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 June 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: 9,131,175 shares of Common
Stock,  $1.00  par  value,  outstanding  on  July  31,  2001.

PAGE 1

<TABLE>
<CAPTION>
                               HARLEYSVILLE NATIONAL CORPORATION

                                   INDEX TO FORM 10-Q REPORT

<S>                                                                                       <C>
                                                                                          PAGE
                                                                                          ----
Part I.  Financial Information

     Item 1. Financial Statements:

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

Consolidated Statements of Income - Six Months and Three Months Ended. . . . . . . . . .     4
              June 30, 2001 and 2000

Consolidated Statements of Cash Flows - Six Months Ended June 30, 2001 and 2000. . . . .     5

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

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

     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)

                                                                     June 30, 2001   December 31, 2000
                                                                     --------------  ------------------
<S>                                                                  <C>             <C>
ASSETS
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . .         57,534              52,018
Federal funds sold. . . . . . . . . . . . . . . . . . . . . . . . .          5,000                   0
Interest-bearing deposits in banks. . . . . . . . . . . . . . . . .          7,138               3,507
                                                                     --------------  ------------------
    Total cash and cash equivalents . . . . . . . . . . . . . . . .         69,672              55,525
                                                                     --------------  ------------------

Investment securities available for sale. . . . . . . . . . . . . .        610,485             570,619
Investment securities held to maturity
 (market value $30,372 and $31,601, respectively) . . . . . . . . .         29,530              30,841
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,275,046           1,209,605
Less: Unearned income . . . . . . . . . . . . . . . . . . . . . . .          2,944               2,450
         Allowance for loan losses. . . . . . . . . . . . . . . . .        (14,708)            (15,210)
                                                                     --------------  ------------------
             Net loans. . . . . . . . . . . . . . . . . . . . . . .      1,263,282           1,196,845
                                                                     --------------  ------------------
Bank premises and equipment, net. . . . . . . . . . . . . . . . . .         21,429              21,870
Accrued income receivable . . . . . . . . . . . . . . . . . . . . .         12,445              12,391
Other real estate owned . . . . . . . . . . . . . . . . . . . . . .            316                 288
Intangible assets, net. . . . . . . . . . . . . . . . . . . . . . .          1,504               1,697
Bank-owned life insurance . . . . . . . . . . . . . . . . . . . . .         38,754              37,471
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . .          7,808               7,666
                                                                     --------------  ------------------
         Total assets . . . . . . . . . . . . . . . . . . . . . . .      2,055,225           1,935,213
                                                                     ==============  ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
   Noninterest-bearing. . . . . . . . . . . . . . . . . . . . . . .        236,298             227,446
   Interest-bearing:
     Checking accounts. . . . . . . . . . . . . . . . . . . . . . .        160,812             163,807
     Money market accounts. . . . . . . . . . . . . . . . . . . . .        368,913             333,622
     Savings. . . . . . . . . . . . . . . . . . . . . . . . . . . .        169,542             161,233
     Time, under $100,000 . . . . . . . . . . . . . . . . . . . . .        454,555             430,074
     Time, $100,000 or greater. . . . . . . . . . . . . . . . . . .        212,731             172,868
                                                                     --------------  ------------------
          Total deposits. . . . . . . . . . . . . . . . . . . . . .      1,602,851           1,489,050
Accrued interest payable. . . . . . . . . . . . . . . . . . . . . .         25,273              22,346
U.S. Treasury demand notes. . . . . . . . . . . . . . . . . . . . .          2,281               2,055
Federal funds purchased . . . . . . . . . . . . . . . . . . . . . .              0              44,500
Federal Home Loan Bank (FHLB) borrowings. . . . . . . . . . . . . .        135,750             110,750
Securities sold under agreements to repurchase. . . . . . . . . . .         79,406              74,083
Guaranteed preferred beneficial interest in Corporation's
  subordinated debentures . . . . . . . . . . . . . . . . . . . . .          5,155                   0
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . .         24,557              18,893
                                                                     --------------  ------------------
          Total liabilities . . . . . . . . . . . . . . . . . . . .      1,875,273           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 9,259,962 shares in 2001 and
       9,253,762 shares in 2000 . . . . . . . . . . . . . . . . . .          9,260               9,254
    Additional paid in capital. . . . . . . . . . . . . . . . . . .         79,972              79,869
    Retained Earnings . . . . . . . . . . . . . . . . . . . . . . .         91,396              83,244
    Treasury stock, at cost: 2001- 131,420; 2000 - 8,500. . . . . .         (4,804)               (253)
    Accumulated other comprehensive income. . . . . . . . . . . . .          4,128               1,422
                                                                     --------------  ------------------
          Total shareholders' equity. . . . . . . . . . . . . . . .        179,952             173,536
                                                                     --------------  ------------------
          Total liabilities and shareholders' equity. . . . . . . .      2,055,225           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)      Six months ended     Three months ended
                                                                 June 30,              June 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 . . . . . . . . . . . . . . . . . .     45,187     42,221      22,617     21,431
Lease financing . . . . . . . . . . . . . . . . . . . . .      4,937      4,232       2,433      2,205
Investment securities:
   Taxable. . . . . . . . . . . . . . . . . . . . . . . .     12,928     11,692       6,396      5,974
   Exempt from federal taxes. . . . . . . . . . . . . . .      5,623      5,249       2,804      2,590
Federal funds sold. . . . . . . . . . . . . . . . . . . .        234        164         211         39
Deposits in banks . . . . . . . . . . . . . . . . . . . .        137        208          76        104
                                                           ---------  ----------  ---------  ----------
      Total interest income . . . . . . . . . . . . . . .     69,046     63,766      34,537     32,343
                                                           ---------  ----------  ---------  ----------
INTEREST EXPENSE:
Savings deposits. . . . . . . . . . . . . . . . . . . . .      9,769      8,331       4,609      4,245
Time, under $100,000. . . . . . . . . . . . . . . . . . .     12,716     11,211       6,395      5,840
Time, $100,000 or greater . . . . . . . . . . . . . . . .      5,673      5,151       2,853      2,668
Borrowed funds. . . . . . . . . . . . . . . . . . . . . .      5,678      6,014       2,622      2,874
                                                           ---------  ----------  ---------  ----------
      Total interest expense. . . . . . . . . . . . . . .     33,836     30,707      16,479     15,627
                                                           ---------  ----------  ---------  ----------
      Net interest income . . . . . . . . . . . . . . . .     35,210     33,059      18,058     16,716
Provision for loan losses . . . . . . . . . . . . . . . .      1,610      1,055         962        549
                                                           ---------  ----------  ---------  ----------
      Net interest income after provision for loan losses     33,600     32,004      17,096     16,167
                                                           ---------  ----------  ---------  ----------
OTHER OPERATING INCOME:
Service charges . . . . . . . . . . . . . . . . . . . . .      2,475      1,870       1,448        950
Security (losses)  gains, net . . . . . . . . . . . . . .      1,783       (192)      1,063        (80)
Trust income. . . . . . . . . . . . . . . . . . . . . . .      1,715      1,462         887        770
Bank-owned life insurance . . . . . . . . . . . . . . . .      1,284        727         593        381
Other Income. . . . . . . . . . . . . . . . . . . . . . .      2,056      1,644       1,130        836
                                                           ---------  ----------  ---------  ----------
      Total other operating income. . . . . . . . . . . .      9,313      5,511       5,121      2,857
                                                           ---------  ----------  ---------  ----------
      Net interest income after provision for loan losses
         and other operating income . . . . . . . . . . .     42,913     37,515      22,217     19,024
                                                           ---------  ----------  ---------  ----------
OTHER OPERATING EXPENSES:
Salaries, wages and employee benefits . . . . . . . . . .     12,905     11,583       6,605      5,829
Occupancy . . . . . . . . . . . . . . . . . . . . . . . .      1,665      1,475         763        698
Furniture and equipment . . . . . . . . . . . . . . . . .      2,466      2,397       1,258      1,219
Other expenses. . . . . . . . . . . . . . . . . . . . . .      8,669      7,121       4,614      3,901
                                                           ---------  ----------  ---------  ----------
      Total other operating expenses. . . . . . . . . . .     25,705     22,576      13,240     11,647
                                                           ---------  ----------  ---------  ----------
      Income before income taxes. . . . . . . . . . . . .     17,208     14,939       8,977      7,377
Income tax expense. . . . . . . . . . . . . . . . . . . .      3,556      2,587       1,856      1,070
                                                           ---------    --------    -------    --------
Net income. . . . . . . . . . . . . . . . . . . . . . . .     13,652     12,352       7,121      6,307
                                                           =========  ==========  =========  ==========

