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, 2002.
                                                 -------------

                                       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 . . . . . . . . . .   (I.R.S.  Employer
incorporation or organization . . . . . . . . . . .  Identification No.)

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

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



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

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

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate  the  number  of  shares outstanding of each of the issuer's classes of
common  stock,  as  of  the latest practicable date: 18,200,764 shares of Common
Stock,  $1.00  par  value,  outstanding  on  August  12,  2002.

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, 2002 and December 31, 2001 . . . . . . . . . . . . . . . . .     3

Consolidated Statements of Income - Six Months and Three Months Ended June 30, 2002 and 2001. . . .     4

Consolidated Statements of Shareholders' Equity - Six Months Ended June 30, 2002 and Twelve Months.     5
              Ended December 31, 2001

Consolidated Statements of Cash Flows - Six Months Ended June 30, 2002 and 2001 . . . . . . . . . .     6

Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . .     7

     Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations     9

     Item 3. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . .    23

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 30,2002    December 31,2001
                                                                  -------------  -----------------
<S>                                                               <C>            <C>
ASSETS
Cash and due from banks. . . . . . . . . . . . . . . . . . . . .  $     64,685   $         62,974
Fed funds sold . . . . . . . . . . . . . . . . . . . . . . . . .         7,725             12,500
Interest-bearing deposits in banks . . . . . . . . . . . . . . .         6,997              7,150
                                                                  -------------  -----------------
    Total cash and cash equivalents. . . . . . . . . . . . . . .        79,407             82,624
                                                                  -------------  -----------------

Investment securities available for sale . . . . . . . . . . . .       765,207            706,371
Investment securities held to maturity . . . . . . . . . . . . .        22,925             26,099
 (fair value $24,319 and $26,782, respectively)
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1,344,112          1,313,934
Less: Deferred costs, net. . . . . . . . . . . . . . . . . . . .         2,176              2,675
         Allowance for loan losses . . . . . . . . . . . . . . .       (16,855)           (15,558)
                                                                  -------------  -----------------
             Net loans . . . . . . . . . . . . . . . . . . . . .     1,329,433          1,301,051
                                                                  -------------  -----------------
Bank premises and equipment, net . . . . . . . . . . . . . . . .        21,045             21,439
Accrued income receivable. . . . . . . . . . . . . . . . . . . .        12,943             11,907
Net assets in foreclosure. . . . . . . . . . . . . . . . . . . .           658                609
Intangible assets, net . . . . . . . . . . . . . . . . . . . . .         1,775              1,360
Bank-owned life insurance. . . . . . . . . . . . . . . . . . . .        47,211             45,942
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . .        11,551             11,569
                                                                  -------------  -----------------
         Total assets. . . . . . . . . . . . . . . . . . . . . .  $  2,292,155   $      2,208,971
                                                                  =============  =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
   Noninterest-bearing . . . . . . . . . . . . . . . . . . . . .  $    256,407   $        254,638
   Interest-bearing:
     Checking accounts . . . . . . . . . . . . . . . . . . . . .       185,455            169,156
     Money market accounts . . . . . . . . . . . . . . . . . . .       410,791            419,890
     Savings . . . . . . . . . . . . . . . . . . . . . . . . . .       201,726            179,284
     Time, under $100,000. . . . . . . . . . . . . . . . . . . .       525,893            489,345
     Time, $100,000 or greater . . . . . . . . . . . . . . . . .       208,439            234,549
                                                                  -------------  -----------------
          Total deposits . . . . . . . . . . . . . . . . . . . .     1,788,711          1,746,862
Accrued interest payable . . . . . . . . . . . . . . . . . . . .        22,438             27,114
U.S. Treasury demand notes . . . . . . . . . . . . . . . . . . .         2,015              2,677
Federal Home Loan Bank (FHLB) borrowings . . . . . . . . . . . .       162,750            127,750
Securities sold under agreements to repurchase . . . . . . . . .        80,404             80,393
Guaranteed preferred beneficial interest in Corporation's
  subordinated debentures. . . . . . . . . . . . . . . . . . . .         5,000              5,000
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . .        32,684             29,826
                                                                  -------------  -----------------
          Total liabilities. . . . . . . . . . . . . . . . . . .     2,094,002          2,019,622
                                                                  -------------  -----------------
Shareholders' Equity:
    Series preferred stock,  par value $1 per share;
       authorized 8,000,000 shares, none issued. . . . . . . . .             -                  -
    Common stock, par value $1 per share; authorized 75,000,000
       shares; issued and outstanding 18,631,717 shares in 2002
       and 18,570,971 shares in 2001 . . . . . . . . . . . . . .        18,632             18,571
    Additional paid in capital . . . . . . . . . . . . . . . . .        72,152             71,419
    Retained earnings. . . . . . . . . . . . . . . . . . . . . .       110,158            100,171
    Treasury stock, at cost: 425,055 shares in 2002
       and 287,440 shares in 2001. . . . . . . . . . . . . . . .        (8,634)            (5,346)
    Accumulated other comprehensive income . . . . . . . . . . .         5,845              4,534
                                                                  -------------  -----------------
          Total shareholders' equity . . . . . . . . . . . . . .       198,153            189,349
                                                                  -------------  -----------------
          Total liabilities and shareholders' equity . . . . . .  $  2,292,155   $      2,208,971
                                                                  =============  =================
<FN>

See  accompanying  notes  to  consolidated  financial  statements.
</TABLE>

PAGE 3


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

                           (Unaudited)                      Six months ended       Three months ended
(Dollars  in  thousands  except  weighted  average  number       June 30,                June 30,
 of  common  shares  and  per  share  information)               ---------                ---------

                                                              2002         2001       2002       2001
                                                           -----------  -----------  -------  -----------
<S>                                                        <C>          <C>          <C>      <C>
INTEREST INCOME:
Loans, including fees . . . . . . . . . . . . . . . . . .  $    42,780  $    45,187  $21,457  $    22,617
Lease financing . . . . . . . . . . . . . . . . . . . . .        4,289        4,937    2,107        2,433
Investment securities:
   Taxable. . . . . . . . . . . . . . . . . . . . . . . .       14,272       12,928    6,812        6,396
   Exempt from federal taxes. . . . . . . . . . . . . . .        5,482        5,623    2,846        2,804
Federal funds sold. . . . . . . . . . . . . . . . . . . .          222          234      183          211
Deposits in banks . . . . . . . . . . . . . . . . . . . .           96          137       47           76
                                                           -----------  -----------  -------  -----------
      Total interest income . . . . . . . . . . . . . . .       67,141       69,046   33,452       34,537
                                                           -----------  -----------  -------  -----------
INTEREST EXPENSE:
Savings deposits. . . . . . . . . . . . . . . . . . . . .        5,842        9,769    2,953        4,609
Time, under $100,000. . . . . . . . . . . . . . . . . . .       11,923       12,716    5,924        6,395
Time, $100,000 or greater . . . . . . . . . . . . . . . .        3,785        5,673    1,731        2,853
Borrowed funds. . . . . . . . . . . . . . . . . . . . . .        4,533        5,678    2,394        2,622
                                                           -----------  -----------  -------  -----------
      Total interest expense. . . . . . . . . . . . . . .       26,083       33,836   13,002       16,479
                                                           -----------  -----------  -------  -----------
      Net interest income . . . . . . . . . . . . . . . .       41,058       35,210   20,450       18,058
Provision for loan losses . . . . . . . . . . . . . . . .        2,445        1,610    1,094          962
                                                           -----------  -----------  -------  -----------
      Net interest income after provision for loan losses       38,613       33,600   19,356       17,096
                                                           -----------  -----------  -------  -----------
OTHER OPERATING INCOME:
Service charges . . . . . . . . . . . . . . . . . . . . .        3,148        2,475    1,627        1,448
Security gains, net . . . . . . . . . . . . . . . . . . .        2,474        1,783    1,243        1,063
Trust income. . . . . . . . . . . . . . . . . . . . . . .        1,596        1,715      851          887
Bank-owned life insurance income. . . . . . . . . . . . .        1,269        1,284      631          593
Other Income. . . . . . . . . . . . . . . . . . . . . . .        3,155        2,056    1,767        1,130
                                                           -----------  -----------  -------  -----------
      Total other operating income. . . . . . . . . . . .       11,642        9,313    6,119        5,121
                                                           -----------  -----------  -------  -----------
      Net interest income after provision for loan losses
         and other operating income . . . . . . . . . . .       50,255       42,913   25,475       22,217
                                                           -----------  -----------  -------  -----------
OTHER OPERATING EXPENSES:
Salaries, wages and employee benefits . . . . . . . . . .       15,081       12,905    7,396        6,605
Occupancy . . . . . . . . . . . . . . . . . . . . . . . .        2,058        1,665      821          763
Furniture and equipment . . . . . . . . . . . . . . . . .        2,607        2,466    1,319        1,258
Other expenses. . . . . . . . . . . . . . . . . . . . . .        9,447        8,669    5,178        4,614
                                                           -----------  -----------  -------  -----------
      Total other operating expenses. . . . . . . . . . .       29,193       25,705   14,714       13,240
                                                           -----------  -----------  -------  -----------
      Income before income tax expense. . . . . . . . . .       21,062       17,208   10,761        8,977
Income tax expense. . . . . . . . . . . . . . . . . . . .        4,871        3,556    2,383        1,856
                                                           -----------  -----------  -------  -----------
Net income. . . . . . . . . . . . . . . . . . . . . . . .  $    16,191  $    13,652  $ 8,378  $     7,121
                                                           ===========  ===========  =======  ===========

