HANOVER BANCORP, INC.
33 Carlisle Street
Hanover, Pennsylvania 17331
March 20, 1998
To Our Shareholders:
On behalf of the Board of Directors and Management, I cordially invite you
to attend the 1998 Annual Meeting of Shareholders of Hanover Bancorp, Inc.
to be held at the Hanover Country Club, Lincolnway East, R.D. 1,
Abbottstown, Pennsylvania, on Tuesday, April 21, 1998, at 9:30 a.m.,
prevailing time. Notice of the Annual Meeting, a Proxy Statement, a Proxy,
an Annual Meeting Reservation Form and the 1997 Annual Report of Hanover
Bancorp, Inc. are enclosed herewith. We hope you will take the opportunity
to carefully review these materials.
At the Annual Meeting of Shareholders, you will be asked to elect four (4)
directors to hold office for a three-year term and to transact such other
business that may properly come before the meeting. There will also be a
report to the shareholders as to the affairs of the Corporation and its
banking subsidiary. Following the presentation, we will respond to
questions received by the Corporation on the business reply Question Card
included with the enclosed Proxy.
We strongly encourage you to vote your shares whether or not you plan to
attend the meeting. It is very important that you mark, sign, date and
return the enclosed Proxy card promptly. If you plan to attend the
meeting, please return the Reservation Form along with your Proxy. A
postage paid business reply envelope is provided herein for your
convenience. If you do attend the meeting but have already returned a
proxy and wish to vote in person, you must give written notice thereof
to the Secretary of the Corporation so that your Proxy will be superseded
by any ballot that you submit at the meeting.
Very truly yours,
/s/ Terrence L. Hormel
Terrence L. Hormel
Chairman of the Board
<PAGE>
HANOVER BANCORP, INC.
33 Carlisle Street
Hanover, Pennsylvania 17331
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 21, 1998
TO THE SHAREHOLDERS OF HANOVER BANCORP, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of
HANOVER BANCORP, INC. (the "Corporation") will be held at the Hanover
Country Club, Lincolnway East, R.D. 1, Abbottstown, Pennsylvania 17301, on
Tuesday, April 21, 1998, at 9:30 a.m., prevailing time, for the following
purposes:
(1) to elect four (4) persons to the Board of Directors of the
Corporation to hold office for a three-year term and until their
successors are duly elected and qualified;
(2) to transact such other business as may properly come before
the Annual Meeting and any adjournment or postponement thereof.
The Board of Directors has established the close of business on
February 28, 1998, as the record date for the determination of those
shareholders who are entitled to notice of, and to vote at, the Annual
Meeting and any adjournment or postponement thereof.
A copy of the Corporation's Annual Report for the fiscal year ended
December 31, 1997, is being mailed with this Notice. Copies of the
Corporation's Annual Report or Form 10-K may be obtained at no cost by
contacting Gerald M. Warner, Secretary, 33 Carlisle Street, Hanover,
Pennsylvania 17331, telephone (717) 637-2201.
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING
REGARDLESS OF THE NUMBER OF SHARES THAT YOU HOLD. PLEASE MARK, SIGN AND
DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED POSTAGE PAID
ENVELOPE, IN ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED. THE GIVING
OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND
THE MEETING AND GIVE WRITTEN NOTICE TO THE SECRETARY OF THE CORPORATION.
By Order of the Board of Directors
/s/ Gerald M. Warner
Gerald M. Warner
Secretary
March 20, 1998
YOUR ATTENTION IS DIRECTED TO THE PROXY STATEMENT ACCOMPANYING THIS NOTICE
OF MEETING OF SHAREHOLDERS.
