FORM 10-Q
                   SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C. 20549


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

       For the quarterly period ended        June 30, 1998        

                                  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           0-12524            

                          Hanover Bancorp, Inc.                  
           (Exact name of registrant as specified in its charter)
            Pennsylvania                          23-2219814                
   (State or other jurisdiction of       (I.R.S. Employer Identification
   incorporation or organization)                     Number)          

           33 Carlisle Street, Hanover, Pennsylvania 17331
         (address of principal executive office and zip code)

                            (717) 637-2201
               Registrant's Telephone Number, including area code

                                                                             
     
(Former name, former address and former fiscal year, if changed since last 
report)

       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    

       Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

    CLASS                            OUTSTANDING June 30, 1998
  Common Stock,                        3,935,537 shares           
 
 par value $.83 per share                                                   
                                         1
<PAGE>
INDEX


HANOVER BANCORP, INC. AND ITS WHOLLY-OWNED SUBSIDIARY



                                                                     Page #
Part I. Financial Information

       Item 1.  Financial Statements (Unaudited)

                Consolidated Balance Sheets -            
                June 30, 1998, and December 31, 1997 . . . . . . ..  .  3

                Consolidated Statements of Income -      
                Three Months Ended June 30, 1998 and 1997  . . . . . .  4

                Consolidated Statements of Income -      
                Six Months Ended June 30, 1998 and 1997  . . . . . . .  5
                Consolidated Statements of Cash Flows -             
                Six Months Ended June 30, 1998 and 1997  . . . . . . .  6

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

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


Part II.      Other Information

       Item 1.  Legal Proceedings. . . . . . . . . . . . . . . . . . .  21

       Item 2.  Changes in Securities. . . . . . . . . . . . . . . . .  21

       Item 3.  Defaults Upon Senior Securities. . . . . . . . . . . .  21

       Item 4.  Submission of Matters to a Vote of Security Holders. .  21

       Item 5.  Other Information. . . . . . . . . . . . . . . . . . .  21
       Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . .  21


Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  . 22
       
                                         2
<PAGE>
<TABLE>
PART I.  FINANCIAL INFORMATION

HANOVER BANCORP, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited: in thousands of dollars, except per share data)
<CAPTION>
                                                                       June 30,         December 31,
                                                                         1998               1997
<S>                                                                 <C>               <C>
ASSETS
  Cash and due from banks                                           $    18,886       $       15,643
  Federal funds sold                                                     10,425                4,075
    Cash and cash equivalents                                            29,311               19,718
  Interest bearing deposits with other banks                                 22                   23
  Short-term investments                                                      -                1,596
  Investment securities:
    Available-for-sale                                                  111,893               94,814
    Held-to-maturity (market value - $2,058 and 2,868, respectively)      2,026                2,827
                                                                        113,919               97,641
  Loans:
    Commercial, financial and agricultural                               42,314               35,254
    Real estate-construction                                              4,781                5,666
    Real estate-commercial mortgage                                      39,790               34,216
    Real estate-residential mortgage                                    130,780              135,217
    Consumer                                                             64,896               67,122
                                                                        282,561              277,475
    Less: Allowance for loan losses                                      (3,283)              (2,908)
      Net loans                                                         279,278              274,567
  Premises and equipment                                                  7,458                7,016
  Accrued interest receivable                                             2,726                2,644
  Other assets                                                            3,010                3,151
     TOTAL ASSETS                                                   $   435,724       $      406,356

LIABILITIES AND SHAREHOLDERS' EQUITY
  Deposits:
    Non-interest bearing                                            $    32,837       $       28,383
    Interest bearing                                                    319,584              301,568
                                                                        352,421              329,951
  Borrowed Funds:
    Short-term                                                           12,249               12,433
    Long-term                                                            30,297               25,452
                                                                         42,546               37,885
  Accrued interest payable                                                3,115                2,334
  Other liabilities                                                       1,445                1,490
  Dividends payable                                                         394                  382
      TOTAL LIABILITIES                                                 399,921              372,042

SHAREHOLDERS' EQUITY
  Common Stock, $.83 par value; authorized, 9,000,000 shares;
    issued and outstanding: 1998-3,935,537 shares;1997-3,911,953 shares   3,266                3,257
  Surplus                                                                19,073               18,687
  Accumulated other comprehensive income                                  1,548              1,652
  Retained earnings                                                      11,916               10,718
     TOTAL SHAREHOLDERS' EQUITY                                          35,803               34,314
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                     $   435,724       $      406,356

Book value per share                                                $      9.10       $         8.78
<FN>
See notes to consolidated financial statements.
</TABLE>
                                         3
<PAGE>
<TABLE>
HANOVER BANCORP, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited: in thousands of dollars, except per share data)


<CAPTION>
                                                         Three months ended
                                                                June 30,
                                                        1998              1997
<S>                                                 <C>              <C>
INTEREST INCOME

  Interest and fees on loans                        $   6,074        $    5,640
  Interest on federal funds sold                           73                98
  Interest on short-term investments                        -                59
  Investment securities:
    Taxable                                             1,311               845
    Tax-exempt                                            346               275
                                                        1,657             1,120
     TOTAL INTEREST INCOME                              7,804             6,917

INTEREST EXPENSE

  Interest on deposits                                  3,356             2,994
  Interest on borrowed funds                              577               352
     TOTAL INTEREST EXPENSE                             3,933             3,346
     NET INTEREST INCOME                                3,871             3,571
PROVISION FOR LOAN LOSSES                                 210               150
     NET INTEREST INCOME AFTER PROVISION
       FOR LOAN LOSSES                                  3,661             3,421