Weighted average number of common shares:
        Basic . . . . . . . . . . . . . . . . . . . . . .   18,246,138   18,345,238   18,221,567   18,279,600
                                                           ===========  ===========  ===========  ===========
        Diluted . . . . . . . . . . . . . . . . . . . . .   18,762,420   18,709,276   18,743,968   18,643,640
                                                           ===========  ===========  ===========  ===========
Net income per share information:
        Basic . . . . . . . . . . . . . . . . . . . . . .  $      0.89  $      0.74   $    0.46  $      0.39
                                                           ===========  ===========  ===========  ===========
        Diluted . . . . . . . . . . . . . . . . . . . . .  $      0.86  $      0.73   $    0.45  $      0.38
                                                           ===========  ===========  ===========  ===========
Cash dividends per share. . . . . . . . . . . . . . . . .  $      0.34  $      0.30   $    0.17  $      0.15
                                                           ===========  ===========  ===========  ===========
<FN>

*  Adjusted  for  100%  stock  dividend  effective  August  10,  2001.

See  accompanying  notes  to  consolidated  financial  statements.
</TABLE>

PAGE 4

<TABLE>
<CAPTION>

                                    CONSOLIDATED  STATEMENTS  OF  SHAREHOLDERS'  EQUITY
                                  HARLEYSVILLE  NATIONAL  CORPORATION  AND  SUBSIDIARIES

SIX  MONTHS  ENDED  JUNE  30,  2002



<S>                                    <C>             <C>                <C>                <C>         <C>
                                                                                                         Accumulated
                                       Common Stock                                                      Other
                                       --------------
(Dollars in thousands). . . . . . . .  Number of       Par                Additional         Retained    Comprehensive
                                       Shares          Value              Paid in Capital    Earnings    Income
                                       --------------  -----------------  -----------------  ----------  --------------
Balance, December 31, 2001. . . . . .         18,571   $         18,571   $         71,419   $ 100,171   $        4,534
Stock options . . . . . . . . . . . .             61                 61                727           -                -
Stock awards. . . . . . . . . . . . .              -                  -                  6           -                -
Net income. . . . . . . . . . . . . .              -                  -                  -      16,191                -
Other comprehensive income,
  net of reclassifications and tax. .              -                  -                  -           -            1,311
Purchases of Treasury stock . . . . .         (3,288)            (3,288)
Cash dividends. . . . . . . . . . . .              -                  -                  -      (6,204)               -
                                       --------------  -----------------  -----------------  ----------  --------------
Comprehensive income. . . . . . . . .
                                       ==============
Balance, June 30, 2002. . . . . . . .         18,632   $         18,632   $         72,152   $ 110,158   $        5,845
                                       ==============  =================  =================  ==========  ==============



FOR THE YEAR ENDED DECEMBER 31, 2001
                                                                                                          Accumulated
                                       Common Stock                                                       Other
                                       ------------
(Dollars in thousands). . . . . . . .  Number of        Par             Additional         Retained       Comprehensive
                                       Shares           Value           Paid in Capital    Earnings       Income
-------------------------------------  --------------  -----------------  -----------------  ----------  --------------
Balance, December 31, 2000. . . . . .          9,254   $          9,254   $         79,869   $  83,244   $        1,422
Stock options . . . . . . . . . . . .             44                 44                812           -                -
Stock dividends . . . . . . . . . . .          9,273              9,273             (9,273)          -
Stock awards. . . . . . . . . . . . .             11                 11
Net income. . . . . . . . . . . . . .              -                  -                  -      28,820                -
Other comprehensive income,
  net of reclassifications and tax. .              -                  -                  -           -            3,112
Purchases of Treasury stock . . . . .         (5,093)            (5,093)
Cash dividends. . . . . . . . . . . .              -                  -                  -     (11,893)               -
                                       --------------  -----------------  -----------------  ----------  --------------
Comprehensive income. . . . . . . . .
                                       ==============
Balance, December 31, 2001. . . . . .         18,571   $         18,571   $         71,419   $ 100,171   $        4,534
                                       ==============  =================  =================  ==========  ==============


<S>                                    <C>         <C>              <C>

SIX  MONTHS  ENDED  JUNE  30,  2002
(Dollars in thousands). . . . . . . .  Treasury                   Comprehensive
                                        Stock       Total            Income
                                       ----------  ---------------  -------
Balance, December 31, 2001. . . . . .  $  (5,346)  $      189,349
Stock options . . . . . . . . . . . .          -              788
Stock awards. . . . . . . . . . . . .          -                6
Net income. . . . . . . . . . . . . .          -           16,191   $16,191
Other comprehensive income,
  net of reclassifications and tax. .          -            1,311     1,311
Purchases of Treasury stock
Cash dividends. . . . . . . . . . . .          -           (6,204)
                                       ----------  ---------------
Comprehensive income                                                $17,502
                                                                    =======
Balance, June 30, 2002. . . . . . . .  $  (8,634)  $      198,153
                                       ==========  ===============



FOR THE YEAR ENDED DECEMBER 31, 2001
     Common Stock
-------------------------------------
(Dollars in thousands). . . . . . . .     Treasury                  Comprehensive
  Shares. . . . . . . . . . . . . . .      Stock           Total       Income
-------------------------------------  ----------  ---------------  -------------
Balance, December 31, 2000. . . . . .  $    (253)  $      173,536
Stock options . . . . . . . . . . . .          -              856
Stock dividends
Stock awards
Net income. . . . . . . . . . . . . .          -           28,820   $28,820
Other comprehensive income,
  net of reclassifications and tax. .          -            3,112     3,112
Purchases of Treasury stock
Cash dividends. . . . . . . . . . . .          -          (11,893)
                                       ----------  ---------------
Comprehensive income                                                $31,932
                                                                    =======
Balance, December 31, 2001. . . . . .  $  (5,346)  $      189,349
                                       ==========  ===============
</TABLE>

