SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549

                                    FORM 10-Q
                                   (Mark One)

           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

               For the quarterly period ended September 30, 2001.
                                              ------------------

                                       OR

          [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

     For the transition period from__________________to____________________.

                         Commission file number 0-15237
                                                -------

                        HARLEYSVILLE NATIONAL CORPORATION
                        ---------------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
<S>                                                  <C>
Pennsylvania. . . . . . . . . . . . . . . . . . . .          23-2210237
---------------------------------------------------  -------------------
(State or other jurisdiction of . . . . . . . . . .     IRS  Employer
incorporation or organization . . . . . . . . . . .  Identification No.)

483 Main Street, Harleysville, Pennsylvania . . . .               19438
---------------------------------------------------  -------------------
(Address of principal executive offices . . . . . .           (Zip Code)

Registrant's telephone number, including area code:      (215) 256-8851)
</TABLE>

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the Registrant was
required  to  file  such  reports)  and  (2)  has  been  subject  to such filing
requirements  for  the  past  90  days.    Yes     X.   No.
                                                 ---

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate  by  check  mark  whether  the  registrant  has filed all documents and
reports  required  to  be  filed  by Sections 12, 13, or 15(d) of the Securities
Exchange  Act  of 1934 subsequent to the distribution of securities under a plan
confirmed  by  a  court.   Yes  ___.  No  ___.

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate  the  number  of  shares outstanding of each of the issuer's classes of
common  stock,  as  of  the latest practicable date: 18,267,029 shares of Common
Stock,  $1.00  par  value,  outstanding  on  October  31,  2001.

PAGE 1
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<CAPTION>
                                    HARLEYSVILLE NATIONAL CORPORATION

                                        INDEX TO FORM 10-Q REPORT
<S>                                                                                                  <C>
                                                                                                     PAGE
                                                                                                     ----
Part I.  Financial Information

     Item 1. Financial Statements:

Consolidated Balance Sheets - September 30, 2001 and December 31, 2000. . . . . . . . . . . . . . .     3

Consolidated Statements of Income - Nine Months and Three Months Ended September 30, 2001
             and 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     4

Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2001 and 2000 . . . . . . .     5

Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . .     6

     Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations     8

     Item 3. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . .    22

Part II.  Other Information

     Item 1.  Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    23

     Item 2.  Change in Securities and Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . .    23

     Item 3.  Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . .    23

     Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . .    23

     Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    23

     Item 6.  Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . .    23

Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    25
</TABLE>
PAGE 2
<TABLE>
<CAPTION>

                                    PART  1.  FINANCIAL  INFORMATION
                        HARLEYSVILLE  NATIONAL  CORPORATION  AND  SUBSIDIARIES
                                      CONSOLIDATED  BALANCE  SHEETS
  (Dollars  in  thousands)                   (Unaudited)

                                                                       September 30, 2001    December 31, 2000
                                                                      --------------------  -------------------
<S>                                                                   <C>                   <C>
ASSETS
Cash and due from banks. . . . . . . . . . . . . . . . . . . . . . .  $            56,791   $           52,018
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . .               17,000                    0
Interest-bearing deposits in banks . . . . . . . . . . . . . . . . .                9,693                3,507
                                                                      --------------------  -------------------
    Total cash and cash equivalents. . . . . . . . . . . . . . . . .               83,484               55,525
                                                                      --------------------  -------------------

Investment securities available for sale . . . . . . . . . . . . . .              688,101              570,619
Investment securities held to maturity
 (market value $27,945 and $31,601, respectively). . . . . . . . . .               26,845               30,841
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            1,302,928            1,209,605
Less: Unearned income. . . . . . . . . . . . . . . . . . . . . . . .                3,074                2,450
         Allowance for loan losses . . . . . . . . . . . . . . . . .              (15,348)             (15,210)
                                                                      --------------------  -------------------
             Net loans . . . . . . . . . . . . . . . . . . . . . . .            1,290,654            1,196,845
                                                                      --------------------  -------------------
Bank premises and equipment, net . . . . . . . . . . . . . . . . . .               21,221               21,870
Accrued income receivable. . . . . . . . . . . . . . . . . . . . . .               13,388               12,391
Other real estate owned. . . . . . . . . . . . . . . . . . . . . . .                  404                  288
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . .                1,576                1,697
Bank-owned life insurance. . . . . . . . . . . . . . . . . . . . . .               39,289               37,471
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .                7,554                7,666
                                                                      --------------------  -------------------
         Total assets. . . . . . . . . . . . . . . . . . . . . . . .  $         2,172,516   $        1,935,213
                                                                      ====================  ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
   Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . .              233,066              227,446
   Interest-bearing:
     Checking accounts . . . . . . . . . . . . . . . . . . . . . . .              155,086              163,807
     Money market accounts . . . . . . . . . . . . . . . . . . . . .              390,340              333,622
     Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . .              175,729              161,233
     Time, under $100,000. . . . . . . . . . . . . . . . . . . . . .              500,259              430,074
     Time, $100,000 or greater . . . . . . . . . . . . . . . . . . .              253,228              172,868
                                                                      --------------------  -------------------
          Total deposits . . . . . . . . . . . . . . . . . . . . . .            1,707,708            1,489,050
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . .               26,281               22,346
U.S. Treasury demand notes . . . . . . . . . . . . . . . . . . . . .                2,484                2,055
Federal funds purchased. . . . . . . . . . . . . . . . . . . . . . .                    0               44,500
Federal Home Loan Bank (FHLB) borrowings . . . . . . . . . . . . . .              127,750              110,750
Securities sold under agreements to repurchase . . . . . . . . . . .               85,639               74,083
Guaranteed preferred beneficial interest in Corporation's
  subordinated debentures. . . . . . . . . . . . . . . . . . . . . .                5,155                    0
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .               28,746               18,893
                                                                      --------------------  -------------------
          Total liabilities. . . . . . . . . . . . . . . . . . . . .            1,983,763            1,761,677
                                                                      --------------------  -------------------
Shareholders' Equity:
    Series preferred stock,  par value $1 per share;
       authorized 3,000,000 shares, none issued. . . . . . . . . . .                    0                    0
    Common stock, par value $1 per share; authorized 30,000,000
       shares; issued and outstanding 18,554,469 shares in 2001 and
       18,527,057 shares in 2000 . . . . . . . . . . . . . . . . . .               18,554               18,527
    Additional paid in capital . . . . . . . . . . . . . . . . . . .               71,205               70,596
    Retained Earnings. . . . . . . . . . . . . . . . . . . . . . . .               96,096               83,244
    Treasury stock, at cost: 2001- 285,440; 2000 - 8,500 . . . . . .               (5,301)                (253)
    Accumulated other comprehensive income . . . . . . . . . . . . .                8,199                1,422
                                                                      --------------------  -------------------
          Total shareholders' equity . . . . . . . . . . . . . . . .              188,753              173,536
                                                                      --------------------  -------------------
          Total liabilities and shareholders' equity . . . . . . . .  $         2,172,516   $        1,935,213
                                                                      ====================  ===================
<FN>
See  accompanying  notes  to  consolidated  financial  statements.
</TABLE>
PAGE 3
<TABLE>
<CAPTION>

                                 HARLEYSVILLE  NATIONAL  CORPORATION  AND  SUBSIDIARIES
                                          CONSOLIDATED  STATEMENTS  OF  INCOME

 (Unaudited)                                       Nine months ended September  30,   Three months ended September  30,

(Dollars  in  thousands  except  weighted  average  number
 of  common  shares  and  per  share  information)
                                                              2001          2000         2001         2000
                                                           -----------  ------------  -----------  -----------
<S>                                                        <C>          <C>           <C>          <C>
INTEREST INCOME:
Loans, including fees . . . . . . . . . . . . . . . . . .  $    68,008  $    64,480   $    22,821  $    22,258
Lease financing . . . . . . . . . . . . . . . . . . . . .        7,377        6,540         2,439        2,309
Investment securities:
   Taxable. . . . . . . . . . . . . . . . . . . . . . . .       19,820       17,811         6,893        6,119
   Exempt from federal taxes. . . . . . . . . . . . . . .        8,174        8,017         2,551        2,768
Federal funds sold. . . . . . . . . . . . . . . . . . . .          449          216           215           52
Deposits in banks . . . . . . . . . . . . . . . . . . . .          227          295            90           87
                                                           -----------  ------------  -----------  -----------
      Total interest income . . . . . . . . . . . . . . .      104,055       97,359        35,009       33,593
                                                           -----------  ------------  -----------  -----------
INTEREST EXPENSE:
Savings deposits. . . . . . . . . . . . . . . . . . . . .       13,939       13,154         4,170        4,823
Time, under $100,000. . . . . . . . . . . . . . . . . . .       19,431       17,230         6,715        6,018
Time, $100,000 or greater . . . . . . . . . . . . . . . .        8,447        8,165         2,773        3,014
Borrowed funds. . . . . . . . . . . . . . . . . . . . . .        8,262        9,220         2,585        3,207
                                                           -----------  ------------  -----------  -----------
      Total interest expense. . . . . . . . . . . . . . .       50,079       47,769        16,243       17,062
                                                           -----------  ------------  -----------  -----------
      Net interest income . . . . . . . . . . . . . . . .       53,976       49,590        18,766       16,531
Provision for loan losses . . . . . . . . . . . . . . . .        2,962        1,636         1,353          581
                                                           -----------  ------------  -----------  -----------
      Net interest income after provision for loan losses       51,014       47,954        17,413       15,950
                                                           -----------  ------------  -----------  -----------
OTHER OPERATING INCOME:
Service charges . . . . . . . . . . . . . . . . . . . . .        3,878        2,814         1,403          943
Security  gains (losses), net . . . . . . . . . . . . . .        3,923         (105)        2,140           87
Trust income. . . . . . . . . . . . . . . . . . . . . . .        2,541        2,252           826          790
Bank-owned life insurance . . . . . . . . . . . . . . . .        1,818        1,302           535          576
Other Income. . . . . . . . . . . . . . . . . . . . . . .        3,409        2,496         1,352          852
                                                           -----------  ------------  -----------  -----------
      Total other operating income. . . . . . . . . . . .       15,569        8,759         6,256        3,248
                                                           -----------  ------------  -----------  -----------
      Net interest income after provision for loan losses
         and other operating income . . . . . . . . . . .       66,583       56,713        23,669       19,198
                                                           -----------  ------------  -----------  -----------
OTHER OPERATING EXPENSES:
Salaries, wages and employee benefits . . . . . . . . . .       19,644       17,474         6,739        5,891
Occupancy . . . . . . . . . . . . . . . . . . . . . . . .        2,457        2,201           792          726
Furniture and equipment . . . . . . . . . . . . . . . . .        3,776        3,783         1,310        1,386
Other expenses. . . . . . . . . . . . . . . . . . . . . .       13,572       10,122         4,903        3,001
                                                           -----------  ------------  -----------  -----------
      Total other operating expenses. . . . . . . . . . .       39,449       33,580        13,744       11,004
                                                           -----------  ------------  -----------  -----------
      Income before income taxes. . . . . . . . . . . . .       27,134       23,133         9,925        8,194
Income tax expense. . . . . . . . . . . . . . . . . . . .        5,859        4,041         2,302        1,454
                                                           -----------  ------------  -----------  -----------
Net income. . . . . . . . . . . . . . . . . . . . . . . .  $    21,275  $    19,092   $     7,623  $     6,740
                                                           ===========  ============  ===========  ===========