Weighted average number of common shares:
        Basic . . . . . . . . . . . . . . . . . . . . . .  9,172,619  9,275,758   9,139,800  9,276,153
                                                           =========  ==========  =========  ==========
        Diluted . . . . . . . . . . . . . . . . . . . . .  9,354,638  9,286,350   9,321,820  9,286,745
                                                           =========  ==========  =========  ==========
Net income per share information:
        Basic . . . . . . . . . . . . . . . . . . . . . .       1.49       1.33        0.78       0.68
                                                           =========  ==========  =========  ==========
        Diluted . . . . . . . . . . . . . . . . . . . . .       1.46       1.33        0.76       0.68
                                                           =========  ==========  =========  ==========
Cash dividends per share. . . . . . . . . . . . . . . . .       0.60       0.53        0.30       0.27
                                                           =========  ==========  =========  ==========
<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) . . . . . . . . . . . . . . . . . . . . . . . .            . .  Six Months Ended June 30,
OPERATING ACTIVITIES:. . . . . . . . . . . . . . . . . . . . . . . . . . .                      2,001     2,000
                                                                                        --------------  --------
  Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     13,652    12,352
  Adjustments to reconcile net income to
   net cash provided by operating activities:
    Provision for loan losses. . . . . . . . . . . . . . . . . . . . . . .                      1,610     1,055
    Depreciation and amortization. . . . . . . . . . . . . . . . . . . . .                      1,323     1,377
    Net amortization of investment
      securities discount/premiums . . . . . . . . . . . . . . . . . . . .                        417       294
    Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . .                      7,185     3,647
    Net realized security (gain) loss. . . . . . . . . . . . . . . . . . .                     (1,783)      192
    Increase in accrued income receivable. . . . . . . . . . . . . . . . .                        (54)     (287)
    Increase in accrued interest payable . . . . . . . . . . . . . . . . .                      2,927     1,140
    (Increase) decrease in other assets. . . . . . . . . . . . . . . . . .                       (141)      299
    Decrease in other liabilities. . . . . . . . . . . . . . . . . . . . .                     (2,978)   (2,026)
    Increase in unearned income. . . . . . . . . . . . . . . . . . . . . .                       (494)   (1,358)
    Write-down of other real estate owned. . . . . . . . . . . . . . . . .                          0        81
    Decrease in intangible assets. . . . . . . . . . . . . . . . . . . . .                        193       180
                                                                                          ------------  --------
       Net cash provided by operating activities . . . . . . . . . . . . .                     21,857    16,946
                                                                                          ------------  --------
INVESTING ACTIVITIES:
  Proceeds from sales of investment securities available for sale. . . . .                    164,238    46,196
  Proceeds, maturity or calls of investment securities held to maturity. .                      1,810     3,527
  Proceeds, maturity or calls of investment securities available for sale.                     46,075    13,762
  Purchases of investment securities held to maturity. . . . . . . . . . .                          0   (16,656)
  Purchases of investment securities available for sale. . . . . . . . . .                   (245,149)  (68,597)
  Net increase in loans. . . . . . . . . . . . . . . . . . . . . . . . . .                    (68,306)  (56,513)
  Net increase in premises and equipment . . . . . . . . . . . . . . . . .                       (883)   (1,685)
  Purchase of bank-owned life insurance. . . . . . . . . . . . . . . . . .                     (1,284)  (10,727)
  Proceeds from sales of other real estate . . . . . . . . . . . . . . . .                        725       984
                                                                                          ------------  --------
       Net cash used in investing activities . . . . . . . . . . . . . . .                   (102,774)  (89,709)
                                                                                          ------------  --------
FINANCING ACTIVITIES:
  Net increase in deposits . . . . . . . . . . . . . . . . . . . . . . . .                    113,801   101,688
  Increase (decrease) in U.S. Treasury demand notes. . . . . . . . . . . .                        226      (922)
  (Decrease) increase in federal funds purchased . . . . . . . . . . . . .                    (44,500)   21,500
  Increase (decrease) in FHLB borrowings . . . . . . . . . . . . . . . . .                     25,000    (1,000)
  Increase (decrease) in securities sold under agreement . . . . . . . . .                      5,324   (42,889)
  Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . .                      5,155         0
  Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     (5,500)   (4,913)
  Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . .                     (4,551)        0
  Stock options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        109        46
                                                                                           -----------  --------
    Net cash provided by financing activities. . . . . . . . . . . . . . .                     95,064    73,510
                                                                                           -----------  --------
Net increase in cash and cash equivalents. . . . . . . . . . . . . . . . .                     14,147       747
Cash and cash equivalents at beginning of period . . . . . . . . . . . . .                     55,525    63,491
                                                                                           -----------  --------
Cash and cash equivalents at end of the period . . . . . . . . . . . . . .                     69,672    64,238
                                                                                           ===========  ========