NET SECURITIES GAINS                                      384               129

OTHER INCOME

  Trust department income                                 215               188
  Services charges on deposit accounts                    313               262
  Other operating income                                  286               164
   TOTAL OTHER INCOME                                     814               614

OTHER EXPENSE

  Salaries                                              1,406             1,322
  Pensions and other employee benefits                    292               291
  Occupancy expense                                       242               238
  Equipment expense                                       268               243
  Marketing and advertising                               131               145
  FDIC Insurance                                           10                 9
  Other operating expense                               1,106               666
   TOTAL OTHER EXPENSE                                  3,455             2,914
     Income before income taxes                         1,404             1,250
INCOME TAXES                                              371               328
     NET INCOME                                     $   1,033        $      922

PER SHARE DATA
  Net income - basic and diluted                    $    0.26        $     0.23
  Cash dividends declared                           $    0.10        $     0.09
<FN>
See notes to consolidated financial statements.
</TABLE>
                                         4
<PAGE>
<TABLE>
HANOVER BANCORP, INC. AND ITS WHOLLY-OWNED SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited: in thousands of dollars, except per share data)


<CAPTION>
                                                           Six months ended
                                                                June 30,
                                                        1998              1997
<S>                                                 <C>              <C>
INTEREST INCOME

  Interest and fees on loans                        $  11,971        $   11,081
  Interest on federal funds sold                           94               127
  Interest on short-term investments                        6                65
  Investment securities:
    Taxable                                             2,556             1,654
    Tax-exempt                                            654               597
                                                        3,210             2,251
     TOTAL INTEREST INCOME                             15,281            13,524

INTEREST EXPENSE

  Interest on deposits                                  6,545             5,800
  Interest on borrowed funds                            1,120               678
     TOTAL INTEREST EXPENSE                             7,665             6,478
     NET INTEREST INCOME                                7,616             7,046
PROVISION FOR LOAN LOSSES                                 655               300
     NET INTEREST INCOME AFTER PROVISION
       FOR LOAN LOSSES                                  6,961             6,746

NET SECURITIES GAINS                                      732               194

OTHER INCOME

  Trust department income                                 431               376
  Services charges on deposit accounts                    609               500
  Other operating income                                  502               330
   TOTAL OTHER INCOME                                   1,542             1,206

OTHER EXPENSE

  Salaries                                              2,788             2,569
  Pensions and other employee benefits                    572               576
  Occupancy expense                                       472               470
  Equipment expense                                       540               489
  Marketing and advertising                               262               255
  FDIC Insurance                                           20                18
  Other operating expense                               1,895             1,362
   TOTAL OTHER EXPENSE                                  6,549             5,739
     Income before income taxes                         2,686             2,407
INCOME TAXES                                              712               615
     NET INCOME                                     $   1,974        $    1,792

PER SHARE DATA

  Net income - basic and diluted                    $    0.50        $     0.45
  Cash dividends declared                           $    0.20        $     0.18
<FN>
See notes to consolidated financial statements.
</TABLE>
                                         5
<PAGE>
<TABLE>
HANOVER BANCORP, INC. AND ITS WHOLLY-OWNED SUBSIDIARY                                   
Consolidated Statements of Cash Flows                                   
(Unaudited: in thousands of dollars, except per share data)                                     
<CAPTION>                              
                                                        Six months ended                        
                                                            June 30,                    
                                                         1998         1997    
<S>                                                   <C>            <C>
OPERATING ACTIVITIES:                                   

Net income                                            $ 1,974        $ 1,792 
Adjustments to reconcile net income to net                                      
  cash provided by operating activities:                                
    Provision for loan losses                             655            300 
    Provision for depreciation and amortization           489            439 
    Securities gains                                     (732)          (194)
    Increase in net deferred tax assets                   (32)          (184)
    Increase in interest receivable                       (82)          (100)
    Increase in interest payable                          781            398 
    (Increase) decrease in other assets                   141           (611)
    Increase in other liabilities                         321             50 
    Increase (decrease) in accrued taxes                 (281)            68 
        NET CASH PROVIDED BY                            
        OPERATING ACTIVITIES                            3,234          1,958
                                        
INVESTING ACTIVITIES:                                   
                                        
Net increase in loans                                 (18,517)       (13,187)
Proceeds of loan sales                                 13,151          4,627
Proceeds from sale of                                   
  available-for-sale investment securities             10,322          7,336
Proceeds from maturities of investment securities       7,773          4,575
Purchases of investment securities                    (33,798)       (11,706)
Proceeds from maturities of short-term investments      1,600         13,000
Purchases of short-term investments                        (3)       (17,936)
Purchases of premises and equipment                      (931)          (478)
        NET CASH USED IN                                
        INVESTING ACTIVITIES                          (20,403)       (13,769)
                                        
FINANCING ACTIVITIES                                    
                                        
Net increase in demand deposits, NOW accounts,                                
  money market accounts, and savings accounts          14,052         28,034 
Net increase in certificates of                                 
  deposit and other time deposits                       8,418            906 
Net increase in borrowed funds                          4,661          2,452
Cash dividends paid                                      (765)          (713)
Cash paid in lieu of fractional shares                     (9)             - 
Proceeds from issuance of common stock                    405             11 
Repurchase and retirement of common stock                   -           (526)
        NET CASH PROVIDED BY                            
        FINANCING ACTIVITIES                           26,762         30,164
                                        
INCREASE IN CASH AND CASH EQUIVALENTS                   9,593         18,353
                                           
Cash and cash equivalents at beginning of period       19,718         15,955
  CASH AND CASH EQUIVALENTS AT END OF PERIOD          $29,311        $34,308 
<FN>                                        
See notes to consolidated financial statements.                                 
</TABLE>
                                         6
<PAGE>
       HANOVER BANCORP, INC. AND ITS WHOLLY-OWNED SUBSIDIARY

       Notes to Consolidated Financial Statements

(1)    In the opinion of management, the accompanying unaudited consolidated 
financial statements contain all adjustments which are of a normal 
recurring nature necessary to present fairly Hanover Bancorp, Inc's. 
financial position as of June 30, 1998, and December 31, 1997, the 
results of its operations for the three months and six months ended 
June 30, 1998 and 1997 and cash flows for the six months ended June 
30, 1998 and 1997.

