**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**Washington,        D.C. 20549**

**Form        10-Q**

**Quarterly        Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of        1934**

**for        the quarterly period ended September 30, 2006**

**Or        **

**Transition        Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of        1934**

**HARLEYSVILLE        NATIONAL CORPORATION**

| **Pennsylvania**                                                                                        |   | **23-2210237**                                                             |
|---------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|
| **(State                  or other jurisdiction****of                  incorporation or organization)** |   | **(IRS                  Employer****Identification                  No.)** |

**483        Main Street**

**Harleysville,        Pennsylvania 19438**

**(Address        of principal executive office and zip code)**

**(215)        256-8851**

**(Registrant’s        telephone number, including area code)**

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| **HARLEYSVILLE                  NATIONAL CORPORATION**                                                                                                           |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                             |   |
|                                                                                                                                                             |   |
| **INDEX                  TO FORM 10-Q REPORT**                                                                                                                   |   |
|                                                                                                                                                             |   |
|                                                                                                                                                             | PAGE   |
|                                                                                                                                                             |   |
| Part                  I. Financial Information                                                                                                                   |   |
|                                                                                                                                                             |   |
| Item                  1. Financial Statements:                                                                                                                   |   |
|                                                                                                                                                             |   |
| Consolidated                  Balance Sheets at September 30, 2006 (unaudited) and December 31,                  2005                                            | 3      |
|                                                                                                                                                             |   |
| Consolidated                  Statements of Income for the Three and Nine Months Ended September                  30,                  2006 and 2005 (unaudited) | 4      |
|                                                                                                                                                             |   |
| Consolidated                  Statements of Shareholders’ Equity for the Nine Months Ended September 30,                  2006 and 2005 (unaudited)        | 5      |
|                                                                                                                                                             |   |
| Consolidated                  Statements of Cash Flows for the Nine Months Ended September 30,                  2006 and                  2005 (unaudited)       | 6      |
|                                                                                                                                                             |   |
| Notes                  to Consolidated Financial Statements                                                                                                      | 7      |
|                                                                                                                                                             |   |
| Item                  2. Management's Discussion and Analysis of Financial Condition                  and Results                  of Operations                 | 17     |
|                                                                                                                                                             |   |
| Item                  3. Quantitative and Qualitative Disclosures about Market                  Risk                                                             | 30     |
|                                                                                                                                                             |   |
| Item                  4. Controls and Procedures                                                                                                                 | 30     |
|                                                                                                                                                             |   |
| Part                  II. Other Information                                                                                                                      | 31     |
|                                                                                                                                                             |   |
| Item                  1. Legal Proceedings                                                                                                                       | 31     |
|                                                                                                                                                             |   |
| Item                  1A. Risk Factors                                                                                                                           | 31     |
|                                                                                                                                                             |   |
| Item                  2. Unregistered Sales of Equity Securities and Use of Proceeds                                                                             | 31     |
|                                                                                                                                                             |   |
| Item                  3. Defaults Upon Senior Securities                                                                                                         | 31     |
|                                                                                                                                                             |   |
| Item                  4. Submission of Matters to a Vote of Security Holders                                                                                     | 31     |
|                                                                                                                                                             |   |
| Item                  5. Other Information                                                                                                                       | 31     |
|                                                                                                                                                             |   |
| Item                  6. Exhibits                                                                                                                                | 31     |
|                                                                                                                                                             |   |
| Signatures                                                                                                                                                       | 32     |

----

| PART                  1. FINANCIAL INFORMATION                                                                            |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|
| HARLEYSVILLE                  NATIONAL CORPORATION AND SUBSIDIARIES                                                       |   |
| CONSOLIDATED                  BALANCE SHEETS                                                                              |   |
|                                                                                                                      |   |
| (Dollars                  in thousands)                                                                                   |   |   | September                  30, 2006 |   |   | December                  31, 2005 |   |
|                                                                                                                      |   |   | (Unaudited)  |   |   |   |   |
| **Assets**                                                                                                                |   |   |   |   |   |   |   |
| Cash                  and due from banks                                                                                  |   | $ | 62,909 |   | $ | 57,756 |   |
| Federal                  funds sold and securities purchased under agreements to                  resell                  |   |   | 176,500 |   |   | 35,000 |   |
| Interest-bearing                  deposits in banks                                                                       |   |   | 3,463 |   |   | 2,455 |   |
| Total                  cash and cash equivalents                                                                          |   |   | 242,872 |   |   | 95,211 |   |
| Residential                  mortgage loans held for sale                                                                 |   |   | 1,125 |   |   | 2,028 |   |
| Investment                  securities available for sale                                                                 |   |   | 863,357 |   |   | 841,653 |   |
| Investment                  securities held to maturity (market                  value $59,301 and $59,753, respectively) |   |   | 58,894 |   |   | 59,555 |   |
| Loans                  and leases                                                                                         |   |   | 2,033,148 |   |   | 1,983,465 |   |
| Less:                  Allowance for loan losses                                                                          |   |   | (21,303 | ) |   | (19,865 | ) |
| Net                  loans                                                                                                |   |   | 2,011,845 |   |   | 1,963,600 |   |
| Premises                  and equipment, net                                                                              |   |   | 33,269 |   |   | 27,570 |   |
| Accrued                  interest receivable                                                                              |   |   | 14,894 |   |   | 13,282 |   |
| Goodwill                                                                                                                  |   |   | 42,956 |   |   | 31,552 |   |
| Intangible                  assets, net                                                                                   |   |   | 7,434 |   |   | 4,031 |   |
| Bank-owned                  life insurance                                                                                |   |   | 61,125 |   |   | 59,334 |   |
| Other                  assets                                                                                             |   |   | 25,232 |   |   | 19,543 |   |
| Total                  assets                                                                                             |   | $ | 3,363,003 |   | $ | 3,117,359 |   |
| **Liabilities                  and Shareholders' Equity**                                                                 |   |   |   |   |   |   |   |
| Deposits:                                                                                                                 |   |   |   |   |   |   |   |
| Noninterest-bearing                                                                                                       |   | $ | 326,851 |   | $ | 363,440 |   |
| Interest-bearing:                                                                                                         |   |   |   |   |   |   |   |
| Checking                  accounts                                                                                        |   |   | 571,444 |   |   | 387,374 |   |
| Money                  market accounts                                                                                    |   |   | 675,904 |   |   | 667,952 |   |
| Savings                                                                                                                   |   |   | 150,889 |   |   | 190,033 |   |
| Time                  deposits                                                                                            |   |   | 903,158 |   |   | 756,658 |   |
| Total                  deposits                                                                                           |   |   | 2,628,246 |   |   | 2,365,457 |   |
| Federal                  funds purchased and securities sold under agreements to                  repurchase              |   |   | 113,086 |   |   | 88,118 |   |
| Other                  short-term borrowings                                                                              |   |   | 1,438 |   |   | 1,752 |   |
| Long-term                  borrowings                                                                                     |   |   | 239,750 |   |   | 297,750 |   |
| Accrued                  interest payable                                                                                 |   |   | 29,123 |   |   | 28,276 |   |
| Subordinated                  debt                                                                                        |   |   | 51,548 |   |   | 51,548 |   |
| Other                  liabilities                                                                                        |   |   | 13,207 |   |   | 11,226 |   |
| Total                  liabilities                                                                                        |   |   | 3,076,398 |   |   | 2,844,127 |   |
| Shareholders'                  Equity:                                                                                    |   |   |   |   |   |   |   |
| Series                  preferred stock, par value $1 per share;                                                          |   |   |  |   |   |  |   |
| Authorized                  8,000,000 shares, none issued                                                                 |   |   | - |   |   | - |   |
| Common                  stock, par value $1 per share; authorized 75,000,000                                              |   |   |  |   |   |  |   |
| shares;                  issued 29,074,250 shares at September 30, 2006 and                                               |   |   |   |   |   |   |   |
| 27,500,407                  shares at December 31, 2005                                                                   |   |   | 29,074 |   |   | 27,500 |   |
| Additional                  paid in capital                                                                               |   |   | 194,818 |   |   | 167,418 |   |
| Retained                  earnings                                                                                        |   |   | 71,860 |   |   | 88,285 |   |
| Accumulated                  other comprehensive loss                                                                     |   |   | (7,300 | ) |   | (8,618 | ) |
| Treasury                  stock, at cost: 90,550 shares at September 30, 2006 and                                         |   |   |   |   |   |   |   |
| 64,700                  shares at December 31, 2005                                                                       |   |   | (1,847 | ) |   | (1,353 | ) |
| Total                  shareholders' equity                                                                               |   |   | 286,605 |   |   | 273,232 |   |
| Total                  liabilities and shareholders' equity                                                               |   | $ | 3,363,003 |   | $ | 3,117,359 |   |

