ 34,624
  NET INTEREST INCOME.     17,151    18,058     18,766    19,767
  PROVISION FOR LOSSES        647       962      1,353       968
  NONINTEREST INCOME .      4,192     5,121      6,256     6,656
  OPERATING EXPENSES .     12,465    13,240     13,744    15,594
  INCOME BEFORE INCOME
    TAX EXPENSE. . . .      8,231     8,977      9,925     9,861
  INCOME TAX EXPENSE .      1,700     1,856      2,302     2,316
                        ---------  --------  ---------  --------
  NET INCOME . . . . .  $   6,531  $  7,121  $   7,623  $  7,545
                        =========  ========  =========  ========
  NET INCOME PER SHARE
    BASIC. . . . . . .  $    0.35  $   0.39  $    0.42  $   0.41
                        =========  ========  =========  ========
    DILUTED. . . . . .  $    0.35  $   0.38  $    0.41  $   0.40
                        =========  ========  =========  ========

                                  Three Months Ended
                        ----------------------------------------
2000:                   March 31   June 30   Sept. 30   Dec. 31
                        ----------------------------------------
  Interest income. . .  $  31,423  $ 32,343  $  33,593  $ 34,452
  Net interest income.     16,343    16,716     16,531    16,447
  Provision for losses        506       549        581       676
  Noninterest income .      2,654     2,857      3,248     3,447
  Operating expenses .     10,929    11,647     11,004    11,097
  Income before income
    tax expense. . . .      7,562     7,377      8,194     8,121
  Income tax expense .      1,517     1,070      1,454     1,609
                        ---------  --------  ---------  --------
  Net income . . . . .  $   6,045  $  6,307  $   6,740  $  6,512
                        =========  ========  =========  ========
  Net income per share
    Basic. . . . . . .  $    0.33  $   0.34  $    0.36  $   0.35
                        =========  ========  =========  ========
    Diluted. . . . . .  $    0.33  $   0.34  $    0.36  $   0.35
                        =========  ========  =========  ========
</TABLE>


REPORT  OF  INDEPENDENT  CERTIFIED  PUBLIC  ACCOUNTANTS
================================================================================
HARLEYSVILLE  NATIONAL  CORPORATION  AND  SUBSIDIARIES

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS, HARLEYSVILLE NATIONAL CORPORATION:

     We  have  audited  the  accompanying  consolidated  balance  sheets  of
Harleysville  National  Corporation and Subsidiaries as of December 31, 2001 and
2000, and the related consolidated statements of income, shareholders equity and
cash  flows  for  each of the three years in the period ended December 31, 2001.
These  financial  statements  are  the  responsibility  of  the  Corporations
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 of America. 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  following consolidated financial statements present
fairly,  in  all  material  respects,  the  consolidated  financial  position of
Harleysville  National  Corporation and Subsidiaries as of December 31, 2001 and
2000,  and  the  consolidated results of their operations and their consolidated
cash flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.


/s/  Grant  Thornton  LLP
Grant  Thornton  LLP
Philadelphia,  Pennsylvania
January  9,  2002


PAGE 21
<TABLE>
<CAPTION>
MANAGEMENTS  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION
AND  RESULTS  OF  OPERATIONS
=====================================================================================================================

HARLEYSVILLE NATIONAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SUMMARY OF OPERATIONS
(Dollars in thousands, except per share                                    Year Ended December 31,
data and average shares outstanding)                  ---------------------------------------------------------------
                                                         2001         2000         1999         1998         1997
                                                      ---------------------------------------------------------------
<S>                                                   <C>          <C>          <C>          <C>          <C>
INCOME AND EXPENSE
Interest income. . . . . . . . . . . . . . . . . . .  $   138,679  $   131,811  $   114,167  $   102,005  $    94,114
Interest expense . . . . . . . . . . . . . . . . . .       64,937       65,774       50,649       44,372       39,989
                                                      -----------  -----------  -----------  -----------  -----------
Net interest income. . . . . . . . . . . . . . . . .       73,742       66,037       63,518       57,633       54,125
Provision for loan losses. . . . . . . . . . . . . .        3,930        2,312        2,153        2,288        2,652
                                                      -----------  -----------  -----------  -----------  -----------
Net interest income after provision for loan losses.       69,812       63,725       61,365       55,345       51,473
Noninterest income . . . . . . . . . . . . . . . . .       22,225       12,206       10,535       10,520        7,961
Noninterest expense. . . . . . . . . . . . . . . . .       55,043       44,677       41,976       38,446       33,522
                                                      -----------  -----------  -----------  -----------  -----------
Income before income tax expense . . . . . . . . . .       36,994       31,254       29,924       27,419       25,912
Income tax expense . . . . . . . . . . . . . . . . .        8,174        5,650        6,686        6,661        6,883
                                                      -----------  -----------  -----------  -----------  -----------
Net income . . . . . . . . . . . . . . . . . . . . .  $    28,820  $    25,604  $    23,238  $    20,758  $    19,029
                                                      ===========  ===========  ===========  ===========  ===========

---------------------------------------------------------------------------------------------------------------------
PER SHARE *
Basic. . . . . . . . . . . . . . . . . . . . . . . .  $      1.57  $      1.38  $      1.25  $      1.12  $      1.03
Diluted. . . . . . . . . . . . . . . . . . . . . . .         1.54         1.38         1.25         1.12         1.03
Cash dividends paid. . . . . . . . . . . . . . . . .         0.65         0.57         0.51         0.45         0.41
Basic average shares outstanding . . . . . . . . . .   18,305,956   18,537,362   18,546,794   18,525,638   18,477,218
Diluted average shares outstanding . . . . . . . . .   18,760,918   18,558,546   18,570,482   18,556,388   18,491,408
*Adjusted for 100% stock dividend effective 8/10/01
and 5% stock dividends effective 11/9/00, 9/30/99,
and 6/30/97.