(2)    The information contained in this report is unaudited and is subject to 
year-end adjustment and audit.

(3)    These statements should be read in conjunction with the consolidated 
financial statements and notes thereto included in the Corporation's 
Annual Report on Form 10-K for the year ended December 31, 1997.

(4)    Net income and cash dividends per share are based on the weighted 
average number of shares outstanding which were 3,934,807 during the 
quarter ended June 30, 1998; 3,938,628 during the quarter ended June 
30, 1997; 3,928,313 during the six months ended June 30, 1998; and 
3,948,497 during the six months ended June 30, 1997. Weighted average 
shares and all per share data have been adjusted to give retroactive 
effect to the 4 for 3 stock split declared April 17, 1998 and paid June 
1, 1998.   

(5)    The results of operations for the six months ended June 30, 1998, are 
not necessarily indicative of the results that may be expected for the 
year ended December 31, 1998.

(6)    Management maintains the allowance for loan losses at a level believed 
adequate to absorb potential losses in the portfolio.  Factors 
considered in evaluating the adequacy of the allowance include 
potential specific losses, past loan loss experience, the volume, 
growth and composition of the loan portfolio and the current economic 
conditions and trends.

(7) Effective January 1, 1998, the Corporation adopted Financial Accounting 
Standards Board (FASB) Statement No. 130, "Reporting Comprehensive 
Income". FASB 130 establishes new rules for the reporting and display 
of comprehensive income and its components; however, the adoption of 
this statement had no impact on the Corporation's net income or 
shareholders' equity.  The statement requires unrealized gains or 
losses on the Corporation's available-for-sale securities to be 
included in other comprehensive income, which prior to adoption were 
reported separately in shareholders' equity. Prior year financial 
statements have been reclassified to conform to the requirements of 
FASB 130.

Comprehensive income and its components for the quarter and six months 
ended June 30, are as follows:
<TABLE>
<CAPTION>
                                                  Quarter        Six months
                                                    Ended          Ended
                                                 1998    1997     1998    1997
<S>                                            <C>     <C>       <C>     <C>
Net income                                     $1,033  $  922    $1,974  $1,792
Adjustment to net unrealized gains on 
  securities available-for-sale, net of 
  tax effects and reclassification adjustment 
  for gains included in net income                 75     470      (104)    (40)
Comprehensive Income                           $1,108  $1,392    $1,870  $1,752

</TABLE>
Accumulated other comprehensive income consists of the net unrealized 
gain on securities available-for-sale, net of tax effects.

                                         7
<PAGE>
(8),  Financial Accounting Standards Board (FASB) Statement No. 131, 
"Disclosures about Segments of an Enterprise and Related 
Information" became effective for fiscal years ending after 
December 15, 1997. This statement establishes standards for the 
reporting of financial information from operating segments in annual 
and interim financial statements. It requires that segment financial 
information be reported on the basis used by management to evaluate 
the operating performance of its business units. FASB 131 is not 
required to applied to interim financial statements in the initial 
year of its application.  As a disclosure requirement, FASB 131 will 
not have an impact on the Corporation's financial condition or 
results of operations.

********
                                         8
<PAGE>
       HANOVER BANCORP, INC. AND ITS WHOLLY-OWNED SUBSIDIARY

       Management's Discussion and Analysis of
       Financial Condition and Results of Operations


Results of Operations:

       The consolidated operations of Hanover Bancorp Inc., (the "Corporation") 
are derived primarily from the operations of its wholly-owned subsidiary, the 
Bank of Hanover and Trust Company (the "Bank").  The following discussion 
and analysis sets forth results of operations through the second quarter of 
1998, including basic performance trends.  There are no known trends, events 
or uncertainties that will have or are likely to have a material effect on 
the Corporation's liquidity, capital resources or operations.  

       All forward looking information contained in this discussion and 
analysis is based on management's current knowledge of factors affecting the 
Corporation's business.  Actual results may differ due to unforeseen events 
such as, but not limited to, a significant downturn in the economic 
environment, changes in interest rates, legislative changes or additional 
requirements mandated by the numerous regulatory authorities.  All such 
forward-looking statements are made pursuant to the safe harbor provisions of 
the Private Securities Litigation Reform Act of 1995.    


Second Quarter of 1998 Compared to Second Quarter of 1997:

       Net income for the three months ended June 30, 1998, increased $111,000
or 12.0% from 1997 while earnings per share (EPS) increased $.03 or 13.0% 
during the same period.  

       Net interest income on a fully taxable equivalent basis was $4.1 million
for the quarter ended June 30, 1998, an increase of $358,000 or 9.6% from 
1997's level of $3.7 million. This increase was due to higher earning asset 
levels, driven by loan and deposit growth and increased investment security 
activity.  Net interest margin decreased 20 basis points from 4.31% in 1997 
to 4.11% in 1998. This decrease was due largely to increased investment 
security activity funded by Federal Home Loan Bank of Pittsburgh borrowings 
at relatively narrow spreads. In addition, the margin has been impacted by a 
shift in the deposit mix towards more costly sources, specifically to the 
indexed, variable rate money market deposit account introduced at the 
beginning of 1997. Although these growth strategies have lowered the 
Corporation's margin, as was anticipated by management, they have boosted 
earning asset levels and net interest income which has positively impacted 
EPS and Return on Equity (ROE).