----

| HARLEYSVILLE                  NATIONAL CORPORATION AND SUBSIDIARIESCONSOLIDATED                  STATEMENTS OF INCOME(Unaudited) |
|----------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                             |   | Three                  Months Ended  | Nine                  Months Ended |
|                                                                                                                                  |   | September                  30,  | September                  30, |
| (Dollars                  in thousands, except per share information)                                                            |   |   | 2006 |   |   | 2005 |   |   | 2006 |   |   | 2005 |   |
|                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Interest                  Income:**                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans                  and leases, including fees                                                                                |   | $ | 34,553 |   | $ | 29,677 |   | $ | 99,519 |   | $ | 83,899 |   |
| Investment                  securities:                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                                                                          |   |   | 7,538 |   |   | 5,678 |   |   | 22,412 |   |   | 17,362 |   |
| Exempt                  from federal taxes                                                                                       |   |   | 2,643 |   |   | 2,797 |   |   | 7,842 |   |   | 8,476 |   |
| Federal                  funds sold and securities purchased under agreements to                  resell                         |   |   | 1,182 |   |   | 353 |   |   | 2,363 |   |   | 888 |   |
| Deposits                  in banks                                                                                               |   |   | 45 |   |   | 65 |   |   | 144 |   |   | 106 |   |
| Total                  interest income                                                                                           |   |   | 45,961 |   |   | 38,570 |   |   | 132,280 |   |   | 110,731 |   |
|                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Interest                  Expense:**                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                  and money market deposits                                                                               |   |   | 10,630 |   |   | 5,916 |   |   | 27,061 |   |   | 15,235 |   |
| Time                  deposits                                                                                                   |   |   | 9,732 |   |   | 6,163 |   |   | 26,341 |   |   | 17,130 |   |
| Short-term                  borrowings                                                                                           |   |   | 1,385 |   |   | 1,299 |   |   | 3,889 |   |   | 3,153 |   |
| Long-term                  borrowings                                                                                            |   |   | 3,600 |   |   | 3,448 |   |   | 11,628 |   |   | 9,952 |   |
| Total                  interest expense                                                                                          |   |   | 25,347 |   |   | 16,826 |   |   | 68,919 |   |   | 45,470 |   |
|                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  interest income                                                                                             |   |   | 20,614 |   |   | 21,744 |   |   | 63,361 |   |   | 65,261 |   |
| Provision                  for loan losses                                                                                       |   |   | 900 |   |   | 650 |   |   | 3,000 |   |   | 2,050 |   |
| Net                  interest income after provision for loan losses                                                             |   |   | 19,714 |   |   | 21,094 |   |   | 60,361 |   |   | 63,211 |   |
|                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Noninterest                  Income:**                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service                  charges                                                                                                 |   |   | 2,092 |   |   | 2,112 |   |   | 6,008 |   |   | 6,113 |   |
| Gain                  on sales in investment securities, net                                                                     |   |   | - |   |   | 1,898 |   |   | - |   |   | 3,047 |   |
| Gain                  on sale of credit card portfolio                                                                           |   |   | - |   |   | - |   |   | 1,444 |   |   | - |   |
| Gain                  on sale of branch                                                                                          |   |   | - |   |   | - |   |   | - |   |   | 690 |   |
| Wealth                  management income                                                                                        |   |   | 3,372 |   |   | 1,261 |   |   | 11,224 |   |   | 5,241 |   |
| Bank-owned                  life insurance income                                                                                |   |   | 591 |   |   | 497 |   |   | 1,792 |   |   | 1,635 |   |
| Other                  income                                                                                                    |   |   | 2,231 |   |   | 1,962 |   |   | 6,771 |   |   | 5,699 |   |
| Total                  noninterest income                                                                                        |   |   | 8,286 |   |   | 7,730 |   |   | 27,239 |   |   | 22,425 |   |
| Net                  interest income after provision for loan losses and                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |
| noninterest                  income                                                                                              |   |   | 28,000 |   |   | 28,824 |   |   | 87,600 |   |   | 85,636 |   |
|                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Noninterest                  Expense:**                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Salaries,                  wages and employee benefits                                                                           |   |   | 11,487 |   |   | 9,189 |   |   | 32,860 |   |   | 28,869 |   |
| Occupancy                                                                                                                        |   |   | 1,379 |   |   | 1,277 |   |   | 4,278 |   |   | 3,911 |   |
| Furniture                  and equipment                                                                                         |   |   | 917 |   |   | 963 |   |   | 2,708 |   |   | 3,284 |   |
| Marketing                                                                                                                        |   |   | 493 |   |   | 617 |   |   | 1,422 |   |   | 2,018 |   |
| Other                  expense                                                                                                   |   |   | 3,284 |   |   | 3,267 |   |   | 11,192 |   |   | 9,627 |   |
| Total                  noninterest expense                                                                                       |   |   | 17,560 |   |   | 15,313 |   |   | 52,460 |   |   | 47,709 |   |
|                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income                  before income tax expense                                                                                |   |   | 10,440 |   |   | 13,511 |   |   | 35,140 |   |   | 37,927 |   |
| Income                  tax expense                                                                                              |   |   | 2,533 |   |   | 3,349 |   |   | 8,997 |   |   | 8,910 |   |
| Net                  income                                                                                                      |   | $ | 7,907 |   | $ | 10,162 |   | $ | 26,143 |   | $ | 29,017 |   |
|                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  income per share information:                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                            |   | $ | 0.27 |   | $ | 0.35 |   | $ | 0.90 |   | $ | 1.00 |   |
| Diluted                                                                                                                          |   | $ | 0.27 |   | $ | 0.34 |   | $ | 0.89 |   | $ | 0.98 |   |
| Cash                  dividends per share                                                                                        |   | $ | 0.19 |   | $ | 0.17 |   | $ | 0.55 |   | $ | 0.50 |   |
| Weighted                  average number of common shares:                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                            |   |   | 29,011,903 |   |   | 28,897,869 |   |   | 28,940,119 |   |   | 28,921,613 |   |
| Diluted                                                                                                                          |   |   | 29,384,310 |   |   | 29,479,228 |   |   | 29,373,646 |   |   | 29,541,486 |   |
|                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Nine                  Months Ended September 30, 2006                                             |
|---------------------------------------------------------------------------------------------------|
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                              |   |   | Common                  Stock  |   |   | Treasury                  Stock |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                   |   |   | Number                    of |   |   | Number                  of |   |   | Par |   |   | Additional                  Paid |   |   | Retained |   |   | Accumulated                  Other Comprehensive |   |   | Treasury |   |   |   |   |   | Comprehensive |   |
|                                                                                              |   |   | Shares   |   |   | Shares |   |   | Value |   |   | In                  Capital |   |   | Earnings |   |   | Income                  (Loss) |   |   | Stock |   |   | Total |   |   | Income |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,                  January 1, 2006                                                         |   |   | 27,500 |   |   | (64 | ) | $ | 27,500 |   | $ | 167,418 |   | $ | 88,285 |   | $ | (8,618 | ) | $ | (1,353 | ) | $ | 273,232 |   |   |   |   |
| Issuance                  of stock for stock options, net of                  excess tax benefits |   |   | 192 |   |   | 193 |   |   | 192 |   |   | 1,862 |   |   | - |   |   | - |   |   | 4,020 |   |   | 6,074 |   |   |   |   |
| Issuance                  of stock for stock awards                                               |   |   | - |   |   | - |   |   | - |   |   | 5 |   |   | - |   |   | - |   |   | - |   |   | 5 |   |   |   |   |
| Stock                  based compensation expense                                                 |   |   | - |   |   | - |   |   | - |   |   | 345 |   |   | - |   |   | - |   |   | - |   |   | 345 |   |   |   |   |
| Stock                  dividend                                                                   |   |   | 1,382 |   |   | - |   |   | 1,382 |   |   | 25,188 |   |   | (26,582 | ) |   | - |   |   | - |   |   | (12 | ) |   |   |   |
| Net                  income                                                                       |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 26,143 |   |   | - |   |   | - |   |   | 26,143 |   | $ | 26,143 |   |
| Other                  comprehensive income, net of reclassifications and tax                     |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 1,318 |   |   | - |   |   | 1,318 |   |   | 1,318 |   |
| Purchases                  of treasury stock                                                      |   |   | - |   |   | (219 | ) |   | - |   |   | - |   |   | - |   |   | - |   |   | (4,514 | ) |   | (4,514 | ) |   |   |   |
| Cash                  dividends                                                                   |   |   | - |   |   | - |   |   | - |   |   | - |   |   | (15,986 | ) |   | - |   |   | - |   |   | (15,986 | ) |   |   |   |
| Comprehensive                  income                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 27,461 |   |
| Balance,                  September 30, 2006                                                      |   |   | 29,074 |   |   | (90 | ) | $ | 29,074 |   | $ | 194,818 |   | $ | 71,860 |   | $ | (                  7,300 | ) | $ | (1,847 | ) | $ | 286,605 |   |   |   |   |
|                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| Nine                  Months Ended September 30, 2005                                          |   |
|------------------------------------------------------------------------------------------------|--------|
|                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |  |   |   |   |   |   |   |   |   |   |   |
|                                                                                           |   |   | Common                  Stock  |   |   | Treasury                  Stock |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                           |   |   | Number                  of  |   |   | Number                  of |   |   | Par |   |   | Additional                  Paid |   |   | Retained |   |   | Accumulated                  Other Comprehensive |   |   | Treasury |   |   |   |   |   | Comprehensive |   |
|                                                                                           |   |   | Shares  |   |   | Shares |   |   | Value |   |   | In                  Capital |   |   | Earnings |   |   | Income                  (Loss | ) |   | Stock |   |   | Total |   |   | Income                  (Loss | ) |
|                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,                  January 1, 2005                                                      |   |   | 27,320 |   |   | (1,043 | ) | $ | 27,320 |   | $ | 160,039 |   | $ | 99,730 |   | $ | 1,243 |   | $ | (17,800 | ) | $ | 270,532 |   |   |   |   |
| Issuance                  of stock for stock options, net of                  tax benefits     |   |   | 142 |   |   | 68 |   |   | 142 |   |   | 2,181 |   |   | - |   |   | - |   |   | 1,282 |   |   | 3,605 |   |   |   |   |
| Issuance                  of stock for stock awards                                            |   |   | - |   |   | - |   |   | - |   |   | 5 |   |   | - |   |   | - |   |   | - |   |   | 5 |   |   |   |   |
| Stock                  dividend                                                                |   |   | 38 |   |   | 1,272 |   |   | 38 |   |   | 6,090 |   |   | (29,535 | ) |   | - |   |   | 23,392 |   |   | (15 | ) |   |   |   |
| Net                  income                                                                    |   |   | -- |   |   | - |   |   | - |   |   | - |   |   | 29,017 |   |   | - |   |   | - |   |   | 29,017 |   | $ | 29,017 |   |
| Other                  comprehensive loss, net of reclassifications and tax                    |   |   | - |   |   | - |   |   | - |   |   | - |   |   | - |   |   | (5,345 | ) |   | - |   |   | (5,345 | ) |   | (5,345 | ) |
| Purchases                  of treasury stock                                                   |   |   | - |   |   | (338 | ) |   | - |   |   | - |   |   | - |   |   | - |   |   | (7,743 | ) |   | (7,743 | ) |   |   |   |
| Cash                  dividends                                                                |   |   | - |   |   | - |   |   | - |   |   | - |   |   | (14,429 | ) |   | - |   |   | - |   |   | (14,429 | ) |   |   |   |
| Comprehensive                  income                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | $ | 23,672 |   |
| Balance,                  September 30, 2005                                                   |   |   | 27,500 |   |   | (41 | ) | $ | 27,500 |   | $ | 168,315 |   | $ | 84,783 |   | $ | (4,102 | ) | $ | (869 | ) | $ | 275,627 |   |   |   |   |
|                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                           |
|                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See                  accompanying notes to consolidated financial                  statements. |