  Cash paid during the period for:
     Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     30,909    29,566
                                                                                           ===========  ========
     Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      2,500     1,290
                                                                                           ===========  ========
   Supplemental disclosure of noncash investing and financing activities:
       Transfer of assets from loans to other real estate owned. . . . . .                        753       646
                                                                                           ===========  ========
<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 June 30, 2001, the results of its operations for six
and  three month periods ended June 30, 2001 and 2000 and the cash flows for the
six month periods ended June 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 six and three month periods ended June 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 six months of 2001 was $16,358,000, compared to $10,248,000
for  the  first  six  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  453,000  shares  of  its
outstanding  common  stock.  The  repurchased  shares  will  be used for general
corporate  purposes.

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 Harleysville
National  Corporation  and  its  subsidiaries.  When  we  use  words  such  as
"believes,"  "expects,"  "anticipates,"  or  similar  expressions, we are making
forward-looking  statements.

        Shareholders  should note that many factors, some of which are discussed
elsewhere  in  this  document  and  in  the  documents  that  we  incorporate by
reference,  could  affect  the future financial results of Harleysville National
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:

<TABLE>
<CAPTION>
<S>  <C>
   *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
</TABLE>

OVERVIEW
--------

        During  the  second  quarter of 2001, the Corporation experienced record
earnings  within  a  sluggish  economy, and surpassed the $2 Billion asset mark.
The  improved  quarter  and  year-to-date  earnings were the result of a rise in
earning assets, improved other income levels, and continued control of operating
expenses.

        Consolidated  net  income for the second quarter of 2001 was $7,121,000,
an increase of $814,000, or 12.9%, over the second quarter of 2000 net income of
$6,307,000.  For  the  quarter  ended June 30, 2001, basic earnings per share of
$.78  were  14.7%  higher than the $.68 earned during the second quarter of 2000
and  diluted  earnings  per  share at $.76 were up 11.8% from $.68 in the second
quarter  of last year.  Consolidated net income for the first six months of 2001
was  $13,652,000, an increase of $1,300,000, or 10.5%, over the first six months
of 2000 net  income of $12,352,000.  Basic earnings per share for the first six
months  of 2001 of $1.49 increased 12.0% from the $1.33 in the comparable period
last year.  Diluted earnings per share of $1.46 for the first six months of 2001
were  higher  than  the  $1.33  year  to  date  June  30,  2000.

PAGE 8
        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.   Net
interest income grew $2,151,000, primarily as a result of a 9.7% rise in average
earning  assets.  Other  operating income rose $3,802,000, due to higher deposit
account service charge fees, trust fees, bank-owned life insurance and net gains
on  the  sale  of  securities.