       The provision for loan losses during the second quarter of 1998 increased
$60,000 over the same period in 1997.  This increase is reflective of the 
growth in the loan portfolio.

                                         9
<PAGE>
Securities gains increased from $129,000 during the three months ended June 
30, 1997 to $384,000 for the same period in 1998. This increase was due to 
higher equity gains realized from the Corporation's bank stock portfolio, 
as management continued to capitalize on the general positive movement in the 
market. Management views these gains as deferred investment income as the 
return on these investments comes primarily in the form long term market 
appreciation.
 
       
Other income for the three months ended June 30, 1998 increased $200,000 or 
32.6% over the same period in 1997.  The increase in trust department income 
is reflective of growth in assets under management which increased by 
approximately 22% from period to period. Service charges on deposit accounts 
increased due to higher automated teller machine (ATM) related fees generated 
through the implementation of noncustomer surcharging and a debit card 
product in addition to higher overdraft fees. Other operating income was up 
primarily as a result of increased income realized through mortgage loan 
sales which was spurred by the recent surge in refinancing activity.

Total other expense during the second quarter of 1998 was $541,000 or 18.6% 
higher than in 1997. The increase in other operating expense was largely 
related to a loss of $252,000 related to the termination of the 
Corporation's pension plan which had been frozen in 1996. The remaining 
increase in other operating expense and the increase in equipment expense was 
primarily related to continued technology investments. The increase in salary 
expense was affected by several temporary vacancies during the prior year.
 
       The level of tax-free income is the primary factor impacting the 
Corporation's effective tax rate.  The Corporation recognized an income tax 
provision which resulted in an effective tax rate of 26.4% for the quarter 
ended June 30, 1998 compared to 26.2% rate in 1997.  

Six Months Ended June 30, 1998 Compared to Six Months Ended June 30 1997:

Net interest income on a fully taxable equivalent basis for the six months 
ended June 30, 1998 increased $636,000 or 8.6% from the same period in 1997. 
This increase was due to higher earning asset levels, driven by loan and 
deposit growth and increased investment security activity.  Net interest 
margin decreased 22 basis points from 4.36% in 1997 to 4.14% in 1998. As 
discussed, this decrease was due primarily to increased investment security 
activity and a shift in the deposit mix towards more costly sources.

       
                                        10
<PAGE>
The provision for loan losses during the first half of 1998 increased 
$355,000 over the same period in 1997.  This increase was primarily related 
to a special $250,000 provision taken in the first quarter to raise the 
allowance to a level more comparable to industry standards. The higher 
provision is also reflective of the growth in the loan portfolio.  

Securities gains increased $538,000 during the period ended June 30, 1998 
from the same period in 1997. This increase was due to higher gains realized 
from the Corporation's bank stock portfolio. 
 
       
Other income for the six months ended June 30, 1998 increased $336,000 or 
27.9% over 1997.  The increase in trust department income is reflective of 
growth in assets under management. Service charges on deposit accounts 
increased primarily due to higher ATM related fees and higher overdraft fees, 
as discussed above. The increase in other operating income was largely 
related to higher income realized through mortgage loan sale activity.

Total other expense during the first half of 1998 was $6.5 million, an 
increase of $810,000 or 14.1% from 1997. As discussed, the increase in other 
operating expense was due largely to the loss related to the pension plan 
termination. Continued technology investments also contributed to the 
increase in this category as well as to the increase in equipment expense. 
The increase in salary expense was affected by several temporary vacancies 
during the prior year while benefits expense was down due to lower healthcare 
costs. The resulting efficiency ratio (the cost to generate one dollar of 
revenue), excluding the nonrecurring pension termination loss, for the six 
months ended June 30, 1998 was 65.80% compared to 66.75% in 1997.
 
       The Corporation recognized an income tax provision which resulted in an 
effective tax rate of 26.5% for the period ended June 30, 1998 up from the 
25.6% rate in 1997.  The increase was the result of a lower proportion of tax 
free assets to earning assets in 1998 relative to 1997 as well as additional 
state corporate income taxes incurred at the parent company.


                                         11
<PAGE>
<TABLE>
Trends in Sources and Uses of Funds
<CAPTION>

                                       June 30,   DECEMBER 31,    Change
                                         1998         1997           $       %
<S>                                 <C>         <C>            <C>            <C>
Funding Sources
  Deposits                          $  352,421  $     329,951  $  22,470      6.8%
  Borrowed funds                        42,546         37,885      4,661     12.3%
  Other liabilities                      4,954          4,206        748     17.8%
  Shareholders equity                   35,803         34,314      1,489      4.3%
    TOTAL SOURCES                   $  435,724  $     406,356  $  29,368      7.2%

Funding Uses
  Loans                             $  279,278  $     274,567  $   4,711      1.7%
  Investment securities                113,919         97,641     16,278     16.7%
  Federal Funds Sold and other
    short-term investments              10,447          5,694      4,753     83.5%
  Other assets                          32,080         28,454      3,626     12.7%
    TOTAL USES                      $  435,724  $     406,356  $  29,368      7.2%
</TABLE>
                                         12
<PAGE>
Financial Condition