<PAGE>
HANOVER BANCORP, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 21, 1998
Date, Time and Place of Annual Meeting
This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors of Hanover Bancorp, Inc. (the
"Corporation" or "Company") of Proxies to be voted at the Annual Meeting of
Shareholders of the Corporation to be held on Tuesday, April 21, 1998, at
9:30 a.m., prevailing time, at the Hanover Country Club, Lincolnway East,
R.D. 1, Abbottstown, Pennsylvania 17301, and at any adjournment or
postponement of the Annual Meeting. This Proxy Statement and the enclosed
form of Proxy (the "Proxy") are first being sent to shareholders
on or about March 20, 1998, to shareholders of record of the
Corporation as of February 28, 1998. Hanover Bancorp, Inc. is a
Pennsylvania business corporation. The principal executive office of the
Corporation is in the Administration Center located at 33 Carlisle Street,
Hanover, Pennsylvania 17331. The telephone number for the Corporation is
(717) 637-2201. All inquiries should be directed to the Secretary, Hanover
Bancorp, Inc. at the above address. The Bank of Hanover and Trust Company
(the "Bank") is the wholly-owned subsidiary of the Corporation.
Solicitation and Voting of Proxies
Shares of common stock of the Corporation may be voted by shareholders
in person or by proxy. Holders of common stock are entitled to one vote
per share and do not have cumulative voting rights in the election of
directors.
If the proxy enclosed herewith (the "Proxy") is properly executed and
returned, the shares represented by it will be voted in accordance with the
directions thereon; or if no directions are indicated, the Proxy will be
voted "FOR" the election to the Board of Directors of the four (4) nominees
listed in this Proxy Statement. If any other matters should be presented
at the Annual Meeting on which a vote may properly be taken, it is intended
that the shares represented by Proxies at such meeting will be voted with
respect thereto in the sole discretion of the proxyholders.
Proxies are being solicited by and on behalf of the Board of Directors
of the Corporation (the "Board"). All expenses of this solicitation,
including the cost of preparing, assembling, printing, mailing and
soliciting Proxies, and any additional material which the Corporation may
furnish shareholders in connection with the Annual Meeting, will be borne by
the Corporation. Directors, officers and employees of the Corporation or
the Bank may, with no additional compensation, use telephone and other
means of communication to request the holders of common stock to return
their Proxies. The Corporation will not pay any compensation for the
solicitation of Proxies, but may reimburse nominees, fiduciaries and
other custodians for their reasonable expenses in sending Proxy materials to
their principals and obtaining their instructions.
1
<PAGE>
Revocability of Proxy
If the enclosed Proxy is executed and returned, it nevertheless may be
revoked at any time prior to its exercise, only (1) by giving written
notice of revocation to Gerald M. Warner, Secretary, Hanover Bancorp, Inc.,
33 Carlisle Street, Hanover, Pennsylvania 17331, (2) by executing a later-
dated Proxy and giving written notice thereof to the Secretary of the
Corporation, or (3) by voting in person after giving written notice to the
Secretary of the Corporation.
Voting Securities and Record Date
The close of business on February 28, 1998, has been fixed as the
record date for determination of shareholders entitled to notice of and to
vote at the Annual Meeting. The Corporation currently is authorized to
issue 6,750,000 shares of Common Stock, par value $1.11 per share (the
"Common Stock") and 2,000,000 shares of Preferred Stock, par value $2.50
per share (the "Preferred Stock"). At the close of business on February
28, 1998, the Corporation had outstanding 2,944,866 shares of Common Stock
and no shares of Preferred Stock. Common Stock is entitled to one vote per
share.
Quorum and Required Vote
Pursuant to Article III, Section 6 of the By-laws of the Corporation,
the presence, in person or by Proxy, of shareholders entitled to cast
at least a majority of the votes which all shareholders are entitled to
cast shall constitute a quorum for the transaction of business at the
Annual Meeting. Under Pennsylvania law and the Corporation's By-laws, the
presence of a quorum is required for each matter to be acted upon at the
Annual Meeting. Votes withheld and abstentions will be counted in
determining the presence of a quorum for the particular matter. Broker non-
votes will not be counted in determining the presence of a quorum for the
particular matter as to which the broker withheld authority. Shareholders
will not be entitled to cumulate their votes in the election of directors.
The four (4) nominees receiving the highest number of votes will be
elected.