Weighted average number of common shares:
        Basic . . . . . . . . . . . . . . . . . . . . . .   18,318,042   18,547,868    18,264,538   18,540,652
                                                           ===========  ============  ===========  ===========
        Diluted . . . . . . . . . . . . . . . . . . . . .   18,747,858   18,569,052    18,694,354   18,561,836
                                                           ===========  ============  ===========  ===========
Net income per share information:
        Basic . . . . . . . . . . . . . . . . . . . . . .  $      1.16  $      1.03   $      0.42  $      0.36
                                                           ===========  ============  ===========  ===========
        Diluted . . . . . . . . . . . . . . . . . . . . .  $      1.14  $      1.03   $      0.41  $      0.36
                                                           ===========  ============  ===========  ===========
Cash dividends per share. . . . . . . . . . . . . . . . .  $      0.46  $      0.41   $      0.16  $      0.14
                                                           ===========  ============  ===========  ===========
<FN>
See  accompanying  notes  to  consolidated  financial  statements.
</TABLE>
PAGE 4
<TABLE>
<CAPTION>

                             HARLEYSVILLE  NATIONAL  CORPORATION  AND  SUBSIDIARIES
                                  CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
                                                 (Unaudited)

<S>                                                                         <C>                   <C>
(Dollars in thousands) . . . . . . . . . . . . . . . . . . . . . . . . . .         Nine Months Ended September 30,
OPERATING ACTIVITIES:. . . . . . . . . . . . . . . . . . . . . . . . . . .                 2001            2000
                                                                            --------------------  --------------
  Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $            21,275   $      19,092
  Adjustments to reconcile net income to
   net cash provided by operating activities:
    Provision for loan losses. . . . . . . . . . . . . . . . . . . . . . .                2,962           1,636
    Depreciation and amortization. . . . . . . . . . . . . . . . . . . . .                2,033           2,177
    Net amortization of investment
      securities discount/premiums . . . . . . . . . . . . . . . . . . . .                  692             383
    Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . .                2,091           3,647
    Net realized security (gain) loss. . . . . . . . . . . . . . . . . . .               (3,923)            105
    Increase in accrued income receivable. . . . . . . . . . . . . . . . .                 (997)         (1,775)
    Increase in accrued interest payable . . . . . . . . . . . . . . . . .                3,935           2,817
    Decrease (increase) in other assets. . . . . . . . . . . . . . . . . .                  113          (4,374)
    Increase in other liabilities. . . . . . . . . . . . . . . . . . . . .                4,113           2,485
    Increase in unearned income. . . . . . . . . . . . . . . . . . . . . .                 (624)         (1,714)
    Write-down of other real estate owned. . . . . . . . . . . . . . . . .                   17              83
    Decrease in intangible assets. . . . . . . . . . . . . . . . . . . . .                  122             272
                                                                            --------------------  --------------
       Net cash provided by operating activities . . . . . . . . . . . . .               31,809          24,834
                                                                            --------------------  --------------
INVESTING ACTIVITIES:
  Proceeds from sales of investment securities available for sale. . . . .              281,930          80,539
  Proceeds, maturity or calls of investment securities held to maturity. .                4,051           5,213
  Proceeds, maturity or calls of investment securities available for sale.               88,014          20,816
  Purchases of investment securities held to maturity. . . . . . . . . . .                    0         (19,740)
  Purchases of investment securities available for sale. . . . . . . . . .             (473,824)       (134,279)
  Net increase in loans. . . . . . . . . . . . . . . . . . . . . . . . . .              (97,243)        (72,835)
  Net increase in premises and equipment . . . . . . . . . . . . . . . . .               (1,385)         (2,443)
  Purchase of bank-owned life insurance. . . . . . . . . . . . . . . . . .               (1,818)        (11,302)
  Proceeds from sales of other real estate . . . . . . . . . . . . . . . .                  963           2,010
                                                                            --------------------  --------------
       Net cash used in investing activities . . . . . . . . . . . . . . .             (199,312)       (132,021)
                                                                            --------------------  --------------
FINANCING ACTIVITIES:
  Net increase in deposits . . . . . . . . . . . . . . . . . . . . . . . .              218,658         143,856
  Increase (decrease) in U.S. Treasury demand notes. . . . . . . . . . . .                  429          (1,138)
  (Decrease) increase in federal funds purchased . . . . . . . . . . . . .              (44,500)         11,500
  Increase (decrease) in FHLB borrowings . . . . . . . . . . . . . . . . .               17,000         (19,500)
  Increase (decrease) in securities sold under agreement . . . . . . . . .               11,556         (28,180)
  Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . .                5,155               0
  Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               (8,423)         (7,469)
  Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . .               (5,048)           (325)
  Stock options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  635              46
                                                                            --------------------  --------------
    Net cash provided by financing activities. . . . . . . . . . . . . . .              195,462          98,790
                                                                            --------------------  --------------
Net increase in cash and cash equivalents. . . . . . . . . . . . . . . . .               27,959          (8,397)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . .               55,525          63,491
                                                                            --------------------  --------------
Cash and cash equivalents at end of the period . . . . . . . . . . . . . .  $            83,484   $      55,094
                                                                            ====================  ==============

  Cash paid during the period for:
     Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $            46,144   $      44,952
                                                                            ====================  ==============
     Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $             4,300   $       2,048
                                                                            ====================  ==============
   Supplemental disclosure of noncash investing and financing activities:
       Transfer of assets from loans to other real estate owned. . . . . .  $             1,096   $       1,015
                                                                            ====================  ==============
<FN>
See  accompanying  notes  to  consolidated  financial  statements.
</TABLE>
PAGE 5

               HARLEYSVILLE NATIONAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  1  - In the opinion of management, the accompanying unaudited consolidated
financial  statements  contain  all  adjustments,  consisting  only  of  normal
recurring  adjustments,  necessary  to present fairly the consolidated financial
position of Harleysville National Corporation (the "Corporation") and its wholly
owned  subsidiaries  -  Harleysville  National  Bank  and  Trust  Company
("Harleysville"),  Citizens  National  Bank ("Citizens"), Security National Bank
("Security")  (collectively,  the  "Banks"),  HNC  Financial  Company  and  HNC
Reinsurance  Company  -  as of September 30, 2001, the results of its operations
for  nine and three month periods ended September 30, 2001 and 2000 and the cash
flows  for  the  nine  month  periods  ended  September 30, 2001 and 2000.  This
quarterly  report  refers to the Corporation's subsidiary Banks, collectively as
"the  Banks."  We recommend that you read these unaudited consolidated financial
statements  in conjunction with the audited consolidated financial statements of
the Corporation and the notes thereto set forth in the Corporation's 2000 annual
report.  All  prior  period  amounts were restated to reflect the acquisition of
Citizens  Bank  and  Trust  Company.

The  results  of operations for the nine and three month periods ended September
30,  2001  and 2000 are not necessarily indicative of the results to be expected
for  the  full  year.

NOTE  2  -  Income  tax  expense  is  less  than the amount calculated using the
statutory  tax rate, primarily the result of tax exempt income earned from state
and  municipal  securities  and  loans.

NOTE  3  - The Corporation accounts for comprehensive income under the Financial
Accounting  Standards  Board  issued  SFAS  No.  130,  "Reporting  Comprehensive
Income."  SFAS  No. 130 establishes standards to provide prominent disclosure of
comprehensive  income  items.  Comprehensive income is the change in equity of a
business  enterprise  during  a  period  from  transactions and other events and
circumstances  from  non-owner  sources.  Other comprehensive income consists of
net  unrealized gains on investment securities available for sale. Comprehensive
income  for  the  first  nine  months  of  2001  was  $28,052,000,  compared  to
$22,682,000  for  the  first  nine  months  of  2000.

NOTE 4 - The Corporation adopted the Financial Accounting Standards Board issued
SFAS  No.  131,  "Disclosures  about  Segments  of  an  Enterprise  and  Related
Information."  SFAS  No.  131  requires  that public business enterprises report
certain  information  about  operating  segments  in  complete sets of financial
statements  of  the  enterprise and in condensed financial statements of interim
periods  issued  to  shareholders.  It  also  requires  that  public  business
enterprises  report  certain  information about their products and services, the
geographic  areas  in which they operate and their major customers.  The company
has  one  reportable  segment,  "Community  Banking."  All  of the Corporation's
activities  are  interrelated, and each activity is dependent and assessed based
on  how  each  of  the  activities  of  the  Corporation  supports  the  others.

NOTE  5  -  In  June 1998, the Financial Accounting standard Board (FASB) issued
Statement  of  Financial  Accounting  Standards  (SFAS) No. 133, "Accounting for
Derivative  Instruments  and  Hedging Activity" as amended in June, 1999 by SFAS
No.  137,  "Accounting  for  Derivative  Instruments  and  Hedging  Activities -
Deferral  of the Effective Date of FASB Statement No. 133," and in June 2000, by
SFAS  138,  "Accounting  for  Certain Derivative Instruments and Certain Hedging
Activities,  "  (collectively  SFAS  No.  133).    SFAS  No.  133  establishes
accounting and reporting standards for derivative instruments, including certain
derivative  instruments imbedded in other contracts, and for hedging activities.
It  requires  that  an  entity  recognize  all  derivatives  as either assets or
liabilities in the statement of financial position and measure those instruments
at  fair value.  If certain conditions are met, a derivative may be specifically
designated  as  a  hedge.  The  accounting  for  changes  in  the  fair value of
derivative  (gains and losses) depends on the intended use of the derivative and
resulting designation. On January 1, 1999, the Corporation adopted SFAS No. 133.
         During July 2000, the Corporation reclassified $7,574,000 of investment
securities  from  the  held  to  maturity  category  to  the  available for sale
category,  due  to  its  acquisition  of  Citizens Bank and Trust Company.  As a
result  of  the  reclassification, the Corporation recorded $19,000 net of taxes
unrealized  holding  losses  in  accumulated  other  comprehensive  income.