        For the six months ended June 30, 2001, the annualized return on average
shareholders' equity and the annualized return on average assets were 15.45% and
1.38%,  respectively.  For  the  same  period  in 2000, the annualized return on
average  shareholders'  equity  was  16.65% and the annualized return on average
assets  was  1.37%.  For  the  three  months ended June 30, 2001, the annualized
return  on  average  shareholders'  equity  and the annualized return on average
assets were 16.00% and 1.42%, respectively.  For the second quarter in 2000, the
annualized  return on average shareholders' equity was 16.93% and the annualized
return  on  average  assets  was 1.39%.  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  15.71%  for 2001, compared to 15.30% in 2000.  The
adjusted  ratio  for the second quarter of 2001 and 2000 were 16.30% and 15.53%,
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 .29% of total assets at June 30, 2001 and December 31,
2000,  compared  to  .32%  at June 30, 2000.   The Corporation did experience an
increase  in net loans charged off during the first six months of 2001, compared
to  the  same  period  in  2000.  Net  loans  charged off year to date 2001 were
$2,112,000, compared to $694,000 in the first six months of 2000.  This increase
is  primarily  in  the  indirect consumer loan portfolio.  Loans 90 days or more
past  due  improved  from  $1,172,000  at June 30, 2000, to $475,000 at June 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; (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 six months of 2001 of $35,210,000
increased  $2,151,000, or 6.5%, over the same period in 2000, which produced net
interest  income of $33,059,000.  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 half of 2001, compared to the same period
in  2000.  The  increase  in  interest  income was partially offset by a rise in
interest expense, primarily the result of higher volumes.  The second quarter of
2001  net  interest income increased 8.03%, 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 six month and three month periods ended June 30, 2001
over  June  30,  2000  by  their  rate  and  volume  components.

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

                              Total        Caused by:        Total     Caused by:
                            ----------                    ----------

                             Variance     Rate    Volume    Variance    Rate   Volume
                            ----------  --------  -------  ----------  ------  -------
Interest Income:
<S>                         <C>         <C>       <C>      <C>         <C>     <C>
  Securities * . . . . . .  $   1,811     ($603)  $ 2,414  $     751   ($521)  $ 1,272
  Money market instruments         (1)     (110)      109        144     (47)      191
  Loans *. . . . . . . . .      3,730        (5)    3,735      1,465    (418)    1,883
                            ----------  --------  -------  ----------  ------  -------
     Total . . . . . . . .      5,540      (718)    6,258      2,360    (986)    3,346
                            ----------  --------  -------  ----------  ------  -------

Interest Expense:
  Savings deposits . . . .      1,438       366     1,072        364    (133)      497
  Time deposits and
  certificates of deposit.      2,027       918     1,109        740      88       652
  Other borrowings . . . .       (336)     (489)      153       (252)   (445)      193
                            ----------  --------  -------  ----------  ------  -------
      Total. . . . . . . .      3,129       795     2,334        852    (490)    1,342
                            ----------  --------  -------  ----------  ------  -------

Net interest income. . . .  $   2,411   ($1,513)  $ 3,924  $   1,508   ($496)  $ 2,004
                            ==========  ========  =======  ==========  ======  =======
    *Tax Equivalent Basis
</TABLE>

        Taxable-equivalent net interest income was $38,778,000 for the first six
months  of  2001, compared to $36,367,000 for the same period in 2000, a 6.6% or
$2,411,000  increase.  This  increase was primarily due to a $3,924,000 increase
related  to  volume,  which  was partially offset by a reduction in net interest
income,  related  to  rate.  Total  taxable-equivalent  interest  income  grew
$5,540,000,  the  result  of  higher volumes, offset by lower rates of loans and
securities  related  to the reduction in interest rates during the first half of
2001.  Average  year-to-date  loans  and  securities  grew  $90,899,000  and
$68,834,000,  respectively  at  June  30,  2001,  compared  to  June  30,  2000.

        Total  interest  expense  grew $3,129,000 during the first six 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
$75,168,000  and  $38,167,000,  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 2.8% during this
period.  An  increase in repurchase agreements was partially offset by decreases
in  FHLB  borrowings  and  federal  funds sold. 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 $19,852,000 was $1,508,000 or
8.2%  higher in the second quarter of 2001, compared to $18,344,000 for the same
period  in  2000.  Interest  income grew $2,360,000 during the period, primarily
due  to  a 10.7% rise in earning asset volumes.  The increase in interest income
was  partially offset by a $852,000 rise in interest expense.  The rates paid on
savings  accounts  and other borrowings decreased and the rates on time deposits
increased  slightly  during  the  second quarter of 2001, compared to the second
quarter  of  2000.  Non-accruing loans are included in the average balance yield
calculation,  but  the  average non-accruing loans had no material effect on the
results.

PAGE 10
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 Banks' Boards of
Directors,  is responsible for managing the rate sensitivity position. The Banks
manage  interest  rate sensitivity by changing mix and repricing characteristics
of  their assets and liabilities through their investment securities portfolios,
their  offering  of  loan  and  deposit  terms and borrowings from the FHLB. The
nature  of  the  Banks'  current operations is such that they are not subject to
foreign currency exchange or commodity price risk.  The Banks do not own trading
assets  and they do not have any hedging transactions in place, such as interest
rate  swaps,  caps  or  floors.