Principal Owners of the Corporation's Shares
<TABLE>
As of February 28, 1998, the following shareholder of record is known by the Board to be the
beneficial owner of more than five percent of the Corporation's outstanding Common Stock:
<CAPTION>
Amount and Nature of
Name of Individual Beneficial Percent
or Identity of Group Ownership of Class
<S> <C> <C>
Bank of Hanover & Trust Company 201,020 6.83%
25 Carlisle Street
Hanover, PA 17331
</TABLE>
2
<PAGE>
Ownership of Securities by the Corporation's
Directors, Nominees and Principal Officers
<TABLE>
The following table sets forth information as of February 28, 1998, regarding the amount and nature
of ownership of Common Stock of the Corporation by each director, each nominee and by all of the
directors, nominees and principal officers of the Corporation as a group. Each such individual has sole
voting and investment power with respect to the shares listed except as otherwise indicated in the
footnotes to the table.
<CAPTION>
Amount and Nature of
Name of Individual Beneficial Percent
or Identity of Group Ownership(1)(2)(3) of Class(1)
<S> <C> <C>
Thomas M. Bross, Jr. 120,847 4.10%
Michael D. Bross 7,044 (4) .24%
S. Forry Eisenhart, Jr. 13,008 (5) .44%
Bertram F. Elsner 6,036 (6) .20%
J. Daniel Frock 17,177 (7) .58%
Gordon A. Haaland, PhD 565 .02%
John S. Hollinger, Jr. 8,712 .30%
Terrence L. Hormel 16,978 (8) .58%
Earl F. Noel, Jr. 7,336 (9) .25%
Vincent P. Pisula, MD 52,714 (10) 1.79%
J. Bradley Scovill 8,000 (11) .27%
Charles W. Test 11,994 (12) .41%
All directors and principal officers
of the Corporation as a group
(18 persons) 273,636 9.29%
<FN>
(1) The securities "beneficially owned" by an individual are determined in accordance with the
definition of "beneficial ownership" set forth in the General Rules and Regulations of the
Securities and Exchange Commission and may include securities owned by or for the individual's
spouse and minor children and any other relative who has the same home, as well as securities to
which the individual has or shares voting or investment power or has the right to acquire beneficial
ownership within 60 days after February 28, 1998.
(2) Information furnished by the directors and the Corporation.
(3) Unless otherwise indicated, shared voting power results from joint ownership with the referenced
persons.
(4) Includes 3,791 shares of which Mr. Bross shares voting power with his wife, Nancy J. Bross.
(5) Includes 4,710 shares for which Mr. Eisenhart is trustee of accounts for his father, S. Forry
Eisenhart, Sr. (3,000 shares), and for each of his three children (570 shares each).
(6) Includes 339 shares of which Mr. Elsner shares voting power with his wife, Joyce C. Elsner.
(7) Includes 16,196 shares of which Mr. Frock shares voting power with his wife, Joanne K. Frock.
(8) Includes 2,697 shares held by Mr. Hormel's wife, Monna B. Hormel.
(9) Includes 6,496 shares of which Mr. Noel shares voting power with his wife, Charmian E. Noel.
(10) Includes 22,502 shares held by Dr. Pisula's wife, Amy R. Pisula.
(11) Includes 2,211 shares of which Mr. Scovill shares voting power with his wife, Joanne M. Scovill.
(12) Includes 315 shares held by Mr. Test's wife, Ingeborg G. Test.
</TABLE>
3
<PAGE>
Election of Directors
The By-laws of the Corporation provide that the Corporation's business
shall be managed by its Board. Article III, Section 1 of the By-laws
provides that the number of directors shall not be less than five nor more
than twenty-five and that the members of the Board shall hold office for
three years or until their successors are duly elected and qualified. The
Board shall determine how many directors shall be elected at each Annual
Shareholders Meeting to serve during the ensuing year. The Board may,
within the limitations described above, increase the number of directors by
not more than two in any one year, provided that they serve for a term to
expire at a time designated by the Board. Every director shall be a
shareholder of the Corporation and he shall own, in his own right, as
tenant by the entirety with his spouse, or beneficially, one hundred shares
of the common stock of the Corporation. No person, except those who were
serving as directors as of June 2, 1982, shall be eligible for election
after he or she shall have obtained the age of 70. Pursuant to Article
III, Section 3 of the By-laws, vacancies on the Board may be filled by the
remaining members of the Board, though less than a quorum, and any director
or directors so elected shall hold office for the unexpired term of the
director or directors who he, she or they replace, and until his, her or
their successor or successors are elected by the shareholders and qualify.