PAGE 6

NOTE  6  -  On  June  29,  2001, the Financial Accounting Standards Board (FASB)
issued  Statement  of  Financial  Accounting  Standards (SFAS) No. 141, Business
Combinations,  and  SFAS  No.  142, Goodwill and Intangible Assets. SFAS No. 141
requires  that  all  business combinations initiated after June 30, 2001 must be
accounted  for under the purchase method of accounting. A plan of combination is
considered  to  be initiated on the earlier of the date that a combining company
(a)  announces  publicly  or  formally makes known to its shareholders the major
terms  of the plan, or (b) notifies its shareholders, in writing, of an exchange
offer.  SFAS  No.  141  was  adopted  upon  issuance.  SFAS  No.  142 prescribes
accounting for all purchased goodwill and intangible assets. The SFAS supersedes
APB  Opinion  17,  Intangible  Assets,  but  carries  over  guidance  related to
internally  developed  intangible  assets.  SFAS  No.  142  states that acquired
goodwill  is  not  amortized, but is tested for impairment at the reporting unit
level annually and whenever an impairment indicator arises.  A reporting unit is
at the same level or one level below an operating segment as defined by SFAS No.
131,  Disclosures About Segments of an Enterprise and Related Information.  SFAS
No.  142  is effective for fiscal years beginning after December 15, 2001. Until
the  adoption  of  SFAS No. 142, existing goodwill continues to be amortized and
tested  for impairment under previously existing standards. The adoption of SFAS
No.  141  and  SFAS  No.  142  is  not expected to have a material impact on the
Corporation's  financial  position,  or  results  of  operations.

NOTE  7  -  On July 6, 2001, the Securities and Exchange Commission (SEC) issued
Staff  Accounting  Bulletin  (SAB)  No.  102,  Selected  Loan  Loss  Allowance
Methodology  and  Documentation  Issues.  SAB  No.  102 provides guidance on the
development,  documentation,  and  application  of  a systematic methodology for
determining  allowances  for  loans  and  leases in accordance with US GAAP. The
adoption  of  SAB  No.  102  is  not  expected  to have a material impact on the
Corporation's  financial  position,  or  results  of  operations.

NOTE  8  -  On  April  28,  2000, the Corporation consummated its acquisition of
Citizens  Bank  and Trust Company.  Under the terms of the merger, accounted for
as  a  pooling-of-interest,  Citizens  Bank  and  Trust  Company's  shareholders
received  166  shares of Harleysville National Corporation common stock for each
share  of  common stock of Citizens Bank and Trust Company.  Upon the completion
of  the acquisition, Citizens Bank and Trust Company's banking operations merged
into  those of Citizens National Bank, a wholly owned subsidiary of Harleysville
National  Corporation.

NOTE  9  -  On  October  12,  2000,  the  Board of Directors declared a 5% stock
dividend  payable  November 9, 2000, to shareholders of record October 26, 2000.
All  prior  period  amounts  were  restated  to  reflect this 5% stock dividend.

NOTE 10- On February 22, 2001, the Corporation issued $5,155,000 of 10.2% junior
subordinate  deferrable  interest  debentures  (the  Debentures) to Harleysville
Statutory  Trust  1  (the  Trust),  a  Connecticut  business trust, in which the
Corporation owns all of the common equity.  The debentures are the sole asset of
the  Trust.  The  Trust  issued $5,000,000 of preferred securities to investors.
The  Corporation's obligations under the debentures and related documents, taken
together,  constitute  a  full and unconditional guarantee by the Corporation of
the  Trust's  obligations  under  the  preferred  securities.  The  preferred
securities  must  be  redeemed  upon  maturity  of the subordinate debentures on
February  22,  2031.

NOTE  11  -  The  Corporation  incorporated HNC Reinsurance Company during March
2001.  HNC  Reinsurance  Company is a reinsurer of consumer loan credit life and
accident  and  health  risks.  Through  the reinsurance company, the Corporation
will  assume  a  portion  of the credit insurance risk in return for income from
insurance  premiums.

NOTE  12 - On December 14, 2000, the Board of Directors of Harleysville National
Corporation  approved  a  plan  to  repurchase  up  to  906,000  shares  of  its
outstanding  common  stock.  The  repurchased  shares  will  be used for general
corporate  purposes.

NOTE  13  -  On  July  12, 2001, the Board of Directors of Harleysville National
Corporation  approved a 2-for-1 stock split of its Common Stock, effected in the
form  of  a  100%  stock  dividend,  payable August 10, 2001, to shareholders of
record  July  27,  2001.  All prior period amounts were restated to reflect this
100%  stock  dividend.

PAGE 7

ITEM  2.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

RESULTS  OF  OPERATIONS
-----------------------

        The following is management's discussion and analysis of the significant
changes  in the results of operations, capital resources and liquidity presented
in  its  accompanying consolidated financial statements for the Corporation, the
Banks  and  HNC  Financial  Company.  The  Corporation's  consolidated financial
condition  and  results  of  operations  consist  almost  entirely of the Banks'
financial  condition  and  results  of operations.  Current performance does not
guarantee,  and  may  not  be  indicative  of similar performance in the future.
These  are  unaudited financial statements and, as such, are subject to year-end
audit  review.

        In  addition  to  historical  information,  this  Form  10-Q  contains
forward-looking  statements.  We  have  made  forward-looking statements in this
document, and in documents that we incorporate by reference, that are subject to
risks  and  uncertainties.  Forward-looking  statements  include the information
concerning  possible  or assumed future results of operations of the Corporation
and  its  subsidiaries.  When  we  use  words  such  as  "believes,"  "expects,"
"anticipates," or similar expressions, we are making forward-looking statements.

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

   *  operating, legal and regulatory risks;
   *  economic, political and competitive forces affecting our banking,
      securities, asset management and credit services businesses; and
   *  the risk that our analysis of these risks and forces could be incorrect
      and/or that the strategies developed to address them could be unsuccessful

OVERVIEW
--------

        The  Corporation experienced record earnings during the third quarter of
2001.  These  earnings were driven by the growth in both net interest income and
other  income.  Gains  on  the  sales of securities were offset by a higher loan
loss  provision,  necessitated  by  an  increase  in  loans  charged-off, and an
increase  in  expenses  related  to  the  sale of off lease vehicles.  While the
Corporation  has  experienced  an increase in charged-off loans during 2001, the
September  30,  2001  nonperforming  assets  and  loans 90 days or more past due
improved  from  September  30,  2000  levels.

        Consolidated net income for the third quarter of 2001 was $7,623,000, an
increase  of  $883,000,  or  13.1%, over the third quarter of 2000 net income of
$6,740,000.  For  the quarter ended September 30, 2001, basic earnings per share
of  $.42 were 16.7% higher than the $.36 earned during the third quarter of 2000
and  diluted  earnings  per  share  at $.41 were up 13.9% from $.36 in the third
quarter of last year.  Consolidated net income for the first nine months of 2001
was $21,275,000, an increase of $2,183,000, or 11.4%, over the first nine months
of  2000 net income of $19,092,000.  Basic earnings per share for the first nine
months  of 2001 of $1.16 increased 12.6% from the $1.03 in the comparable period
last  year.  Diluted  earnings  per  share of $1.14 for the first nine months of
2001  were  higher  than  the  $1.03  year  to  date  September  30,  2000.

        The  2001  year  to  date  increase  in net income, compared to the same
period  in  2000,  is  the  result  of both higher net interest income and other
operating  income, partially offset by a higher provision for loan losses and an
increase  in  other  operating  expenses.  Net  interest income grew $4,386,000,
primarily  as  a  result  of  a  10.9%  rise  in  average earning assets.  Other
operating  income  rose $6,810,000, due to higher deposit account service charge
fees,  trust  fees,  bank-owned  life  insurance  and  net  gains on the sale of
securities  and  mortgages.

PAGE 8
        For  the  nine months ended September 30, 2001, the annualized return on
average  shareholders'  equity  and the annualized return on average assets were
15.83%  and  1.40%,  respectively.  For  the same period in 2000, the annualized
return  on  average shareholders' equity was 16.84% and the annualized return on
average  assets  was  1.40%.  For the three months ended September 30, 2001, the
annualized  return  on average shareholders' equity and the annualized return on
average  assets  were  16.58% and 1.45%, respectively.  For the third quarter in
2000,  the  annualized return on average shareholders' equity was 17.20% and the
annualized  return on average assets was 1.44%.  The reductions in the return on
average  shareholders'  equity  for  both  periods is due to the increase in the
accumulated  other  comprehensive  income  during  2001,  compared to 2000.  The
increase in accumulated other comprehensive income is related to the rise in the
market  value of the investment securities available for sale.  The year to date
2001  annualized  return on average shareholders' equity, net of the accumulated
other  comprehensive  income,  was  16.17% for 2001, compared to 15.58% in 2000.
The  adjusted  ratios  for  the  third  quarter of 2001 and 2000 were 17.05% and
16.13%,  respectively.

        The  Banks  continue  to  focus on the quality of their loan portfolios.
Nonperforming  assets,  including nonaccrual loans, restructured loans and other
real  estate  owned  were  .27%  of  total  assets  at  September  30,  2001, an
improvement over .29% at December 31, 2000 and .31% at September 30, 2000.   The
Corporation did experience an increase in net loans charged off during the first
nine months of 2001, compared to the same period in 2000.  Net loans charged off
year  to  date  2001  were  $2,824,000, compared to $1,191,000 in the first nine
months  of  2000.  This  increase  is  primarily  in the indirect consumer loan,
commercial  and  lease portfolios.  Loans 90 days or more past due improved from
$951,000  at  September  30,  2000,  to  $714,000  at  September  30,  2001.

        Net  income is affected by five major elements: (1) net interest income,
or  the  difference  between interest income earned on loans and investments and
interest expense paid on deposits and borrowed funds; (2) the provision for loan
losses, or the amount added to the allowance for loan losses to provide reserves
for  future  losses  on  loans;  (3)  other  operating  income, which is made up
primarily  of  certain service fees and Investment Management and Trust Services
income,  and  gains  and  losses  from  sales of securities and loans; (4) other
operating  expenses,  which  consist  primarily  of salaries and other operating
expenses;  and  (5) income taxes.  Each of these major elements will be reviewed
in  more  detail  in  the  following  discussion.


NET  INTEREST  INCOME  AND  RELATED  ASSETS  AND  LIABILITIES
-------------------------------------------------------------

        Net  interest  income  for  the first nine months of 2001 of $53,976,000
increased  $4,386,000, or 8.8%, over the same period in 2000, which produced net
interest  income of $49,590,000.  As illustrated in the table below, the primary
source  of  this increase was a rise in interest income resulting from increases
in  earning asset volumes in the first nine months of 2001, compared to the same
period  in 2000.  The increase in interest income was partially offset by a rise
in  interest expense, mainly the result of higher volumes.  The third quarter of
2001  net  interest income increased 13.5%, compared to the same period in 2000.
This  rise  was  due  to an increase in earning asset volumes and lower interest
expense related to deposit and other borrowing rates, partially offset by higher
interest  expense  related  to  higher  deposit  volumes.