---------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCE SHEET
Loans. . . . . . . . . . . . . . . . . . . . . . . .  $ 1,264,750  $ 1,166,684  $ 1,031,055  $   894,758  $   815,891
Investments. . . . . . . . . . . . . . . . . . . . .      660,983      562,508      515,006      427,850      357,749
Other interest-earning assets. . . . . . . . . . . .       19,228        9,876       20,133       31,698       34,477
Total assets . . . . . . . . . . . . . . . . . . . .    2,058,738    1,843,525    1,639,041    1,413,772    1,271,153
Deposits . . . . . . . . . . . . . . . . . . . . . .    1,599,515    1,436,781    1,267,936    1,144,822    1,045,309
Guaranteed preferred beneficial interest in
  Corporation's subordinated debentures. . . . . . .        4,204            -            -            -            -
Other interest-bearing liabilities . . . . . . . . .      222,043      218,811      194,887       99,416       71,568
Shareholders' equity . . . . . . . . . . . . . . . .      182,178      154,547      148,636      142,959      129,758

---------------------------------------------------------------------------------------------------------------------
BALANCE SHEET AT YEAR-END
Loans. . . . . . . . . . . . . . . . . . . . . . . .  $ 1,316,609  $ 1,212,055  $ 1,118,816  $   956,867  $   852,386
Investments. . . . . . . . . . . . . . . . . . . . .      732,470      601,460      530,895      491,942      372,760
Other interest-earning assets. . . . . . . . . . . .       19,650        3,507       13,837       23,886       21,463
Total assets . . . . . . . . . . . . . . . . . . . .    2,208,971    1,935,213    1,767,667    1,541,449    1,313,443
Deposits . . . . . . . . . . . . . . . . . . . . . .    1,746,862    1,489,050    1,341,437    1,211,326    1,087,253
Guaranteed preferred beneficial interest in
  Corporation's subordinated debentures. . . . . . .        5,000            -            -            -            -
Other interest-bearing liabilities . . . . . . . . .      210,820      231,388      251,597      151,628       64,400
Shareholders' equity . . . . . . . . . . . . . . . .      189,349      173,536      146,663      149,572      136,715

---------------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 22
<TABLE>
<CAPTION>
BALANCE  SHEET  ANALYSIS

     The  table  below  presents  the major asset and liability categories on an
average  daily  basis  for the periods presented, along with interest income and
expense,  and  key  rates  and  yields.

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS EQUITY, INTEREST RATES AND
INTEREST DIFFERENTIAL

                                                                      Year Ended December 31,
                                 -------------------------------------------------------------------------------------------------
                                               2001                                  2000                           1999
                                 -------------------------------------------------------------------------------------------------
                                  AVERAGE    AVERAGE               Average    Average               Average    Average
(Dollars in thousands)            BALANCE      RATE    INTEREST    Balance      Rate    Interest    Balance      Rate    Interest
                                 -------------------------------------------------------------------------------------------------
<S>                              <C>         <C>       <C>        <C>         <C>       <C>        <C>         <C>       <C>
ASSETS
Investment securities:
  Taxable investments . . . . .  $  455,096     6.02%  $  27,376  $  348,560     6.94%  $  24,205  $  305,163     6.39%  $  19,485
  Nontaxable investments (1). .     205,887     7.49      15,412     213,948     7.46      15,962     209,843     7.44      15,613
                                 ----------  --------  ---------  ----------  --------  ---------  ----------  --------  ---------
    Total investment securities     660,983     6.47      42,788     562,508     7.14      40,167     515,006     6.82      35,098
Loans (1) (2) . . . . . . . . .   1,264,750     7.98     100,869   1,166,684     8.31      96,896   1,031,055     8.14      83,938
Other rate-sensitive assets . .      19,228     4.23         814       9,876     5.99         592      20,133     3.98         802
                                 ----------  --------  ---------  ----------  --------  ---------  ----------  --------  ---------
    Total earning assets. . . .   1,944,961     7.43     144,471   1,739,068     7.92     137,655   1,566,194     7.65     119,838
Noninterest-earning assets. . .     113,777        -           -     104,457        -           -      72,847        -           -
                                 ----------  --------  ---------  ----------  --------  ---------  ----------  --------  ---------
    Total assets. . . . . . . .  $2,058,738     7.02%  $ 144,471  $1,843,525     7.47%  $ 137,655  $1,639,041     7.31%  $ 119,838
                                 ==========  ========  =========  ==========  ========  =========  ==========  ========  =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
  Demand. . . . . . . . . . . .  $  219,368     - %$           -  $  204,778     - %$           -  $  192,659     - %$           -
  Savings . . . . . . . . . . .     701,819     2.46      17,258     625,928     2.93      18,337     567,316     2.52      14,272
  Time. . . . . . . . . . . . .     678,328     5.49      37,216     606,075     5.73      34,747     507,961     5.26      26,712
                                 ----------  --------  ---------  ----------  --------  ---------  ----------  --------  ---------
    Total . . . . . . . . . . .   1,599,515     3.41      54,474   1,436,781     3.69      53,084   1,267,936     3.23      40,984
Borrowings and other
  interest-bearing liabilities.     226,247     4.62      10,463     218,811     5.80      12,690     194,887     4.96       9,665
Other liabilities . . . . . . .      50,798        -           -      33,386        -           -      27,582        -           -
                                 ----------  --------  ---------  ----------  --------  ---------  ----------  --------  ---------
    Total liabilities . . . . .   1,876,560     3.46      64,937   1,688,978     3.89      65,774   1,490,405     3.40      50,649
Shareholders' equity. . . . . .     182,178        -           -     154,547        -           -     148,636        -           -
                                 ----------  --------  ---------  ----------  --------  ---------  ----------  --------  ---------
    Total liabilities and
      shareholders' equity. . .  $2,058,738     3.15%  $  64,937  $1,843,525     3.57%  $  65,774  $1,639,041     3.09%  $  50,649
                                 ==========  ========  =========  ==========  ========  =========  ==========  ========  =========
Average effective rate on
  interest-bearing liabilities.  $1,606,394     4.04%  $  64,937  $1,450,814     4.53%  $  65,774  $1,270,164     3.99%  $  50,649
                                 ==========  ========  =========  ==========  ========  =========  ==========  ========  =========

----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------

Interest Income/Earning Assets.  $1,944,961     7.43%  $ 144,471  $1,739,068     7.92%  $ 137,655  $1,566,194     7.65%  $ 119,838
Interest Expense/Earning Assets  $1,944,961     3.34   $  64,937  $1,739,068     3.78   $  65,774  $1,566,194     3.23   $  50,649
                                             --------                         --------                         --------
Effective Interest Differential                 4.09%                            4.14%                            4.42%
                                             ========                         ========                         ========

<FN>
(1)  The interest earned on nontaxable investment securities and loans is shown on a tax-equivalent basis.
(2)  Nonaccrual loans have been included in the appropriate average loan balance category, but
     interest on nonaccrual loans has not been included for purposes of determining interest income.

----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       (continued)
</TABLE>
PAGE 23
     The  following  is  managements  discussion and analysis of the significant
changes  in the results of operations, capital resources and liquidity presented
in  its  accompanying consolidated financial statements for the Corporation, the
Banks, HNC Financial  Company  and  HNC  Reinsurance  Company.  The Corporations
consolidated  financial  condition  and  results  of  operations  consist almost
entirely  of  the  Banks  financial condition and results of operations. Current
performance does not guarantee, and may not be indicative of similar performance
in  the  future.