PAGE 5

<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:. . . . . . . . . . . . . . . . . . . . . . . . . . .              2002        2001
                                                                            -----------------  ----------
  Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $         16,191   $  13,652
  Adjustments to reconcile net income to
   net cash provided by operating activities:
    Provision for loan losses. . . . . . . . . . . . . . . . . . . . . . .             2,445       1,610
    Depreciation and amortization. . . . . . . . . . . . . . . . . . . . .             1,224       1,323
    Net amortization of investment
      securities discount/premiums . . . . . . . . . . . . . . . . . . . .             1,162         417
    Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . .              (705)      7,185
    Net realized security gains. . . . . . . . . . . . . . . . . . . . . .            (2,474)     (1,783)
    Increase in accrued income receivable. . . . . . . . . . . . . . . . .            (1,036)        (54)
    (Decrease) increase in accrued interest payable. . . . . . . . . . . .            (4,676)      2,927
    Decrease (increase) in other assets. . . . . . . . . . . . . . . . . .                18        (141)
    Net increase (decrease) in other liabilities . . . . . . . . . . . . .             2,858      (2,978)
    Decrease (increase) in deferred cost, net. . . . . . . . . . . . . . .               499        (494)
    Write-down of other real estate owned. . . . . . . . . . . . . . . . .                10           -
    (Increase) decrease in intangible assets . . . . . . . . . . . . . . .              (415)        193
                                                                            -----------------  ----------
       Net cash provided by operating activities . . . . . . . . . . . . .  $         15,101   $  21,857
                                                                            ----------------  ----------
INVESTING ACTIVITIES:
  Proceeds from sales of investment securities available for sale. . . . .  $        254,204   $ 164,393
  Proceeds, maturity or calls of investment securities held to maturity. .             3,227       1,810
  Proceeds, maturity or calls of investment securities available for sale.           111,080      46,075
  Purchases of investment securities available for sale. . . . . . . . . .          (420,848)   (245,149)
  Net increase in loans. . . . . . . . . . . . . . . . . . . . . . . . . .           (31,929)    (68,306)
  Net increase in premises and equipment . . . . . . . . . . . . . . . . .              (830)       (883)
  Purchase of bank-owned life insurance. . . . . . . . . . . . . . . . . .            (1,269)     (1,284)
  Proceeds from sales of other real estate . . . . . . . . . . . . . . . .               547         725
                                                                            -----------------  ----------
       Net cash used in investing activities . . . . . . . . . . . . . . .  $        (85,818)  $(102,619)
                                                                            -----------------  ----------
FINANCING ACTIVITIES:
  Net increase in deposits . . . . . . . . . . . . . . . . . . . . . . . .  $         41,849   $ 113,801
  Decrease in U.S. Treasury demand notes . . . . . . . . . . . . . . . . .              (662)        226
  Decrease in federal funds purchased. . . . . . . . . . . . . . . . . . .                 -     (44,500)
  Increase in FHLB borrowings. . . . . . . . . . . . . . . . . . . . . . .            35,000      25,000
  Increase in securities sold under agreement. . . . . . . . . . . . . . .                11       5,324
  Proceeds from issuance of guaranteed preferred beneficial interest
    in Corporation's subordinated debentures . . . . . . . . . . . . . . .                 -       5,000
  Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            (6,204)     (5,500)
  Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . .            (3,288)     (4,551)
  Stock options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               794         109
                                                                            -----------------  ----------
    Net cash provided by financing activities. . . . . . . . . . . . . . .  $         67,500   $  94,909
                                                                            -----------------  ----------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . .  $         (3,217)  $  14,147
Cash and cash equivalents at beginning of period . . . . . . . . . . . . .            82,624      55,525
                                                                            -----------------  ----------
Cash and cash equivalents at end of the period . . . . . . . . . . . . . .  $         79,407   $  69,672
                                                                            ================  ==========

  Cash paid during the period for:
     Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $         30,758   $  30,909
                                                                            =================  ==========
     Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $         5,000   $   2,500
                                                                            =================  ==========
   Supplemental disclosure of noncash investing and financing activities:
       Transfer of assets from loans to other real estate owned. . . . . .  $            606   $     753
                                                                            =================  ==========
<FN>
See  accompanying  notes  to  consolidated  financial  statements.
</TABLE>

PAGE 6
               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, 2002, the results of its operations for six
and  three month periods ended June 30, 2002 and 2001 and the cash flows for the
six month periods ended June 30, 2002 and 2001.  This quarterly report refers to
the  corporation's  subsidiary  banks,  collectively as "the banks."  We suggest
that  these  unaudited  consolidated financial statements be read in conjunction
with  the  audited  consolidated financial statements of the corporation and the
notes  thereto  set  forth  in  the  corporation's  2001  annual  report.

The  results  of  operations  for the six and three month periods ended June 30,
2002  and  2001 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  has adopted SFAS No. 130, "Reporting Comprehensive
Income"  which  establishes  standards  to  provide  prominent  disclosure  of
comprehensive  income  items.  Comprehensive income is the change in equity of a
business  enterprise  during  a  period  from  transactions and other events and
circumstances  from  non-owner  sources.  Other comprehensive income consists of
net  unrealized  gains (losses) on investment securities available for sale. The
adoption  of  SFAS  No.  130 did not have a material impact on the Corporation's
financial  position  or  results  of  operation.

      The  components  of  other  comprehensive  income  are  as  follows:
<TABLE>
<CAPTION>
Comprehensive  Income
---------------------
<S>                                 <C>          <C>           <C>
(Dollars in thousands) . . . . . .  BEFORE TAX   TAX           NET OF TAX
June 30, 2002. . . . . . . . . . .  AMOUNT       EXPENSE       AMOUNT
----------------------------------  -----------  ------------  -----------
Unrealized losses on securities:
   Unrealized holding gains
       arising during period . . .  $     4,491  $    (1,572)  $     2,919
   Less reclassification
       adjustment for gains
       realized in net income. . .        2,474         (866)        1,608
                                    -----------  ------------  -----------
  Other comprehensive income, net.  $     2,017  $      (706)  $     1,311
                                    ===========  ============  ===========

                                    BEFORE TAX   TAX          NET OF TAX
June 30, 2001. . . . . . . . . . .  AMOUNT       EXPENSE       AMOUNT
----------------------------------  -----------  ------------  -----------
Unrealized gains on securities:
   Unrealized holding gains
       arising during period . . .  $     5,947  $    (2,082)  $     3,865
   Less reclassification
       adjustment for gains
       realized in net income. . .        1,783         (624)        1,159
                                    -----------  ------------  -----------
  Other comprehensive income, net.  $     4,164  $    (1,458)  $     2,706
                                    ===========  ============  ===========
</TABLE>

PAGE 7

NOTE  4  -  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 did not have a material impact on the Corporation's
financial  position,  or  results  of  operations.

NOTE  5  -  On July 6, 2001, the Securities and Exchange Commission (SEC) issued
Staff  Accounting  Bulletin  (SAB)  No.  102,  Selected  Loan  Loss  Allowance
Methodology  and  Documentation  Issues.  SAB  No.  102 provides guidance on the
development,  documentation,  and  application  of  a systematic methodology for
determining  allowances  for  loans  and  leases in accordance with US GAAP. The
adoption  of  SAB  No.  102  did not have a material impact on the Corporation's
financial  position,  or  results  of  operations.

NOTE  6- On January 1, 2002, the Corporation adopted Statement of Position (SOP)
01-6,  Accounting  by Certain Entities That Lend to or Finance the Activities of
Others, which reconciles and conforms existing differences in the accounting and
financial reporting guidance in the AICPA Audit and Accounting Guides, Banks and
Savings  Institutions, Audits of Credit Unions, and Audits of Finance Companies.
It also carries forward accounting guidance for practices deemed to be unique to
certain  financial  institutions.  The adoption of this SOP had no impact on the
Corporation's  financial  position  or  results  of  operations.

NOTE 7 - On February 22, 2001, the Corporation issued $5,000,000 of 10.2% junior
subordinate  deferrable  interest  debentures  (the  debentures) to Harleysville
Statutory  Trust  1  (the  Trust),  a  Connecticut  business trust, in which the
Corporation owns all of the common equity.  The debentures are the sole asset of
the  Trust.  The  Trust  issued $5,000,000 of preferred securities to investors.
The  Corporation's obligations under the debentures and related documents, taken
together,  constitute  a  full and unconditional guarantee by the Corporation of
the  Trust's  obligations  under  the  preferred  securities.  The  preferred
securities  must  be  redeemed  upon  maturity  of the subordinate debentures on
February  22,  2031.