----

| HARLEYSVILLE                  NATIONAL CORPORATION AND SUBSIDIARIES                                                                                  |
|------------------------------------------------------------------------------------------------------------------------------------------------------|
| CONSOLIDATED                  STATEMENTS OF CASH FLOWS                                                                                               |
| (Unaudited)                                                                                                                                          |
|                                                                                                                                                 |   | Nine                  Months Ended   |
| (Dollars                  in thousands)                                                                                                              |   | September                  30, |
|                                                                                                                                                 |   |   | 2006 |   |   | 2005 |   |
| **Operating                  Activities:**                                                                                                           |   |   |   |   |   |   |   |
| Net                  income                                                                                                                          |   | $ | 26,143 |   | $ | 29,017 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities:                                  |   |   |  |   |   |   |   |
| Provision                  for loan losses                                                                                                           |   |   | 3,000 |   |   | 2,050 |   |
| Depreciation                  and amortization                                                                                                       |   |   | 3,324 |   |   | 2,352 |   |
| Net                  amortization of investment securities discounts/premiums                                                                        |   |   | 2,711 |   |   | 2,126 |   |
| Deferred                  income tax benefit                                                                                                         |   |   | (2,120 | ) |   | (2,892 | ) |
| Gains                  on sales of investment securities, net                                                                                        |   |   | — |   |   | (3,047 | ) |
| Gain                  on sale of credit card portfolio                                                                                               |   |   | (1,444 | ) |   | — |   |
| Gain                  on sale of branch                                                                                                              |   |   | — |   |   | (690 | ) |
| Gain                  on sale of bank subsidiary                                                                                                     |   |   | — |   |   | (287 | ) |
| Bank-owned                  life insurance income                                                                                                    |   |   | (1,792 | ) |   | (1,635 | ) |
| Stock                  based compensation expense                                                                                                    |   |   | 345 |   |   | — |   |
| Net                  increase in accrued interest receivable                                                                                         |   |   | (1,612 | ) |   | (642 | ) |
| Net                  increase (decrease) in accrued interest payable                                                                                 |   |   | 847 |   |   | (1,894 | ) |
| Net                  (increase) decrease in other assets                                                                                             |   |   | 372 |   |   | (2,380 | ) |
| Net                  decrease in other liabilities                                                                                                   |   |   | (3,631 | ) |   | (2,598 | ) |
| Other,                  net                                                                                                                          |   |   | (88 | ) |   | (9 | ) |
|                     Net cash provided by operating activities                                                                              |   |   | 26,055 |   |   | 19,471 |   |   |   |   |
| **Investing                  Activities:**                                                                                                           |   |   |   |   |   |   |   |
| Proceeds                  from sales of investment securities available for sale                                                                     |   |   | — |   |   | 247,040 |   |   |   |   |
| Proceeds                  from maturity or calls of investment securities held to                  maturity                                          |   |   | 617 |   |   | 5,870 |   |
| Proceeds                  from maturity or calls of investment securities available for                  sale                                        |   |   | 121,486 |   |   | 144,473 |   |
| Purchases                  of investment securities available for sale                                                                               |   |   | (143,821 | ) |   | (362,435 | ) |
| Net                  increase in loans                                                                                                               |   |   | (65,693 | ) |   | (102,787 | ) |
| Net                  cash paid due to acquisition, net of cash acquired                                                                              |   |   | (14,525 | ) |   | — |   |
| Net                  proceeds from sale of credit card portfolio                                                                                     |   |   | 16,705 |   |   | — |   |
| Net                  cash paid in sale of branch                                                                                                     |   |   | — |   |   | (7,431 | ) |
| Net                  cash received from sale of bank subsidiary                                                                                      |   |   | — |   |   | 1,931 |   |
| Purchases                  of premises and equipment                                                                                                 |   |   | (8,241 | ) |   | (2,563 | ) |
| Proceeds                  from sales of premises and equipment                                                                                       |   |   | 216 |   |   | 42 |   |
| Purchase                  of bank-owned life insurance                                                                                               |   |   | — |   |   | (5,000 | ) |
| Proceeds                  from sales of other real estate                                                                                            |   |   | 32 |   |   | 142 |   |
|                      Net cash provided used in investing activities                                                                   |   |   | (93,224 | ) |   | (80,718 | ) |
| **Financing                  Activities:**                                                                                                           |   |   |   |   |   |   |   |
| Net                  increase in deposits                                                                                                            |   |   | 262,789 |   |   | 150,574 |   |
| Increase                  (decrease) in federal funds purchased and securities sold under                  agreements                  to repurchase |   |   | 24,968 |   |   | (37,954 | ) |
| Decrease                  in short-term borrowings                                                                                                   |   |   | (314 | ) |   | (45,507 | ) |
| Advances                  of long-term borrowings                                                                                                    |   |   | 10,000 |   |   | 20,000 |   |
| Repayments                  of long-term borrowings                                                                                                  |   |   | (68,000 | ) |   | — |   |
| Advances                  of subordinated debt                                                                                                       |   |   | — |   |   | 25,774 |   |
| Cash                  dividends                                                                                                                      |   |   | (15,986 | ) |   | (14,429 | ) |
| Repurchase                  of common stock                                                                                                          |   |   | (4,514 | ) |   | (7,743 | ) |
| Proceeds                  from the exercise of stock options                                                                                         |   |   | 5,032 |   |   | 3,605 |   |
| Excess                  tax benefits from stock based compensation                                                                                   |   |   | 867 |   |   | — |   |
| Other,                  net                                                                                                                          |   |   | (12 | ) |   | (15 | ) |
| Net                  cash provided by financing activities                                                                                           |   |   | 214,830 |   |   | 94,305 |   |
| Net                  increase in cash and cash equivalents                                                                                           |   |   | 147,661 |   |   | 33,058 |   |
| Cash                  and cash equivalents at beginning of period                                                                                    |   |   | 95,211 |   |   | 106,990 |   |
| Cash                  and cash equivalents at end of the period                                                                                      |   | $ | 242,872 |   | $ | 140,048 |   |
|                                                                                                                                                 |   |   |   |   |   |   |   |
| Cash                  paid during the period for:                                                                                                    |   |   |   |   |   |   |   |
| Interest                                                                                                                                             |   | $ | 42,790 |   | $ | 47,611 |   |
| Income                  taxes                                                                                                                        |   | $ | 12,173 |   | $ | 13,018 |   |
| Supplemental                  disclosure of noncash investing and financing activities:                                                              |   |   |   |   |   |   |   |
| Transfer                  of assets from loans to net assets in foreclosure                                                                          |   | $ | 114 |   | $ | 279 |   |
|                                                                                                                                                 |
| See                  accompanying notes to consolidated financial statements.                                                                        |   |   |   |   |   |   |   |

----

**HARLEYSVILLE        NATIONAL CORPORATION AND SUBSIDIARIES**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**Note        1**
**-        Summary of Significant Accounting Policies**

*Principles        of Consolidation and Basis of Presentation*

*Goodwill        and Other Intangible Assets*

*Stock        Based Compensation*

*pro        forma*

----

**Note        1**
**-        Summary of Significant Accounting Policies - Continued**

**Note        2 - Dispositions / Acquisition **

----

**Note        2 - Dispositions / Acquisition - Continued**

**Note        3 -**
**        Pension Plan**

|                                                             |   | Nine                  Months Ended September, 30  |
|------------------------------------------------------------------|--------|--------------------------------------------------------|
| (Dollars                  in thousands)                          |   |                                                   | 2006 |   |   | 2005 |   |
|                                                             |   |                                                   |   |   |   |   |   |
| Service                  cost                                    |   | $                                                      | 780 |   | $ | 789 |   |
| Interest                  cost                                   |   |                                                   | 491 |   |   | 481 |   |
| Expected                  return on plan assets                  |   |                                                   | (413 | ) |   | (393 | ) |
| Amortization                  of unrecognized net actuarial loss |   |                                                   | 88 |   |   | 70 |   |
| Net                  periodic benefit expense                    |   | $                                                      | 946 |   | $ | 947 |   |

----

**Note        4 - Stock Dividend/Split**

**Note        5 **
**Stock        Based Compensation**

** **

*pro        forma*

| (Dollars                  in thousands, except per share amounts)                                                                                                      |   |                                      | Three                  Months Ended |   |   | Nine                  Months Ended |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|-------------------------------------|--------|--------|------------------------------------|--------|
|                                                                                                                                                                        |   | September                  30, 2005  |
| Net                  income                                                                                                                                            |   |                                      |                                |   |   |                               |   |
| As                  reported                                                                                                                                           |   | $                                         | 10,162                              |   | $      | 29,017                             |   |
| Stock-based                  compensation expense included in reported                  net income, net of related tax effects                                         |   |                                      | -                                   |   |   | -                                  |   |
| Stock-based                  compensation expense determined under                  fair value based method for all awards,net                  of related tax effects |   |                                      | (106                                | )      |   | (503                               | )      |
|  *Pro                  forma*                                                                                                                                     |   | $                                         | 10,056                              |   | $      | 28,514                             |   |
|                                                                                                                                                                   |   |                                      |                                |   |   |                               |   |
| Earnings                  per share (Basic)                                                                                                                            |   |                                      |                                |   |   |                               |   |
| As                  reported                                                                                                                                           |   | $                                         | .35                                 |   | $      | 1.00                               |   |
|  *Pro                  forma*                                                                                                                                     |   | $                                         | .35                                 |   | $      | .99                                |   |
|                                                                                                                                                                   |   |                                      |                                |   |   |                               |   |
| Earnings                  per share (Diluted)                                                                                                                          |   |                                      |                                |   |   |                               |   |
| As                  reported                                                                                                                                           |   | $                                         | .34                                 |   | $      | .98                                |   |
|  *Pro                  forma*                                                                                                                                     |   | $                                         | .34                                 |   | $      | .97                                |   |

----

**Note        5 **
**Stock        Based Compensation - Continued**

| **Options**                                        |   |   | **Shares** |   |   | **Weighted-Average                  Exercise Price** |   |   | **Weighted-Average                  Remaining Contractual Term****(in                  years)** |   |   | **Aggregate****Intrinsic                  Value****(in                  thousands)** |   |
|----------------------------------------------------|--------|--------|------------|--------|--------|------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------------|--------|
| Outstanding                  at January 1, 2006    |   |   | 1,650,387  |   | $      | 14.27                                                |   |   |                                                                                            |   |   |                                                                                 |   |
| Granted                                            |   |   | 18,900     |   |   | 18.60                                                |   |   |                                                                                            |   |   |                                                                                 |   |
| Exercised                                          |   |   | (399,798   | )      |   | 9.50                                                 |   |   |                                                                                            |   |   |                                                                                 |   |
| Forfeited                  (unvested)              |   |   | (57,359    | )      |   | 22.70                                                |   |   |                                                                                            |   |   |                                                                                 |   |
| Cancelled                  (vested)                |   |   | (26,260    | )      |   | 17.67                                                |   |   |                                                                                            |   |   |                                                                                 |   |
|                                               |   |   |       |   |   |                                                 |   |   |                                                                                            |   |   |                                                                                 |   |
| Outstanding                  at September 30, 2006 |   |   | 1,185,870  |   | $      | 15.46                                                |   |   | 5.61                                                                                            |   | $      | 7,333                                                                                |   |
|                                               |   |   |       |   |   |                                                 |   |   |                                                                                            |   |   |                                                                                 |   |
| Exercisable                  at September 30, 2006 |   |   | 1,011,614  |   | $      | 14.26                                                |   |   | 5.10                                                                                            |   | $      | 7,327                                                                                |   |
|                                               |   |   |       |   |   |                                                 |   |   |                                                                                            |   |   |                                                                                 |   |

| **Nonvested                  Shares**            |   |   | **Shares** |   |   | **Weighted-Average****Grant-Date                  Fair Value** |   |
|--------------------------------------------------|--------|--------|------------|--------|--------|----------------------------------------------------------------|--------|
|                                             |   |   |       |   |   |                                                           |   |
| Nonvested                  at January 1, 2006    |   |   | 229,671    |   | $      | 6.24                                                           |   |
|                                             |   |   |       |   |   |                                                           |   |
| Granted                                          |   |   | 18,900     |   |   | 5.23                                                           |   |
|                                             |   |   |       |   |   |                                                           |   |
| Vested                                           |   |   | (16,955    | )      |   | 5.33                                                           |   |
|                                             |   |   |       |   |   |                                                           |   |
| Forfeited                                        |   |   | (57,359    | )      |   | 6.27                                                           |   |
|                                             |   |   |       |   |   |                                                           |   |
| Nonvested                  at September 30, 2006 |   |   | 174,257    |   | $      | 6.21                                                           |   |