The Corporation uses funds primarily to support its lending activities.  Net 
loans outstanding increased by $4.7 million or 1.7% from December 31, 1997 to 
June 30, 1998. This increase was net of residential mortgage loans sold of 
$13.2 million.  The growth was comprised primarily of increases in the 
commercial categories offset by decreases in the consumer and residential 
mortgage categories. The decrease in the consumer category was due to lower 
dealer loan activity resulting from generally slower automobile sales. The 
decrease in the residential mortgage category was a result of the loan sales 
in addition to increased prepayment activity driven by the current low rate 
environment. Investment securities, another major use of funds, increased 
$16.3 million or 16.7% through the first half of 1998 while federal funds 
sold and other short-term investments increased by $4.8 million during this 
period.  These increases reflect the deployment of funding resulting from 
deposit growth exceeding loan growth. In addition, the Corporation increased 
its investment portfolio, with FHLB funding, in order to boost earning asset 
levels and net interest income.  To limit the interest rate risk exposure, 
most of this activity was focused on intermediate term, fixed rate mortgage 
backed and tax exempt municipal securities.

Deposits are the most important funding source and the primary support for 
the Corporation's growth.  During the first six months of 1998, total 
deposits increased $22.5 million or 6.8%.  This growth came primarily from 
the demand and money market categories and certificates of deposit over 
$100,000 (large CDs). The increase in money market deposits was reflective of 
the continued growth of the indexed account mentioned earlier. The increase 
in large CDs was related primarily to one temporary municipal deposit. 
Borrowed funds increased primarily as a result of the additional usage of 
FHLB borrowings as discussed above. In addition to being a source for funding 
specific investments, these borrowings are used to manage the balance sheet 
and interest rate risk.


Capital Resources and Dividends

The Corporation has an ongoing strategic objective of maintaining a capital 
base which supports the pursuit of profitable business opportunities, 
provides resources to absorb the risks inherent in its activities and meets 
or exceeds all regulatory requirements.

At June 30, 1998, total shareholders' equity was $35.8 million, an increase 
of $1.5 million or 4.3% from December 31, 1997.  This change consisted of an 
increase of $1.6 million in capital stock, surplus and undivided profits 
(core equity) and an decrease of $104,000 in unrealized gains on AFS 
securities.  The increase in the core equity was primarily the result of 
earnings retained.

       On April 17, 1998, the Board of Directors declared a 4-for-3 stock split 
which was paid June 1, 1998 to shareholders of record May 1, 1998.  The 
primary objective of this split was to enhance liquidity and improve 
marketability by increasing the number of shares outstanding, while 
maintaining the strong market climate for Hanover Bancorp stock. Another tool 
available to management for supporting the market for the Corporation's 
stock is the repurchase program approved April 18, 1997 by the Board of 
Directors. As of June 30, 1998, 148,347 shares were still available for 
purchase under the program. This program and the prior program have benefitted 
the Corporation in terms of improved EPS and ROE, two performance factors key 
to driving shareholder value. 

                                         13
<PAGE>
During the quarter ended June 30, 1998, the Board of Directors declared a 
cash dividend of $.10 per share payable August 1, 1998, an increase of $.01 
or 11.1% per share from a year ago.  The Corporation relies on net income 
rather than retained earnings for the payment of dividends to shareholders.  
The dividend rate is determined by the Board of Directors after considering 
the level of internal capital growth necessary to maintain an appropriate 
ratio of equity to assets and the projected level of earnings.  Management 
anticipates that the internal growth rate of equity is more than adequate to 
support the Corporation's asset growth.

As can be seen by the following tables, the Corporation and the Bank remain 
well capitalized as defined by the regulatory authorities.
<TABLE>
<CAPTION>
                                                    June 30,    December 31,
                                                      1998          1997
<S>                                                  <C>           <C>
Hanover Bancorp, Inc.
       Tier 1 capital to risk-adjusted assets        12.46%        12.47%
       Total capital to risk-adjusted assets         13.65%        13.58%
       Leverage ratio                                 8.15%         8.19%
       
Bank of Hanover and Trust Company
       Tier 1 capital to risk-adjusted assets        10.99%        10.82%
       Total capital to risk-adjusted assets         12.20%        11.93%
       Leverage ratio                                 7.15%         7.09%
</TABLE>
       
The Federal Deposit Insurance Corporation Improvement Act of 1991 
("FDICIA") created a framework for supervisory actions in an effort to 
reduce the risks of possible long-term losses to the deposit insurance 
funds.  It established five levels of capital at which insured depository 
institutions will be "well capitalized," "adequately capitalized," 
"undercapitalized," "significantly undercapitalized" and 
"critically undercapitalized".  In 1992, the regulators adopted 
regulations to implement the requirements of FDICIA.  Under the 
regulations, the required minimum capital ratios for each category of 
institutions are, with certain exceptions, as follows:


                                                            Tier I
                                     Total Capital        Capital to
                                  to Risk-Adjusted       Risk-Adjusted
                                 Assets          Assets              
Leverage

Well capitalized        10% or above and      6% or above and      5% or above
Adequately 
     capitalized        8% or above and       4% or above and      4% or above
Undercapitalized          Under 8% or           under 4% or          under 4%
Significantly
     undercapitalized     Under 6% or           under 3% or          under 3%
Critically 
     undercapitalized                                               2% or under


The appropriate federal bank regulatory agency has authority to downgrade 
an institution's capital designation by one category if it determines 
that an institution is in an unsafe or unsound condition or is engaging in 
unsafe or unsound practices.