        The  Banks  use  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 Banks' net interest income is simulated
by  increasing  and decreasing interest rates.  This simulation is known as rate
shocks.  The  June  30, 2001 report below forecasts changes in the Banks' market
value  of equity under alternative interest rate environments.  The market value
of  equity is defined as the net present value of the Banks' existing assets and
liabilities.

<TABLE>
<CAPTION>


                                    CHANGE IN                   ASSET/LIABILITY
                   MARKET VALUE    MARKET VALUE    PERCENTAGE      APPROVED
                   OF EQUITY        OF EQUITY        CHANGE      PERCENT CHANGE
                   ------------  ----------------  -----------  ---------------
<S>                <C>           <C>               <C>          <C>
+200 Basis Points       261,481           (4,040)       -1.52%          +/- 30%
+100 Basis Points       269,859            4,338         1.63%          +/- 30%
Flat Rate . . . .       265,521                -         0.00%          +/- 30%
-100 Basis Points       243,884          (21,637)       -8.15%          +/- 30%
-200 Basis Points       214,805          (50,716)      -19.10%          +/- 30%
</TABLE>

        In  the  event the Banks should experience an excessive decline in their
market  value  of  equity  resulting from changes in interest rates, they have a
number  of  options  which it they could utilize to remedy such a mismatch.  The
Banks  could restructure their investment portfolios through sale or purchase of
securities  with more favorable repricing attributes.  They 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 4.16% for the six-month period ended June 30,
2001,  decreased  from the 4.28% net interest margin for the first six months of
2000.  The  decrease  in the net interest margin is the result of a reduction in
the yield earned on earning assets and an increase in funding cost. The yield on
earning  assets  of 7.80% during the first six months of 2001 was lower than the
7.90%  earned during the same period in 2000.  The decrease in the yield was due
to  lower  yields  in  both  investment securities and money market instruments,
related  to  the  impact  of  the decrease in interest rates during this period.
During  the  first  six months of 2001, the Corporation was able to maintain the
same 8.22% yield on loans as it did in the first six months of 2000.  During the
first  half of 2001, the average interest rate paid on interest-bearing deposits
and  other borrowings of 4.40% was higher than the first six months of 2000 rate
of  4.32%.  This  rise  in rates paid on interest bearing deposits is due to the
higher cost of funding related to the competitive deposit gathering environment.
Compared  to  the entire year 2000 net interest margin of 4.14%, the Corporation
has managed a 2 basis point increase in the net interest margin during the first
six  months of 2001. The second quarter of 2001 net interest margin of 4.19% was
lower  than  the  second  quarter  2000  net  interest  margin  of  4.28%.

PAGE 11
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
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

PAGE 12
/  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.

         For  the  first  six  months  of 2001 the provision for loan losses was
$1,610,000,  compared  to  $1,055,000,  for the same period in 2000.  The higher
provision  for  loan  losses during the first half of 2001, compared to the same
period  in  2000  is attributed to the growth in loans during this period and an
increase in net loans charged off.  Net loans charged off was $2,112,000 for the
six  months  ended  June 30, 2001, compared to $694,000 for the six months ended
June  30, 2000.  The increase in loans charged off was primarily due to indirect
consumer  related  loans.  The ratio of nonperforming assets to total assets for
June  30, 2001 of .29% did not change from December 31, 2000, and was lower than
the  June  30,  2000  ratios  of  .32%.

Allowance  for  Loan  Losses
----------------------------
Transactions  in  the  allowance  for  loan  losses  are  as  follows:
<TABLE>
<CAPTION>
                                                        2001         2000
                                                      ------------  ------
<S>                                            <C>              <C>              <C>
Balance, beginning of year                      $   15,210,000   $14,887,000
   Provision charged to operating expenses           1,610,000     1,055,000
   Loans charged off                                (2,443,000)     (992,000)
   Recoveries                                          331,000       298,000
                                                ---------------  ------------
Balance, June 30                                    14,708,000    15,248,000
                                               ===============  ============

Ratios: . . . . . . . . . . . . . . . . . . . . .   June 30, 2001  Dec. 31, 2000  June 30, 2000
-------------------------------------------------  -------------  -------------  ---------------
Allowance for loan losses to nonperforming assets        249.0%         268.3%        257.7%
Nonperforming assets to total loans & net assets
     acquired in foreclosure                              0.46%          0.47%         0.50%
Nonperforming assets to total assets                      0.29%          0.29%         0.32%
Allowance for loan losses to total loans                  1.15%          1.25%         1.30%
</TABLE>

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

                               June 30, 2001
                               -------------
                                         Percent
                              Amount    of Loans
                             --------  ---------
<S>                          <C>       <C>
Commercial and industrial    $  5,176        26%
Consumer loans. . . . . .       5,355        34%
Real estate . . . . . . .       2,695        30%
Lease financing . . . . .       1,482        10%
                             --------  ---------
  Total . . . . . . . .   .  $ 14,708       100%
                             ========  =========
</TABLE>

        Nonperforming  assets  (nonaccruing loans, net assets in foreclosure and
troubled  debt  restructured  loans)  were  0.46%  of total loans and net assets
acquired in foreclosure at June 30, 2001, compared to 0.47% at December 31, 2000
and 0.50% at June 30, 2000.  The ratio of the allowance for loan losses to loans
at June 30, 2001 of 1.15% decreased from the December 31, 2000 and June 30, 2000
ratios  of  1.25%  and  1.30%,  respectively.