**Note        6 **
**Earnings        Per Share**

----

**Note        6 **
**Earnings        Per Share - Continued**

|                                                                                                     |                                   |                                       |
|----------------------------------------------------------------------------------------------------------|----------------------------------------|--------------------------------------------|
|                                                                                                     |                                   |
|                                                                                                     | Three                    Months Ended  |  Nine                    Months Ended |
|                                                                                                     |  September                    30, |  September                    30,     |
| (Dollars                    in thousands, except per share data)                                         | 2006                                   | 2005                                       | 2006 | 2005 |
|                                                                                                     |                                   |                                       |   |   |
| **Basic                    earnings per share**                                                          |                                   |                                       |   |   |
| Net                    income available to common shareholders                                           | $7,907                                 | $10,162                                    | $26,143 | $29,017 |
| Weighted                    average common shares outstanding                                            | 29,011,903                             | 28,897,869                                 | 28,940,119 | 28,921,613 |
| Basic                    earnings per share                                                              | $                    .27               | $                    .35                   | $                    .90 | $                    1.00 |
|                                                                                                     |                                   |                                       |   |   |
| **Diluted                    earnings per share**                                                        |                                   |                                       |   |   |
| Net                    income available to common shareholdersand                    assumed conversions | $7,907                                 | $10,162                                    | $26,143 | $29,017 |
| Weighted                    average common shares outstanding                                            | 29,011,903                             | 28,897,869                                 | 28,940,119 | 28,921,613 |
| Dilutive                    potential common shares (1),                    (2)                          | 372,407                                | 581,359                                    | 433,527 | 619,873 |
| Total                    diluted weighted average common shares outstanding                              | 29,384,310                             | 29,479,228                                 | 29,373,646 | 29,541,486 |
| Diluted                    earnings per share                                                            | $                    .27               | $                    .34                   | $                    .89 | $                    .98 |
|                                                                                                     |                                   |                                       |   |   |

| (1)   | Includes                incremental shares from assumed conversions of stock                options. |
|-----------------|------------------------------------------------------------------------------------------------------|
| (2)   | Antidilutive                options have been excluded in the computation of diluted earnings                per                share because the options’ exercise prices were greater than the                averagemarket                price of the common stock. For the three and nine months ended September                30, 2006, there were 417,456 antidilutive options at an average price                of                $24.50. For                the three and nine months ended September 30, 2005, there were 370,210                antidilutive options at an average price of $25.67 and 372,415                antidilutive options at                an average price of $25.64. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Note        7**
**Comprehensive        Income**

| Comprehensive                  Income                                                                   |
|---------------------------------------------------------------------------------------------------------|
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |
| (Dollars                  in thousands)                                                                 |   |   | Before                  tax |   |   | Tax                  Benefit |   |   | Net                  of tax |   |
| Nine                  months ended September 30, 2006                                                   |   |   | Amount |   |   | (Expense) |   |   | Amount |   |
| Net                  unrealized gains on available for sale securities:                                 |   |   |   |   |   |   |   |   |   |   |
| Net                  unrealized holding gains arising during period                                     |   | $ | 2,035 |   | $ | (712 | ) | $ | 1,323 |   |
| Less                  reclassification adjustment for net gains realized in net                  income |   |   | - |   |   | - |   |   | - |   |
| Net                  unrealized gains                                                                   |   |   | 2,035 |   |   | (712 | ) |   | 1,323 |   |
| Change                  in fair value of derivatives used for cash flow hedges                          |   |   | (144 | ) |   | 50 |   |   | (94 | ) |
| Amortization                  of unrealized loss on termination of cash flow hedge                      |   |   | 137 |   |   | (48 | ) |   | 89 |   |
| Other                  comprehensive income, net                                                        |   | $ | 2,028 |   | $ | (710 | ) | $ | 1,318 |   |
|                                                                                                    |   |   |   |   |   |   |   |   |   |   |
| (Dollars                  in thousands)                                                                 |   |   | Before                  tax |   |   | Tax                  Benefit |   |   | Net                  of tax |   |
| Nine                  months ended September 30, 2005                                                   |   |   | Amount |   |   | (Expense | ) |   | Amount |   |
| Net                  unrealized losses on available for sale securities:                                |   |   |   |   |   |   |   |   |   |   |
| Net                  unrealized holding losses arising during period                                    |   | $ | (5,533 | ) | $ | 1,937 |   | $ | (3,596 | ) |
| Less                  reclassification adjustment for net gains realized in net                  income |   |   | 3,047 |   |   | (1,066 | ) |   | 1,981 |   |
| Net                  unrealized losses                                                                  |   |   | (8,580 | ) |   | 3,003 |   |   | (5,577 | ) |
| Change                  in fair value of derivatives used for cash flow hedges                          |   |   | 552 |   |   | (193 | ) |   | 359 |   |
| Unrealized                  loss on termination of cash flow hedge                                      |   |   | (195 | ) |   | 68 |   |   | (127 | ) |
| Other                  comprehensive loss, net                                                          |   | $ | (8,223 | ) | $ | 2,878 |   | $ | (5,345 | ) |

**Note        8 - Segment Information**

----

**Note        8 - Segment Information - Continued**

| **(Dollars                  in thousands)**                  |   |   | **Community                  Banking** |   |   | **Wealth                  Management** |   |   | **All                  Other** |   |   | **Consolidated                  Totals** |   |
|--------------------------------------------------------------|--------|--------|----------------------------------------|--------|--------|----------------------------------------|--------|--------|--------------------------------|--------|--------|------------------------------------------|--------|
| Three                  Months Ended September 30, 2006       |   |   |                                   |   |   |                                   |   |   |                           |   |   |                                     |   |
|                                                         |   |   |                                   |   |   |                                   |   |   |                           |   |   |                                     |   |
| Net                  interest income (expense)               |   | $      | 21,060                                 |   | $      | 118                                    |   | $      | (564                           | )      | $      | 20,614                                   |   |
| Provision                  for loan losses                   |   |   | 900                                    |   |   | -                                      |   |   | -                              |   |   | 900                                      |   |
| Noninterest                  income                          |   |   | 4,738                                  |   |   | 3,377                                  |   |   | 171                            |   |   | 8,286                                    |   |
| Noninterest                  expense                         |   |   | 14,108                                 |   |   | 3,141                                  |   |   | 311                            |   |   | 17,560                                   |   |
| Income                  (loss) before income taxes (benefit) |   |   | 10,790                                 |   |   | 354                                    |   |   | (704                           | )      |   | 10,440                                   |   |
| Income                  taxes (benefit)                      |   |   | 2,698                                  |   |   | 132                                    |   |   | (297                           | )      |   | 2,533                                    |   |
| Net                  income (loss)                           |   | $      | 8,092                                  |   | $      | 222                                    |   | $      | (407                           | )      | $      | 7,907                                    |   |
|                                                         |   |   |                                   |   |   |                                   |   |   |                           |   |   |                                     |   |
| Three                  Months Ended September 30, 2005       |   |   |                                   |   |   |                                   |   |   |                           |   |   |                                     |   |
|                                                         |   |   |                                   |   |   |                                   |   |   |                           |   |   |                                     |   |
| Net                  interest income                         |   | $      | 21,778                                 |   | $      | 147                                    |   | $      | (181                           | )      | $      | 21,744                                   |   |
| Provision                  for loan losses                   |   |   | 650                                    |   |   | -                                      |   |   | -                              |   |   | 650                                      |   |
| Noninterest                  income                          |   |   | 5,761                                  |   |   | 1,268                                  |   |   | 701                            |   |   | 7,730                                    |   |
| Noninterest                  expense                         |   |   | 13,937                                 |   |   | 1,315                                  |   |   | 61                             |   |   | 15,313                                   |   |
| Income                  (loss) before income taxes (benefit) |   |   | 12,952                                 |   |   | 100                                    |   |   | 459                            |   |   | 13,511                                   |   |
| Income                  taxes (benefit)                      |   |   | 3,228                                  |   |   | 34                                     |   |   | 87                             |   |   | 3,349                                    |   |
| Net                  income (loss)                           |   | $      | 9,724                                  |   | $      | 66                                     |   | $      | 372                            |   | $      | 10,162                                   |   |
|                                                         |
| Nine                  Months Ended September 30, 2006        |   |   |                                   |   |   |                                   |   |   |                           |   |   |                                     |   |
|                                                         |   |   |                                   |   |   |                                   |   |   |                           |   |   |                                     |   |
| Net                  interest income (expense)               |   | $      | 64,495                                 |   | $      | 383                                    |   | $      | (1,517                         | )      | $      | 63,361                                   |   |
| Provision                  for loan losses                   |   |   | 3,000                                  |   |   | -                                      |   |   | -                              |   |   | 3,000                                    |   |
| Noninterest                  income                          |   |   | 15,208                                 |   |   | 11,471                                 |   |   | 560                            |   |   | 27,239                                   |   |
| Noninterest                  expense                         |   |   | 41,783                                 |   |   | 9,788                                  |   |   | 889                            |   |   | 52,460                                   |   |
| Income                  (loss) before income taxes (benefit) |   |   | 34,920                                 |   |   | 2,066                                  |   |   | (1,846                         | )      |   | 35,140                                   |   |
| Income                  taxes (benefit)                      |   |   | 8,899                                  |   |   | 864                                    |   |   | (766                           | )      |   | 8,997                                    |   |
| Net                  income (loss)                           |   | $      | 26,021                                 |   | $      | 1,202                                  |   | $      | (1,080                         | )      | $      | 26,143                                   |   |
|                                                         |   |   |                                   |   |   |                                   |   |   |                           |   |   |                                     |   |
| Assets                                                       |   | $      | 3,310,306                              |   | $      | 18,706                                 |   | $      | 33,991                         |   | $      | 3,363,003                                |   |
|                                                         |   |   |                                   |   |   |                                   |   |   |                           |   |   |                                     |   |
| Nine                  Months Ended September 30, 2005        |   |   |                                   |   |   |                                   |   |   |                           |   |   |                                     |   |
|                                                         |   |   |                                   |   |   |                                   |   |   |                           |   |   |                                     |   |
| Net                  interest income                         |   | $      | 65,037                                 |   | $      | 464                                    |   | $      | (240                           | )      | $      | 65,261                                   |   |
| Provision                  for loan losses                   |   |   | 2,050                                  |   |   | -                                      |   |   | -                              |   |   | 2,050                                    |   |
| Noninterest                  income                          |   |   | 15,189                                 |   |   | 5,258                                  |   |   | 1,978                          |   |   | 22,425                                   |   |
| Noninterest                  expense                         |   |   | 41,769                                 |   |   | 5,747                                  |   |   | 193                            |   |   | 47,709                                   |   |
| Income                  (loss) before income taxes (benefit) |   |   | 36,407                                 |   |   | (25                                    | )      |   | 1,545                          |   |   | 37,927                                   |   |
| Income                  taxes (benefit)                      |   |   | 8,580                                  |   |   | (9                                     | )      |   | 339                            |   |   | 8,910                                    |   |
| Net                  income (loss)                           |   | $      | 27,827                                 |   | $      | (16                                    | )      | $      | 1,206                          |   | $      | 29,017                                   |   |
|                                                         |   |   |                                   |   |   |                                   |   |   |                           |   |   |                                     |   |
| Assets                                                       |   | $      | 3,087,114                              |   | $      | -                                      |   | $      | 33,024                         |   | $      | 3,120,138                                |   |

----

**Note        8 - Segment Information - Continued**

**Note        9 - Financial Instruments with Off-Balance Sheet Risk**

|                                                                                                                                          |     | *Total                  Amount Committed at* |
|-----------------------------------------------------------------------------------------------------------------------------------------------|----------|----------------------------------------------|
| **Commitments**                                                                                                                               |     | September                  30, 2006          | December                  31, 2005 |
| (Dollars                  in thousands)                                                                                                       |
|                                                                                                                                          |     |                                         |
| Financial                  instruments whose contract amounts represent credit risk:                                                          |     |                                         |
| Commitments                  to extend credit                                                                                                 | $730,535 | $722,034                                     |
| Standby                  letters of credit and financial guarantees written                                                                   | 25,821   | 21,661                                       |
| Financial                  instruments whose notional or contract amounts exceed the amount                  of credit                  risk: |     |                                         |
| Interest                  rate swap agreements                                                                                                | 57,100   | 22,100                                       |