FDICIA provides for increased supervision for banks not rated in one of the 
highest categories under the "CAMELS" composite bank rating system.  
Undercapitalized institutions are required to submit capital restoration 
plans to the appropriate federal banking regulator and are subject to 
restrictions on operations, including prohibitions on branching, engaging 
in new activities, paying management fees, making capital distributions 
such as dividends, and growing without regulatory approval.

The Bank has been deemed "well capitalized".


                                         14
<PAGE>
Asset Quality and Allowance for Loan Losses:


The following tables illustrate the Corporation's nonperforming asset 
position as of June 30, 1998 compared to its position at December 31, 1997. 
<TABLE>
<CAPTION> 


                                        
                                             June 30,   December 31,
                                               1998          1997
<S>                                          <C>           <C>
Non-accrual loans                            $  531        $  331
Accruing loans past due 90 days or more         378           174
Restructured loans                              177           221
Other real estate and other
  repossessed assets                             90           236
        Total non-performing assets          $1,176        $  962


Non-accrual loans by category

Commercial, financial and agricultural       $   82       $   ---
Real estate-construction                        ---           ---
Real estate-mortgage                            441           331
Consumer                                          8           ---
                                             $  531        $  331

Past due loans by category

Commercial, financial and agricultural       $   66        $  ---
Real estate-construction                        ---           ---
Real estate-mortgage                            287           153
Consumer                                         25           21
                                             $  378        $  174

Restructured loans by category

Commercial, financial and agricultural       $  ---        $  ---
Real estate-construction                        ---           ---
Real estate-mortgage                            177           221
Consumer                                        ---           ---
                                             $  177        $  221
</TABLE>

Nonperforming assets were .42% of total loans at June 30, 1998 compared to 
 .35% at December 31, 1997.  In addition, potential problem loans at June 30, 
1998, as determined by the Corporation's internal review process, were $2.3 
million in comparison to $2.8 million at December 31, 1997.  Of these 
amounts, $408,000 and $470,000 were considered impaired under FASB 114 for 
June 30, 1998 and December 31, 1997, respectively.  Loans considered impaired 
under FASB 114 represent those potential problem loans which management feels 
are probable (as opposed to possible) to result in future noncompliance in 
addition to the Corporation's applicable nonaccrual loans and restructured 
loans. 



                                         15
<PAGE>
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
                                          Period ended     Year ended
                                           June 30,       December 31,
                                             1998             1997  
<S>                                         <C>              <C>
Balance at beginning of period              $2,908           $2,403
Recoveries on loans                            108              181
Provision charged to operations                655              910
Loans charged-off                             (388)            (586)
Balance at end of period                    $3,283           $2,908
</TABLE>

The Corporation remains committed to making provisions in order to maintain a 
strong allowance relative to its level of specific potential losses and to 
its growing overall loan portfolio.  A total provision of $655,000 was made 
during the first half of 1998.  As discussed, this amount included a special 
$250,000 provision. The resulting allowance for loan losses at June 30, 1998 
was $3.3 million in comparison to $2.9 million at December 31, 1997.  This 
allowance approximated 1.16% of total loans and 279% of nonperforming assets 
at June 30, 1998 versus 1.05% and 302% at year end 1997.  Management feels 
that the allowance for loan losses is adequate to cover potential losses 
within the overall portfolio.  

 
Liquidity

Liquidity is the ability to meet funding requirements of customers' deposit 
withdrawals or credit needs at a reasonable cost.  The Corporation's 
Asset/Liability Management Committee (ALCO) has established policies and 
procedures to control its liquidity position and to provide for potential 
future needs.  The Corporation's liquidity position is enhanced by a 
relatively stable funding base.  The ratio of deposits (excluding CDs over 
$100,000) to total assets was 76.1% at June 30, 1998, while CDs over $100,000 
and other borrowed funds to total assets was 14.5%. To manage its liquidity 
needs, the Corporation looks to a number of sources on both sides of its 
balance sheet.  

On the asset side of the balance sheet, the Corporation relies on federal 
funds sold, short-term investments, maturities in the investment portfolio, 
principal repayments on outstanding loans and amortizing investment 
securities and sales of loans in the secondary markets.  At June 30, 1998, 
the balance of the federal funds sold account was $10.4 million, while a 
total of $5.4 million of the Corporation's investment portfolio was 
scheduled to mature in one year or less.  Additionally, an average of $8.6 
million in loan principal repayments and $790,000 in mortgage-backed and 
asset-backed securities repayments were received by the Corporation during 
each month of the first six months of 1998.  Also during this period, the 
Corporation sold $13.2 million of loans in the secondary markets.

The Corporation maintains borrowing agreements with several correspondent 
banks and the Discount Window at the Federal Reserve Bank of Philadelphia.  
In addition it has access to the FHLB for permanent funding needs.  Through 
these relationships, the Corporation has available short-term credit of 
approximately $10.0 million and permanent funding of approximately $90.0 
million.
                                         16
<PAGE>
<TABLE>
HANOVER BANCORP INC. CONSOLIDATED GAP ANALYSIS                                          
<CAPTION>                         
                                                
                                   0-30       31-90        91-365
                                  DAYS         DAYS         DAYS
                                  (In thousands of dollars)                               
<S>                             <C>          <C>         <C>
June 30,1998                                          
                                                
Interest Earning Assets         $ 75,069     $ 20,518    $ 74,004 
Interest Bearing Liabilities    $ 81,827     $ 20,060    $ 53,937 
                                                
Rate Sensitivity GAP:                                           
  Periodic Gap                  $ (6,758)    $    458    $ 20,067
  Cumulative Gap                $ (6,758)    $ (6,300)   $ 13,767
                                                