        The rate-volume variance analysis set forth in the table below, which is
computed  on  a  tax-equivalent basis (tax rate of 35%), analyzes changes in net
interest  income  for the nine month and three month periods ended September 30,
2001  over  September  30,  2000  by  their  rate  and  volume  components.

PAGE 9
<TABLE>
<CAPTION>
                                                Nine Months Ended                     Three Months Ended
                                                September 30, 2001                    September 30, 2001
                                                    Over/Under                            Over/Under
                                                September 30, 2000                    September 30, 2000

                                               Total          Caused by:        Total         Caused by:
                                                             -----------                     ------------
<S>                                          <C>         <C>          <C>      <C>           <C>       <C>
                                             Variance    Rate         Volume   Variance      Rate      Volume
                                             ----------  -----------  -------  ------------  --------  -------
Interest Income:
  Securities *. . . . . . . . . . . . . . .  $   2,250      ($1,932)  $ 4,182  $       440   ($1,289)  $ 1,729
  Money market instruments. . . . . . . . .        166         (120)      286          166       (65)      231
  Loans * . . . . . . . . . . . . . . . . .      4,400       (1,470)    5,870          669    (1,430)    2,099
                                             ----------  -----------  -------  ------------  --------  -------
     Total. . . . . . . . . . . . . . . . .      6,816       (3,522)   10,338        1,275    (2,784)    4,059
                                             ----------  -----------  -------  ------------  --------  -------

Interest Expense:
  Savings deposits. . . . . . . . . . . . .        785         (695)    1,480         (653)   (1,066)      413
  Time deposits and certificates of deposit      2,483          156     2,327          456      (725)    1,181
  Other borrowings. . . . . . . . . . . . .       (958)      (1,334)      376         (622)     (837)      215
                                             ----------  -----------  -------  ------------  --------  -------
      Total . . . . . . . . . . . . . . . .      2,310       (1,873)    4,183         (819)   (2,628)    1,809
                                             ----------  -----------  -------  ------------  --------  -------

Net interest income . . . . . . . . . . . .  $   4,506      ($1,649)  $ 6,155  $     2,094     ($156)  $ 2,250
                                             ==========  ===========  =======  ============  ========  =======
    *Tax Equivalent Basis
</TABLE>

        Taxable-equivalent  net  interest  income  was $59,214,000 for the first
nine  months  of  2001,  compared to $54,708,000 for the same period in 2000, an
8.2%  or  $4,506,000  increase.  This increase was primarily due to a $6,155,000
increase  related  to  volume,  which was partially offset by a reduction in net
interest income, related to rate.  Total taxable-equivalent interest income grew
$6,816,000,  the  result  of  higher volumes, offset by lower rates of loans and
securities  related  to  the  reduction  in interest rates during 2001.  Average
year-to-date loans and securities grew $96,333,000 and $82,040,000, respectively
at  September  30,  2001,  compared  to  September  30,  2000.

        Total  interest  expense grew $2,310,000 during the first nine months of
2001,  compared  to  the  same  period in 2000.  This growth was principally the
result  of  higher  volumes in all deposit categories and other borrowings.  The
average  year-to-date  growth  in  savings  deposits  and  time  deposits  were
$73,424,000  and  $54,815,000,  respectively.  The  primary  increase in savings
deposits  was  related  to  a  rise in higher rate money market account products
introduced  during  the  last two years.  Other borrowings grew 9.1% during this
period.  An  increase  in  securities  sold  under  agreements to repurchase was
partially  offset  by  decreases in FHLB borrowings and federal funds purchased.
Other  borrowings  include  federal funds purchased, FHLB borrowings, securities
sold  under  agreements  to  repurchase  and  U.  S.  Treasury  demand  notes.

        Taxable-equivalent  net interest income of $20,435,000 was $2,094,000 or
11.4%  higher in the third quarter of 2001, compared to $18,341,000 for the same
period  in  2000.  Interest  income  grew $1,275,000 during the period, due to a
13.5%  rise  in  earning  asset  volumes.  Interest  expense  actually decreased
$819,000 as a result of lower rates, partially offset by higher deposit volumes.
The  rates  paid  on  all deposit accounts and other borrowings decreased during
this  period.  Non-accruing  loans  are  included  in  the average balance yield
calculation,  but  the  average non-accruing loans had no material effect on the
results.


INTEREST  RATE  SENSITIVITY  ANALYSIS

        The  Corporation  actively  manages  its  interest  rate  sensitivity
positions.  The  objectives  of  interest  rate  risk  management are to control
exposure of net interest income to risks associated with interest rate movements
and  to  achieve  consistent growth in net interest income.  The Asset/Liability
Committee, using policies and procedures approved by the Corporation's Boards of
Directors,  is  responsible  for  managing  the  rate  sensitivity position. The

PAGE 10

Corporation  manages  interest  rate  sensitivity  by changing mix and repricing
characteristics  of  its  assets  and  liabilities  through  their  investment
securities  portfolios,  its  offering  of loan and deposit terms and borrowings
from  the  FHLB. The nature of the Corporation's current operations is such that
it  is  not  subject  to foreign currency exchange or commodity price risk.  The
Corporation  does  not  own  trading  assets  and  does  not  have  any  hedging
transactions  in  place,  such  as  interest  rate  swaps,  caps  or  floors.

        The  Corporation  uses  two  principal  reports to measure interest rate
risk:  asset/liability  simulation  reports;  and  net  interest margin reports.
Management  also  simulates  possible  economic  conditions  and  interest  rate
scenarios  in  order  to quantify the impact on net interest income.  The effect
that  changing  interest  rates have on the Corporation's net interest income is
simulated by increasing and decreasing interest rates.  This simulation is known
as  rate  shocks.  The  September 30, 2001 report below forecasts changes in the
Corporation's  market  value  of  equity  under  alternative  interest  rate
environments.  The market value of equity is defined as the net present value of
the  Corporation's  existing  assets  and  liabilities.

<TABLE>
<CAPTION>
(Dollars  in  thousands)

                                     CHANGE IN                  ASSET/LIABILITY
                   MARKET VALUE    MARKET VALUE    PERCENTAGE      APPROVED
                    OF EQUITY        OF EQUITY       CHANGE      PERCENT CHANGE
                   ------------  ----------------  -----------  ---------------
<S>                <C>           <C>               <C>          <C>

+300 Basis Points       225,380           (9,936)       -4.22%          +/- 45%
+200 Basis Points       237,773            2,457         1.04%          +/- 30%
+100 Basis Points       236,375            1,059         0.45%          +/- 15%
Flat Rate . . . .       235,316                -         0.00%
-100 Basis Points       194,179          (41,137)      -17.48%          +/- 15%
-200 Basis Points       165,262          (70,054)      -29.77%          +/- 30%
-300 Basis Points       173,144          (62,172)      -26.42%          +/- 45%
</TABLE>

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


NET  INTEREST  MARGIN
---------------------

        The  net  interest  margin  of  4.14%  for  the  nine-month period ended
September  30,  2001, decreased from the 4.24% net interest margin for the first
nine months of 2000.  The decrease in the net interest margin is the result of a
reduction  in the yield earned on earning assets, partially offset by a decrease
in  funding  cost.  The  yield  on earning assets of 7.64% during the first nine
months  of  2001 was lower than the 7.95% earned during the same period in 2000.
The  decrease  in  the yield was due to lower yields earned in all earning asset
categories,  related to the impact of the decrease in interest rates during this
period.  From  September  30,  2000  to  September  30, 2001, the yield on loans
decreased  17 basis points compared to a 400 basis points reduction in the prime
rate.  During  the  first nine months of 2001, the average interest rate paid on
interest-bearing  deposits and other borrowings of 4.14% was lower than the same
period  in  2000  rate of 4.24%. This decrease in rates paid on interest bearing
deposits  is  due  to  the  lower rates associated with money market and savings
accounts.  Year-to-date  2001  certificates  of deposits rate was 3 basis points
higher  than  the  same period in 2000.  The 2001 nine-month net interest margin
has matched the entire year 2000 net interest margin of 4.14%. The third quarter
of  2001  net interest margin of 4.10% was lower than the third quarter 2000 net
interest  margin  of  4.18%.


PROVISION  FOR  LOAN  LOSSES
----------------------------

       The  Banks  use  the  reserve method of accounting for credit losses. The
balance  in  the  allowance  for  loan  and  lease losses is determined based on
management's  review  and  evaluation  of the loan portfolio in relation to past

PAGE 11

loss  experience,  the  size  and composition of the portfolio, current economic
events  and  conditions,  and  other  pertinent  factors, including management's
assumptions  as to future delinquencies, recoveries and losses. Increases to the
allowance  for  loan  and  lease losses are made by charges to the provision for
credit  losses.  Credit exposures deemed to be uncollectible are charged against
the  allowance  for  credit losses. Recoveries of previously charged-off amounts
are  credited  to  the  allowance  for  credit  losses.

       While  management considers the allowance for loan and lease losses to be
adequate  based  on  information  currently  available,  future additions to the
allowance may be necessary due to changes in economic conditions or management's
assumptions  as  to future delinquencies, recoveries and losses and management's
intent  with  regard  to  the  disposition of loans and leases. In addition, the
OCC,  as  an integral part of their examination process, periodically review the
Banks'  allowance  for  loan  losses. The OCC may require the Banks to recognize
additions  to  the  allowance  for credit losses based on their judgements about
information  available  to  them  at  the  time  of  their  examination.

       The  Banks'  allowance  for  loan and lease losses is the accumulation of
various  components  that  are  calculated  based  on  various  independent
methodologies.  All  components  of  the  allowance  for  credit  losses  are an
estimation.  Management  bases  its recognition and estimation of each allowance
component  on certain observable data that it believes is the most reflective of
the  underlying  credit  losses  being  estimated.  The  observable  data  and
accompanying  analysis  is directionally consistent, based upon trends, with the
resulting  component  amount  for  the  allowance for loan and lease losses. The
Banks'  allowance  for  loan  and lease losses components include the following:
historical  loss  estimation by loan product type and by risk rating within each
product  type,  payment (past due) status, industry concentrations, internal and
external  variables  such as economic conditions, credit policy and underwriting
changes,  competence  of the loan review process and other historical loss model
imprecision.  The  Banks'  historical  loss  component  is  the most significant
component  of  the  allowance for loan and lease losses, and all other allowance
components  are  based  on the inherent loss attributes that management believes
exist  within  the  total portfolio that are not captured in the historical loss
component.