     In  addition  to  historical  information,  this  document contains forward
looking  statements.  We  have  made forward-looking statements in this document
that  are subject to risks and uncertainties. Forward-looking statements include
the  information  concerning possible or assumed future results of operations of
Harleysville  National  Corporation and its subsidiaries. When we use words such
as  believes,  expects,  anticipates,  or  similar  expressions,  we  are making
forward-looking  statements.

     Shareholders  should  note  that  many factors, some of which are discussed
elsewhere  in  this  document  and  in  the  documents  that  we  incorporate by
reference,  could affect the future financial results of the Corporation and its
subsidiaries  and  could  cause  those  results  to differ materially from those
expressed  in  our  forward-looking  statements  contained  or  incorporated  by
reference  in  this  document.  These  factors  include  the  following:

-    operating, legal and regulatory risks;

-    economic,  political  and  competitive  forces  affecting  our  banking,
     securities,  asset  management  and  credit  services  businesses;  and

-    the  risk  that  our  analysis of these risks and forces could be incorrect
     and/or that the strategies developed to address them could be unsuccessful.

INTRODUCTION

     The  Corporation  experienced record earnings during 2001, that were driven
by  the growth in both net interest income and other income. The increase in net
interest  income was primarily related to the growth in earning assets. The rise
in  other income was due to the gains on the sales of securities and an increase
in fee based income. These increases in income were partially offset by a higher
provision for loan losses, necessitated by an increase in loans charged-off, and
an  increase  in  expenses  related  to  the  sale  of  off-lease  vehicles. The
Corporations  net income of $28,820,000 in 2001, increased 12.6% compared to the
$25,604,000  reported in 2000. Diluted earnings of $1.54 in 2001 increased 11.6%
from  $1.38  in  2000.  Basic  earnings per share in 2001 were $1.57 compared to
$1.38  in  2000.  Net  interest income grew $7,705,000, as a result of the 11.8%
rise  in  average  earning  assets. Other operating income rose $10,019,000, due
primarily  to  higher  security  gains  and  fees generated from HNC Reinsurance
Company,  a  reinsurer  of  consumer  loan  credit  life and accident and health
insurance.

     Maintaining  asset  quality  is paramount for the Banks. While the economic
slowdown during 2001 impacted the loan quality at the Banks, they are still well
positioned  to  cover inherent credit risks. Key loan quality performance ratios
at December 31, 2001, reflected the impact of the economic slowdown. While still
strong, they did experience a moderate weakening from the strong ratios recorded
at  December  31,  2000.  The  ratio  of  the  allowance  for  loan  losses  to
nonperforming  assets  of 223.4% at December 31, 2001, decreased from the 268.3%
at  December  31, 2000. The ratio of nonperforming assets to total loans and net
assets acquired in foreclosure at December 31, 2001, of .53%, increased from the
December  31,  2000,  ratio  of  .47%.

INTEREST-EARNING ASSETS AND INTEREST-BEARING LIABILITIES

     Average interest-earning assets were $1,944,961,000 in 2001, an increase of
$205,893,000,  or  11.8%,  compared  to $1,739,068,000 in 2000. The increase was
evenly  distributed  between  loans  and  investments.  During 2001, the average
balance  of  investments  increased $98,475,000, or 17.5% and the loan portfolio
grew  $98,066,000,  or 8.4%. Average interest-earning assets were $1,566,194,000
in  1999.

     The level of average interest-bearing liabilities totaled $1,606,394,000 in
2001,  an  increase of $155,580,000, or 10.7%, compared to 2000. Contributing to
this rise were increases in savings deposits, time deposits and other borrowings
of  $75,891,000,  $72,253,000,  and  $7,436,000,  respectively.  Average
interest-bearing  liabilities  were  $1,270,164,000  in  1999.

INVESTMENT  SECURITIES

     Statement  of Financial Accounting (SFAS) Standards No. 115, Accounting for
Certain Investments in Debt and Equity Securities, requires, among other things,
that  debt and equity securities classified as available for sale be reported at
fair value, with unrealized gains and losses excluded from earnings and reported
in  other  comprehensive  income.  The net effect of unrealized gains or losses,
caused by marking an available for sale portfolio to market, causes fluctuations
in  the  level  of  shareholders  equity  and equity-related financial ratios as
market  interest  rates  cause  the  fair  value  of  fixed-rate  securities  to
fluctuate.

     The  December  31,  2001,  balance of investment securities of $732,470,000
grew  $131,010,000,  or  21.8%,  over  the  December  31,  2000,  balance  of
$601,460,000.  The  investment  securities  available  for  sale  increased
$135,752,000 and the investment securities held to maturity decreased $4,742,000
during  2001.  The  increase in the investments available for sale was funded by
proceeds  from  the maturities and calls in the investment securities portfolios
and  through  the  increase  in  deposits  during  2001.

LOANS

     Total  loans grew $104,329,000 or 8.6%, from $1,209,605,000 at December 31,
2000,  to $1,313,934,000 at December 31, 2001. The growth in loans was primarily
the  result  of  increases  in  real  estate  and commercial loans. During 2001,
commercial  loans,  real estate and consumer loans grew $52,970,000, $48,060,000
and  $11,770,000  respectively.  The majority of the growth in real estate loans
were in commercial mortgages. The growth in consumer loans was due to the growth
in home equity lines of credit and direct installment loans, partially offset by
a  reduction  in  indirect  automobile  dealer  loans. The reduction in indirect
automobile  dealer  loans  was  primarily  related  to  the financing incentives
offered  by  the  vehicle manufacturers and the overall increased competition in
this  market  segment  during  2001. Residential mortgages sold during 2001 were
$36,116,000  compared  to $7,690,000 in 2000. This increase in sales during 2001
was  attributed  to  the  lower  interest  rates  that stimulated home sales and
refinancing, and the positioning of our mortgage products to meet the demands of
our  customers.

     The  Banks  have  no  concentration  of loans to individual borrowers which
exceeded  10%  of  total loans at December 31, 2001 and 2000. As of December 31,
2001,  the  Banks  have a concentration of indirect consumer loans (11% of total
loans) included in the consumer loans classification. The Banks actively monitor
the  risk  of  this loan concentration. The Banks have no foreign loans, and the
impact  of  nonaccrual, restructured troubled debt and delinquent loans on total
interest  income  was  not  material.

     A loan is generally classified as nonaccrual when principal or interest has
consistently  been  in  default  for a period of 90 days or more or because of a
deterioration  in  the financial condition of the borrower or payment in full of
principal or interest is not expected. Delinquent loans past due 90 days or more
and  still  accruing  interest  are  loans  that  are generally well-secured and
expected  to  be  restored  to  a  current  status  in  the  near  future.