NOTE 8 - 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  9  -  On  July  12,  2001, the Board of Directors of Harleysville National
Corporation  approved a 2-for-1 stock split of its Common Stock, effected in the
form  of  a  100%  stock  dividend,  payable August 10, 2001, to shareholders of
record  July  27,  2001.  All prior period amounts were restated to reflect this
100%  stock  dividend.

PAGE 8
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,  HNC  Financial  Company  and HNC Reinsurance Company.  The corporation's
consolidated  financial  condition  and  results  of  operations  consist almost
entirely  of  the Banks' financial condition and results of operations.  Current
performance does not guarantee, and may not be indicative of similar performance
in  the  future.  These  are  unaudited  financial  statements and, as such, are
subject  to  year-end  audit  review.

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

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

*..operating, legal and regulatory risks;

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

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

OVERVIEW
--------
       The  Corporation  recorded  increases  in  second  quarter  2002  and
year-to-date 2002 net income over comparable periods in 2001 of 17.7% and 18.6%,
respectively.  The improved quarter and year-to-date earnings were the result of
a  rise  in  earning assets, an increase in the net interest margin and a higher
level  of other income.  The Corporation also experienced an improvement in loan
quality  during  the  first  half  of  2002.

       Second  quarter  2002 diluted earnings per share of $.45, increased 18.4%
over the second quarter 2001 diluted earnings per share of $.38.  Second quarter
basic  earnings  per  share in 2002 of $.46 exceed the second quarter 2001 basic
earnings  per  share  of  $.39  by  17.9%.  Second  quarter  2002  net income of
$8,378,000  increased  17.7%  over  the  second  quarter  2001  net  income  of
$7,121,000.  Net  income  for  the  first six months of 2002 was $16,191,000, an
18.6%  increase over the $13,652,000 for the comparable period in 2001.  Diluted
earnings  per share of $.86 were up 17.8% from the $.73 in 2001.  Basic earnings
per  share  of  $.89 for the first six months of 2002 were 20.3% higher than the
$.74  year  to  date June 30, 2001.  The Corporation's consolidated total assets
were  $2,292,155,000  at  June  30, 2002, 11.5% above the June 30, 2001 level of
$2,055,225,000.

PAGE 9

      The  rise  in  net  income  during  2002,  compared  to  2001 is primarily
attributed  to  higher net interest income levels.  This increase was the result
of  an 11.4% rise in average earning asset levels and an 11 basis point increase
in  the  net interest margin.  Other income grew 25.0% during this period on the
strength of higher service charges, security gains and other miscellaneous fees.
Partially  offsetting  these increases were higher provision for loan losses and
other  operating  expenses.

      For  the  six months ended June 30, 2002, the annualized return on average
shareholder's equity and the annualized return on average assets were 16.81% and
1.47%,  respectively.  For  the  same  period  in 2001, the annualized return on
average  shareholder's  equity  was  15.45% and the annualized return on average
assets  was 1.38%. Excluding unrealized gains and losses on securities available
for sale, the annualized return on average realized shareholder's equity for the
first  half  of  2002  and  2001  were  17.08%  and  15.71%,  respectively.
 For  the  three  months  ended  June 30, 2002, the annualized return on average
shareholders' equity and the annualized return on average assets were 17.38% and
1.51%,  respectively.  For  the  same  period  in 2001, the annualized return on
average  realized  shareholders'  equity was 16.00% and the annualized return on
average  assets  was  1.42%. Excluding unrealized gains and losses on securities
available  for  sale,  the  annualized  return on average realized shareholders
equity  for  the  second  quarter  of  2002  and  2001  were  17.54% and 16.30%,
respectively.

       The  quality  of  the  loan  portfolios  is a primary focus of the banks.
Nonperforming assets (nonaccruing loans and net assets in foreclosure) were .24%
of total assets at June 30, 2002, compared to .32% at December 31, 2001 and .29%
at  June 30, 2001.  As of June 30, 2002, aggregate loans past due 90 or more and
still  accruing  interest were $1,005,000 compared to $1,926,000 at December 31,
2001  and  $475,0000  at  June  30,  2001.

       Net  income  is  affected by five major elements: net interest income, or
the  difference  between  interest  income  earned  on loans and investments and
interest  expense  paid  on  deposits and borrowed funds; the provision for loan
losses, or the amount added to the allowance for loan losses to provide reserves
for  future  losses on loans; other operating income, which is made up primarily
of  certain  fees,  trust  income and gains and losses from sales of securities;
other operating expenses, which consist primarily of salaries, employee benefits
and  other  operating  expenses; and 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 2002 of $41,058,000 was
$5,848,000,  or 16.6% higher than the same period in 2001 net interest income of
$35,210,000.  As  illustrated  in  the  table  below,  this rise in net interest
income  was the result of higher earning asset volumes and a higher net interest
margin.  The  Corporation has benefited from the lower interest rate environment
experienced  during  the  last year.  Interest income was actually lower in 2002
compared  to  2001, as a result of the impact of lower interest rates, partially
offset  by  the  increase  in  interest  income  related to higher earning asset
volumes.  The  lower  net  interest  income  was  more  than offset by the lower
interest  expense related to the lower interest rates paid on deposits and other
borrowings  during  2002.  The  second  quarter  of  2002 net interest income of
$20,450,000  increased  $2,392,000,  or  13.2%, over the second quarter of 2001.

       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, 2002
over  June  30, 2001 by  their  rate  and  volume  components.

PAGE 10
<TABLE>
<CAPTION>

                                              Six Months Ended                    Three Months Ended
                                               June 30, 2002                        June 30, 2002
                                                 Over/Under                             Over/Under
                                               June 30, 2001                        June 30, 2001

                                                Total       Caused by:             Total     Caused by:
                                                           ----------                        ----------
                                              Variance     Rate     Volume    Variance     Rate    Volume
                                             ----------  ---------  -------  ----------  --------  -------
<S>                                          <C>         <C>        <C>      <C>         <C>       <C>
Interest Income:
  Securities *. . . . . . . . . . . . . . .  $     851   $ (2,294)  $ 3,145  $     337   $  (993)  $ 1,330
  Money market instruments. . . . . . . . .        (53)      (224)      171        (57)     (173)      116
  Loans * . . . . . . . . . . . . . . . . .     (3,057)    (6,461)    3,404     (1,483)   (3,111)    1,628
                                             ----------  ---------  -------  ----------  --------  -------
     Total. . . . . . . . . . . . . . . . .     (2,259)    (8,979)    6,720     (1,203)   (4,277)    3,074
                                             ----------  ---------  -------  ----------  --------  -------

Interest Expense:
  Savings deposits. . . . . . . . . . . . .     (3,927)    (4,617)      690     (1,656)   (1,999)      343
  Time deposits and certificates of deposit     (2,681)    (4,351)    1,670     (1,593)   (2,238)      645
  Other borrowings. . . . . . . . . . . . .     (1,145)    (1,417)      272       (228)     (471)      243
                                             ----------  ---------  -------
      Total . . . . . . . . . . . . . . . .     (7,753)   (10,385)    2,632     (3,477)   (4,708)    1,231
                                             ----------  ---------  -------  ----------  --------  -------

Net Interest Income . . . . . . . . . . . .  $   5,494   $  1,406   $ 4,088  $   2,274   $   431   $ 1,843
                                             ==========  =========  =======  ==========  ========  =======
    *Tax Equivalent Basis
</TABLE>

          Taxable-equivalent  net  interest income was $44,272,000 for the first
six months of 2002, compared to $38,778,000 for the same period in 2001, a 14.2%
or $5,494,000 increase.  This rise in taxable-equivalent net interest income was
primarily  due  to  a  $7,753,000  reduction  in  interest expense, which was in
partially  offset  by  a  decrease  in  interest income, related to rate.  Total
taxable-equivalent interest income decreased $2,259,000, primarily the result of
lower  earning  asset yields, partially offset by the higher volumes of earnings
assets.  Average  year-to-date  securities,  loans  and  money market instrument
volumes grew $100,333,000, $94,965,000 and $16,678,000, respectively at June 30,
2002,  compared  to the same period in 2001.  The yield earned on earning assets
decreased  102  basis points from 7.80% in the first six months of 2001 to 6.78%
during  the  same  period  in  2002.