On the date of the Annual Meeting, the Board will consist of twelve
members. Four (4) nominees are to be elected to hold office for a three-
year term and until their successors are duly elected and qualified. The
names of the nominees for election and the names of the other directors
whose terms continue following the Annual Meeting are shown below.
Following the Annual Meeting, the Board will consist of twelve members. It
is the intention of persons designated in the Proxy to vote "FOR" the
nominees listed. If any nominee or nominees should become unavailable for
election (which is not expected), the Proxies will vote "FOR" such other
individuals as the Board may recommend. All business experience shown for
each director is for a period of at least five years.
Management and the Board recommend the four (4) nominees for election
to the Board and intend to vote their shares "FOR" the nominees.
Nominees for Director Whose Term Expires in 2001 And Current
Directors Whose Term Expires in 1998
BERTRAM F. ELSNER, age 61, is President and Chief Executive Officer of
Elsner Engineering Works, Inc., which designs and manufactures automatic
rewinding machines and specialty machinery. He has served as Director of
the Bank since 1985 and of the Corporation since December 1985. Mr. Elsner
is Chairman of the Bank's Audit and Compliance Committee, and a member of
the Bank's Executive, and Building Committees. He is serving or has served
on the Bank's Loan Committee during the past year.
J. DANIEL FROCK, age 58, is co-owner and President of Frock Bros.
Trucking, Inc., which provides 48-state truck service to manufacturers and
shippers of industrial goods, food and agricultural products and consumer
wares. Prior to joining Frock Bros. Trucking, Inc., Mr. Frock was employed
by Hanover Wire Cloth Division of CCX, Inc., most recently as Vice
President of Operations. He has served as a Director of the Bank since
1985 and of the Corporation since December 1985. Mr. Frock is a member of
the Bank's Audit and Compliance, Trust, and Strategic Planning Committees.
He is serving or has served on the Bank's Loan Committee during the past
year.
GORDON A. HAALAND, PhD, age 57, is President of Gettysburg College.
Dr. Haaland was named as a Director of the Corporation and Bank in December
1997. He is a member of the Bank's Finance and Trust Committees. He
previously served on the Board of First New Hampshire Bancorp, in New
Hampshire for five years.
JOHN S. HOLLINGER, JR., age 55, is a Real Estate Broker and owner of
the Hollinger Group, Real Estate Co. He is active in real estate sales,
rentals, management, appraisals and land subdivision and development. He
is Vice Chairman of the Board of Directors of the Corporation and the Bank.
Mr. Hollinger has served as a Director of the Bank since 1978 and of the
Corporation since August 1983. He is Chairman of the Bank's Building
Committee, and a member of the Bank's Executive, and Trust Committees. He
is serving or has served on the Bank's Loan Committee during the past year.
4
<PAGE>
Directors to Continue in Office Until 1999
MICHAEL D. BROSS, age 44, is President of Berwick Enterprises, Inc.
which is the operating company for The Bridges Golf Club. He is also owner
of Stonewood Farms which operates turkey farms and raises cutting horses.
Prior to the establishment of Stonewood Farms and Berwick Enterprises, Mr.
Bross was employed by Round Hill Foods, Inc., most recently as President.
He is the son of Director Thomas M. Bross, Jr. Mr. Bross has served as a
Director of the Bank since 1987 and of the Corporation since May 1987. He
is a member of the Bank's Finance, and Audit and Compliance Committees. He
is serving or has served on the Bank's Loan Committee during the past year.
THOMAS M. BROSS, JR., age 76, is the former President and Chairman of
the Board of Round Hill Foods, Inc., New Oxford, Pennsylvania, a food
processor. He is the father of Director Michael D. Bross. Mr.