PAGE 13
        Nonaccruing loans at June 30, 2001 of $5,581,000,000, increased $211,000
from  the  December  31,  2000 level of $5,370,000, and grew $1,131,000 from the
June  30,  2000 level of $4,450,000.   The increase in nonaccruing loans at June
30,  2001,  compared to June 30, 2000 was primarily the result of an increase in
commercial  nonaccruing  loans.

        Net  assets  in  foreclosure  totaled  $316,000  as of June 30, 2001, an
increase  of $28,000 from the December 31, 2000 balance of $288,000.  During the
first  six  months  of  2001, transfers from loans to assets in foreclosure were
$753,000;  payments  on  foreclosed  properties totaled $725,000.  There were no
write-downs  of  assets  in foreclosure during the first six months of 2001. The
loans  transferred  to  assets  in  foreclosure  included  commercial  loans  of
$140,000,  consumer loans of $24,000 and leases of $589,000.  The balance of net
assets  in  foreclosure  at  June 30, 2000 was $1,017,000.  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.  As  of  June  30,  2001  and  December  31,  2000,  troubled  debt
restructured  loans  totaled  $11,000.

        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 June 30, 2001, loans past due 90 days or more and
still  accruing  interest were $475,000, compared to $514,000 as of December 31,
2000 and $1,172,000 as of June 30, 2000.  The decrease in loans past due 90 days
at  June 30, 2001, compared June 30, 2000 was primarily the result of a decrease
in  commercial  loans  past  due  90  days.

<TABLE>
<CAPTION>

The  following  information  concerns  impaired  loans:
<S>                                                   <C>             <C>             <C>
                                                      June 30, 2001   Dec. 31, 2000   June 30, 2000
                                                      --------------  --------------  --------------
    Impaired Loans . . . . . . . . . . . . . . . . .  $    3,714,000  $    3,322,000  $    3,140,000
                                                      ==============  ==============  ==============

     Average year-to-date impaired loans:. . . . . .  $    3,315,000  $    2,965,000  $    2,605,000
                                                      ==============  ==============  ==============

     Impaired loans with specific loss allowances: .  $    3,714,000  $    3,322,000  $    3,140,000
                                                      ==============  ==============  ==============

     Loss allowances reserved on impaired loans: . .  $      411,000  $      377,000  $      347,000
                                                      ==============  ==============  ==============

    Year-to-date income recognized on impaired loans  $       55,000  $      128,000  $       37,000
                                                      ==============  ==============  ==============
</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.

PAGE 14
<TABLE>
<CAPTION>

OTHER  OPERATING  INCOME
------------------------
                           Six  Months  Ended  June  30,          Three  Months  Ended  June  30,
                          -----------------------------           -------------------------------

                                          2001    2000     2001    2000
                                 -------------  -------  ------  -------
                             (Dollars in thousands)     (Dollars in thousands)
<S>                              <C>             <C>      <C>     <C>
Service charges . . . . . . . .  $       2,475  $1,870   $1,448  $  950
Security gains (losses), net. .          1,783    (192)   1,063     (80)
Trust income. . . . . . . . . .          1,715   1,462      887     770
Bank-owned life insurance . . .          1,284     727      593     381
Other income. . . . . . . . . .          2,056   1,644    1,130     836
                                         -----   -----    -----   ------
  Total other operating income.  $       9,313  $5,511   $5,121  $2,857
                                 =============  =======  ======  =======
</TABLE>

Other operating income for the first six months of 2001 increased $3,802,000, or
69.0%,  from  $5,511,000  at  June  30,  2000 to $9,313,000 at June 30, 2001.  A
$1,975,000  increase  in  security  gains contributed to this rise.  The rise in
other income was $1,827,000, or 32.0%, not inclusive of the securities gains and
losses.  This  rise  in  other  operating  income  is  the  result of a $605,000
increase  in  service  charges, a $253,000 growth in trust income and a $412,000
increase  in  other  income.  Bank-owned  life  insurance  (BOLI)  income  rose
$557,000.  The second quarter 2001 other income was 79.2% higher than the second
quarter of 2000.  A $1,143,0000 rise in security gains was the primary factor in
this  rise,  along  with  increases  in  the  all  of the remaining other income
categories.

        Service  charges grew $605,000 or 32.4% in the first six 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 six months of 2001 was $483,000, compared to the
first  half  of 2000. The remaining increase is related to the growth in average
transaction  deposits  and  enhanced  fee  structures.  The  2001 second quarter
service  charge income of $1,448,000 increased $498,000 or 52.4% over the second
quarter  of  2000,  primarily  due  to  an  increase  in  overdraft  fees.

        The Corporation recorded net security gains on the sale of securities of
$1,783,000  in  the first six months of 2001, compared to a $192,000 loss in the
first  half of 2000.  The Corporation recorded net security gains on the sale of
securities of $1,063,000 in the second quarter of 2001 and a net loss of $80,000
in  the  second  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
$253,000, or 17.3% in the first six months of 2001 and $117,000, or 15.2% in the
second  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  of  15.9% from June 30, 2000 to June 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  $38,091,000  exceeded the $26,105,000 averaged during the
same period in 2000.  This growth was the basis for the rise in BOLI income from
$727,000  in  the  first half of 2000 to $1,284,000 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
$593,000 of BOLI income during the second quarter of 2001 and $381,000 during
the second  quarter  of  2000.