Rate Sensitivity Ratio                                          
  Periodic Gap                    (1.55%)        0.11%       4.61%
  Cumulative Gap                  (1.55%)       (1.45%)      3.16%
                                                
December 31, 1997:                                            
                                                
Rate Sensitivity GAP:                                           
  Periodic Gap                  $ (9,391)    $   (264)   $ 15,948
  Cumulative Gap                $ (9,391)    $ (9,655)   $  6,293
                                                
Rate Sensitivity Ratio                                          
  Periodic Gap                     (2.31%)     (0.06%)      3.92%
  Cumulative Gap                   (2.31%)     (2.38%)      1.55%
</TABLE>
                                         17
<PAGE>
Market Risk

In January 1997, the Securities and Exchange Commission (SEC) issued new 
disclosure rules related to derivatives and exposures to market risk from 
derivative financial instruments, other financial instruments and certain 
derivative commodity instruments.  These rules became effective for the 
Corporation's December 31, 1997 financial statements.  Market risk 
includes interest rate risk, foreign currency exchange rate risk, commodity 
price risk and equity price risk.  The new disclosure rules have two parts: 
quantitative and qualitative market risk disclosures outside the financial 
statements and accounting policy disclosures about derivatives in the notes 
to the financial statements.  As further discussed within, the 
Corporation's primary market risk is interest rate risk from its 
financial assets and liabilities.  Derivatives are not presently utilized 
and thus the expanded policy disclosures are not applicable.

Interest rate risk is the exposure to fluctuations in the Corporation's 
current and future net interest income from movements in interest rates.  
This exposure results from differences between the amounts of interest 
earning assets and interest bearing liabilities that reprice within a 
specified time period.  

The primary objective of the Corporation's asset/liability management 
process is to maximize current and future net interest income within 
acceptable levels of interest rate risk while satisfying liquidity and 
capital requirements.  Management recognizes that a certain amount of 
interest rate risk is inherent and appropriate yet is not essential to the 
Corporation's profitability.  Thus the goal of interest rate risk 
management is to strike a balance between risk and reward such that net 
interest income is maximized while risk is maintained at a tolerable level. 
 

The Corporation uses "gap" and simulation analysis for measuring 
interest rate risk.  These methods allow  management to regularly monitor 
both the direction and magnitude of the Corporation's risk exposure.  The 
Corporation primarily uses the securities portfolio and FHLB advances to 
manage its interest rate risk position.  Additionally, pricing, promotion 
and product development activities are directed in an effort to emphasize 
the term or repricing characteristics that best meet current interest rate 
risk objectives.   At present, off-balance sheet instruments are not used 
by the Corporation.

Gap analysis assigns each interest earning asset and interest bearing 
liability to a time frame reflecting its next repricing or maturity date.  
Incorporated into this process are the trends in prepayments on loan 
balances and mortgage-backed securities. The difference between total 
interest-sensitive assets and liabilities at each time frame represents the 
interest sensitivity gap for that interval.  A positive gap generally 
indicates that rising interest rates during a particular interval will 
increase net interest income, since more assets will reprice than 
liabilities.  The opposite is true for a negative gap position.  As can be 
seen in the accompanying table, the Corporation had a cumulative gap within one 
year at June 30, 1998 of positive $13.8 million and a rate sensitivity 
ratio of positive 3.16%, in comparison to a positive gap of $6.3 million 
and a rate sensitivity ratio of positive 1.55% at December 31, 1997.

Simulation analysis prospectively evaluates the effect of upward and 
downward changes in interest rates on net interest income. This process is 
largely dependent on the underlying assumptions.  Key assumptions in the 
model include maturity and repricing characteristics of the financial 
assets and liabilities, prepayments on amortizing  assets, other imbedded 
options, nonmaturity deposit sensitivity and loan and deposit growth and 
pricing.  These assumptions are inherently uncertain  due to the timing, 
magnitude and frequency of rate changes and changes in market conditions 
and management strategies, among other factors.  In addition, the 
                                         18
<PAGE>
Corporation has not yet developed alternative prepayment or balance sheet 
growth assumptions for the various rate scenarios.  Therefore the model 
cannot precisely estimate net interest income or predict the impact of 
higher or lower interest rates on net interest income.  However, the model 
is useful in that it helps to quantify interest rate risk and it provides a 
relative gauge of the Corporation's interest rate risk position.

Based on the results of the simulation model as of December 31, 1997, the 
Corporation would expect net interest income to decrease over the next 
twelve months by 3.1% assuming an immediate  upward shift in market 
interest rates of 200 basis points, and to increase by .9% if rates shifted 
downward in the same manner. The more pronounced change in the upward 
scenario is primarily due to the Corporation's holdings of convertible 
FHLB borrowings  These borrowings contain features which allow the FHLB to 
convert them from fixed rate to variable rate after a specified time 
period.  The model assumes that in the upward scenario the FHLB would 
exercise these options as soon as they become available.  The conversion 
feature of these advances cannot be reflected  in the gap analysis which is 
a key factor explaining why the gap shows a fairly neutral position while 
the simulation  analysis indicates a more liability sensitive position.  
Management does not believe this risk position has changed significantly 
since year-end.

REGULATORY ISSUES

Congress is currently considering legislative reform centered on repealing 
the Glass-Steagall Act which prohibits commercial banks from engaging in 
the securities industry.  The holding company structure would be regulated 
by the Federal Reserve Board, and its subsidiaries would be supervised by 
the applicable regulator based on their respective functions.