----

**Note        9 - Financial Instruments with Off-Balance Sheet Risk -        Continued**

**Note        10 - Recent Accounting Pronouncements**

        to Topic        1, Financial Statements, of the Staff Accounting Bulletin Series. Section        N        provides guidance on the consideration of the effects of prior year        misstatements in quantifying current year misstatements for the purpose of        a        materiality assessment. These methods are referred to as the “roll-over” and“iron curtain” methods. The roll-over method quantifies the amount by which the        current year income statement is misstated. Exclusive reliance on an income        statement approach can result in the accumulation of errors on the balance        sheet        that may not have been material to any individual income statement, but which        may misstate one or more balance sheet accounts. The iron curtain method        quantifies the error as the cumulative amount by which the current year balance        sheet is misstated. Exclusive reliance on a balance sheet approach can result        in        disregarding the effects of errors in the current year income statement that        results from the correction of an error existing in previously issued financial        statements. We currently use the roll-over method for quantifying        identified financial statement misstatements. According to the guidance,        a        registrant must quantify the impact of correcting all misstatements on its        current year financial statements, including both the carryover and reversing        effects of prior year misstatements. Early application of the guidance in        SAB        No. 108 is encouraged in any report for an interim period of the first fiscal        year ending after November 15, 2006, filed after the publication of this        SAB.        The Corporation is in the process of assessing the impact of applying the        guidance in this SAB on the Corporation’s financial results.

,        “Accounting        for Uncertainty in Income Taxes - an interpretation of FASB Statement No.        109.”FIN No. 48 clarifies the accounting and reporting for income taxes where        interpretation of the tax law may be uncertain.        FIN No.        48 prescribes a recognition threshold and measurement attribute for the        financial statement recognition and measurement of a tax position taken or        expected to be taken in a tax return. FIN No. 48 also provides guidance on        de-recognition, classification, interest and penalties, accounting in interim        periods, disclosure, and transition. FIN No. 48 will apply to fiscal years        beginning after December 15, 2006, with earlier adoption permitted. The        Corporation is in the process of assessing the impact of the adoption of        this        statement on the Corporation’s financial results.

----

**Note        10 - Recent Accounting Pronouncements - Continued**

* *

----

**Item        2.                                                                                              **
**MANAGEMENT'S        DISCUSSION AND ANALYSIS OF**

**RESULTS        OF OPERATIONS AND FINANCIAL CONDITION**

**Critical        Accounting Estimates **

----

*pro        forma*

**Financial        Overview**

----

**Results        of Operations**

**Net        Interest Income **

**Table        1—Analysis of Changes in Net Interest Income—Fully Taxable-Equivalent Basis**

|                                                            |   | Three                  Months Ended              | Nine                  Months Ended              |
|-----------------------------------------------------------------|--------|-------------------------------------------------------|-------------------------------------------------|
|                                                            |   | September                  30, 2006 compared to  | September                  30, 2006 compared to |
| (Dollars                  in thousands)                         |   | September                  30, 2005                   | September                  30, 2005             |
|                                                            |   |                                                  |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                 |   |                                                  | Total                                      |   | Due                  to change in: |   | Total |   | Due                  to change in: |
|                                                                 |   |                                                  | Change                                     |   |   | Volume |   |   | Rate |   |   | Change |   |   | Volume |   |   | Rate |   |
|                                                            |   |                                                  |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase                  in interest income:                   |   |                                                  |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment                  securities *                        |   | $                                                     | 1,562                                           |   | $ | 147 |   | $ | 1,415 |   | $ | 3,948 |   | $ | 759 |   | $ | 3,189 |   |
| Federal                  funds sold and deposits in banks       |   |                                                  | 809                                             |   |   | 473 |   |   | 336 |   |   | 1,513 |   |   | 554 |   |   | 959 |   |
| Loans                  *                                        |   |                                                  | 4,937                                           |   |   | 1,849 |   |   | 3,088 |   |   | 15,731 |   |   | 6,035 |   |   | 9,696 |   |
| Total                                                           |   |                                                  | 7,308                                           |   |   | 2,469 |   |   | 4,839 |   |   | 21,192 |   |   | 7,348 |   |   | 13,844 |   |
|                                                            |   |                                                  |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase                  (decrease) in interest expense:       |   |                                                  |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                  and money market deposits              |   |                                                  | 4,714                                           |   |   | 370 |   |   | 4,344 |   |   | 11,826 |   |   | 386 |   |   | 11,440 |   |
| Time                  deposits                                  |   |                                                  | 3,569                                           |   |   | 1,957 |   |   | 1,612 |   |   | 9,211 |   |   | 5,274 |   |   | 3,937 |   |
| Borrowed                  funds                                 |   |                                                  | 238                                             |   |   | (676 | ) |   | 914 |   |   | 2,412 |   |   | (443 | ) |   | 2,855 |   |
| Total                                                           |   |                                                  | 8,521                                           |   |   | 1,651 |   |   | 6,870 |   |   | 23,449 |   |   | 5,217 |   |   | 18,232 |   |
|                                                            |   |                                                  |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  increase (decrease) in net interest income |   | $                                                     | (1,213                                          | ) | $ | 818 |   | $ | (2,031 | ) | $ | (2,257 | ) | $ | 2,131 |   | $ | (4,388 | ) |
| *Tax                  equivalent basis using a tax rate of 35%  |   |                                                  |                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

**Table        2—**
**Average        Balance Sheets and Interest Rates**
**¾**
**Fully        Taxable-Equivalent Basis**

| (Dollars                  in thousands)                       |   | Three                  Months Ended September 30, | Three                  Months Ended September 30, |
|---------------------------------------------------------------|--------|---------------------------------------------------|---------------------------------------------------|
|                                                          |   | 2006                                              | 2005                                              |
|                                                          |   |                                              |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                          |   |                                              | Average                                      |   |   |   |   |   | Average |   |   | Average |   |   |   |   |   | Average |   |
| **Assets**                                                    |   |                                              | Balance                                           |   |   | Interest |   |   | Rate |   |   | Balance |   |   | Interest |   |   | Rate |   |
| Earning                  assets:                              |   |                                              |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment                  securities:                       |   |                                              |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                  investments                          |   | $                                                 | 661,976                                           |   | $ | 7,538 |   |   | 4.52 | % | $ | 642,405 |   | $ | 5,678 |   |   | 3.51 | % |
| Nontaxable                  investments (1)                   |   |                                              | 255,127                                           |   |   | 3,892 |   |   | 6.05 |   |   | 261,519 |   |   | 4,190 |   |   | 6.36 |   |
| Total                  investment securities                  |   |                                              | 917,103                                           |   |   | 11,430 |   |   | 4.94 |   |   | 903,924 |   |   | 9,868 |   |   | 4.33 |   |
| Federal                  funds sold and deposits in banks     |   |                                              | 92,878                                            |   |   | 1,227 |   |   | 5.24 |   |   | 50,489 |   |   | 418 |   |   | 3.28 |   |
| Loans                  (1)                  (2)               |   |                                              | 2,027,028                                         |   |   | 34,823 |   |   | 6.82 |   |   | 1,912,551 |   |   | 29,886 |   |   | 6.20 |   |
| Total                  earning assets                         |   |                                              | 3,037,009                                         |   |   | 47,480 |   |   | 6.20 |   |   | 2,866,964 |   |   | 40,172 |   |   | 5.56 |   |
| Noninterest-earning                  assets                   |   |                                              | 216,607                                           |   |   |  |   |   |   |   |   | 187,931 |   |   |   |   |   |   |   |
| Total                  assets                                 |   | $                                                 | 3,253,616                                         |   |   |   |   |   |   |   | $ | 3,054,895 |   |   |   |   |   |   |   |
|                                                          |   |                                              |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and Shareholders' Equity**     |   |                                              |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                |   |                                              |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  deposits:                   |   |                                              |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                  and money market                     |   | $                                                 | 1,305,618                                         |   |   | 10,630 |   |   | 3.23 |   | $ | 1,232,136 |   |   | 5,916 |   |   | 1.90 |   |
| Time                                                          |   |                                              | 878,493                                           |   |   | 9,732 |   |   | 4.40 |   |   | 685,168 |   |   | 6,163 |   |   | 3.57 |   |
| Total                  interest-bearing deposits              |   |                                              | 2,184,111                                         |   |   | 20,362 |   |   | 3.70 |   |   | 1,917,304 |   |   | 12,079 |   |   | 2.50 |   |
| Borrowed                  funds                               |   |                                              | 409,583                                           |   |   | 4,985 |   |   | 4.83 |   |   | 471,579 |   |   | 4,747 |   |   | 3.99 |   |
| Total                  interest bearing liabilities           |   |                                              | 2,593,694                                         |   |   | 25,347 |   |   | 3.88 |   |   | 2,388,883 |   |   | 16,826 |   |   | 2.79 |   |
| Noninterest-bearing                  liabilities:             |   |                                              |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                  deposits                              |   |                                              | 334,847                                           |   |   |   |   |   |   |   |   | 343,658 |   |   |   |   |   |   |   |
| Other                  liabilities                            |   |                                              | 42,397                                            |   |   |   |   |   |   |   |   | 46,904 |   |   |   |   |   |   |   |
| Total                  noninterest-bearing liabilities        |   |                                              | 377,244                                           |   |   |   |   |   |   |   |   | 390,562 |   |   |   |   |   |   |   |
| Total                  liabilities                            |   |                                              | 2,970,938                                         |   |   |   |   |   |   |   |   | 2,779,445 |   |   |   |   |   |   |   |
| Shareholders'                  equity                         |   |                                              | 282,678                                           |   |   |   |   |   |   |   |   | 275,450 |   |   |   |   |   |   |   |
| Total                  liabilities and shareholders' equity   |   | $                                                 | 3,253,616                                         |   |   |   |   |   |   |   | $ | 3,054,895 |   |   |   |   |   |   |   |
| Net                  interest spread                          |   |                                              |                                              |   |   |   |   |   | 2.32 |   |   |   |   |   |   |   |   | 2.77 |   |
| Effect                  of noninterest-bearing sources        |   |                                              |                                              |   |   |   |   |   | 0.57 |   |   |   |   |   |   |   |   | .46 |   |
| Net                  interest income/margin on earning assets |   |                                              |                                              |   | $ | 22,133 |   |   | 2.89 | % |   |   |   | $ | 23,346 |   |   | 3.23 | % |
|                                                          |   |                                              |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less                  tax equivalent adjustment               |   |                                              |                                              |   |   | 1,519 |   |   |   |   |   |   |   |   | 1,602 |   |   |   |   |
| Net                  interest income                          |   |                                              |                                              |   | $ | 20,614 |   |   |   |   |   |   |   | $ | 21,744 |   |   |   |   |