          The  $7,753,000  reduction  in  interest  expense  is  the result of a
$10,385,000  decrease  related  to  lower  rates, partially offset by $2,632,000
related to higher deposit and other borrowing volumes.  The average rate paid on
deposits  and  other borrowings of 3.03% during the first six months of 2002 was
137  basis points lower than the 4.40% rate paid during the same period in 2001.
The  average balance of deposits and other borrowings grew $181,280,000 or 11.8%
in  the  first  half  of  2002,  compared  to the first six months of 2001.  The
average  year-to-date  growth  in  time  deposits  and  other  borrowings  were
$75,332,000  and  $14,168,000,  respectively.  The  lower rate savings deposits,
which  include  interest  bearing  checking accounts, savings accounts and money
market  accounts,  were  $91,780,000  or  13.4% higher than in the first half of
2002,  compared  to  the  same  period in 2001. Other borrowings include federal
funds  purchased,  FHLB  borrowings,  securities  sold  under  agreements  to
repurchase,    U.  S.  Treasury  demand  notes and junior subordinate deferrable
interest  debentures.

         The taxable-equivalent net interest income during the second quarter of
2002  of  $22,126,000  was $2,274,000 or 11.5% higher than the second quarter of
2001  net interest income.   The $1,203,000 decrease in interest income was more
than  offset by a $3,477,000 reduction in interest expense.  The yield earned on
average  earning  assets during the second quarter of 2002 of 6.70% was 97 basis
points  lower  than the 7.67% earned during the second quarter of 2001.  Average
earning  assets  in the second quarter of 2002 were $201,026,000 or 10.6% higher
than the second quarter of 2001.  Loans, securities and money market instruments
grew $91,514,000, $85,169,000 and $24,343,000 during this period.  The rate paid
on  average  deposits and other borrowings of 2.99% during the second quarter of

PAGE 11

2002  was  123  basis  points  lower  than the 4.22% rate paid during the second
quarter  of  2001.  Average  deposits  and other borrowings grew $175,740,000 or
11.2%  during  this  period.  The  largest  gains were a $91,512,000 increase in
savings  deposits  and  a  $59,604,000  rise  in  time  deposits.

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

           The  net interest margin of 4.27% for the six-month period ended June
30,  2002,  increased 11 basis points from the 4.16% net interest margin for the
first six months of 2001.  The higher net interest margin experienced in 2002 is
related  to  the  lower  funding costs and the increase in earning asset levels.
During  the  first six months of 2002 the rate paid on interest-bearing deposits
and  other  borrowings decreased 137 basis points, compared to a 102 basis point
drop in the yield on earning assets.  The rate paid on deposits was 3.03% during
the  first  half  of  2002, compared to 4.40% during the first half of 2001. The
yield  on earning assets of 6.78% earned during the first six months of 2002 was
lower than the 7.80% earned during the first six months of 2001. The decrease in
the  yield  earned  and rate paid are due to the lower interest rate environment
experienced  during the first six months of 2002, compared to the same period in
2001.   The  second  quarter  of  2002  net interest margin of 4.22% was 3 basis
points  higher  than  the  second  quarter  of 2001 net interest margin of 4.19%

INTEREST  RATE  SENSITIVITY  ANALYSIS
-------------------------------------

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

 The  Corporation  uses  three  principal reports to measure interest rate risk:
asset/liability  simulation  reports;  gap  analysis  reports;  and net interest
margin  reports.  Management  also  simulates  possible  economic conditions and
interest  rate scenarios in order to quantify the impact on net interest income.
The  effect  that changing interest rates have on the Corporation's net interest
income  is  simulated  by  increasing  and  decreasing  interest  rates.  This
simulation  is  known  as rate shocks.  The June 30, 2002 report below forecasts
changes  in  the Corporation's market value of equity under alternative interest
rate  environments.  The  market  value  of equity is defined as the net present
value  of  the  Corporation's  existing  assets  and  liabilities.

<TABLE>
<CAPTION>

(Dollars  in  thousands)

                    CHANGE IN    ASSET/LIABILITY
                   MARKET VALUE    MARKET VALUE    PERCENTAGE      APPROVED
                    OF EQUITY       OF EQUITY        CHANGE     PERCENT CHANGE
                   ------------  ----------------  -----------  ---------------
<S>                <C>           <C>               <C>          <C>
+300 Basis Points       222,078          (78,704)      -26.17%          +/- 45%
+200 Basis Points       261,014          (39,768)      -13.22%          +/- 30%
+100 Basis Points       291,008           (9,774)       -3.25%          +/- 15%
Flat Rate . . . .       300,782                -         0.00%
-100 Basis Points       286,855          (13,927)       -4.63%          +/- 15%
-200 Basis Points       213,165          (87,617)      -29.13%          +/- 30%
-300 Basis Points       229,912          (70,870)      -23.56%          +/- 45%
</TABLE>

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

PAGE 12

with  appropriate  maturities  or  repricing  attributes, or attract deposits or
obtain  borrowings  with  desired  maturities.

PROVISION  FOR  LOAN  LOSSES
----------------------------
The Bank uses 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 Bank's
allowance  for  loan losses. The OCC may require the Bank 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  Bank's  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 Bank's 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 Bank's
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  represents 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 Bank analyzes 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,  by  adjusting  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.

PAGE 13

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

For  the  first six months of 2002 the provision for loan losses was $2,445,000,
compared  to  $1,610,000  for the same period in 2002. Net loans charged off was
$1,148,000  for  the  six months ended June 30, 2002, compared to $2,112,000 for
the  six  months  ended June 30, 2001.  The decrease in net charged off loans is
attributed  to  the  increase in the recoveries of charged off indirect consumer
loans  and  a  reduction in leases charged off .  The ratio of the allowance for
loan  losses to nonperforming assets for June 30, 2002 of 303.9% was higher than
the  December  31,  2001  and  the  June  30,  2001 ratios of 223.4% and 249.4%,
respectively.

ALLOWANCE  FOR  LOAN  LOSSES

       A  summary  of  the  allowance  for  loan  losses  is  as  follows:
<TABLE>
<CAPTION>
   (Dollars in thousands)                    JUNE 30,
                                              -------
                                         2002         2001
                                      -----------  -----------
Average loans                         $1,328,070   $1,233,105
                                      -----------  -----------
<S>                                   <C>          <C>
Allowance, beginning of period . . .  $   15,558   $   15,210
                                      -----------  -----------
Loans charged off:
       Commercial and industrial . .          24           40
       Consumer. . . . . . . . . . .       1,441        1,388
       Real estate . . . . . . . . .         276          328
       Lease financing . . . . . . .         185          687
                                      -----------  -----------
             Total loans charged off       1,926        2,443
                                      -----------  -----------
Recoveries:
       Commercial and industrial . .          70            3
       Consumer. . . . . . . . . . .         508          202
       Real estate . . . . . . . . .         146           83
       Lease financing . . . . . . .          54           43
                                      -----------  -----------
             Total recoveries. . . .         778          331
                                      -----------  -----------
Net loans charged off. . . . . . . .       1,148        2,112
                                      -----------  -----------
Provision for loan losses. . . . . .       2,445        1,610
                                      -----------  -----------
Allowance, end of period . . . . . .  $   16,855   $   14,708
                                      ===========  ===========
Ratio of net charge offs to
        average loans outstanding. .        0.09%        0.17%
                                      ===========  ===========
</TABLE>
PAGE 14