       The  historical loss components of the allowance represent the results of
analyses  of  historical  charge-offs and recoveries within pools of homogeneous
loans,  within  each  risk rating and broken down further by segment, within the
portfolio.

       The  historical  loss components of the allowance for commercial loans is
based  principally  on  current risk ratings, historical loss rates adjusted, by
adjusting  the risk window, to reflect current events and conditions, as well as
analyses  of other factors that may have affected the collectibility of loans in
the  commercial portfolio. The Banks analyze all commercial loans that are being
monitored  as  potential credit problems, via Watchlist Memorandum, to determine
whether  such  loans  are  individually  impaired,  with  impairment measured by
reference  to  the  collateral  coverage  and  /  or  debt service coverage. The
historical  loss  component  of  the  allowance  for  consumer  loans  is  based
principally  on  loan  payment status, retail classification and historical loss
rates,  adjusted, via the risk window, to reflect current events and conditions.

       The  industry  concentration component is recognized as a possible factor
in  the  estimation  of  credit  losses.  Two  industries  represent  possible
concentrations;  commercial  real  estate  and  automobile  dealers. No specific
loss-related observable data is recognized by management currently, therefore no
specific  factor  is  calculated  in  the reserve solely for the impact of these
concentrations,  although  management  continues  to carefully consider relevant
data  for  possible  future  sources  of  observable  data.

       The  historic  loss  model  imprecision  component  (soft  factors  and
unallocated  portion)  reflects  management's  belief  that there are additional
inherent  credit  losses based on loss attributes not adequately captured in the
statistical  /  historical  loss  component  and is an assessment of information
delay  and  its  impact  on  the  timeliness of the risk rating process and loss
recognition.  The principal observable data utilized by management as the driver
of  the  loss  recognition  and  measurement  of  this  component is an internal
management measure of the age of financial information used in the borrower debt
service  analysis. This is also a key judgmental component, as experiential data
confirms  that  measurable  losses  lag the empirical model as a downward credit
cycle  begins.

PAGE 12
         For  the  first  nine months of 2001, the provision for loan losses was
$2,962,000,  compared  to  $1,636,000,  for the same period in 2000.  The higher
provision  for  loan losses during the nine months of 2001, compared to the same
period  in  2000  is  attributed to an increase in net loans charged off and the
growth in loans.  Net loans charged off was $2,824,000 for the nine months ended
September  30,  2001, compared to $1,191,000 for the nine months ended September
30,  2000.  Net  loans charged off in the third quarter of 2001 of $712,000 were
higher than the $497,000 charged off in the third quarter of 2000.  The increase
in  loans  charged  off  was  primarily  due to indirect consumer related loans,
leases  and commercial loans.  The ratio of nonperforming assets to total assets
for  September  30,  2001  of  .27%  was  lower  than  the December 31, 2000 and
September  30,  2000  ratios  of  .29%  and  .31%,  respectively.

Allowance  for  Loan  Losses
----------------------------
Transactions  in  the  allowance  for  loan  losses  are  as  follows:

<TABLE>
<CAPTION>
                                                2001          2000
                                            ------------  ------------
<S>                                         <C>           <C>
Balance, beginning of year . . . . . . . .  $15,210,000   $14,887,000
   Provision charged to operating expenses    2,962,000     1,636,000
   Loans charged off . . . . . . . . . . .   (3,645,000)   (1,717,000)
   Recoveries. . . . . . . . . . . . . . .      821,000       526,000
                                            ------------  ------------
Balance, September 30. . . . . . . . . . .  $15,348,000    15,332,000
                                            ============  ============
</TABLE>
<TABLE>
<CAPTION>
<S>                                                <C>              <C>             <C>
Ratios: . . . . . . . . . . . . . . . . . . . . .  Sept. 30, 2001   Dec. 31, 2000   Sept. 30, 2000
-------------------------------------------------  ---------------  --------------  ---------------
Allowance for loan losses to nonperforming assets           261.9%          268.3%           259.1%
Nonperforming assets to total loans & net assets
    acquired in foreclosure . . . . . . . . . . .            0.45%           0.47%            0.50%
Nonperforming assets to total assets. . . . . . .            0.27%           0.29%            0.31%
Allowance for loan losses to total loans. . . . .            1.18%           1.25%            1.29%
</TABLE>
<TABLE>
<CAPTION>

The  following  table  sets  forth  an  allocation  of  the allowance  for  loan  losses  by  loan  category:

                                 September 30, 2001
                                -------------------
<S>                        <C>                  <C>
                                                 Percent
                           Amount               of Loans
                           -------------------  ---------

Commercial and industrial  $             5,161        26%
Consumer loans. . . . . .                5,738        34%
Real estate . . . . . . .                2,889        30%
Lease financing . . . . .                1,560        10%
                           -------------------  ---------
  Total . . . . . . . . .  $            15,348       100%
                           ===================  =========
</TABLE>

       Nonperforming  assets  (nonaccruing  loans, net assets in foreclosure and
troubled  debt  restructured  loans)  were  0.45%  of total loans and net assets
acquired in foreclosure at September 30, 2001, compared to 0.47% at December 31,
2000  and  0.50%  at  September  30,  2000.  The ratio of the allowance for loan
losses  to  loans at September 30, 2001 of 1.18% decreased from the December 31,
2000  and  September  30,  2000  ratios  of  1.25%  and  1.29%,  respectively.

        Nonaccruing  loans  at  September  30, 2001 of $5,446,000 increased
1.4%  from  the  December  31,  2000 level of $5,370,000, and grew 6.4% from the
September  30,  2000 level of $5,119,000.   The increase in nonaccruing loans at
September  30,  2001, compared to September 30, 2000 was primarily the result of
an  increase  in  commercial  nonaccruing  loans.

PAGE 13

Net  assets in foreclosure totaled $404,000 as of September 30, 2001, an
increase of $116,000 from the December 31, 2000 balance of $288,000.  During the
first  nine  months  of 2001, transfers from loans to assets in foreclosure were
$1,096,000;  payments  on  foreclosed  properties  totaled  $963,000.  There was
$17,000  in write-downs of assets in foreclosure during the first nine months of
2001.  The  loans transferred to assets in foreclosure included commercial loans
of  $140,000,  mortgages  of  $53,000,  consumer  loans of $24,000 and leases of
$879,000.  The  balance  of  net assets in foreclosure at September 30, 2000 was
$358,000.  Efforts to liquidate assets acquired in foreclosure are proceeding as
quickly  as  potential  buyers  can  be  located  and  legal constraints permit.
Generally accepted accounting principles require foreclosed assets to be carried
at the lower of cost (lesser of carrying value of asset or fair value at date of
acquisition)  or  estimated  fair  value.

Loans  past  due  90  days or more and still accruing interest are loans
that  are generally well secured and expected to be restored to a current status
in  the  near  future.  As of September 30, 2001, loans past due 90 days or more
and  still  accruing interest were $714,000, compared to $514,000 as of December
31,  2000 and $951,000 as of September 30, 2000.  The decrease in loans past due
90  days  at  September  30, 2001, compared September 30, 2000 was primarily the
result of a decrease in commercial loans past due 90 days. The increase in loans
past  due  90  days at September 30, 2001, compared to December 31, 2000 was the
result  of  consumer  loans  and  leases.

<TABLE>
<CAPTION>

The  following  information  concerns  impaired  loans:
<S>                                                   <C>              <C>             <C>
                                                      Sept. 30, 2001   Dec. 31, 2000   Sept. 30, 2000
                                                      ---------------  --------------  ---------------
    Impaired Loans . . . . . . . . . . . . . . . . .  $     3,468,000  $    3,322,000  $     4,295,000
                                                      ===============  ==============  ===============

     Average year-to-date impaired loans:. . . . . .  $     3,322,000  $    2,965,000  $     2,648,000
                                                      ===============  ==============  ===============

     Impaired loans with specific loss allowances: .  $     3,468,000  $    3,322,000  $     4,295,000
                                                      ===============  ==============  ===============

     Loss allowances reserved on impaired loans: . .  $       369,000  $      377,000  $       445,000
                                                      ===============  ==============  ===============

    Year-to-date income recognized on impaired loans  $        69,000  $      128,000  $        79,000
                                                      ===============  ==============  ===============
</TABLE>

      The  Banks' policy for interest income recognition on impaired loans is to
recognize  income  on  restructured  loans  under the accrual method.  The Banks
recognize  income  on  nonaccrual  loans under the cash basis when the loans are
both  current  and  the  collateral  on  the  loan  is  sufficient  to cover the
outstanding  obligation  to  the  Banks.  The Banks will not recognize income if
these  factors  do  not  exist.

<TABLE>
<CAPTION>

OTHER  OPERATING  INCOME
------------------------
                                       Nine  Months  Ended            Three Months Ended
                                         September 30,                   September 30,
                                       -------------------            -------------------
                                              2001             2000     2001    2000
                                     -----------------------  -------  ------  ------
                                      (Dollars in thousands)        (Dollars in thousands)
<S>                                  <C>                      <C>      <C>     <C>
Service charges . . . . . . . . . .  $                 3,878  $2,814    1,403     943
Security gains (losses), net. . . .                    3,923    (105)   2,140      87
Trust income. . . . . . . . . . . .                    2,541   2,252      826     790
Bank-owned life insurance . . . . .                    1,818   1,302      535     576
Other income. . . . . . . . . . . .                    3,409   2,496    1,352     852
                                      ----------------------  ------   ------  ------
      Total other operating income.  $                15,569  $8,759   $6,256  $3,248
                                     =======================  =======  ======  ======
</TABLE>
PAGE 14

      Other  operating  income  for  the  first  nine  months  of 2001 increased
$6,810,000,  or  77.7%,  from $8,759,000 at September 30, 2000 to $15,569,000 at
September 30, 2001.  A $4,028,000 increase in security gains contributed to this
rise.  The  rise  in other income was $2,782,000, or 31.4%, not inclusive of the
securities  gains and losses.  This rise in other operating income is the result
of  a  $1,064,000 increase in service charges, a $289,000 growth in trust income
and  a  $913,000  increase  in  other  income.  Bank-owned life insurance (BOLI)
income rose $516,000.  The third quarter 2001 other income was 92.6% higher than
the third quarter of 2000.  A $2,053,0000 rise in security gains was the primary
factor  in  this  rise,  along  with increases in the all of the remaining other
income categories.  The  rise  in other income in the third quarter of 2001 was
$955,000,  or  30.2% higher than the third quarter of 2000, not inclusive of the
securities  gains  and  losses.