     The  economic  slowdown  had  an  impact  on  the loan quality during 2001,
nonetheless,  the  Banks  continued  to  maintain a high quality loan portfolio.
Nonperforming  assets  (nonaccruing  loans  and  net  assets  in
                                                                     (continued)
PAGE 24
foreclosure) were 0.53% of total loans and net assets acquired in foreclosure at
December 31, 2001, compared to 0.47% at December 31, 2000, and 0.50% at December
31,  1999.  The  ratio  of  the  allowance to nonperforming assets was 223.4% at
December  31,  2001,  compared  to  268.3%  at  December 31, 2000, and 266.3% at
December  31,  1999.

     Nonaccruing  loans  of  $6,354,000 at December 31, 2001, increased $984,000
from  the  December  31,  2000,  balance  of  $5,370,000.  A rise in nonaccruing
commercial  loans,  indirect  consumer loans and leases was responsible for this
increase. The December 31, 2000, balance of nonaccrual loans was $1,680,000 more
than  the  December  31,  1999,  balance  of  $3,690,000.

     Net  assets  in  foreclosure  totaled  $609,000 as of December 31, 2001, an
increase  of  $321,000  from  the December 31, 2000, balance of $288,000. During
2001, sales of foreclosed properties totaled $1,349,000, transfers from loans to
assets  in  foreclosure were $1,714,000 and write-downs of assets in foreclosure
equaled  $44,000.  Efforts  to  liquidate  assets  acquired  in  foreclosure are
proceeding  as  quickly as potential buyers can be located and legal constraints
permit. Generally accepted accounting principles require foreclosed assets to be
carried at the lower of cost (lesser of carrying value of asset or fair value at
date  of  acquisition)  or  estimated  fair  value,  less  selling  costs

     Loans  past  due 90 days or more and still accruing interest are loans that
are  generally well secured and are in the process of collection. As of December
31,  2001,  loans  past  due  90  days  or more and still accruing interest were
$1,926,000,  compared  to  $514,000 as of December 31, 2000. This increase was a
result  of  a  rise  in  real  estate  related  loans  past  due  90  days.

     The  Banks  use  the  reserve  method  of accounting for credit losses. The
balance  in  the  allowance  for  loans  and lease losses is determined based on
managements review and evaluation of the loan portfolio in relation to past loss
experience,  the  size and composition of the portfolio, current economic events
and  conditions,  and other pertinent factors, including managements assumptions
as  to  future delinquencies, recoveries and losses. Additions to the allowances
are  charged  to  operations.  The  allowance  for  loan  losses  grew 2.3% from
$15,210,000  at  December  31,  2000,  to  $15,558,000 at December 31, 2001. The
allowance  for  loan  losses  to  nonperforming  assets at December 31, 2001 was
223.4%,  compared  to  268.3%  at  December  31,  2000.

<TABLE>
<CAPTION>
                                                Year Ended December 31,
                                         -------------------------------------
                                            2001         2000         1999
                                         -------------------------------------
<S>                                      <C>          <C>          <C>
Nonperforming assets. . . . . . . . . .  $6,963,000   $5,670,000   $5,591,000
Allowance for loan losses to
  nonperforming assets. . . . . . . . .       223.4%       268.3%       266.3%
Nonperforming assets to total loans and
  net assets acquired in foreclosure. .        0.53%        0.47%        0.50%
Allowance for loan losses
  to total loans. . . . . . . . . . . .        1.18%        1.25%        1.33%
</TABLE>

DEPOSITS AND BORROWINGS AND OTHER INTEREST-BEARING LIABILITIES

     Deposits  and  other  borrowings  are  the  primary  funding sources of the
Corporation.  A  rise  in  deposits was partially offset by a reduction in other
borrowings.  Total  deposits  of  $1,746,862,000 at December 31, 2001, increased
$257,812,000,  or  17.3%,  from the $1,489,050,000 balance at December 31, 2000.
The  Corporation  reported  increases in all deposit categories during 2001. The
growth  in  money  market accounts and time deposits during this period were the
primary  source  of  this  increase. Money market deposits grew $86,268,000 as a
result of the introduction of new higher rate money market products during 2001.
Time  deposits  under  $100,000  increased $59,271,000 and time deposits greater
than  $100,000  grew  $61,681,000. The growth in time deposits over $100,000 was
primarily  due  to  the Banks efforts to build strong deposit relationships with
local  municipalities  and  school  districts. Noninterest-bearing deposits grew
$27,192,000,  savings  accounts  increased  $18,051,000  and  interest-bearing
checking  accounts  rose  $5,349,000.

     Other  borrowings  experienced  a  decrease  of  $20,568,000 during 2001. A
reduction  in  federal funds purchased of $44,500,000 was offset by increases in
the  remaining  other  borrowings categories. Federal Home Loan Bank borrowings,
securities  sold  under  agreements to repurchase and U.S. Treasury demand notes
increased  $17,000,000,  $6,310,000  and  $622,000, respectively. Borrowings and
other  interest-bearing  liabilities  include  federal  funds  purchased,  FHLB
borrowings,  securities  sold  under  agreements to repurchase and U.S. Treasury
demand  notes.
                                                                     (continued)
PAGE 25
INCOME  STATEMENT  ANALYSIS

RESULTS OF OPERATIONS

     Net  income for 2001 of $28,820,000 increased $3,216,000, or 12.6% from the
2000  net  income  of  $25,604,000.  On a per share basis, diluted earnings were
$1.54  in  2001  and  $1.38 in 2000. Basic earnings per share were $1.57 in 2001
compared  to $1.38 in 2000. Net income increased in 2000 by $2,366,000, or 10.2%
over  1999.

     The  return on average shareholders equity was 15.82% for 2001, compared to
16.57%  for  2000 and 15.63% in 1999. The 2001 return on average assets of 1.40%
increased  from  the 2000 return on average asset rate of 1.39%. The 1999 return
on  average assets was 1.42%. Net income is affected by five major elements: (1)
net  interest  income, or the difference between interest income earned on loans
and  investments  and  interest expense paid on deposits and borrowed funds; (2)
the  provision  for  loan  losses, or the amount added to the allowance for loan
losses  to  provide  reserves  for  future  losses on loans; (3) other operating
income,  which  is  made  up  primarily  of  certain service fees and Investment
Management  and  Trust  Services  income;  (4)  other  operating expenses, which
consist  primarily  of  salaries  and  other  operating expenses; and (5) income
taxes.  Each of these major elements is reviewed in more detail in the following
discussion.