<TABLE>
<CAPTION>

 ANALYSIS OF CREDIT RISK          JUNE 30,     DECEMBER 31,     JUNE 30,
 -----------------------
                                   2002           2001           2001
                                   ----           ----           ----
<S>                              <C>          <C>          <C>
Nonperforming Assets. . . . . .  $5,546,000   $6,963,000   $5,897,000
90 + days past due. . . . . . .  $1,005,000   $1,926,000   $  475,000
Allowance for loan losses to
   nonperforming assets . . . .       303.9%       223.4%       249.4%
Nonperforming assets to total
   loans and net assets acquired
   in foreclosure . . . . . . .        0.41%        0.53%        0.46%
Allowance for loan losses
   to total loans . . . . . . .        1.25%        1.18%        1.15%
Nonperforming assets
   to total assets. . . . . . .        0.24%        0.32%        0.29%
</TABLE>

The following table sets forth an allocation of the allowance for loan losses by
loan  category:
<TABLE>
<CAPTION>
                              June 30, 2002
                              -------------
                                     Percent
                            Amount   of Loans
                           --------  ---------
<S>                        <C>       <C>
Commercial and industrial  $  5,523        33%
Consumer loans. . . . . .     7,095        42%
Real estate . . . . . . .     2,752        16%
Lease financing . . . . .     1,485         9%
                           --------  ---------
  Total . . . . . . . . .  $ 16,855       100%
                           ========  =========
</TABLE>

Nonperforming  assets  (nonaccruing  loans  and  net assets in foreclosure) were
0.41%  of  total  loans and net assets acquired in foreclosure at June 30, 2002,
compared to 0.53% at December 31, 2001 and 0.46% at June 30, 2001.  The ratio of
the allowance for loan losses to loans at June 30, 2002 of 1.25% was higher than
the  December  31,  2001  ratio  of  1.18% and the June 30, 2001 ratio of 1.15%.

Nonaccruing  loans at June 30, 2002 of $4,888,000, decreased $1,466,000 from the
December  31, 2001 level of $6,354,000, and decreased $693,000 from the June 30,
2001  level  of  $5,581,000.The  decrease in nonaccruing loans at June 30, 2002,
compared to both December 31, 2001 and June 30, 2001 was primarily the result of
a  decrease  in  commercial  real  estate  nonaccruing  loans.

Net  assets  in  foreclosure  were  $658,000 as of June 30, 2002, an increase of
$49,000  from  the  December 31, 2001 balance of $609,000.  During the first six
months  of  2002,  transfers  from loans to assets in foreclosure were $606,000,
payments on foreclosed properties were $547,000 and the write-downs of assets in
foreclosure were $10,000 during this period.  The loans transferred to assets in
foreclosure included vehicle leases of $336,000, equipment leases of $205,000, a
$15,000  commercial  loan and a $50,000 mortgage .  The balance of net assets in
foreclosure at June 30, 2001 was $316,000.  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.

PAGE 15

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,  2002, loans past due 90 days or more and still
accruing interest were $1,005,000 compared to $1,926,000 as of December 31, 2001
and  $475,000 as of June 30, 2001.The decrease in loans past due 90 days at June
30,  2002,  compared December 31, 2001 was primarily the result of a decrease in
commercial  real  estate  loans  past  due  90  days.

The  following  information  concerns  impaired  loans:
<TABLE>
<CAPTION>
                                                   June 30, 2002   Dec. 31, 2001   June 30, 2001
                                                   --------------  --------------  --------------
<S>                                                <C>             <C>             <C>
 Impaired Loans . . . . . . . . . . . . . . . . .  $    2,697,000  $    3,721,000  $    3,714,000
                                                   ==============  ==============  ==============

 Average year-to-date impaired loans. . . . . . .  $    3,128,000  $    3,505,000  $    3,315,000
                                                   ==============  ==============  ==============

 Impaired loans with specific loss allowances . .  $    2,697,000  $    3,721,000  $    3,714,000
                                                   ==============  ==============  ==============

 Loss allowances reserved on impaired loans . . .  $      290,000  $      429,000  $      411,000
                                                   ==============  ==============  ==============

 Year-to-date income recognized on impaired loans  $       52,000  $       78,000  $       55,000
                                                   ==============  ==============  ==============
</TABLE>

The  banks'  policy  for  interest  income recognition on nonaccrual loans is to
recognize  income  under  the cash basis when the loans are both current and the
collateral  on the loan is sufficient to cover the outstanding obligation to the
banks.  The  banks  will  not  recognize  income  if these factors do not exist.
<TABLE>
<CAPTION>

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

                                            2002      2001                 2002    2001
                                     -------------  ------                 ------  ------
                                        (Dollars in thousands)        (Dollars in thousands)
<S>                                  <C>            <C>                   <C>     <C>
Service charges . . . . . . . . . .  $       3,148  $2,475                $1,627  $1,448
Security gains, net . . . . . . . .          2,474   1,783                 1,243   1,063
Trust income. . . . . . . . . . . .          1,596   1,715                   851     887
Bank-owned life insurance income. .          1,269   1,284                   631     593
Other income. . . . . . . . . . . .          3,155   2,056                 1,767   1,130
                                      ------------  ------                ------  ------
      Total other operating income.  $      11,642  $9,313                $6,119  $5,121
                                     =============  ======                ======  ======
</TABLE>

The  six month ending June 30, 2002 other operating income increased $2,329,000,
or  25.0%,  from  $9,313,000  for  the  same  period in 2001. This rise in other
operating income is the result of increases in service charges, other income and
security  gains  of $673,000, $1,099,000 and $691,000, respectively.  Offsetting
these gains were reductions in bank-owned life insurance (BOLI) income and trust
income.  The  rise  in  other  operating  income was 21.8%, not inclusive of the
securities  gains.  The  second  quarter  other  operating  income  grew  19.5%,
compared  to  the  second  quarter  2001.

Service charges grew $673,000 or 27.2% in the first six months of 2002, compared
to  the  same  period  in  2001.  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 half of 2002 was $534,000, compared to the same period in
2001.  The  remaining  increase  is related to the growth in average transaction
deposits  and  enhanced fee structures.  The second quarter 2002 service charges

PAGE 16

grew  $179,000  or  12.4%  compared to the same period in 2001.  This growth was
primarily  the  result  of  higher  overdraft  fees.

The  Corporation recorded net security gains on the sale of securities available
for  sale of $2,474,000 in the first half of 2002, compared to $1,783,000 during
the  first  half of 2001.  Second quarter 2002 net security gains on the sale of
securities  were  $1,243,000,  compared  to  $1,063,000 in the second quarter of
2001.  The Corporation sold the investment securities available for sale to fund
the  purchase  of other securities in an effort to enhance the overall return of
the  portfolio  and  to  reduce  the  risk  within  different  interest  rate
environments.

Income  from  the  Investment  Management  and Trust Services Division decreased
$119,000  or  6.9%  in  the  first six months of 2002 and $36,000 or 4.1% in the
second  quarter,  compared to the same periods in 2001. These decreases were the
result  of  lower  estate  fees  earned  during  this  period and the lower fees
associated  with  the  lower  market  value  of  trust  assets.

The  Corporation's  bank owned life insurance (BOLI) income decreased $15,000 or
1.2%  during  the first six months of 2002, compared to the same period in 2001.
This  lower  income  level was related to the lower rate environment experienced
during  2002.  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 second quarter 2002 BOLI
income  was  6.4%  higher  than  the  second  quarter  of  2001.

Other  income  for  the  first six months of 2002 increased $1,099,000 or 53.5%,
compared  to  the  same  period  in  2001.  The second quarter other income grew
$637,000  or  56.4%  over  the  second  quarter  of 2001.  Contributing to these
increases were higher fees earned on the sale of alternative investment products
including  mutual funds and annuities, gains on the sale of residential mortgage
loans,  loan  servicing  fees  and  fees generated from HNC Reinsurance Company.