Bross has served as a Director of the Bank since 1973 and of the
Corporation since August 1983. He served as Vice Chairman of the Board of
Directors of the Corporation and the Bank from 1983 to 1997. He is a member
of the Bank's Finance, and Strategic Planning Committees. He is serving
or has served on the Bank's Loan Committee during the past year.
EARL F. NOEL, JR., age 52, is President of Yazoo Mills, Inc., a
manufacturer of paper tubes and cores, located in New Oxford, Pennsylvania.
Mr. Noel has served as a Director of the Bank and the Corporation since
September 1995. He is a member of the Bank's Finance, and Trust
Committees. He is or has served on the Bank's Loan Committee during the
past year.
J. BRADLEY SCOVILL, age 38, is Director, President and Chief Executive
Officer of the Corporation since January 1996 and of the Bank since
December 1994. He is an ex officio member of all committees of the Bank's
Board of Directors, with the exception of the Audit and Compliance
Committee. Mr. Scovill previously served as the Treasurer of the
Corporation and Chief Financial Officer of the Bank.
Directors to Continue in Office Until 2000
TERRENCE L. HORMEL, age 49, is President of KeyMan Distribution
Resources, a contract logistical services company; Secretary/Treasurer of
Keystone Distribution Center, a public warehousing and distribution
company; and Treasurer of Midlantic Transfer, Ltd. He is also Managing
Partner of Penntown Properties and Partner of Hormel Associates which are
commercial real estate development and management companies. All of these
companies are located in Hanover, Pennsylvania. He is the Treasurer of
Hanover Hospital and Hanover Healthcorp, Inc. and is Chairman of the York
County Industrial Development Corporation. Mr. Hormel is Chairman of the
Board of Directors of the Corporation and the Bank. Mr. Hormel has served
as a Director of the Bank since 1981 and of the Corporation since August
1983. He is Chairman of the Bank's Executive, Strategic Planning, and
Finance Committees. He is serving or has served on the Bank's Loan
Committee during the past year. He is an ex officio member of all
committees of the Bank's Board of Directors.
VINCENT P. PISULA, M.D., age 74, is a retired surgeon who practiced
general surgery in the Hanover area since 1959. He has business experience
in farming, land sales and development. Dr. Pisula has served as a
Director of the Bank since 1969 and of the Corporation since August 1983.
He is a member of the Bank's Audit and Compliance, Building, and Strategic
Planning Committees. He is serving or has served on the Bank's Loan
Committee during the past year.
CHARLES W. TEST, age 71, is Chairman of the Board of C.W. Test
Builder, Inc., general contractors (since 1958) and owner of C.W. Test
Orchards, land development. Mr. Test has served as a Director of the Bank
since 1973 and of the Corporation since August 1983. He is a member of the
Bank's Audit and Compliance, and Building Committees. He is serving or has
served on the Bank's Loan Committee during the past year.
S. FORRY EISENHART, JR., age 48, is President and Chief Executive
Officer of Eisenhart Wallcoverings Company and Eisenhart Corp., a
wallcovering manufacturer headquartered in Hanover, Pennsylvania. Mr.
Eisenhart has served as a Director of the Bank and the Corporation since
August 1993. He is Chairman of the Bank's Trust Committee, and a member of
the Bank's Executive, and Finance Committees. Mr. Eisenhart is serving or
has served on the Bank's Loan Committee during the past year.
5
<PAGE>
Board of Directors and Committees
The Corporation's Board met ten times during 1997. The Board of
Directors of the Bank met twelve times during 1997. During 1997, each
incumbent director attended at least 75 percent of the aggregate number
of meetings held by the Board of Directors of the Corporation and the Bank,
and the committees of which the director was a member.
The Corporation's Board has not provided for separate Audit,
Nominating and Compensation Committees. However, the normal functions of
such committees are carried out by the Board as a whole. Any shareholder
who desires to propose an individual for consideration by the Board as a
nominee for Director should submit a written proposal to the Secretary of
the Corporation in accordance with the Pennsylvania Business Corporation
Law of 1988, as amended.
The Board of Directors of the Bank has standing Executive, Audit and
Compliance, Trust, Finance, Strategic Planning and Building Committees.
The Bank also has a standing Loan Committee that rotates all of its
directors to serve for a period of at least three months each year.