From time to time, various types of federal and state legislation have been 
proposed that could result in additional regulation of, and restrictions 
on, the business of the Corporation and the Bank.  It cannot be predicted 
whether such legislation will be adopted or, if adopted, how such 
legislation would affect the business of the Corporation and the Bank.  As 
a consequence of the extensive regulation of commercial banking activities 
in the United States, the Corporation's and the Bank's business is 
particularly susceptible to being affected by federal legislation and 
regulations that may increase the cost of doing business.  Except as 
specifically described above, management believes that the effect of the 
provisions of the aforementioned legislation on the liquidity, capital 
resources, and results of operations of the Corporation will be immaterial.

Further, the business of the Corporation is also affected by the state of 
the financial services industry in general.  As a result of legal and 
industry changes, management expects that the industry will continue to 
experience consolidations and mergers as the financial services industry 
strives for greater cost efficiencies and market share. Management believes 
that such consolidations and mergers may enhance its competitive position 
as a community bank.

On September 30, 1996, the President signed into law the Deposit Insurance 
Funds Act of 1996 to recapitalize the Savings Association Insurance Fund 
(SAIF) administered by the FDIC and to provide for repayment of the 
Financial Institution Collateral Obligation (FICO) bonds issued by the 
United States Treasury Department.  Pursuant to this legislation, the FDIC 
levied a one-time special assessment on SAIF deposits equal to 65.7 cents 
per $100 of the SAIF-assessable deposit base as of March 31, 1995.  During 
the years 1997, 1998 and 1999, the average regular annual deposit insurance 
assessment is estimated to be about 1.29 cents per $100 of deposits for 
Bank Insurance Fund (BIF) deposits and 6.44 cents per $100 of deposits for 
SAIF deposits.  Individual institution's assessments will continue to 
vary according to their capital and management ratings.  As always, the 
FDIC will be able to raise the assessments as necessary to maintain the 
funds at their target capital ratios provided by law.  After 1999, BIF and 
SAIF will share the FICO costs equally.  Under current estimates, BIF and 
SAIF assessment bases would each be assessed at the rate of approximately 
2.43 cents per $100 of deposits. The FICO bonds will mature in 2018-2019, 
ending the interest payment obligation.  

                                         19
<PAGE>
The law also provides that BIF and SAIF are to merge to form the Deposit 
Insurance Fund ("DIF") at the beginning of 1999, provided that there 
are no SAIF institutions in existence at that time.  Merger of the Funds 
will require state laws to be amended in those states authorizing savings 
associations to eliminate that authorization (state chartered savings banks 
will not be affected).  This provision reflects Congress's apparent 
intent to merge thrift and commercial bank charters by January 1999; 
however, no law has yet been enacted to achieve that purpose.

The Act also provides regulatory relief to the financial services industry 
relative to environmental risks, frequency of examinations, and the 
simplification of forms and disclosures.

The regulation increased the Corporation's FDIC insurance premium costs 
slightly in 1997.  This law did not have, nor is expected to have, a 
material impact on the Corporation's liquidity, capital resources or 
results of operations.

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.  However, 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.  

During the first quarter of 1998 the Pennsylvania State Department of 
Banking completed a routine examination of the Bank including an assessment 
of asset quality. During 1997 the FDIC completed a similar examination of 
the Bank. 
                                         20
<PAGE>
PART II.  OTHER INFORMATION

HANOVER BANCORP, INC. AND ITS WHOLLY-OWNED SUBSIDIARY

Item 1.  Legal Proceedings

        In the opinion of the management of the Corporation and the Bank, there
are no proceedings pending to which the Corporation and/or Bank is a party or 
to which their property is subject, which, if determined adversely to the 
Corporation or Bank, would be material in relation to the Corporation's and 
the Bank's undivided profits or financial condition.  There are no 
proceedings pending other than ordinary routine litigation incident to the 
business of the Corporation or the Bank.  In addition, no material 
proceedings are pending or are known to be threatened or contemplated against 
the Corporation or the Bank by government authorities.  

Item 2.  Changes in Securities - None.   

Item 3.  Defaults Upon Senior Securities - None.

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

  (a)   An annual meeting of shareholders was held April 21, 1998.

  (b)-(c)       One matter was voted upon, as follows:

       Four directors were elected, as below:
                                                Votes      Votes
                                      Term      Cast       Cast      Votes
                                     Expires    "For"    "Against"  "Abstained"

             Re-elected

             Bertram F. Elsner          2001   2,154,539    16,649      0
             J. Daniel Frock            2001   2,154,539    16,649      0
             Gordon A Haaland, Ph.D.    2001   2,150,782    20,406      0
             John S. Hollinger, Jr.     2001   2,151,463    19,725      0
        

                Directors whose term continued after meeting

                Michael D. Bross           1999
                Thomas M. Bross, Jr.       1999
                Earl F. Noel, Jr.          1999
                J. Bradley Scovill         1999
                Terrence L. Hormel         2000
                Vincent P. Pisula, M.D.    2000
                Charles W. Test            2000
                S. Eisenhart, Jr.          2000

Item 5.  Other Information - None

Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits
    3(i).  Amended and Restated Articles of Incorporation of the Registrant
    3(ii). Amended and Restated Bylaws of the Registrant
    27.    Financial Data Schedule

(b)     Reports on Form 8-K - None
                                         21
<PAGE>
        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. 



                                         HANOVER BANCORP, INC.



Date: August 13, 1998                    /s/ Bradley Scovill    
                                         J. Bradley Scovill
                                         President and
                                         Chief Executive Officer
                                         (Principal Executive Officer)


Date: August 13, 1998                   /s/ Thomas J. Paholsky     
                                         Thomas J. Paholsky
                                         Treasurer
                                         (Principal Accounting and
                                          Financial Officer)             

                                         22
<PAGE>