<TABLE>
<CAPTION>

OTHER  OPERATING  EXPENSES
--------------------------
                                     Six Months Ended June 30,     Three Months Ended June 30,
                                     ------------------------      --------------------------
                                               2002     2001               2002     2001
                                       -------------  -------            -------  -------
(Dollars in thousands)                 (Dollars in thousands)
<S>                                    <C>            <C>                <C>      <C>
Salaries. . . . . . . . . . . . . . .  $      11,844  $10,712            $ 5,898  $ 5,498
Employee benefits . . . . . . . . . .          3,237    2,193              1,498    1,107
Occupancy . . . . . . . . . . . . . .          2,058    1,665                821      763
Furniture and equipment . . . . . . .          2,607    2,466              1,319    1,258
Other expenses. . . . . . . . . . . .          9,447    8,669              5,178    4,614
                                        ------------  -------            -------  -------
      Total other operating expenses.  $      29,193  $25,705            $14,714  $13,240
                                       =============  =======            =======  =======
</TABLE>

The  first  six months of 2002 other operating expenses of $29,193,000 increased
$3,488,000  or  13.6%  from $25,705,000 for the same period in 2001.  The second
quarter  2002  other operating expenses grew $1,474,000 or 11.1% compared to the
second  quarter  of 2001.  The rise in operating expenses was the result of both
employee  benefit  costs  and  a  one-time occupancy expense related to a closed
branch.

Employee  salaries  increased $1,132,000 or 10.7% from $10,712,000 for the first
six  months  of  2001  to  $11,844,000  for  the  same period in 2002.  Employee
salaries  increased $400,000 or 7.3% during the second quarter of 2002, compared
to  the  second  quarter  of  2001.  These  increases  reflects  cost  of living
increases,  merit  increases,  salaries  related  to  the  rise  in  the sale of
alternative  investment products and additional staff necessitated by the growth
of  the Banks.  Employee benefits of $3,237,000 expensed in the first six months
of  2002,  were  $1,044,000  or  47.6%  higher  than  the $2,193,000 of employee
benefits  expensed during the same period in 2001.  Second quarter 2002 employee
benefits of $1,498,000 were 35.3% higher than the second quarter 2001 expense of

PAGE 17

$1,107,000.  The  increase  in employee benefits is the result of higher pension
expenses and employee medical insurance coverage.  The higher pension expense is
related to the addition of new employees to the plan and the overall performance
of  the  plan.

Net occupancy expense increased $393,000, or 23.6%, from $1,665,000 in the first
six months of 2001 to $2,058,000 in the first six months of 2002.  This increase
was  primarily  due to a $365,000 expense related to a branch closure during the
first  quarter  of 2002.  Net occupancy expenses grew $58,000 or 7.6% during the
second  quarter  of 2002, compared to the second quarter of 2001.  Furniture and
equipment  expense  increased  $141,000  or 5.7%, during the first six months of
2002,  compared  to the same period in 2001.  The increase in the second quarter
of  2002  was 4.8% over the second quarter of 2001.   These increases are due to
higher  equipment  maintenance  and  rental  expenses, partially offset by lower
depreciation  cost.

Other  expenses  increased  $778,000,  or 9.0%, from $8,669,000 in the first six
months  of  2001,  compared  to $9,447,000 in other expenses recorded during the
same  period  in 2002.   The increase during the second quarter of 2002 compared
to  the  second  quarter  in  2001  was  $564,000  or  12.2%.  This increase was
primarily  due  to higher expenses related to costs associated with the addition
of  employees  to  the  supplemental  executive  retirement  plan and a $437,000
year-to-date  rise  in  the  off-lease  vehicles  residual reserve expense.  The
Corporation reviews the off-lease vehicles residual reserve on a quarterly basis
and  anticipates a lower residual reserve expenses during the last half of 2002,
compared to the first half of 2002 and the last two quarters of 2001.  The total
2002  projected  residual  reserve  expense  should be lower than the total 2001
actual  residual  reserve  expense  of  $3,705,000.

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  loans.

BALANCE  SHEET  ANALYSIS
------------------------
Total assets increased $83,184,000, or 3.8%, from $2,208,971,000 at December 31,
2001  to  $2,292,155,000 at June 30, 2002.  This increase was the result of both
higher investment securities available for sale and loans.  Partially offsetting
these  increases was a decrease in fed funds sold. Total assets at June 30, 2002
grew 11.5%, compared to June 30, 2001.  This gain was primarily due to increases
in  both  investment  securities  available  for  sale  and  loans.

The  balance  of  securities available for sale at June 30, 2001 of $765,207,000
increased $58,836,000 compared to the December 31, 2001 balance of $706,371,000.
During  the first two quarters of 2002, $254,204,000 of securities available for
sale  were  sold  which  generated  a pretax gain of $2,474,000.  In comparison,
$164,393,000  securities  available  for sale were sold during the first half of
2001  to  generate a pretax gain of $1,783,000. 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
associated  within  different  interest  rate  environments.  The  balance  of
investment  securities  held  to  maturity decreased $3,174,000 during the first
half  of  2002.  Total loans grew $29,679,000 or 2.3% during the two quarters of
2002.  This  growth  was primarily due to increases in both commercial loans and
home equity loans, partially offset by lower indirect auto financing and vehicle
leases.  Total  loans  grew  5.3%  at  June 30, 2002, compared to June 30, 2001.

Total  deposits  grew  $41,849,000,  or 2.4% from $1,746,862,000 at December 31,
2001  to  $1,788,711,000  at  June  30,  2002.  This  growth  was  due to higher
noninterest-bearing  deposits,  interest-bearing  checking  accounts,  savings
accounts  and  time  deposits  under  $100,000.  Offsetting these increases were
lower  money  market  accounts  and time deposits over $100,000. The lower money
market  volume  is  due  to one large account deposited during December 2001 and
withdrawn  during  January of 2002. The lower time deposits over $100,000 is due
to  our  low  demand  for short-term funding at the end of the second quarter of
2002.  The  June 30, 2002 total deposit balance grew 11.6%, compared to the June
30,  2001  total  deposits.

PAGE 18

Time  deposits  under  $100,000,  savings  accounts,  interest  bearing checking
accounts  and  non-interest  bearing  deposits  grew  $36,548,000,  $22,442,000,
$16,299,000 and $1,769,000, respectively.  Time deposits over $100,000 and money
market  accounts  decreased  $26,110,000  and  $9,099,000,  respectively.

Other borrowings experienced an increase of $34,349,000 during the six months of
2002.  A  $35,000,000 increase in Federal Home Loan Bank Borrowings was slightly
offset  by  a $662,000 reduction in U.S. Treasury demand notes.  Securities sold
under  agreements  to  repurchase  increased  by  $11,000.

CAPITAL
-------
Capital  formation  is  important  to  the  Corporation's  well being and future
growth.  Capital  for  the  period  ending  June  30,  2002 was $198,153,000, an
increase of  $8,804,000 over the end of 2001.  The increase is the result of the
retention  of  the  Corporation's earnings, offset by the adjustment for the net
unrealized  gains  on  the  investments  securities  available  for sale and the
purchase  of  treasury stock during the first six months of 2002. Net unrealized
gains  and  losses  on  available for sale investment securities are recorded as
accumulated  other  comprehensive  income  in  the equity section of the balance
sheet.  The  accumulated  other comprehensive income at June 30, 2002 was a gain
of  $5,845,000,  compared  to  a  gain  of $4,534,000 at December 31, 2001.  The
corporation  purchased  $3,288,000 of treasury stock during the first six months
of  2002.  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.