        Other  income  for  the  first six months of 2001 increased $412,000, or
25.1%,  compared  to  the same period in 2000.  The second quarter of 2001 other
income  of  $1,130,000  grew  $294,000,  or  35.2%,  over  the second quarter of

PAGE 15
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.

<TABLE>
<CAPTION>

OTHER  OPERATING  EXPENSES
--------------------------
                           Six  Months  Ended  June  30,   Three  Months  Ended  June  30,
                           -----------------------------   -------------------------------

                                          2001      2000     2001     2000
                                   -----------------------  -------  -------  -------
                                    (Dollars in thousands)    (Dollars in thousands)
<S>                                <C>             <C>      <C>      <C>
Salaries. . . . . . . . . . . . .  $      10,712  $ 9,633  $ 5,498  $ 4,865
Employee benefits . . . . . . . .          2,193    1,950    1,107      964
Occupancy expense . . . . . . . .          1,665    1,475      763      698
Furniture and equipment expense .          2,466    2,397    1,258    1,219
Other expenses. . . . . . . . . .          8,669    7,121    4,614    3,901
                                   -------------  -------  -------  -------
  Total other operating expenses.  $      25,705  $22,576  $13,240  $11,647
                                   =============  =======  =======  =======
</TABLE>

        Other operating expenses for the first six months of 2001 of $25,705,000
increased  $3,129,000,  or  13.9%, from $22,576,000 for the same period in 2000.
The  rise  in  operating expenses was partially the result of costs related to a
one-time  expense  related  to  the  organization of a consumer loan reinsurance
company of $329,000.  Also contributing to this rise in other operating expenses
were  costs  associated  with  an  increase  in  lease  residual  losses and the
introduction  of alternative investment products including mutual funds and
annuities  during  the  last  quarter  of  2000.

        Employee  salaries  increased  $1,079,000,  or 11.2% from $9,633,000 for
the  first  six  months  of  2000  to  $10,712,000  for the same period in 2001.
Employee  benefits  of $2,193,000 expensed in the first six months of 2001, were
$243,000,  or  12.5%  higher  than  the $1,950,000 of employee benefits expensed
during  the  same  period  in 2000.  The second quarter 2001 salary and employee
benefits  exceeded  the  second  quarter  of  2000  levels  by  13.0% and 14.8%,
respectively.  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.

        Net  occupancy  expense increased $190,000, or 12.9%, from $1,475,000 in
the first six months of 2000 to $1,665,000 in the first six months of 2001.  Net
occupancy  expenses  grew  9.3%  in  the second quarter of 2001, compared to the
second quarter of 2000.  Contributing to this increase were higher energy costs,
higher  than  normal  snow  removal  expenses  and a reduction in rental income.
Equipment  expenses  increased  $69,000, or 2.9%, during the first six months of
2001,  compared  to  the  same  period  in  2000.  The  second quarter equipment
expenses grew $39,000, or 3.2% over the second quarter of 2000.  These increases
are  due  to  a  rise  in  equipment  rental expenses, partially offset by lower
depreciation  and  maintenance  costs.

        Other  expenses  increased  $1,548,000, or 21.7%, from $7,121,000 in the
first  six  months  of  2000,  compared to $8,669,000 in other expenses recorded
during  the  same  period  in  2001.  Second  quarter  2001  other  expenses  of
$4,614,000  were  18.3% higher than the second quarter of 2000 other expenses of
$3,901,000.  The  rise in other operating expense was the result of a $1,149,000
increase  in  the  off  lease  vehicles  residual  reserve,  and  the  $329,000
non-recurring  organization  expenses  associated  with  the  consumer  loan
reinsurance  company.  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 remainder of 2001.  Not inclusive of these two
expenses,  year  to  date  June 30, 2001 other operating expense increased 1.0%,
compared  to  the  same  period  in  2000.

PAGE 16
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 $120,012,000, or 6.2%, from $1,935,213,000 at December
31, 2000  to  $2,055,225,000  at  June 30, 2001.  This growth was primarily the
result  of  an  increase  in  earning  assets,  which  grew  $113,121,000  to
$1,930,143,000  at  June 30, 2001, from $1,817,022 at December 31, 2000.  During
the  first  six  months  of  2001,  loans  grew  $65,935,000,  securities  rose
$38,555,000, federal funds sold increased $5,000,000, and interest-bearing
deposits in  Banks  grew  $3,631,000.

       The  balance  of  securities  available  for  sale  at  June  30, 2001 of
$610,485,000  increased $39,866,000 compared to the December 31, 2000 balance of
$570,619,000.  During  the  first six months of 2001, $164,238,000 of securities
were  sold  which  generated  a  pretax  loss  of  $1,783,000.  In  comparison,
$46,196,000  of securities available for sale were sold during the first half of
2000  to  generate  a  pretax loss of $192,000. 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 $1,311,000 during the first half of 2001.

        Total  loans  grew  $65,935,000  or  5.4% during the first six months of
2001.  Contributing  to  this  growth  were  increases  in  commercial  loans,
commercial  mortgages, and indirect consumer loans.  A rise in equipment leasing
was  offset  by  a  decrease  in  leased  vehicles.