Terrence L. Hormel, Chairman of the Board, is an ex officio member of all
Board committees for the Bank.
The Audit and Compliance Committee of the Bank met four times during
1997 to review reports presented by the internal auditor and by the loan
review and compliance officer. The Committee also reviews the annual audit
performed by the external auditors. The Committee makes suggestions to
management to improve internal control and to protect against improper
security for all assets and records. This Committee is comprised of
Directors B.F. Elsner, Chairman; M.D. Bross, J.D. Frock, V.P. Pisula, M.D
and C.W. Test.
Compensation of Directors
Directors of the Bank, including the Chairman of the Board, who are
not also employees, are entitled to fees at the rate of $1,500 per quarter,
$350 per regular Board Meeting and $150 for special Board Meetings and
Committee Meetings.
Terrence L. Hormel, as Chairman of the Board, receives an annual
retainer of $14,400. He receives no fees for Committee Meetings. Mr.
Hormel earned total fees of $24,900 during 1997. Aggregate fees paid to
all directors in 1997 were $151,500.
The Bank has Deferred Compensation Agreements with five current or
former directors. Under these agreements, participating directors elected
to forego receipt of director's fees for a period of five years in return
for a defined benefit over a ten year period. In order to account for
this benefit, the Bank is required to fund a liability which recognizes
the Bank's future contractual obligation to the participants. The Bank
is providing for cost recovery through the purchase of life insurance
policies covering the participants on which it is the owner and
beneficiary. Also, the Bank has Split Dollar Agreements with four
current directors who had previously participated in Deferred
Compensation Agreements. Under the Split Dollar Agreements, the
Bank agrees to purchase a life insurance policy for the participant until
age 65. This life insurance policy is then split to provide the
participant with an undefined amount of compensation over a ten year period
while the Bank maintains the policy in force to provide cost recovery.
Since there is no contractual obligation to provide a defined future
benefit, the Bank is not required to fund a liability on behalf of the
participant. The 1997 costs associated with the Deferred Compensation
and Split Dollar Agreements was $72,347.
6
<PAGE>
Compensation Committee Report
The Board has primary and ultimate responsibility for the governance
of the Corporation. The Board's fundamental task in discharging this
responsibility, which includes serving as steward for the shareholders'
investment and fiduciary for the customers' deposits, is to provide a
capable staff of executive officers, including the Chief Executive Officer.
The authority required to operate and manage the resources of the
Corporation is delegated to these officers in order to achieve the
stewardship and fiduciary goals established by the Board.
Compensation of executive officers, including the Chief Executive
Officer, is an essential aspect of the Board's governance responsibilities.
The Executive Committee of the Board is responsible for implementing the
Corporation's Executive Compensation Policy. This Policy is to provide and
maintain a salary and benefit program that rewards executive officers,
including the Chief Executive Officer, for service to the Corporation at a
level sufficient to attract and retain the appropriate quality individual
in each position.
The compensation range for each position is determined through
evaluation of internal and external equity, labor market conditions, and
specific responsibilities set forth in the position description. Specific
compensation for each officer, including the Chief Executive Officer, is
based primarily on the performance of the incumbent, as measured in the
annual performance review, with the goal of matching the officer's
compensation to his/her "value added" to the Corporation. This "value
added" has two components (1) the dollar value of adequately discharging
the duties of the office as measured by the pay scale for the position, and
(2) the extra value added by the incumbent's extraordinary effort and
results. Thus, the compensation for executive officers, including the
Chief Executive Officer, consists of base salary plus performance-based
incentives.
Performance-based incentives are determined within the framework of
the Corporation's Incentive Compensation Program. The Program is based
upon the achievement of targeted corporate financial objective(s) which are
established annually and in which all employees of the Corporation participate.
Incentive pools are created for varying staff and officer levels as a
function of base salaries. For option awards, a Black Scholes valuation
model is utilized. Specific awards are determined to recognize the value
of individual contributions during the year.