NET INTEREST INCOME

     The 2001 net interest income of $73,742,000 increased $7,705,000, or 11.7%,
from  2000  levels.  Net interest income was $66,037,000 in 2000, which was 4.0%
higher  than  the  $63,518,000 reported in 1999. The rise in net interest income
during  2001  is a direct result of both an 11.8% increase in earning assets and
the  stability  of  the  net  interest  margin.

     The 2001 interest income of $138,679,000 grew $6,868,000, or 5.2%, from the
$131,811,000  2000 balance. The increase in interest income is the result of the
growth  in  both  average  loans  and  investment securities during this period,
offset by lower rates related to the Federal Reserve lowering interest rates 475
basis  points during 2001. Interest expense in 2001 of $64,937,000 was $837,000,
or  1.3%  lower than the 2000 interest expense of $65,774,000. This decrease was
the  result  of  the  reduction in interest rates outpacing the interest expense
related  to  the  10.7%  rise  in average interest-bearing liabilities. Interest
expense was also affected by the funding of the bank-owned life insurance (BOLI)
with  deposits  during  2001.  The  Banks  average  investment in BOLI increased
$7,693,000 in 2001 to $39,161,000. While the cost of funding BOLI is recorded as
interest  expense,  BOLI  income  is  recorded  as  other  operating  income.

NET INTEREST MARGIN

     The  2001  net  interest  margin  of  4.09% was lower than the net interest
margins  for  2000  and  1999  of  4.14%  and 4.42%, respectively. The lower net
interest  margin  experienced in 2001 is related to the funding of the BOLI with
bank  deposits  and the lower yield experienced on earning assets. The impact of
funding  the  additional  BOLI  purchased  during  2001 reduced the net interest
margin  by 2 basis points in 2001, compared to 2000. The tax-equivalent yield on
total  interest-earning  assets  decreased 49 basis points from 7.92% in 2000 to
7.43%  in 2001. This reduction is primarily due to the impact of the decrease in
interest  rates during this period. The 2001 average interest expense to average
earning assets ratio of 3.34%, decreased 44 basis points from 2000. The 49 basis
point  drop  in the yield on earning assets, outpaced the 44 basis point drop in
interest  expense  to earnings assets ratio, resulting in the 5 basis point drop
in  the  2001 net interest margin, compared to 2000. The tax-equivalent yield on
total  interest-earnings  assets  in  1999  was  7.65%  and  the  1999  cost  of
interest-bearing  liabilities  was  3.99%.

INTEREST RATE SENSITIVITY ANALYSIS

     The  Corporation  actively manages its interest rate sensitivity positions.
The  objectives  of interest rate risk management are to control exposure of net
interest  income to risks associated with interest rate movements and to achieve
consistent  growth  in net interest income. The Asset/Liability Committee, using
policies  and  procedures  approved  by  the Corporations Board of Directors, is
responsible  for managing the rate sensitivity position. The Corporation manages
interest  rate  sensitivity by changing mix and repricing characteristics of its
assets  and  liabilities,  through  the  management of its investment securities
portfolio,  its  offering  of loan and deposit terms and through borrowings from
the  FHLB.  The nature of the Corporations current operations is such that it is
not  subject  to  foreign  currency  exchange  or  commodity  price  risk.  The
Corporation  does  not  own  trading  assets  and  it  does not have any hedging
transactions  in  place  such  as  interest  rate  swaps,  caps  or  floors.

     The  Banks  utilize  three principal reports to measure interest rate risk:
asset/liability  simulation  reports;  gap  analysis  reports;  and net interest
margin reports. The table below shows the interest rate sensitivity gap position
as  of  December 31, 2001. The table presents data at a single point in time and
includes  management assumptions estimating the prepayment rate and the interest
rate environment prevailing at December 31, 2001. Money market, interest-bearing
checking,  and  savings  accounts  are  considered  stable sources of funds, and
although  the  rates are subject to change, rates on these accounts historically
have  not  changed  as quickly or as often as the other deposits included in the
following analysis. On a cumulative basis over the next 12 months, the Banks are
in  a  negative  gap position of (1.22%) of earning assets at December 31, 2001.
                                                                     (continued)

PAGE 26
<TABLE>
<CAPTION>
(Dollars in thousands)                                      INTEREST RATE SENSITIVITY GAP POSITION AS OF DECEMBER 31, 2001
                                                            ---------------------------------------------------------------
                                                               0 TO 90        91 TO 365       >1 YEAR          OVER 5
                                                                 DAYS            DAYS         <5 YEARS          YEARS
                                                            --------------  --------------  ------------  -----------------
<S>                                                         <C>             <C>             <C>           <C>
ASSETS
OTHER RATE-SENSITIVE ASSETS. . . . . . . . . . . . . . . .  $      18,150   $       1,500   $         -   $              -
LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . .        410,345         358,605       489,279             58,380
INVESTMENT SECURITIES. . . . . . . . . . . . . . . . . . .         63,625         123,568       274,653            263,649
                                                            --------------  --------------  ------------  -----------------
TOTAL RATE-SENSITIVE ASSETS. . . . . . . . . . . . . . . .        492,120         483,673       763,932            322,029
                                                            --------------  --------------  ------------  -----------------
LIABILITIES
NONINTEREST-BEARING DEPOSITS . . . . . . . . . . . . . . .        254,638               -             -                  -
TIME DEPOSITS. . . . . . . . . . . . . . . . . . . . . . .        205,758         303,233       214,846                 57
MONEY MARKET SAVINGS FUNDS . . . . . . . . . . . . . . . .         12,597          37,790       201,546            167,957
INTEREST-BEARING CHECKING ACCOUNTS . . . . . . . . . . . .          5,075          15,224        81,195             67,662
SAVINGS ACCOUNTS . . . . . . . . . . . . . . . . . . . . .          5,378          16,136        86,056             71,714
OTHER BORROWINGS.. . . . . . . . . . . . . . . . . . . . .        127,070          18,000        53,750             17,000
                                                            --------------  --------------  ------------  -----------------
TOTAL RATE-SENSITIVE LIABILITIES . . . . . . . . . . . . .        610,516         390,383       637,393            324,390
                                                            --------------  --------------  ------------  -----------------
INCREMENTAL GAP. . . . . . . . . . . . . . . . . . . . . .  $    (118,396)  $      93,290   $   126,539   $         (2,361)
                                                            ==============  ==============  ============  =================
CUMULATIVE GAP . . . . . . . . . . . . . . . . . . . . . .  $    (118,396)  $     (25,106)  $   101,433   $         99,072
                                                            ==============  ==============  ============  =================
% OF EARNING ASSETS. . . . . . . . . . . . . . . . . . . .          -5.74%          -1.22%         4.92%              4.81%
                                                            ==============  ==============  ============  =================