Service  charges  grew  $1,064,000  or 37.8% in the first nine months of
2001,  compared  to  the  same  period  in  2000.  This rise is the result of an
increase  in  fees  charged  on  transaction deposit accounts, attributed to the
increase  in  average deposit transaction accounts and through the Corporation's
strategies  to  enhance  fee  income.  The  driving force behind the increase in
service  charges  was the introduction of a new overdraft product in March 2001.
The  growth in overdraft fees during the first nine months of 2001 was $917,000,
compared  to  the  same period in 2000. The remaining increase is related to the
growth  in  average  transaction deposits and enhanced fee structures.  The 2001
third  quarter  service  charge income of $1,403,000 increased $460,000 or 48.8%
over  the third quarter of 2000, primarily due to an increase in overdraft fees.

        The Corporation recorded net security gains on the sale of securities of
$3,923,000  in the first nine months of 2001, compared to a $105,000 loss in the
same period in 2000.  The Corporation recorded net security gains on the sale of
securities  of  $2,140,000 in the third quarter of 2001 and $87,000 in the third
quarter of 2000.  The Corporation sells investment securities available for sale
to  fund  the  purchase  of other securities in an effort to enhance the overall
return  of  the portfolio, and to reduce the risk within different interest rate
environments.

        Income  from  the Investment Management and Trust Services Division grew
$289,000,  or 12.8% in the first nine months of 2001 and $36,000, or 4.6% in the
third  quarter  of  2001, compared to the same periods in 2000.  These increases
were  the  result  of  both  an increase in the book value of trust assets under
management  from September 30, 2000 to September 30, 2001, and the Corporation's
continuing  emphasis  on  marketing the Investment Management and Trust Services
Division's  products  and  services.

       The Corporation's average 2001 year to date investment in bank-owned life
insurance  (BOLI)  of  $38,378,000  exceeded the $29,585,000 averaged during the
same  period  in  2000.  The  majority of this growth took place in June of 2000
when  $10,000,000  of  additional BOLI was purchased.  This growth was the basis
for  the  rise  in  BOLI  income  from  $1,302,000  in the first half of 2000 to
$1,818,000  for  the  same period in 2001.  BOLI involves the purchasing of life
insurance by the Corporation on a chosen group of employees.  The Corporation is
the  owner  and beneficiary of the policies.  This pool of insurance, due to tax
advantages  to  the Banks, is profitable to the Corporation.  This profitability
is  used  to  offset  a portion of future employee benefit cost increases.  Bank
deposits  fund  BOLI  and the earnings from BOLI are recognized as other income.
The  Corporation  recognized $535,000 of BOLI income during the third quarter of
2001  and  $576,000  during  the  third  quarter  of  2000.

Other  income  for  the first nine months of 2001 increased $913,000, or
36.6%,  compared  to  the  same period in 2000.  The third quarter of 2001 other
income  of  $1,352,000  grew $500,000, or 58.7%, over the third quarter of 2000.
Contributing  to  this rise were increases related to fees earned on the sale of
alternative  investment  products including mutual funds and annuities and gains
on the sale of residential mortgage loans.  Partially offsetting these increases
was  a  reduction  in  the  gains  on  the  sale  of  off  lease  vehicles.

PAGE 15
<TABLE>
<CAPTION>

OTHER  OPERATING  EXPENSES
--------------------------
                                                Nine  Months  Ended       Three  Months  Ended
                                                   September  30,             September 30,
                                                -------------------       ---------------------
                                                  2001             2000     2001     2000
                                       -----------------------  -------  -------  -------
                                               (Dollars in thousands)     (Dollars in thousands)
<S>                                    <C>                      <C>      <C>      <C>
Salaries. . . . . . . . . . . . . . .  $                16,350  $14,560  $ 5,637  $ 4,928
Employee benefits . . . . . . . . . .                    3,294    2,914    1,102      963
Occupancy expense . . . . . . . . . .                    2,457    2,201      792      726
Furniture and equipment expense . . .                    3,776    3,783    1,310    1,386
Other expenses. . . . . . . . . . . .                   13,572   10,122    4,903    3,001
                                       -----------------------   ------    -------- -----
Total other operating expenses.  $                      39,449  $33,580  $13,744  $11,004
                                       =======================  =======  =======  =======
</TABLE>

        Other  operating  expenses  for  the  first  nine  months  of  2001  of
$39,449,000 increased $5,869,000, or 17.5%, from $33,580,000 for the same period
in  2000.  Contributing to this rise in other operating expense was a $2,200,000
increase in the off lease vehicles residual reserve.  Net of the increase in the
off  lease vehicle residual reserve expense, other operating expenses would have
grown  11.0%  during  this  period.  Also  contributing  to  this  rise in other
operating  expenses  were  costs  associated with the organization of a consumer
loan reinsurance company and the introduction of alternative investment products
including  mutual  funds  and  annuities  during  the  last  quarter  of  2000.

        Employee  salaries  increased  $1,790,000, or 12.3% from $14,560,000 for
the  first  nine  months  of  2000  to  $16,350,000 for the same period in 2001.
Employee  benefits of $3,294,000 expensed in the first nine months of 2001, were
$380,000,  or  13.0%  higher  than  the $2,914,000 of employee benefits expensed
during  the  same  period  in  2000.  The third quarter 2001 salary and employee
benefits exceeded the third quarter of 2000 levels both by 14.4%.  The increase
in  salaries and employee benefits reflects merit increases, expenses related to
the sale of alternative investment products and additional staff necessitated by
the  growth  of  the  Banks.  Also  contributing  to this increase was a special
one-time  bonus  paid during the third quarter in recognition of the Corporation
reaching  the  $2  billion  in  assets  level.

Net  occupancy  expense increased $256,000, or 11.6%, from $2,201,000 in
the  first  nine  months of 2000 to $2,457,000 in the first nine months of 2001.
Net  occupancy  expenses grew 9.1% in the third quarter of 2001, compared to the
third  quarter of 2000.  Contributing to this increase were higher energy costs,
an  increase  in  taxes  and  a  reduction  in rental income. Equipment expenses
decreased  $7,000  during  the  first  nine months of 2001, compared to the same
period  in 2000.  The third quarter equipment expenses decreased $76,000 or 5.5%
over  the  third  quarter  of  2000.  These  decreases  are  related  to  lower
depreciation  expenses,  partially  offset  by  higher  maintenance  expense.

Other  expenses  increased $3,450,000, or 34.1%, from $10,122,000 in the
first  nine  months  of 2000, compared to $13,572,000 in other expenses recorded
during the same period in 2001.  Third quarter 2001 other expenses of $4,903,000
were  63.4%  higher than the third quarter of 2000 other expenses of $3,001,000.
The  rise in other operating expense was the result of a year-to-date $2,200,000
increase  and  a  $1,051,000  third  quarter  increase in the off lease vehicles
residual  reserve.  The  Corporation  reviews  the  off  lease vehicles residual
reserve  account  on  a  quarterly basis, and anticipates continued above normal
expenses to the reserve for the fourth quarter of 2001 and continuing into 2002.
Not  inclusive of these  two  expenses, year to date September 30, 2001 and the
third  quarter  other operating expense increased 12.6% and 28.9%, respectively,
over  the  same  periods  during  2000.  These  increases  are related to higher
expenses  related  to  marketing,  advertising,  internet  banking,  and  the
organization  of  a  consumer  loan  reinsurance  company.

INCOME  TAXES
-------------

        Income  tax  expense  is  less  than  the  amount  calculated  using the
statutory  tax rate primarily as a result of tax exempt income earned from state
and  municipal  securities  and  tax-free  loans.

BALANCE  SHEET  ANALYSIS
------------------------

        Total  assets  grew  $237,303,000,  or  12.3%,  from  $1,935,213,000  at
December  31,  2000  to  $2,172,516,000  at September 30, 2001.  This growth was
primarily  the  result of an increase in earning assets, which grew $230,619,000

PAGE 16

to  $2,047,641,000  at  September  30, 2001, from $1,817,022,000 at December 31,
2000.  During  the first nine months of 2001, loans grew $93,947,000, securities
rose  $113,486,000,  federal  funds  sold  increased  $17,000,000,  and
interest-bearing  deposits  in  banks  grew  $6,186,000.

       The  balance  of  securities  available for sale at September 30, 2001 of
$688,101,000 increased $117,482,000 compared to the December 31, 2000 balance of
$570,619,000.  During  the first nine months of 2001, $281,930,000 of securities
were  sold  which  generated  a  pretax  profit  of  $3,923,000.  In comparison,
$80,539,000  of  securities  available  for sale were sold during the first nine
months  of  2000  to  generate  a pretax loss of $105,000. The Corporation sells
investment  securities  available  for  sale  to  fund  the  purchase  of  other
securities  in  an effort to enhance the overall return of the portfolio, and to
reduce  the  risk  within  different interest rate environments.  The balance of
investment  securities  held  to  maturity decreased $3,996,000 during the first
nine  months  of  2001.

        Total  loans  grew  $93,947,000  or 7.8% during the first nine months of
2001.  The  Banks  realized  gains in all loan categories, with the exception of
leased  vehicles.

        Total  deposits  increased $218,658,000, or 14.7% from $1,489,050,000 at
December  31,  2000  to $1,707,708,000 at September 30, 2001.  This increase was
primarily  due  to  the  growth  in both time deposits and money market accounts
during  this  period.  Time  deposits  over  $100,000 increased $80,360,000 as a
result  of enhanced focus on municipal funds.  Time deposits under $100,000 grew
$70,185,000  due  to  the  Banks'  strategy to grow longer-term funding sources.
Money  market accounts grew $56,718,000 as a result of the growth in balances of
higher  rate  money  market account products.  Savings deposits grew $14,496,000
and  non-interest-bearing  accounts  rose $5,620,000.  Interest-bearing checking
accounts  decreased  $8,721,000.

       Other  borrowings  experienced a decrease of $10,360,000 during the first
nine  months of 2001.  This decrease is the result of a $44,500,000 reduction in
federal  funds  purchased.  Offsetting  this  decrease  were  gains  to  FHLB
borrowings,  securities  sold  under  agreements to repurchase and U.S. Treasury
demand  notes  of  $17,000,000,  $11,556,000  and  $429,000,  respectively.  The
Corporation  also  issued  $5,155,000  of  10.2%  junior  subordinate deferrable
interest  debentures  during  2001.