----

| (Dollars                  in thousands)                       |   | Nine                  Months Ended September 30, | Nine                  Months Ended September 30, |
|---------------------------------------------------------------|--------|--------------------------------------------------|--------------------------------------------------|
|                                                          |   | 2006                                             | 2005                                             |
|                                                          |   |                                             |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                          |   |                                             | Average                                     |   |   |   |   |   | Average |   |   | Average |   |   |   |   |   | Average |   |
| **Assets**                                                    |   |                                             | Balance                                          |   |   | Interest |   |   | Rate |   |   | Balance |   |   | Interest |   |   | Rate |   |
| Earning                  assets:                              |   |                                             |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment                  securities:                       |   |                                             |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                  investments                          |   | $                                                | 675,138                                          |   | $ | 22,412 |   |   | 4.44 | % | $ | 641,102 |   | $ | 17,362 |   |   | 3.62 | % |
| Nontaxable                  investments (1)                   |   |                                             | 252,447                                          |   |   | 11,573 |   |   | 6.13 |   |   | 263,993 |   |   | 12,675 |   |   | 6.42 |   |
| Total                  investment securities                  |   |                                             | 927,585                                          |   |   | 33,985 |   |   | 4.90 |   |   | 905,095 |   |   | 30,037 |   |   | 4.44 |   |
| Federal                  funds sold and deposits in banks     |   |                                             | 67,181                                           |   |   | 2,507 |   |   | 4.99 |   |   | 46,773 |   |   | 994 |   |   | 2.84 |   |
| Loans                  (1)                  (2)               |   |                                             | 2,007,650                                        |   |   | 100,333 |   |   | 6.68 |   |   | 1,879,230 |   |   | 84,602 |   |   | 6.02 |   |
| Total                  earning assets                         |   |                                             | 3,002,416                                        |   |   | 136,825 |   |   | 6.09 |   |   | 2,831,098 |   |   | 115,633 |   |   | 5.46 |   |
| Noninterest-earning                  assets                   |   |                                             | 209,946                                          |   |   |  |   |   |   |   |   | 181,633 |   |   |   |   |   |   |   |
| Total                  assets                                 |   | $                                                | 3,212,362                                        |   |   |   |   |   |   |   | $ | 3,012,731 |   |   |   |   |   |   |   |
|                                                          |   |                                             |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Liabilities                  and Shareholders' Equity**     |   |                                             |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  liabilities:                |   |                                             |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing                  deposits:                   |   |                                             |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Savings                  and money market                     |   | $                                                | 1,264,577                                        |   |   | 27,061 |   |   | 2.86 |   | $ | 1,234,032 |   |   | 15,235 |   |   | 1.65 |   |
| Time                                                          |   |                                             | 841,242                                          |   |   | 26,341 |   |   | 4.19 |   |   | 659,241 |   |   | 17,130 |   |   | 3.47 |   |
| Total                  interest-bearing deposits              |   |                                             | 2,105,819                                        |   |   | 53,402 |   |   | 3.39 |   |   | 1,893,273 |   |   | 32,365 |   |   | 2.29 |   |
| Borrowed                  funds                               |   |                                             | 445,688                                          |   |   | 15,517 |   |   | 4.65 |   |   | 460,933 |   |   | 13,105 |   |   | 3.80 |   |
| Total                  interest bearing liabilities           |   |                                             | 2,551,507                                        |   |   | 68,919 |   |   | 3.61 |   |   | 2,354,206 |   |   | 45,470 |   |   | 2.58 |   |
| Noninterest-bearing                  liabilities:             |   |                                             |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Demand                  deposits                              |   |                                             | 338,709                                          |   |   |   |   |   |   |   |   | 335,015 |   |   |   |   |   |   |   |
| Other                  liabilities                            |   |                                             | 42,918                                           |   |   |   |   |   |   |   |   | 50,590 |   |   |   |   |   |   |   |
| Total                  noninterest-bearing liabilities        |   |                                             | 381,627                                          |   |   |   |   |   |   |   |   | 385,650 |   |   |   |   |   |   |   |
| Total                  liabilities                            |   |                                             | 2,933,134                                        |   |   |   |   |   |   |   |   | 2,739,811 |   |   |   |   |   |   |   |
| Shareholders'                  equity                         |   |                                             | 279,228                                          |   |   |   |   |   |   |   |   | 272,920 |   |   |   |   |   |   |   |
| Total                  liabilities and shareholders' equity   |   | $                                                | 3,212,362                                        |   |   |   |   |   |   |   | $ | 3,012,731 |   |   |   |   |   |   |   |
| Net                  interest spread                          |   |                                             |                                             |   |   |   |   |   | 2.48 |   |   |   |   |   |   |   |   | 2.88 |   |
| Effect                  of noninterest-bearing sources        |   |                                             |                                             |   |   |   |   |   | 0.54 |   |   |   |   |   |   |   |   | .43 |   |
| Net                  interest income/margin on earning assets |   |                                             |                                             |   | $ | 67,906 |   |   | 3.02 | % |   |   |   | $ | 70,163 |   |   | 3.31 | % |
|                                                          |   |                                             |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less                  tax equivalent adjustment               |   |                                             |                                             |   |   | 4,545 |   |   |   |   |   |   |   |   | 4,902 |   |   |   |   |
| Net                  interest income                          |   |                                             |                                             |   | $ | 63,361 |   |   |   |   |   |   |   | $ | 65,261 |   |   |   |   |

| (1)   | The                interest earned on nontaxable investment securities and loans is                shown on                a tax equivalent basis (tax rate of 35%). |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (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. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Net        Interest Margin**

----

**Interest        Rate Sensitivity Analysis **

**Table        3—Market Value of Equity**

|                                         |   |   | Change                  in   |   |   |                          |   |   |       |   |   | Asset/Liability                 |   |
|-----------------------------------------|--------|--------|----------------------------------------|--------|--------|-------------------------------|--------|--------|------------|--------|--------|---------------------------------|--------|
|                                    |   |   | Market                  Value     |   |   | Market                  Value |   |   | Percentage |   |   | Approved                        |   |
| (Dollars                  in thousands) |   |   | of                  Equity             |   |   | of                  Equity    |   |   | Change     |   |   | Percent                  Change |   |
|                                    |   |   |                                   |   |   |                          |   |   |       |   |   |                            |   |
| +300                  Basis Points      |   | $      | 337,566                                |   | $      | (106,586                      | )      |   | -24.00     | %      |   | +/-                  35         | %      |
| +200                  Basis Points      |   |   | 376,394                                |   |   | (67,758                       | )      |   | -15.26     | %      |   | +/-                  25         |   |
| +100                  Basis Points      |   |   | 413,414                                |   |   | (30,738                       | )      |   | -6.92      | %      |   | +/-                  15         |   |
| Flat                  Rate              |   |   | 444,152                                |   |   | -                             |   |   | 0.00       | %      |   |                            |   |
| -100                  Basis Points      |   |   | 452,237                                |   |   | 8,085                         |   |   | 1.82       | %      |   | +/-                  15         |   |
| -200                  Basis Points      |   |   | 442,927                                |   |   | (1,225                        | )      |   | -0.28      | %      |   | +/-                  25         |   |
| -300                  Basis Points      |   |   | 428,872                                |   |   | (15,280                       | )      |   | -3.44      | %      |   | +/-                  35         |   |

----

**Provision        for Loan Losses **

----

**Table        4—Allowance for Loans Losses**

|                                                 |   | Nine                  Months Ended  |
|------------------------------------------------------|--------|------------------------------------------|
|                                                 |   | September                  30,      |
| (Dollars                  in thousands)              |   |                                     | 2006 |   |   | 2005 |   |
|                                                 |   |                                     |   |   |   |   |   |
| Average                  loans                       |   | $                                        | 2,007,650 |   | $ | 1,879,230 |   |
|                                                 |   |                                     |   |   |   |   |   |
| Allowance,                  beginning of period      |   |                                     | 19,865 |   |   | 18,455 |   |
| Loans                  charged off:                  |   |                                     |   |   |   |   |   |
| Commercial                  and industrial           |   |                                     | 469 |   |   | 282 |   |
| Consumer                                             |   |                                     | 1,253 |   |   | 1,467 |   |
| Real                  estate                         |   |                                     | 483 |   |   | 144 |   |
| Lease                  financing                     |   |                                     | 18 |   |   | 31 |   |
| Total                  loans charged off             |   |                                     | 2,223 |   |   | 1,924 |   |
| Recoveries:                                          |   |                                     |   |   |   |   |   |
| Commercial                  and industrial           |   |                                     | 48 |   |   | 65 |   |
| Consumer                                             |   |                                     | 412 |   |   | 301 |   |
| Real                  estate                         |   |                                     | 114 |   |   | 197 |   |
| Lease                  financing                     |   |                                     | 87 |   |   | 61 |   |
| Total                  recoveries                    |   |                                     | 661 |   |   | 624 |   |
| Net                  loans charged off               |   |                                     | 1,562 |   |   | 1,300 |   |
| Provision                  for loan losses           |   |                                     | 3,000 |   |   | 2,050 |   |
| Allowance,                  end of period            |   | $                                        | 21,303 |   | $ | 19,205 |   |
| Ratio                  of net charge offs to average |   |                                     |   |   |   |   |   |
| loans                  outstanding (annualized)      |   |                                     | 0.10 | % |   | 0.09 | % |
|                                                 |   |                                     |   |   |   |   |   |

**Table        5—Allocation of the Allowance for Loan Losses by Loan Type**

|                                    |   | September                  30, 2006  | December                  31, 2005 |
|-----------------------------------------|--------|-------------------------------------------|------------------------------------|
|                                    |   |                                      |                               |   |   | Percent                  of  |   |   |   |   |   | Percent                  of |   |
| (Dollars                  in thousands) |   |                                      | Amount                             |   |   | Reserve |   |   | Amount |   |   | Reserve |   |
|                                    |   |                                      |                               |   |   |   |   |   |   |   |   |   |   |
| Real                  estate            |   | $                                         | 7,802                              |   |   | 37 | % | $ | 6,422 |   |   | 32 | % |
| Commercial                              |   |                                      |                               |   |   |   |   |   |   |   |   |   |   |
| and                  industrial         |   |                                      | 8,895                              |   |   | 42 | % |   | 8,534 |   |   | 43 | % |
| Consumer                                |   |                                      | 4,512                              |   |   | 21 | % |   | 4,596 |   |   | 23 | % |
| Lease                  financing        |   |                                      | 94                                 |   |   | - | % |   | 313 |   |   | 2 | % |
| Total                                   |   | $                                         | 21,303                             |   |   | 100 | % | $ | 19,865 |   |   | 100 | % |

----

**Nonperforming        Assets**

**Table        6—**
**Nonperforming        Assets**

| (Dollars                  in thousands)                                       |   |   | September                  30, 2006 |   |   | December                  31, 2005 |   |   | September                  30, 2005 |   |
|-------------------------------------------------------------------------------|--------|--------|-------------------------------------|--------|--------|------------------------------------|--------|--------|-------------------------------------|--------|
|                                                                          |   |   |                                |   |   |                               |   |   |                                |   |
|  Nonaccrual                  loans                                       |   | $      | 10,806                              |   | $      | 7,493                              |   | $      | 6,388                               |   |
|  Loans                  90 days or more past due                         |   |   | 2,262                               |   |   | 846                                |   |   | 1,125                               |   |
| Total                  nonperforming loans                                    |   |   | 13,068                              |   |   | 8,339                              |   |   | 7,513                               |   |
|  Net                  assets in foreclosure                              |   |   | 87                                  |   |   | 29                                 |   |   | 469                                 |   |
| Total                  nonperforming assets                                   |   | $      | 13,155                              |   | $      | 8,368                              |   | $      | 7,982                               |   |
|                                                                          |   |   |                                |   |   |                               |   |   |                                |   |
|   Allowance                  for loan losses to nonperforming loans |   |   | 163.0                               | %      |   | 238.2                              | %      |   | 255.6                               | %      |
|  Nonperforming                  loans to total net loans                 |   |   | 0.65                                | %      |   | 0.42                               | %      |   | 0.39                                | %      |
|  Allowance                  for loan and lease losses to total loans     |   |   | 1.05                                | %      |   | 1.00                               | %      |   | 0.99                                | %      |
|  Nonperforming                  assets to total assets                   |   |   | 0.39                                | %      |   | 0.27                               | %      |   | 0.26                                | %      |