                                                                                                          ASSET/LIABILITY
                                                                             CHANGE IN                        POLICY
                                                            MARKET VALUE    MARKET VALUE    PERCENTAGE       APPROVED
                                                              OF EQUITY      OF EQUITY        CHANGE      PERCENT CHANGE
                                                            --------------  --------------  ------------  -----------------
+BASIS POINTS. . . . . . . . . . . . . . . . . . . . . . .        206,832         (17,581)        -7.83%            +/- 30%
+BASIS POINTS. . . . . . . . . . . . . . . . . . . . . . .        225,691           1,278          0.57%            +/- 30%
+BASIS POINTS. . . . . . . . . . . . . . . . . . . . . . .        232,046           7,633          3.40%            +/- 30%
FLAT RATE. . . . . . . . . . . . . . . . . . . . . . . . .        224,413               -          0.00%            +/- 30%
-100 BASIS POINTS. . . . . . . . . . . . . . . . . . . . .        188,219         (36,194)       -16.13%            +/- 30%
-200 BASIS POINTS. . . . . . . . . . . . . . . . . . . . .        161,329         (63,084)       -28.11%            +/- 30%
-300 BASIS POINTS. . . . . . . . . . . . . . . . . . . . .        184,187         (40,226)       -17.92%            +/- 30%

---------------------------------------------------------------------------------------------------------------------------
                                                                                                                (continued)
</TABLE>

PAGE 27
     Management  also  simulates  possible economic conditions and interest rate
scenarios  in  order  to  quantify the impact on net interest income. The effect
that  changing  interest  rates have on the Corporation's net interest income is
simulated  by increasing and decreasing interest rates. This simulation is known
as rate shocking. The report above forecasts changes in the Corporation's market
value  of  equity under alternative interest rate environments. The market value
of  equity  is  defined  as  the net present value of the Corporation's existing
assets  and  liabilities.  The  results  of  the  December  31, 2001, rate shock
simulations  show  that  the  Corporation  is  within  all guidelines set by the
Corporation's  Asset/Liability  policy.

     In  the  event  the Corporation should experience a mismatch in its desired
GAP  ranges or an excessive decline in its market value of equity resulting from
changes  in interest rates, it has a number of options which it could utilize to
remedy  such  a  mismatch.  The  Corporation  could  restructure  its investment
portfolio  through  the  sale  or  purchase  of  securities  with more favorable
repricing  attributes.  It  could  also emphasize loan products with appropriate
maturities  or  repricing  attributes,  or attract deposits or obtain borrowings
with  desired  maturities.

PROVISION FOR LOAN LOSSES

     The  provision  for  loan  losses  is based on management's analysis of the
adequacy  of  the  allowance  for  loan  losses.  In  its evaluation, management
considers  past  loan experience, overall characteristics of the loan portfolio,
current  economic  conditions  and  other  relevant factors. Based on the latest
monthly evaluation of potential loan losses, the allowance is adequate to absorb
known  and  inherent  losses  in  the  loan  portfolio.  Ultimately however, the
adequacy of the allowance is largely dependent upon the economy, a factor beyond
the  Corporation's  control.  With  this in mind, additions to the allowance for
loan  losses  may  be  required in future periods, especially if economic trends
worsen  or  certain  borrowers'  abilities  to  repay  decline.

     The  provision for 2001 of $3,930,000, reflected an increase of $1,618,000,
compared  to  the  2000  provision  of $2,312,000. The increase in the provision
during  2001  is  based  on  management's  analysis  of the adequacy of the loan
portfolio.  The  allowance  for  loan  losses  to nonperforming assets ratio for
December  31, 2001, 2000 and 1999 were 223.4%, 268.3%, and 266.3%, respectively.
Total loans charged off increased from $2,653,000 in 2000 to $4,661,000 in 2001.
The  increase  in  the loans charged off was primarily due to consumer loans and
lease  financing.  Recoveries  of $1,079,000 during 2001 increased from the 2000
recoveries of $664,000. The increase in recoveries is related to consumer loans,
real estate loans and leases. The charged off loans and recoveries for 1999 were
$1,799,000  and  $288,000,  respectively.

OTHER INCOME

     The  Corporation  successfully  employed strategies to enhance other income
during  2001.  These  strategies include the initiation of the Bounce Protection
product,  the  establishment of the retail investment group and the formation of
HNC Reinsurance Company. Other operating income in 2001 of $22,225,000 increased
$10,019,000,  or  82.1%,  compared  to  the  2000  level  of  $12,206,000.  The
Corporation  experienced  significant  increases in all other income categories.
Net  security gains, other income, service charges, BOLI income and trust income
exceeded  2000  levels  by  $4,577,000,  $2,953,000,  $1,638,000,  $528,000  and
$323,000,  respectively.  Excluding  the  net  security  gains,  other  income
nonetheless  grew  44.8%  during  2001.

     Service  charges on deposit accounts income of $5,470,000 in 2001 increased
$1,638,000,  or  42.7%,  from  the  2000  income from service charges on deposit
accounts  of $3,832,000. The growth in service charges during 2001 is attributed
to  the 10.9% rise in average fee earning deposits and the introduction of a new
overdraft  Bounce Protection product in March 2001. The growth in overdraft fees
during 2001 was $1,417,000, compared to 2000. The 2000 service charges grew only
1.6% over 1999 service charges. This low growth rate in 2000 was the result of a
reduction  in  fees  associated  with  merger  related  promotions.

     The  Corporation  recorded  net  security  gains  on the sale of securities
available  for  sale  of  $4,629,000  in  2001, compared to $52,000 in 2000. The
Corporation  sold  the  investment  securities  available  for  sale to fund the
purchase  of  other securities in an effort to enhance the overall return of the
portfolio  and  to  reduce the risk within different interest rate environments.
The  1999  net  security  gains  were  $495,000.

     Fees  from  the  Corporation's  Investment Management and Trust Division of
$3,300,000  increased $323,000, or 10.8%, compared to the $2,977,000 recorded in
2000.  This  increase was the result of the Corporation's continuing emphasis on
marketing  the  Investment Management and Trust Services Division's products and
services.  The  1999  Investment  Management  and  Trust  Division  income  was
$2,643,000.

     The  Corporation's  bank  owned  life  insurance  (BOLI)  income  increased
$528,000,  or  27.2%, to $2,472,000 during 2001, compared to $1,944,000 in 2000.
This  increase  was  directly  related  to the 24.4% growth in the Corporation's
average  investment  in  BOLI  during 2001. BOLI involves the purchasing of life
insurance  by the Corporation on a chosen group of employees. The Corporation is
the  owner  and  beneficiary of the policies. This pool of insurance, due to tax
advantages to the Banks, is profitable to the Corporation. This profitability is
used  to  offset  a  portion  of  future  employee  benefit cost increases. Bank
deposits  fund  BOLI  and the earnings from BOLI are recognized as other income.
The  Corporation  recognized  $526,000  of  BOLI  income  in  1999.