        Total  deposits  increased  $113,801,000, or 7.6% from $1,489,050,000 at
December  31,  2000  to  $1,602,851,000  at  June  30,  2001.  This increase was
primarily  due  to  the  growth  in both time deposits greater than $100,000 and
money  market  accounts  during  this  period.  Time  deposits  over  $100,0000
increased  $39,863,000  as  a  result  of  the seasonal flow of municipal funds.
Money  market accounts grew $35,291,000 as a result of the growth in balances of
higher  rate  money  market  account  products.  Time  deposits  under  $100,000
increased $24,481,000, non-interest-bearing accounts rose $8,852,000 and savings
deposits  grew  $8,309,000.  Interest-bearing  checking  accounts  decreased
$2,995,000.

       Other  borrowings  experienced  a decrease of $8,796,000 during the first
six  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
$25,000,000, $5,323,000 and $226,000, 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 June 30, 2001 was $179,952,000, an
increase  of  $6,416,000  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 half 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 June 30, 2001 was
a gain of $4,128,000, 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  $4,551,000  of  common  stock during the first half 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 June 30, 2001                           Actual     Actual           Adequacy Purposes
---------------------------------------
                                              Amount      Ratio             Amount    Ratio
                                           ------------  -------  ------------------  ------
<S>                                        <C>           <C>      <C>                 <C>
Total Capital (to risk weighted assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $    195,552   13.12%  $          119,217   8.00%
Harleysville National Bank. . . . . . . .       112,140   10.23%              87,669   8.00%
Citizens National Bank. . . . . . . . . .        38,539   14.25%              21,638   8.00%
Security National Bank. . . . . . . . . .        14,160   12.90%               8,782   8.00%
Tier 1 Capital (to risk weighted assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $    180,246   12.10%  $           59,609   4.00%
Harleysville National Bank. . . . . . . .       102,292    9.33%              43,834   4.00%
Citizens National Bank. . . . . . . . . .        35,152   13.00%              10,819   4.00%
Security National Bank. . . . . . . . . .        13,176   12.00%               4,391   4.00%
Tier 1 Capital (to average assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $    180,246    8.99%  $           80,243   4.00%
Harleysville National Bank. . . . . . . .       102,292    7.19%              56,901   4.00%
Citizens National Bank. . . . . . . . . .        35,152    8.39%              16,753   4.00%
Security National Bank. . . . . . . . . .        13,176    8.95%               5,888   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. . . . . . . .   109,586  10.00%
Citizens National Bank. . . . . . . . . .    27,047  10.00%
Security National Bank. . . . . . . . . .    10,977  10.00%
Tier 1 Capital (to risk weighted assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $      -      -
Harleysville National Bank. . . . . . . .    65,752   6.00%
Citizens National Bank. . . . . . . . . .    16,228   6.00%
Security National Bank. . . . . . . . . .     6,586   6.00%
Tier 1 Capital (to average assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $      -      -
Harleysville National Bank. . . . . . . .    71,126   5.00%
Citizens National Bank. . . . . . . . . .    20,942   5.00%
Security National Bank. . . . . . . . . .     7,360   5.00%
</TABLE>

PAGE 18
<TABLE>
<CAPTION>

(Dollars  in  thousands)

                                                                         For Capital Adequacy
As of December 31, 2000                           Actual         Actual        Purposes
-----------------------------------------
                                                  Amount          Ratio    Amount     Ratio
                                           ---------------------  -------  ---------  ------
<S>                                        <C>                    <C>      <C>        <C>
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%     20,955   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>

<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>

PAGE 19

        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 June 30, 2001, the Corporation's Tier
1  risk-adjusted  capital  ratio was 12.10%, and the total risk-adjusted capital
ratio  was  13.12%, both well above the regulatory requirements.  The risk-based
capital  ratios  of  each  of  the  Corporation's commercial banks also exceeded
regulatory  requirements  at  June  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 8.99% at June 30, 2001 and 8.97% at December
31,  2000.

        The year-to-date June 30, 2001 cash dividend per share of $.60 was 13.2%
higher than the cash dividend for the same period in 2000 of $.53.  The dividend
payout  ratio  for the first six months of 2001 was 40.3%, 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 six 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 June 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 $115,032,000, as of June 30,
2001.  The  Banks  also have unused federal funds lines of credit of $40,000,000
and  non-pledged  investment securities available for sale of $139,990,000 as of
June  30,  2001.

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 holing 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.

PAGE 20

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.

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

       There  are  several  federal  and  state  statutes  which  regulate  the
obligations  and  liabilities  of  financial  institutions  pertaining  to
environmental  issues.  In addition to the potential for attachment of liability
resulting  from  its  own  actions,  a  bank  may  be  held liable under certain
circumstances  for  the  actions  of  its borrowers, or third parties, when such
actions  result in environmental problems on properties that collateralize loans
held  by  the  bank.  Further, the liability has the potential to far exceed the
original  amount  of  a  loan  issued  by  the  bank.  Currently,  neither  the
Corporation nor the Banks are a party to any pending legal 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  third quarter of 2001, 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  Citizens  Bank  and  Trust

PAGE 21

Company  stock.  Upon the completion of the acquisition, Citizens Bank and Trust
Company's banking operations were 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 22

                          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.)

PAGE 23

(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
        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 on Form 8-K

        Current Report on Form 8-K, dated April 9, 2001, filed with the Commission on April 24, 2001,
        reporting  the Registrant's first quarter 2001 press release.

</TABLE>

PAGE 24

                                   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:  August  14,  2001


PAGE 25

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
        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 26