**Table        7—Impaired Loans**

| (Dollars                  in thousands)                           |   |   | September                  30, 2006 |   |   | December                  31, 2005 |   |   | September                  30, 2005 |   |
|-------------------------------------------------------------------|--------|--------|-------------------------------------|--------|--------|------------------------------------|--------|--------|-------------------------------------|--------|
|                                                              |   |   |                                |   |   |                               |   |   |                                |   |
| Impaired                  Loans                                   |   | $      | 3,260                               |   | $      | 3,317                              |   | $      | 1,330                               |   |
|                                                              |   |   |                                |   |   |                               |   |   |                                     |   |
| Average                  year-to-date impaired loans              |   | $      | 3,027                               |   | $      | 1,542                              |   | $      | 1,285                               |   |
|                                                              |   |   |                                |   |   |                               |   |   |                                     |   |
| Impaired                  loans with specific loss allowances     |   | $      | 3,260                               |   | $      | 3,317                              |   | $      | 1,330                               |   |
|                                                              |   |   |                                |   |   |                               |   |   |                                |   |
| Loss                  allowances reserved on impaired loans       |   | $      | 483                                 |   | $      | 675                                |   | $      | 151                                 |   |
|                                                              |   |   |                                |   |   |                               |   |   |                                |   |
| Year-to-date                  income recognized on impaired loans |   | $      | 50                                  |   | $      | 33                                 |   | $      | 19                                  |   |

----

**Noninterest        Income**

**Noninterest        Expense**

**Federal        Income Taxes**

----

**Balance        Sheet Analysis**

**Capital**

**Table        8—Regulatory Capital**

|   (Dollars                  in thousands)        |   |   |         |   |   |   |   |  For                  CapitalAdequacy                  Purposes | To                  Be Well CapitalizedUnder                  Prompt CorrectiveAction                  Program |
|------------------------------------------------------------|--------|--------|--------------|--------|--------|--------|--------|----------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|
|  As                  of September 30, 2006            |   |   | ActualAmount |   |   | Ratio  |   |                                                                 | Amount                                                                                                         |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                                                       |   |   |         |   |   |   |   |                                                                 |                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Total                  Capital (to risk weighted assets):  |   |   |         |   |   |   |   |                                                                 |                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Corporation                                                |   | $      | 317,653      |   |   | 12.26  | %      | $                                                                    | 207,326                                                                                                        |   |   | 8.00 | % | $ | 259,158 |   |   | - |   |
| Harleysville                  National Bank                |   |   | 272,675      |   |   | 10.58  | %      |                                                                 | 206,122                                                                                                        |   |   | 8.00 | % |   | 257,653 |   |   | 10 | % |
| Tier                  1 Capital (to risk weighted assets): |   |   |         |   |   |   |   |                                                                 |                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Corporation                                                |   |   | 296,250      |   |   | 11.43  | %      |                                                                 | 103,663                                                                                                        |   |   | 4.00 | % |   | 155,495 |   |   | - |   |
| Harleysville                  National Bank                |   |   | 251,272      |   |   | 9.75   | %      |                                                                 | 103,061                                                                                                        |   |   | 4.00 | % |   | 154,592 |   |   | 6 | % |
| Tier                  1 Capital (to average assets):       |   |   |         |   |   |   |   |                                                                 |                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Corporation                                                |   |   | 296,250      |   |   | 9.24   | %      |                                                                 | 128,251                                                                                                        |   |   | 4.00 | % |   | 160,313 |   |   | - |   |
| Harleysville                  National Bank                |   |   | 251,272      |   |   | 7.92   | %      |                                                                 | 129,905                                                                                                        |   |   | 4.00 | % |   | 158,631 |   |   | 5 | % |

|   (Dollars                  in thousands)        |   |   |         |   |   |   |   |  For                  CapitalAdequacy                  Purposes | To                  Be Well CapitalizedUnder                  Prompt CorrectiveAction                  Program |
|------------------------------------------------------------|--------|--------|--------------|--------|--------|--------|--------|----------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|
|  As                  of December 31, 2005             |   |   | ActualAmount |   |   | Ratio  |   |                                                                 | Amount                                                                                                         |   |   | Ratio |   |   | Amount |   |   | Ratio |   |
|                                                       |   |   |         |   |   |   |   |                                                                 |                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Total                  Capital (to risk weighted assets):  |   |   |         |   |   |   |   |                                                                 |                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Corporation                                                |   | $      | 318,911      |   |   | 12.98  | %      | $                                                                    | 196,563                                                                                                        |   |   | 8.00 | % | $ | 245,703 |   |   | - |   |
| Harleysville                  National Bank                |   |   | 259,883      |   |   | 10.64  | %      |                                                                 | 195,390                                                                                                        |   |   | 8.00 | % |   | 244,238 |   |   | 10 | % |
| Tier                  1 Capital (to risk weighted assets): |   |   |         |   |   |   |   |                                                                 |                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Corporation                                                |   |   | 298,946      |   |   | 12.17  | %      |                                                                 | 98,281                                                                                                         |   |   | 4.00 | % |   | 147,422 |   |   | - |   |
| Harleysville                  National Bank                |   |   | 239,918      |   |   | 9.82   | %      |                                                                 | 97,695                                                                                                         |   |   | 4.00 | % |   | 146,543 |   |   | 6 | % |
| Tier                  1 Capital (to average assets):       |   |   |         |   |   |   |   |                                                                 |                                                                                                           |   |   |   |   |   |   |   |   |   |   |
| Corporation                                                |   |   | 298,946      |   |   | 9.69   | %      |                                                                 | 123,408                                                                                                        |   |   | 4.00 | % |   | 154,260 |   |   | - |   |
| Harleysville                  National Bank                |   |   | 239,918      |   |   | 7.86   | %      |                                                                 | 122,154                                                                                                        |   |   | 4.00 | % |   | 152,693 |   |   | 5 | % |

----

**,**

**Liquidity**

**Recent        Federal Deposit Insurance Corporation (FDIC) Rules**

----

**Other        Information**

----

**Item        3**
**Qualitative        and Quantitative Disclosures About Market Risk**

**Item        4**
**Controls        and Procedures**

**(i)        Management’s Report on Disclosure Controls**

**(ii)        Changes in Internal Controls**

----

**PART        II. OTHER INFORMATION**

**Item        1.**
**Legal        Proceedings**

**Item        1A.**
**Risk        Factors**

**Item        2.**
**Unregistered        Sales of Equity Securities and Use of Proceeds **

|                                  |   |   | Total                  Number of Common Shares Purchased  |   |   | Weighted                  Average Price Paid Per Share |   |   | Total                  Number of Shares Purchased as Part of Publicly Announced                  Plans(1) |   |   | Maximum                  Number of Shares that may yet be Purchased under the Plans(1) |   |
|---------------------------------------|--------|--------|----------------------------------------------------------------|--------|--------|--------------------------------------------------------|--------|--------|-----------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------|--------|
|                                  |   |   |                                                           |   |   |                                                   |   |   |                                                                                                      |   |   |                                                                                   |   |
| July                  1-31, 2006      |   |   | -                                                              |   | $      | -                                                      |   |   | -                                                                                                         |   |   | 1,046,661                                                                              |   |
| August                  1-31, 2006    |   |   | -                                                              |   |   | -                                                      |   |   | -                                                                                                         |   |   | 1,046,661                                                                              |   |
| September                  1-30, 2006 |   |   | 127,400                                                        |   |   | 20.39                                                  |   |   | 127,400                                                                                                   |   |   | 919,261                                                                                |   |
| Total                                 |   |   | 127,400                                                        |   | $      | 20.39                                                  |   |   | 127,400                                                                                                   |   |   |                                                                                   |   |

| (1)   | On                December 14, 2000, the Board of Directors authorized a program to                purchase                up to 1,377,023 shares (restated for stock dividends and splits),                or 5%,                of its outstanding common stock.                This repurchase plan was completed during the second quarter of 2005.                On                May 12, 2005, the Board of Directors authorized a plan to purchase                up to                1,416,712 shares (restated for five percent stock dividend paid on                September 15, 2006 and September 15, 2005) or 4.9%, of its outstanding                common stock. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Item        3.**
**Defaults        Upon Senior Securities**

**Item        4.**
**Submission        of Matters to a Vote of Security Holders**

**Item        5.**
**Other        Information**

| (a)   | None                to report. |
|-----------------|--------------------------------|
| (b)   | There                were no changes in the manner shareholders may recommend nominees                to the                Registrant’s Board of Directors. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Item        6.**
**Exhibits        **