     The  2001 other income increased $2,953,000 during 2001, from $3,401,000 in
2000  to  $6,354,000  in  2001.  The  primary  source  of  this increase was the
generation  of  $1,772,000  of  fees  related  to  HNC  Reinsurance Company. HNC
Reinsurance  Company  was formed during 2001 to generate fees through reinsuring
consumer  loan credit life and accident and health insurance. The fees generated
from  HNC  Reinsurance  Company  were partially offset by $1,618,000 of expenses
associated  with  the  company  that  are  recorded  in  other  expenses.  Also
contributing  to the increase in other income were increases in mutual funds and
annuities  sales,  and residential mortgage loan sales. Other income in 1999 was
$3,100,000.

OTHER EXPENSES

     The  Corporation's 2001, overhead expense as a percentage of average assets
of  2.67%  increased  from the 2000 ratio of 2.42%. The ratio remains well below
its  peer ratio of 2.98% as of September 30, 2001. Other operating expenses rose
to  $55,043,000 in 2001, a 23.2% increase over the $44,677,000 recorded in 2000.
Contributing  to this rise in other operating expenses was a $3,475,000 increase
in  the  off lease vehicles residual reserve, and $1,618,000 of expenses related
to  HNC  Reinsurance Company. Net of these two expenses, other operating expense
would  have  grown  11.8%.  The increase in other operating expenses was 6.4% in
2000,  compared  to  1999.

     Employee  salaries  and  benefits  increased  $2,923,000,  or  12.3%,  from
$23,745,000  in  2000  to $26,668,000 in 2001. The increase in 2001 salaries was
9.1%  and  the  rise  in  benefits  was 29.4%. The increase in salaries reflects
additional  staff  necessitated  by  the  growth  of  the  Corporation, and both
cost-of-living and merit increases. The rise in benefit expense is primarily due
to  a $702,000 pension expense in 2001, compared to no expense in 2000. The 2001
expense  was primarily the result of an increase in employees qualifying for the
pension  plan  during  2001. There was no expense related to the pension plan in
2000, as a result of the strong performance of the pension plan investments. The
2000  salaries  and  benefits  expense  increased  6.6% over the 1999 salary and
benefits  expense  of  $22,271,000.
                                                                     (continued)
PAGE 28
     The 2001 net occupancy costs increased by $367,000, or 12.5%, compared with
a $243,000, or 9.1%, increase in 2000. Contributing to the increase in 2001 were
higher energy costs, increases in taxes and insurance, and a reduction in rental
income.  Equipment  expenses  increased  $110,000,  or  2.1%,  during  2001, and
$360,000,  or  7.5%,  in  2000.  The  2001  increase  was  the  result of higher
maintenance  and  rental  expenses,  partially  offset  by  lower  depreciation
expenses.

     Other  expenses  grew  $6,966,000,  or  54.1%,  from $12,871,000 in 2000 to
$19,837,000  in  2001. The primary source of this increase was a $3,475,000 rise
in  the off-lease vehicles residual reserve expense. The Corporation reviews the
off-lease  vehicles  residual  reserve  on  a  quarterly  basis, and anticipates
continued  above  normal expense contributions to the reserve continuing through
2002.  Also  contributing  to  the  increase  in other expense was $1,618,000 of
expenses  related  to HNC Reinsurance Company, which was offset by $1,772,000 of
related  fees  recorded  as  other  income. Net of the increase in the off-lease
vehicle  residual  reserve  expense  and the expenses related to HNC Reinsurance
Company,  the  2001  other  expenses grew 14.6%. This increase was the result of
higher  advertising,  marketing, deferred compensation expense and contributions
expensed  in  2001.  The  2000  other expenses increased 5.1%, compared to 1999.

INCOME TAXES

     The  Corporation  accounts  for  income  taxes  under  the liability method
specified  by  SFAS  No. 109, "Accounting for Income Taxes." Under SFAS No. 109,
deferred  tax  assets  and  liabilities  are  measured  using  enacted tax rates
expected  to  apply  to  taxable  income  in  the years in which those temporary
differences  are  expected  to  be recovered or settled. Under SFAS No. 109, the
effect on deferred taxes of a change in tax rates is recognized in income in the
period  that  includes  the  enactment  date.  The  principal  types of accounts
resulting  in differences between assets and liabilities for financial statement
and  tax  return  purposes  are  the  allowance  for loan losses, leased assets,
deferred  loan  fees  and  compensation.
                                                                     (continued)
PAGEB 29
CAPITAL

     Capital,  at the end of 2001, was $189,349,000, an increase of $15,813,000,
or  9.1%,  over  the  end  of 2000. The increase was due to the retention of the
Corporation's  earnings,  and  to  the  adjustment  for the net unrealized gains
related  to  the  available for sale investment securities. Net unrealized gains
and  losses  on  available  for  sale  investment  securities  are  recorded  as
accumulated  other  comprehensive  income  (loss)  in  the equity section of the
balance  sheet. The accumulated other comprehensive income at December 31, 2001,
was a gain of $4,534,000, compared to a gain of $1,422,000 at December 31, 2000.
Management  believes  that  the  Corporation's  current  capital  position  and
liquidity  position  are  strong  and  that  its capital position is adequate to
support  its operations. Except as previously discussed, management is not aware
of  any  recommendation  by  any  regulatory  authority, which, if it were to be
implemented,  would  have  a  material  effect  on  the  Corporation's  capital.

     Pursuant to the federal regulators' risk-based capital adequacy guidelines,
the  components  of  capital  are  called  Tier  1  and  Tier 2 capital. For the
Corporation,  Tier  1 capital is shareholders' equity, and Tier 2 capital is the
allowance  for  loan  losses.  The  risk-based  capital  ratios  are computed by
dividing the components of capital by risk-adjusted assets. Risk-adjusted assets
are  determined  by  assigning  credit risk-weighting factors from 0% to 100% to
various  categories  of  assets and off-balance sheet financial instruments. The
minimum  for the Tier 1 capital ratio is 4.0%, and the total capital ratio (Tier
1  plus  Tier  2  capital  divided  by risk-adjusted assets) minimum is 8.0%. At
December  31,  2001,  the  Corporation's  Tier 1 risk-adjusted capital ratio was
12.18%,  and  the  total risk-adjusted capital ratio was 13.23%, both well above
regulatory  requirements.  The  risk-based  capital  ratios  of  each  of  the
Corporation's  commercial banks also exceeded regulatory requirements at the end
of  2001.