<TABLE>
<CAPTION>
(Dollars  in  thousands)
                                                                For  Capital
As  of  June  30,  2002                     Actual            Adequacy  Purposes
-----------------------
                                            Amount   Ratio    Amount   Ratio
                                           --------  ------  --------  ------
<S>                                        <C>       <C>     <C>       <C>
Total Capital (to risk weighted assets):
Corporation . . . . . . . . . . . . . . .  $214,890  13.35%  $128,765   8.00%
Harleysville National Bank. . . . . . . .   126,921  10.89%    93,204   8.00%
Citizens National Bank. . . . . . . . . .    36,067  12.11%    23,827   8.00%
Security National Bank. . . . . . . . . .    16,137  12.59%    10,252   8.00%
Tier 1 Capital (to risk weighted assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $197,089  12.24%  $ 64,382   4.00%
Harleysville National Bank. . . . . . . .   116,074   9.96%    46,602   4.00%
Citizens National Bank. . . . . . . . . .    32,339  10.86%    11,913   4.00%
Security National Bank. . . . . . . . . .    14,531  11.34%     5,126   4.00%
Tier 1 Capital (to average assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $197,089   8.87%  $ 88,866   4.00%
Harleysville National Bank. . . . . . . .   116,074   7.36%    63,077   4.00%
Citizens National Bank. . . . . . . . . .    32,339   7.16%    18,074   4.00%
Security National Bank. . . . . . . . . .    14,531   8.24%     7,055   4.00%
</TABLE>

PAGE 19

<TABLE>
<CAPTION>

                                       To Be Well Capitalized
                                      Under Prompt Corrective
                                         Action Provision

                                            Amount   Ratio
                                           --------  ------
Total Capital (to risk weighted assets):
-----------------------------------------
<S>                                        <C>       <C>
Corporation . . . . . . . . . . . . . . .  $      -      -
Harleysville National Bank. . . . . . . .   116,505  10.00%
Citizens National Bank. . . . . . . . . .    29,783  10.00%
Security National Bank. . . . . . . . . .    12,816  10.00%
Tier 1 Capital (to risk weighted assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $      -      -
Harleysville National Bank. . . . . . . .    69,903   6.00%
Citizens National Bank. . . . . . . . . .    17,870   6.00%
Security National Bank. . . . . . . . . .     7,689   6.00%
Tier 1 Capital (to average assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $      -      -
Harleysville National Bank. . . . . . . .    78,847   5.00%
Citizens National Bank. . . . . . . . . .    22,592   5.00%
Security National Bank. . . . . . . . . .     8,819   5.00%
</TABLE>
<TABLE>
<CAPTION>
(Dollars  in  thousands)
                                                                For Capital
          As of December 31, 2001           Actual            Adequacy Purposes
          -----------------------
                                            Amount   Ratio    Amount   Ratio
                                           --------  ------  --------  ------
<S>                                        <C>       <C>     <C>       <C>
Total Capital (to risk weighted assets):
Corporation . . . . . . . . . . . . . . .  $205,743  13.23%  $124,445   8.00%
Harleysville National Bank. . . . . . . .   118,782  10.46%    90,862   8.00%
Citizens National Bank. . . . . . . . . .    39,888  13.91%    22,936   8.00%
Security National Bank. . . . . . . . . .    15,132  12.53%     9,661   8.00%
Tier 1 Capital (to risk weighted assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $189,423  12.18%  $ 62,222   4.00%
Harleysville National Bank. . . . . . . .   108,939   9.59%    45,431   4.00%
Citizens National Bank. . . . . . . . . .    36,297  12.66%    11,468   4.00%
Security National Bank. . . . . . . . . .    13,622  11.28%     4,830   4.00%
Tier 1 Capital (to average assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $189,423   8.71%  $ 87,040   4.00%
Harleysville National Bank. . . . . . . .   108,939   6.91%    63,024   4.00%
Citizens National Bank. . . . . . . . . .    36,297   8.45%    17,182   4.00%
Security National Bank. . . . . . . . . .    13,622   8.44%     6,455   4.00%
</TABLE>
PAGE 20
<TABLE>
<CAPTION>
                                     To Be Well Capitalized
                                     Under Prompt Corrective
                                        Action Provision

                                            Amount   Ratio
                                           --------  ------
Total Capital (to risk weighted assets):
-----------------------------------------
<S>                                        <C>       <C>
Corporation . . . . . . . . . . . . . . .  $      -      -
Harleysville National Bank. . . . . . . .   113,578  10.00%
Citizens National Bank. . . . . . . . . .    28,669  10.00%
Security National Bank. . . . . . . . . .    12,076  10.00%
Tier 1 Capital (to risk weighted assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $      -      -
Harleysville National Bank. . . . . . . .    68,147   6.00%
Citizens National Bank. . . . . . . . . .    17,202   6.00%
Security National Bank. . . . . . . . . .     7,246   6.00%
Tier 1 Capital (to average assets):
-----------------------------------------
Corporation . . . . . . . . . . . . . . .  $      -      -
Harleysville National Bank. . . . . . . .    78,780   5.00%
Citizens National Bank. . . . . . . . . .    21,477   5.00%
Security National Bank. . . . . . . . . .     8,069   5.00%
</TABLE>

Pursuant  to the federal regulators' risk-based capital adequacy guidelines, the
components  of  capital  are  called  Tier  1  and  Tier  2  capital.  For  the
Corporation,  Tier  1 capital is the shareholders' equity, and Tier 2 capital is
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,  2002,  the Corporation's Tier 1 risk-adjusted
capital  ratio was 12.24%, and the total risk-adjusted capital ratio was 13.35%,
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,  2002.

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 8.87% at June 30, 2002 and 8.71% at December
31,  2001.

The  year-to-date June 30, 2002 cash dividend per share of $.34 was 13.3% higher
than the cash dividend for the same period in 2001 of $.30.  The dividend payout
ratio  for  the  first  six  months of 2002 was 38.3%, compared to 41.3% for the
twelve month period ended December 31, 2001.  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 three months of 2002.

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  used  of  funds  for  the next 120 days.  The resulting
projections  as  of  June 30, 2002 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 $113,419,000, as of June 30,
2002.  The  Banks  also have unused federal funds lines of credit of $50,000,000
and  non-pledged  investment securities available for sale of $323,889,000 as of
June  30,  2002.

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

PAGE 21

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.

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 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 proceeding 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.

PAGE 22

Branching
---------
The  Corporation's  subsidiaries currently plan to open at least one new branch.
During  the  third  quarter  of  2002,  Security  National  Bank plans to open a
location  in  Douglassville, 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.

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 on page 12 of this Form 10-Q
and  in  SEC  Form  10-K  for  the  period  ended  December  31,  2001.

                           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

</TABLE>
<TABLE>
<CAPTION>
<S>      <C>
Item 5.  Other Information
-------  --------------------------------
  None

Item 6.  Exhibits and Reports on Form 8-K
-------  --------------------------------
</TABLE>
PAGE 23
<TABLE>
<CAPTION>
     (a)  Exhibits:
     --------------
     The  following  exhibits  are  being  filed  as  part  of  this  Report:

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

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

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

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

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

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

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

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

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

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

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

        (11)    Computation of Earnings per Common Share.  The information for this Exhibit is incorporated by
              reference to page 4 of this Form 10-Q.
</TABLE>
  (b)  Reports  on  Form  8-K

Current  Report  on  Form 8-K, dated April 9, 2002, filed with the Commission on
April  17,  2002,  reporting  the Registrant's first quarter 2002 press release.

Current  Report  on  Form  8-K, dated May 30, 2002, filed with the Commission on
June  11,  2002,  reporting  the  Registrant's appointment of two new directors.

Current  Report  on  Form 8-K, dated July 10, 2002, filed with the Commission on
July  26,  2002,  reporting  the Registrant's second quarter 2002 press release.

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.

<TABLE>
<CAPTION>

<S>                 <C>
                    HARLEYSVILLE  NATIONAL  CORPORATION




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



                    /s/  Gregg J. Wagner
                    --------------------
                    Gregg J. Wagner, Treasurer
                   (Principal financial and accounting officer)
</TABLE>




Date:  August  12,  2002

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
           4, 1999.)

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

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

</TABLE>

PAGE 26