----

**SIGNATURES**

**HARLEYSVILLE        NATIONAL CORPORATION**

----

**EXHIBIT        INDEX**

**Exhibit        No**
**Description        of Exhibits**

| (2.1)    | Purchase                  Agreement, dated as of November 15, 2005, by and among Harleysville                  National Bank and Trust Company, Cornerstone Financial Consultants,                  Ltd.,                  Cornerstone Advisors Asset Management, Inc., Cornerstone Institutional                  Investors, Inc., Cornerstone Management Resources, Inc., John R.                  Yaissle,                  Malcolm L. Cowen, II, and Thomas J. Scalici. The schedules and                  exhibits to                  the Purchase Agreement are listed at the end of the Purchase Agreement                  but                  have been omitted from the exhibit to Form 10-K. The Registrant                  agrees to                  supplementally furnish a copy of any omitted schedule or exhibit                  to the                  Securities and Exchange Commission upon request. (Incorporated                  by                  reference to Exhibit 2.1 of the Registrant’s Annual Report on Form 10-K                  for the year ended December 31, 2005, filed with the Commission                  on March                  15, 2006.)  |
|---------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2.2)    | Branch                  Purchase Agreement and Deposit Assumption Agreement, dated as of                  July 26,                  2006, by and among First National Community Bank and Harleysville                  National                  Bank and Trust Company, filed herewith. The attachments, schedules                  and                  exhibits to the Branch Purchase and Deposit Assumption Agreement                  are                  listed at the end of the Branch Purchase and Deposit Assumption                  Agreement                  but have been omitted from the exhibit to Form 10-Q. The Registrant                  agrees                  to supplementally furnish a copy of any omitted attachment, schedule                  or                  exhibit to the Securities and Exchange Commission upon request.                                                                                                                                                                                                                                                                                                                                      |
| (3.1)    | Harleysville                  National Corporation Amended and Restated Articles of Incorporation.                  (Incorporated by reference to Exhibit 3.1 to the Corporation’s                  Registration Statement No. 333-111709 on Form S-4, as filed on                  January 5, 2004.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (3.2)    | Harleysville                  National Corporation Amended and Restated By-laws. (Incorporated                  by                  reference to Exhibit 3.1 to the Corporation’s Current Report on Form 8-K,                  filed with the Commission on February 14, 2005.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (10.1)   | Harleysville                  National Corporation 1993 Stock Incentive Plan.** (Incorporated                  by                  reference to Exhibit 4.3 of Registrant’s Registration Statement                  No. 33-69784 on Form S-8, filed with the Commission on                  October 1, 1993.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (10.2)   | Harleysville                  National Corporation Stock Bonus Plan.*** (Incorporated by reference                  to                  Exhibit 99A of Registrant’s Registration Statement No. 333-17813                  on Form S-8, filed with the Commission on December 13,                  1996.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (10.3)   | Supplemental                  Executive Retirement Plan.* (Incorporated by reference to                  Exhibit 10.3 of Registrant’s                  Annual Report in Form 10-K for the year ended December 31, 1997,                  filed with the Commission on March 27, 1998.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| (10.4)   | Walter E.                  Daller, Jr., Chairman and former President and Chief Executive                  Officer’s Employment Agreement dated October 26, 1998.* (Incorporated by                  reference to Registrant’s Current Report on Form 8-K, filed with the                  Commission on March 25, 1999.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (10.5)   | Consulting                  Agreement and General Release dated November 12, 2004 between                  Walter E. Daller, Jr., Harleysville National Corporation and                  Harleysville National Bank and Trust Company.* (Incorporated by                  reference                  to Registrant’s Current Report on Form 8-K, filed with the Commission                  on November 16, 2004.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (10.6)   | Amendment                  to Supplemental Executive Retirement Benefit Agreement dated March                  14,                  2005 by and among Harleysville Management Services, LLC and Walter                  E.                  Daller, Jr.* (Incorporated by reference to Registrant’s Current Report on                  Form 8-K, filed with the Commission on March 14, 2005.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (10.7)   | Employment                  Agreement dated October 26, 1998 by and among Harleysville National                  Corporation, Harleysville National Bank and Trust Company and                  Demetra M. Takes, President and Chief Executive Officer of                  Harleysville National Bank and Trust Company.* (Incorporated by                  reference                  to Registrant’s Current Report on Form 8-K, filed with the Commission                  on March 25, 1999.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (10.8)   | Amendment                  to Supplemental Executive Retirement Benefit Agreement dated March                  14,                  2005 by and among Harleysville Management Services, LLC and Demetra                  M.                  Takes, President and Chief Executive Officer of Harleysville National                  Bank                  and Trust Company.* (Incorporated by reference to Registrant’s Current                  Report on Form 8-K, filed with the Commission on March 14,                  2005.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (10.9)   | Harleysville                  National Corporation 1998 Stock Incentive Plan.** (Incorporated                  by                  reference to Registrant’s Registration Statement No. 333-79971 on                  Form S-8, filed with the Commission on June 4,                  1999.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (10.10)  | Harleysville                  National Corporation 1998 Independent Directors Stock Option Plan,                  as                  amended and restated effective February 8, 2001.** (Incorporated                  by                  reference to Appendix “A” of Registrant’s Definitive Proxy Statement,                  filed with the Commission on March 9, 2001.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (10.11)  | Supplemental                  Executive Retirement Benefit Agreement dated February 23, 2004                  between Michael B. High, Executive Vice President and former Chief                  Financial Officer, and Harleysville Management Services, LLC.*                  (Incorporated by reference to Registrant’s Quarterly Report on                  Form 10-Q, filed with the Commission on May 10,                  2004.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (10.12)  | Employment                  Agreement effective April 1, 2005 between Michael B. High,                  Executive Vice President and Chief Operating Officer of the Corporation,                  and Harleysville Management Services, LLC.* (Incorporated by                  reference to Registrant’s Current Report on Form 8-K, filed with the                  Commission on November 16, 2004.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (10.13)  | Amendment                  to Supplemental Executive Retirement Benefit Agreement dated March                  14,                  2005 by and among Harleysville Management Services, LLC and Michael                  B.                  High, Executive Vice President and Chief Operating Officer of the                  Corporation.* (Incorporated by reference to Registrant’s Current Report on                  Form 8-K, filed with the Commission on March 14, 2005.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

----

| (10.14)  | Employment                  Agreement dated March 9, 2004 between Mikkalya Murray, Executive Vice                  President and Harleysville Management Services, LLC.* (Incorporated                  by reference to Registrant’s Quarterly Report on Form 10-Q, filed                  with the Commission on May 10, 2004.)                                                                                                                                                                                                                    |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (10.15)  | Amendment                  to Supplemental Executive Retirement Benefit Agreement dated March                  14,                  2005 by and among Harleysville Management Services, LLC and Mikkalya                  Murray, Executive Vice President.* (Incorporated by reference to                  Registrant’s Current Report on Form 8-K, filed with the Commission on                  March 14, 2005.)                                                                                                                                                     |
| (10.16)  | Harleysville                  National Corporation 2004 Omnibus Stock Incentive Plan.** (Incorporated                  by                  reference to Exhibit B of Registrant’s Definitive Proxy Statement, filed                  with the Commission on March 5, 2004).                                                                                                                                                                                                                                                                                             |
| (10.17)  | Employment                  Agreement dated August 23, 2004 between James F.                  McGowan, Jr., Executive Vice President & Chief Credit Officer and                  Harleysville Management Services, LLC.* (Incorporated by reference to                  Registrant’s Current Report on Form 8-K, filed with the Commission on                  August 25, 2004.)                                                                                                                                                      |
| (10.18)  | Supplemental                  Executive Retirement Benefit Agreement dated August 23, 2004 between                  James F. McGowan, Jr., Executive Vice President & Chief                  Credit Officer, and Harleysville Management Services, LLC.*                  (Incorporated by reference to Registrant’s Current Report on                  Form 8-K, filed with the Commission on August 25,                  2004.)                                                                                                     |
| (10.19)  | Amendment                  to Supplemental Executive Retirement Benefit Agreement dated March                  14,                  2005 by and among Harleysville Management Services, LLC and James                  F.                  McGowan, Jr., Executive Vice President & Chief Credit Officer.*                  (Incorporated by reference to Registrant’s Current Report on Form 8-K,                  filed with the Commission on March 14, 2005.)                                                                                                   |
| (10.20)  | Employment                  Agreement dated September 27, 2004 between John Eisele, Executive                  Vice President & President of Millennium Wealth Management and Private                  Banking, and Harleysville Management Services, LLC.* (Incorporated by                  reference to Registrant’s Current Report on Form 8-K, filed with the                  Commission on September 29, 2004.)                                                                                                                          |
| (10.21)  | Supplemental                  Executive Retirement Benefit Agreement dated September 27, 2004                  between John Eisele, Executive Vice President & President of                  Millennium Wealth Management and Private Banking, and Harleysville                  Management Services, LLC.* (Incorporated by reference to Registrant’s                  Current Report on Form 8-K, filed with the Commission on                  September 29, 2004.)                                                                          |
| (10.22)  | Amendment                  to Supplemental Executive Retirement Benefit Agreement dated March                  14,                  2005 by and among Harleysville Management Services, LLC and John                  Eisele,                  Executive Vice President & President of Millennium Wealth Management                  and Private Banking.* (Incorporated by reference to Registrant’s Current                  Report on Form 8-K, filed with the Commission on March 14,                  2005.)                                                   |
| (10.23)  | Employment                  Agreement effective January 1, 2005 between Gregg J. Wagner,                  President and Chief Executive Officer of the Corporation, and Harleysville                  Management Services, LLC.* (Incorporated by reference to Registrant’s                  Current Report on Form 8-K, filed with the Commission on                  November 16, 2004.)                                                                                                                                                     |
| (10.24)  | Amendment                  to Supplemental Executive Retirement Benefit Agreement dated March                  14,                  2005 by and among Harleysville Management Services, LLC and Gregg                  J.                  Wagner, the current President and Chief Executive Officer of the                  Corporation.* (Incorporated by reference to Registrant’s Current Report on                  Form 8-K, filed with the Commission on March 14, 2005.)                                                                                        |
| (10.25)  | Employment                  Agreement dated May 18, 2005, between George S. Rapp, Senior Vice                  President and Chief Financial Officer, and Harleysville Management                  Services, LLC.* (Incorporated by reference to Registrant’s Current Report                  on Form 8-K, filed with the Commission on May 20, 2005.)                                                                                                                                                                                                                  |
| (10.26)  | Stock                  Purchase Agreement dated June 30, 2005, between David R. Kotok&                  Associates, Inc., Harleysville National Corporation and Harleysville                  National Bank and Trust Company. (Incorporated by reference to                  Registrant’s Current Report on Form 8-K, filed with the Commission on July                  1, 2005.)                                                                                                                                                                                 |
| (10.27)  | Amended                  and Restated Declaration of Trust for HNC Statutory Trust III by                  and among                  Wilmington Trust Company, as Institutional Trustee and Delaware                  Trustee,                  Harleysville National Corporation, as Sponsor, and the Administrators                  named therein, dated as of September 28, 2005. (Incorporated by                  reference                  to Registrant’s Quarterly Report on Form 10-Q/A, filed with the Commission                  on November, 9, 2005.)  |
| (10.28)  | Indenture                  between Harleysville National Corporation, as Issuer, and Wilmington                  Trust                  Company, as Trustee, for Fixed/Floating Rate Junior Subordinated                  Debt                  Securities, dated as of September 28, 2005. (Incorporated by reference                  to                  Registrant’s Quarterly Report on Form 10-Q/A, filed with the Commission on                  November, 9, 2005.)                                                                                             |
| (10.29)  | Guarantee                  Agreement between Harleysville National Corporation and Wilmington                  Trust                  Company, dated as of September 28, 2005. (Incorporated by reference                  to                  Registrant’s Quarterly Report on Form 10-Q/A, filed with the Commission on                  November, 9, 2005.)                                                                                                                                                                                                          |
| (10.30)  | Employment                  Agreement effective July 12, 2006 between Lewis C. Cyr, Chief Lending                  Officer of the Corporation, and Harleysville Management                  Services, LLC.* (Incorporated by reference to Registrant’s Current                  Report on Form 8-K, filed with the Commission on July 12,                  2006.)                                                                                                                                                                                             |
| (11)     | Computation                  of Earnings per Common Share, incorporated by reference to Note                  6 of the                  Consolidated Financial Statements of this Report on Form                  10-Q.                                                                                                                                                                                                                                                                                                                                                       |
| (31.1)   | Certification                  of the Chief Executive Officer pursuant to Section 302 of the                  Sarbanes-Oxley Act of 2002, filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                           |
| (31.2)   | Certification                  of the Chief Financial Officer pursuant to Section 302 of the                  Sarbanes-Oxley Act of 2002, filed herewith.                                                                                                                                                                                                                                                                                                                                                                                                           |
| (32.1)   | Certification                  of the Chief Executive Officer pursuant to 18 U.S.C.                  Section 1350, as adopted pursuant to Section 906 of the                  Sarbanes-Oxley Act of 2002, furnished herewith.                                                                                                                                                                                                                                                                                                                             |

----

| (32.2)  | Certification                  of the Chief Financial Officer pursuant to 18 U.S.C.                  Section 1350, as adopted pursuant to Section 906 of the                  Sarbanes-Oxley Act of 2002, furnished herewith.  |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|