     To  supplement  the  risk-based  capital  adequacy  guidelines, the Federal
Reserve  Board  (FRB) established a leverage ratio guideline. The leverage ratio
consists  of Tier 1 capital divided by quarterly average total assets, excluding
intangible  assets.  The  minimum  leverage  ratio  guideline  is 3% for banking
organizations  that  do  not  anticipate  significant  growth  and  that  have
well-diversified  risk,  excellent  asset quality, high liquidity, good earnings
and,  in  general, are considered top-rated, strong banking organizations. Other
banking  organizations  are  expected  to  have  ratios  of  at  least 4% or 5%,
depending  upon  their  particular  condition  and growth plans. Higher leverage
ratios  could  be  required by the particular circumstances or risk profile of a
given  banking  organization.  The  Corporation's leverage ratios were 8.71% and
8.97%  at  December  31,  2001  and  2000,  respectively.

     Under  FDIC  regulations,  a  "well  capitalized"  institution  must have a
leverage  ratio of at least 5%, a Tier 1 risk-based capital ratio of at least 6%
and  a  total  risk-based  capital ratio of at least 10% and not be subject to a
capital  directive  order.  To  be  considered  "adequately  capitalized"  an
institution  must  generally  have  a  leverage  ratio  of at least 4%, a Tier 1
risk-based  capital ratio of at least 4% and a total risk-based capital ratio of
at least 8%. An institution is deemed to be "critically under capitalized" if it
has  a  tangible  equity ratio of 2% or less. As of December 31, 2001, the Banks
are  above  the  regulatory  minimum  guidelines  and  meet  the  criteria to be
categorized  as  "well  capitalized"  institutions.

LIQUIDITY

     Liquidity  is a measure of the ability of the Banks to meet their needs and
obligations  on  a  timely  basis. For a bank, liquidity requires the ability to
meet the day-to-day demands of deposit customers, and the ability to fulfill the
needs  of  borrowing  customers. Generally, the Banks arrange their mix of cash,
money  market investments, investment securities and loans in order to match the
volatility,  seasonality,  interest sensitivity and growth trends of its deposit
funds.  The  liquidity  measurement  is  based  on  the  asset/liability model's
projection  of  potential  sources  and  uses of funds for the next 120 days.The
resulting  projections  as  of  December 31, 2001, show the potential sources of
funds  exceeding  the  potential  uses  of  funds.  The Corporation has external
sources  of  funds, which can be drawn upon when funds are required. The primary
source  of  external  liquidity  is an available line of credit with the FHLB of
Pittsburgh.  Unused lines of credit at the FHLB of Pittsburgh were $112,436,000,
as  of  December  31,  2001.  The  Banks also have unused federal funds lines of
credit  of  $45,000,000 and non-pledged investment securities available for sale
of  $274,506,000  as  of  December  31,  2001.

     There  are  no  known  trends  or any known demands, commitments, events or
uncertainties  that  will  result in, or that are reasonably likely to result in
liquidity  increasing  or  decreasing  in  any  material  way.


PAGE 30
MARKET  INFORMATION
================================================================================
HARLEYSVILLE  NATIONAL  CORPORATION  AND  SUBSIDIARIES

     The  following table sets forth quarterly dividend information and the high
and  low  prices  for  the  Corporations  common  stock  for  2001 and 2000. The
Corporations  stock  is  traded  in the over-the-counter market under the symbol
HNBC  and  commonly  quoted  under  NASDAQ  National  Market  Systems.

<TABLE>
<CAPTION>
Price of Common Stock

2001                   Low Price  High Price  Dividend
------------------------------------------------------
<S>                    <C>        <C>         <C>
FIRST QUARTER*         $   16.94  $    19.69  $    .15
SECOND QUARTER*            18.13       22.38       .15
THIRD QUARTER              19.90       26.69       .16
FOURTH QUARTER             20.95       25.81       .19


2000                   Low Price  High Price  Dividend
------------------------------------------------------
First Quarter**        $   11.31  $    15.48  $    .13
Second Quarter**           12.23       15.60       .14
Third Quarter**            12.03       16.25       .14
Fourth Quarter*            13.63       17.35       .16

<FN>
* Adjusted for a 100% stock dividend effective 8/10/01.
** Adjusted for a 100% stock dividend effective 8/10/01
and adjusted for a 5% stock dividend effective 11/09/00
</TABLE>


--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
Harleysville National Corporation              Stock Listing                                Registrar/Transfer Agent
<S>                                            <C>                                          <C>
483 Main Street, PO Box 195                    Harleysville National Corporation common     American Stock Transfer & Trust Company
Harleysville, PA 19438                         stock is traded over-the-counter under the   59 Maiden Lane
Shareholder Services                           symbol HNBC. The stock is commonly           New York, NY 10038
(800) 423-3955                                 quoted under NASDAQ National Market          (800) 937-5449
www.hncbank.com                                Systems. At the close of business on
                                               December 31, 2001, there were 3,277          Design
                                               shareholders of record.                      Paskill & Stapleton, Inc.
Corporate Information
                                                                                            Printing
Copies of the Corporation's Annual Report to   Dividend Reinvestment Plan                   Piccari Press
the Securities and Exchange Commission
(Form 10-K) are available, without charge to   The Corporation has a Dividend
shareholders, by going online to               Reinvestment and Stock Purchase Plan.
www.hncbank.com or by writing:                 Interested shareholders can obtain more
  Jo Ann M. Bynon,                             information or register for this service by
  Corporate Secretary                          contacting American Stock Transfer & Trust
  483 Main Street, PO Box 195                  Company at (800) 278-4353.
  Harleysville, PA 19438
                                               Shareholders not participating in the
Annual Meeting                                 Dividend Reinvestment Plan may opt to have
                                               their dividends deposited directly into their
The 2002 Annual Meeting of Shareholders of     checking or savings account at any financial
Harleysville National Corporation will be      institution participating in the Automated
held at Presidential Caterers, Norristown, PA  Clearing House (ACH) System. To register,
on April 9, 2002, at 9:30 A.M.                 contact American Stock Transfer & Trust
                                               Company at (800) 937-5449.

NASDAQ Market Makers

As of December 31, 2001, the following firms   Auditors
made a market in the Corporation's common
stock:                                         Grant Thornton LLP
  F.J. Morrissey & Co., Inc.                   Two Commerce Square
  Ferris, Baker, Watts, Inc.                   2001 Market Street
  Janney Montgomery LLC                        Suite 3100
  Herzog, Heine, Geduld, Inc.                  Philadelphia, PA 19103
  Ryan Beck & Co., Inc.                        (215) 561-4200
</TABLE>