CAPITAL
-------

        Capital  formation  is  important  to  the  Corporation's well being and
future  growth.  Capital  for  the  period  ending  September  30,  2001  was
$188,753,000, an increase of  $15,217,000 over the end of 2000.  The increase is
the  result  of both the retention of the Corporation's earnings and an increase
in  the  unrealized gains on investment securities available for sale, partially
offset  by  the purchase of treasury stock during the first nine months of 2001.
Net  unrealized gains and losses on investment securities available for sale are
recorded  as accumulated other comprehensive income (loss) in the equity section
of  the  balance sheet.  The accumulated other comprehensive income at September
30,  2001 was a gain of $8,199,000, compared to a gain of $1,422,000 at December
31, 2000.  As part of its plan to repurchase shares of outstanding common stock,
the  Corporation  repurchased  $5,048,000  of common stock during the first nine
months of 2001.   Management believes that the Corporation's current capital and
liquidity  positions  are adequate to support its operations.  Management is not
aware  of  any recommendations by any regulatory authority, which, if it were to
be  implemented,  would  have  a  material  effect on the Corporation's capital.

PAGE 17

<TABLE>
<CAPTION>
(Dollars  in  thousands)
                                                                       For Capital
As of September 30, 2001                    Actual                  Adequacy Purposes
------------------------
                                            Amount        Ratio      Amount     Ratio
                                           ------------  ---------  ---------  ------
<S>                                        <C>           <C>        <C>        <C>
Total Capital (to risk weighted assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $    201,005     12.69%  $ 126,745   8.00%
Harleysville National Bank. . . . . . . .       115,857      9.82%     94,345   8.00%
Citizens National Bank. . . . . . . . . .        39,244     14.38%     21,829   8.00%
Security National Bank. . . . . . . . . .        14,613     12.71%      9,198   8.00%
Tier 1 Capital (to risk weighted assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $    184,950     11.67%  $  63,372   4.00%
Harleysville National Bank. . . . . . . .       105,911      8.98%     47,172   4.00%
Citizens National Bank. . . . . . . . . .        35,825     13.13%     10,915   4.00%
Security National Bank. . . . . . . . . .        13,245     11.52%      4,599   4.00%
Tier 1 Capital (to average assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $    184,950      8.77%  $  84,309   4.00%
Harleysville National Bank. . . . . . . .       105,911      6.98%     60,735   4.00%
Citizens National Bank. . . . . . . . . .        35,825      8.37%     17,118   4.00%
Security National Bank. . . . . . . . . .        13,245      8.78%      6,034   4.00%
</TABLE>
<TABLE>
<CAPTION>
                                                     To Be Well Capitalized
                                                     Under Prompt Corrective
                                                       Action Provision
<S>                                        <C>                       <C>
                                                      Amount          Ratio
                                           ------------------------  ------
Total Capital (to risk weighted assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $                      -      -
Harleysville National Bank. . . . . . . .                   117,931  10.00%
Citizens National Bank. . . . . . . . . .                    27,827  10.00%
Security National Bank. . . . . . . . . .                    11,498  10.00%
Tier 1 Capital (to risk weighted assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $                      -      -
Harleysville National Bank. . . . . . . .                    70,759   6.00%
Citizens National Bank. . . . . . . . . .                    16,372   6.00%
Security National Bank. . . . . . . . . .                     6,899   6.00%
Tier 1 Capital (to average assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $                      -      -
Harleysville National Bank. . . . . . . .                    75,919   5.00%
Citizens National Bank. . . . . . . . . .                    21,397   5.00%
Security National Bank. . . . . . . . . .                     7,543   5.00%
</TABLE>
<TABLE>
<CAPTION>

(Dollars  in  thousands)
                                                                     For Capital
As of December 31, 2000                    Actual                 Adequacy Purposes
------------------------
<S>                                        <C>       <C>        <C>        <C>
                                           Amount    Ratio        Amount     Ratio
                                           --------  ------      ---------  ------
Total Capital (to risk weighted assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $186,989  13.35%      $ 112,063   8.00%
Harleysville National Bank. . . . . . . .   106,549  10.46%         81,461   8.00%
Citizens National Bank. . . . . . . . . .    37,622  14.36%         20,995   8.00%
Security National Bank. . . . . . . . . .    13,553  12.65%          8,572   8.00%
Tier 1 Capital (to risk weighted assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $171,226  12.22%      $  56,031   4.00%
Harleysville National Bank. . . . . . . .    95,980   9.43%         40,731   4.00%
Citizens National Bank. . . . . . . . . .    34,344  13.11%         10,477   4.00%
Security National Bank. . . . . . . . . .    12,509  11.67%          4,286   4.00%
Tier 1 Capital (to average assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $171,226   8.97%      $  76,313   4.00%
Harleysville National Bank. . . . . . . .    95,980   7.12%         53,932   4.00%
Citizens National Bank. . . . . . . . . .    34,344   8.51%         16,147   4.00%
Security National Bank. . . . . . . . . .    12,509   8.70%          5,754   4.00%
</TABLE>
PAGE 18
<TABLE>
<CAPTION>
                                           To Be Well Capitalized Under
                                                Prompt Corrective
                                                Action Provision
<S>                                        <C>                <C>
                                                 Amount        Ratio
                                           -----------------  ------
Total Capital (to risk weighted assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $               -      -
Harleysville National Bank. . . . . . . .            101,826  10.00%
Citizens National Bank. . . . . . . . . .             26,193  10.00%
Security National Bank. . . . . . . . . .             10,715  10.00%
Tier 1 Capital (to risk weighted assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $               -      -
Harleysville National Bank. . . . . . . .             61,096   6.00%
Citizens National Bank. . . . . . . . . .             15,716   6.00%
Security National Bank. . . . . . . . . .              6,429   6.00%
Tier 1 Capital (to average assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $               -      -
Harleysville National Bank. . . . . . . .             67,415   5.00%
Citizens National Bank. . . . . . . . . .             20,183   5.00%
Security National Bank. . . . . . . . . .              7,193   5.00%
</TABLE>


        Pursuant  to  the  federal  regulators'  risk-based  capital  adequacy
guidelines, the components of capital are called Tier 1 and Tier 2 capital.  For
the  Corporation, Tier 1 capital is the shareholders' equity, and Tier 2 capital
includes  the  allowance  for  loan losses.  The minimum for the Tier 1 ratio is
4.0%,  and  the  total  capital  ratio  (Tier  1  plus Tier 2 capital divided by
risk-adjusted assets) minimum is 8.0%.  At September 30, 2001, the Corporation's
Tier  1  risk-adjusted  capital  ratio  was  11.67%, and the total risk-adjusted
capital  ratio  was  12.69%,  both  well above the regulatory requirements.  The
risk-based  capital  ratios  of  each of the Corporation's commercial banks also
exceeded  regulatory  requirements  at  September  30,  2001.

        The  leverage  ratio  consists  of  Tier  1 capital divided by quarterly
average  total  assets,  excluding intangible assets.  Banking organizations are
expected  to  have ratios of at least 4% and 5%, depending upon their particular
condition  and  growth  plans.  Higher  leverage ratios could be required by the
particular  circumstances  or risk profile of a given banking organization.  The
Corporation's  leverage  ratios  were  8.77%  at September 30, 2001 and 8.97% at
December  31,  2000.

        The  year-to-date September 30, 2001 cash dividend per share of $.46 was
12.2%  higher  than  the cash dividend for the same period in 2000 of $.41.  The
dividend  payout  ratio for the first nine months of 2001 was 39.6%, compared to
40.7% for the twelve month period ended December 31, 2000.  Activity in both the
Corporation's dividend reinvestment and stock purchase plan and the stock option
plan  did  not have a material impact on capital during the first nine months of
2001.

LIQUIDITY
---------

        Liquidity  is  a measure of the ability of the Banks to meet their needs
and  obligations on a timely basis.  For a bank, liquidity provides the means to
meet  the  day-to-day  demands  of  deposit customers and the needs of borrowing
customers.  Generally,  the  Banks  arrange  their  mix  of  cash,  money market
investments,  investment  securities and loans in order to match the volatility,
seasonality,  interest  sensitivity and growth trends of its deposit funds.  The
liquidity  measurement  is  based  on  the asset/liability model's projection of
potential  sources  and  uses  of  funds  for  the next 120 days.  The resulting
projections  as  of  September  30,  2001  show  the  potential sources of funds
exceeding  the potential uses of funds.  The Corporation has external sources of
funds,  which  can be drawn upon when funds are required.  The primary source of
external  liquidity  is an available line of credit with the FHLB of Pittsburgh.
Unused  lines  of  credit  at  the  FHLB  of  Pittsburgh were $85,438,000, as of
September 30, 2001.  The Banks also have unused federal funds lines of credit of
$45,000,000  and  non-pledged  investment  securities  available  for  sale  of
$164,613,000  as  of  September  30,  2001.

PAGE 19

OTHER  ITEMS
------------

Legislative  &  Regulatory
--------------------------

       In  November, 1999, the Gramm-Leach-Bliley Financial Modernization Act of
1999  (Modernization Act) became law.  The Modernization Act allows bank holding
companies  meeting  management, capital and Community Reinvestment Act standards
to  engage  in  a  substantially broader range of nonbanking activities than was
permissible  before  enactment,  including  underwriting  insurance  and  making
merchant  banking  investments in commercial and financial companies.  It allows
insurers  and  other  financial  services  companies  to  acquire banks; removes
various  restrictions  that currently apply to bank holding company ownership of
securities firms and mutual fund advisory companies; and establishes the overall
regulatory  structure  applicable  to bank holding companies that also engage in
insurance  and  securities  operations.  The  Corporation  currently believes it
meets  the  requirements  for  the  broader  range  of  activities  that will be
permitted  by  the  Modernization  Act.

        The  Modernization  Act  also  modifies current law related to financial
privacy  and  community reinvestment.  The new privacy provisions will generally
prohibit  financial  institutions,  including  the  Corporation, from disclosing
nonpublic  financial information to nonaffiliated third parties unless customers
have  the  opportunity  to  "opt  out"  of  the  disclosure.

Pending  Legislation
--------------------

       Management  is not aware of any other current specific recommendations by
regulatory  authorities or proposed legislation which, if they were implemented,
would  have  a material adverse effect upon the liquidity, capital resources, or
results of operations, although the general cost of compliance with numerous and
multiple federal and state laws and regulations does have, and in the future may
have,  a  negative  impact  on  the  Corporation's  results  of  operations.

Effects  of  Inflation
----------------------

       Inflation  has  some impact on the Corporation's and the Banks' operating
costs.  Unlike  many  industrial  companies,  however,  substantially all of the
Banks'  assets  and  liabilities  are monetary in nature.  As a result, interest
rates  have  a  more  significant  impact  on  the  Corporation's and the Banks'
performance  than  the  general level of inflation.  Over short periods of time,
interest  rates  may  not  necessarily move in the same direction or in the same
magnitude  as  prices  of  goods  and  services.

Effect  of  Government  Monetary  Policies
------------------------------------------

       The  earnings  of  the  Corporation  are and will be affected by domestic
economic  conditions  and  the monetary and fiscal policies of the United States
government and its agencies.  An important function of the Federal Reserve is to
regulate  the  money  supply  and interest rates.  Among the instruments used to
implement  those  objectives  are  open  market  operations  in  United  States
government  securities  and  changes in reserve requirements against member bank
deposits.  These  instruments  are  used  in  varying  combinations to influence
overall  growth  and  distribution  of bank loans, investments and deposits, and
their  use  may  also  affect  rates  charged  on  loans  or  paid for deposits.

       The Banks are members of the Federal Reserve and, therefore, the policies
and  regulations  of  the  Federal  Reserve  have  a  significant  effect on its
deposits,  loans  and  investment growth, as well as the rate of interest earned
and  paid,  and are expected to affect the Banks' operations in the future.  The
effect of such policies and regulations upon the future business and earnings of
the  Corporation  and  the  Banks  cannot  be  predicted.

PAGE 20

Environmental  Regulations
--------------------------

       There  are  several  federal  and  state  statutes  that  regulate  the
obligations  and  liabilities  of  financial  institutions  pertaining  to
environmental  issues.  In addition to the potential for attachment of liability
resulting  from  its  own  actions,  a  bank  may  be  held liable under certain
circumstances  for  the  actions  of  its borrowers, or third parties, when such
actions  result in environmental problems on properties that collateralize loans
held  by  the  bank.  Further, the liability has the potential to far exceed the
original  amount  of  a  loan  issued  by  the  bank.  Currently,  neither  the
Corporation  nor the Banks are a party to any pending legal proceedings pursuant
to any environmental statute, nor are the Corporation and the Banks aware of any
circumstances  that  may  give  rise  to  liability  under  any  such  statute.

Branching
---------

       The  Corporation's  subsidiaries  currently plan to open at least one new
branch.  During  the  first quarter of 2002, Harleysville National Bank plans to
open  a  location in Souderton, Pennsylvania. This new branch site is contiguous
to  our current service area and was chosen to expand the Banks' market area and
market  share  of  loans  and  deposits.  During  the  second  quarter  of 2001,
Harleysville  National Bank closed its Spring City branch and moved the customer
relationships  to  their  Royersford  branch.  Also during the second quarter of
2001, Citizens National Bank closed its Walnutport office and moved the customer
relationships  to  their  Slatington  office.

Acquisition
-----------

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


 ITEM  3  -  Qualitative  and  Quantitative  Disclosures  About  Market  Risk

       In  the  normal course of conducting business activities, the Corporation
is  exposed to market risk, principally interest risk, through the operations of
its  banking  subsidiaries.  Interest  rate  risk  arises  from  market  driven
fluctuations  in  interest  rates  that  affect  cash flows, income, expense and
values  of financial instruments.  The Asset/Liability Committee, using policies
and  procedures  approved  by the Banks' Boards of Directors, is responsible for
managing  the  rate  sensitivity  position.

       No  material  changes in market risk strategy occurred during the current
period.  A  detailed  discussion of market risk is provided in the Annual Report
on  Form  10-K  filed  with  the  SEC  for  the  period ended December 31, 2000.

PAGE 21
                          PART II.    OTHER INFORMATION
<TABLE>
<CAPTION>
<S>      <C>
Item 1.  Legal Proceedings
-------  -----------------
</TABLE>

       Management,  based upon discussions with the Corporation's legal counsel,
is  not aware of any litigation that would have a material adverse effect on the
consolidated  financial  position  of the Corporation.  There are no proceedings
pending  other  than the ordinary routine litigation incident to the business of
the  Corporation  and  its  subsidiaries  - Harleysville National Bank and Trust
Company,  Citizens  National Bank, Security National Bank, HNC Financial Company
and  HNC  Reinsurance Company.  In addition, no material proceedings are pending
or  are  known  to be threatened or contemplated against the Corporation and its
subsidiaries  by  government  authorities.
<TABLE>
<CAPTION>
<S>                <C>
Item 2. . . . . .  Change in Securities and Use of Proceeds
-----------------  ---------------------------------------------------
  Not applicable.

Item 3. . . . . .  Defaults Upon Senior Securities
-----------------  ---------------------------------------------------
  Not applicable.

Item 4. . . . . .  Submission of Matters to a Vote of Security Holders
-----------------  ---------------------------------------------------
  None.

Item 5. . . . . .  Other Information
-----------------  ---------------------------------------------------
  None.

Item 6. . . . . .  Exhibits and Reports on Form 8-K
-----------------  ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
     (a)  Exhibits:  The  following  exhibits  are  being  filed  as  part  of  this  Report:

Exhibit  No.     Description  of  Exhibits
-----------      -------------------------
<C>        <S>

    (3.1)    Harleysville National Corporation Articles of Incorporation, as amended. (Incorporated by reference
           to Exhibit 3(a) to the Corporation's Registration Statement No. 33-65021 on Form S-4, as filed on
           December 14, 1995.)

    (3.2)    Harleysville National Corporation By-laws. (Incorporated by reference to Exhibit 3(b) to the
           Corporation's Registration Statement No. 33-65021 on Form S-4, as filed on December 14, 1995.)

   (10.1)    Harleysville National Corporation 1993 Stock Incentive Plan. (Incorporated by Reference to Exhibit
           4.3 of Registrant's Registration Statement No. 33-57790 on Form S-8, filed with the Commission on
           October 1, 1993.)

   (10.2)    Harleysville National Corporation Stock Bonus Plan.  (Incorporated by Reference to Exhibit 99A of
           Registrant's Registration Statement No. 33-17813 on Form S-8, filed with the Commission on
           December 13, 1996.)

   (10.3)    Supplemental Executive Retirement Plan.  (Incorporated by Reference to Exhibit 10.3 of
           Registrant's Annual Report in Form 10-K for the year ended December 31, 1997, filed with the
           Commission on March 27, 1998.)

   (10.4)    Walter E. Daller, Jr., Chairman, President and Chief Executive Officer's employment agreement.
           (Incorporated by Reference to Registrant's Registration Statement on Form 8-K, filed with the
           Commission on March 25, 1999.)

PAGE 22

   (10.5)    Demetra M. Takes, President and Chief Operating Officer of Harleysville employment agreement.
           (Incorporated by Reference to Registrant's Registration Statement on Form 8-K, filed with the
           Commission on March 25, 1999.)

   (10.6)    Vernon L. Hunsberger, Senior Vice President/CFO and Cashier's employment agreement.
           (Incorporated by Reference to Registrant's Registration Statement on Form 8-K, filed with the
           Commission on March 25, 1999.)

   (10.7)    Harleysville National Corporation 1998 Stock Incentive Plan. (Incorporated by Reference to
           Registrant's Registration Statement No. 333-79971 on Form S-8 filed with the Commission on June
           4, 1999.)

   (10.8)    Harleysville National Corporation 1998 Independent Directors Stock Option Plan.  (Incorporated by
           Reference to Registrant's Registration Statement No. 333-79973 on Form S-8 filed with the
           Commission on June 4, 1999.)

     (11)    Computation of Earnings per Common Share.   The information for this Exhibit is incorporated by
           reference to page 4 of this Form 10-Q.


            (b) Reports of Form 8-K

            Current Report on Form 8-K, dated July 12, 2001, filed with the Commission on July 13, 2001,
            reporting the Registrant's second quarter 2001 press release.
</TABLE>
PAGE 23

                                   SIGNATURES
                                   ----------


        Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned  thereunto  duly  authorized.



                 HARLEYSVILLE  NATIONAL  CORPORATION




                 /s/ Walter E. Daller, Jr.
                 ________________________
                 Walter E. Daller, Jr., President and Chief Executive Officer
                 (Principal executive officer)



                 /s/ Gregg J. Wagner
                 ________________________
                 Gregg J. Wagner, Executive Vice President - Finance
                 (Principal financial and accounting officer)





Date:  November  14,  2001
--------------------------

PAGE 24
                                                    EXHIBIT INDEX
                                                    -------------
<TABLE>
<CAPTION>

Exhibit  No.     Description  of  Exhibits
-----------      -------------------------
<C>        <S>

    (3.1)    Harleysville National Corporation Articles of Incorporation, as amended. (Incorporated by reference
           To Exhibit 3(a) to the Corporation's Registration Statement No. 33-65021 on Form S-4, as filed on
           December 14, 1995.)

    (3.2)    Harleysville National Corporation By-laws. (Incorporated by reference to Exhibit 3(b) to the
           Corporation's Registration Statement No. 33-65021 on Form S-4, as filed on December 14, 1995.)

   (10.1)    Harleysville National Corporation 1993 Stock Incentive Plan. (Incorporated by Reference to Exhibit
           4.3 of Registrant's Registration Statement No. 33-57790 on Form S-8, filed with the Commission on
           October 1, 1993.)

   (10.2)    Harleysville National Corporation Stock Bonus Plan.  (Incorporated by Reference to Exhibit 99A of
           Registrant's Registration Statement No. 33-17813 on Form S-8, filed with the Commission on
           December 13, 1996.)

   (10.3)    Supplemental Executive Retirement Plan.  (Incorporated by Reference to Exhibit 10.3 of
           Registrant's Annual Report in Form 10-K for the year ended December 31, 1997, filed with the
           Commission on March 27, 1998.)

   (10.4)    Walter E. Daller, Jr., Chairman, President and Chief Executive Officer's employment agreement.
           (Incorporated by Reference to Registrant's Registration Statement on Form 8-K, filed with the
           Commission on March 25, 1999.)

   (10.5)    Demetra M. Takes, President and Chief Operating Officer of Harleysville employment agreement.
           (Incorporated by Reference to Registrant's Registration Statement on Form 8-K, filed with the
           Commission on March 25, 1999.)

   (10.6)    Vernon L. Hunsberger, Senior Vice President/CFO and Cashier's employment agreement.
           (Incorporated by Reference to Registrant's Registration Statement on Form 8-K, filed with the
           Commission on March 25, 1999.)

   (10.7)    Harleysville National Corporation 1998 Stock Incentive Plan. (Incorporated by Reference to
           Registrant's Registration Statement No. 333-79971 on Form S-8 filed with the Commission on June
           4, 1999.)

   (10.8)    Harleysville National Corporation 1998 Independent Directors Stock Option Plan.  (Incorporated by
           Reference to Registrant's Registration Statement No. 333-79973 on Form S-8 filed with the
           Commission on June 4, 1999.)

     (11)    Computation of Earnings per Common Share.   The information for this Exhibit is incorporated by
           Reference to page 4 of this Form 10-Q.
</TABLE>

PAGE 25