In 1997, both short- and long-term incentives were awarded. Short-
term incentives consisted of cash payments. Executive officers were not
eligible for cash awards in 1997. Long-term incentives consisted of stock
option awards. A total of 31,962 options were awarded, of which 4,600 stock
options were granted to Mr. Scovill, the Chief Executive Officer of the
Corporation and the Bank, based on the Board of Directors application of
the Program parameters and subjective assessment.
The Compensation Committee does not deem Section 162(m) of the
Internal Revenue Code (the "IRC") to be applicable to the Corporation at
this time. The Compensation Committee intends to monitor the future
application of Section 162(m) of the IRC to the compensation paid to its
executive officers and in the event that this section becomes applicable,
it is the intent of the Compensation Committee to amend the Corporation's
compensation plans to preserve the deductibility of the compensation
payable under such plans.
The following served as members of the Compensation Committee: Terrence
L. Hormel, Chairman, Thomas M. Bross, Jr., S. Forry Eisenhart, Jr., Bertram
F. Elsner, John S. Hollinger, Jr., and J. Bradley Scovill.
Compensation Committee Interlocks and Insider Participation
Mr. J. Bradley Scovill, President and Chief Executive Officer of the
Corporation and the Bank, is a member of the Executive Committee. As a
member of the Executive Committee, Mr. Scovill participated in discussions
relating to compensation of executive officers of the Bank but he did not
participate in discussions relating to his compensation.
7
<PAGE>
Executive Compensation
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
AWARDS PAYOUTS
OTHER
NAME AND ANNUAL RESTRICTED ALL OTHER
PRINCIPAL COMPEN- STOCK 0PTIONS/ LTIP COMPEN-
POSITION YEAR SALARY($) BONUS($) SATION($)(1) AWARDS($) SAR'S(#)(2) PAYOUTS($) SATION($)(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Bradley Scovill, 1997 134,829 --- 4,447 --- 4,600 --- 7,479
President and 1996 127,180 --- 2,915 --- 5,280 --- 7,204
Chief Executive 1995 120,000 12,000 6,865 --- 5,282 --- 3,375
Officer
<FN>
(1) For 1997, $2,556 was the cost of country club membership dues and $1,891 was the cost of company
provided automobile. For 1996, $1,665 was the cost of country club membership dues and $1,250 was
the cost of company provided automobile. For 1995, $4,688 was the cost of country club initiation
fees, $1,665 was the cost of country club membership dues and $512 was the cost of company provided
automobile.
(2) The number of options are adjusted for a 3 for 2 stock split on May 15, 1995.
(3) Consists of Bank of Hanover's contribution to the Hanover Bancorp, Inc. 401(k) Plan.
</TABLE>
8
<PAGE>
Option Grants and Fiscal Year End Values
<TABLE>
The following table shows all grants in 1997 of stock options to the executive officer named in the
Summary Compensation Table above. All grants were made under the Corporation's Omnibus Stock Plan.
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value at
Assumed Annual
Appreciation
Individual Grants for Option Term
% of
Number of Total
Securities Options/SARs
Underlying Granted to Exercise
Option/SARs Employees or Base
Granted in Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
J. Bradley Scovill, 1,200(1) 3.75% 18.50 01-01-07 20,151 48,645
President and Chief 3,400(2) 10.64% 22.75 12-31-07 42,172 123,276
Executive Officer
<FN>
(1) Options were issued on January 1, 1997 under the Omnibus Stock Plan and will become exercisable on
January 1, 2000 with no partial vesting prior to January 1, 2000. All options must be exercised
within ten years of the grant date or they expire.
(2) Options were issued on December 31, 1997 under the Omnibus Stock Plan and will become exercisable on
December 31, 2000 with no partial vesting prior to December 31, 2000. All options must be exercised
within ten years of the grant date or they expire.
</TABLE>
<TABLE>
The following table provides information concerning the option exercises during the last fiscal year
and the number and value of the unexercised options to purchase the Corporation's Common Stock granted to
the executive officer named in the Summary Compensation Table above.
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Fiscal Year-End(#) Options at Fiscal Year-End($)(2)
Shares
Acquired Value
Name on Exercise(#) Realized($) Exercisable Unexercisable(1) Exercisable Unexercisable(1)
<S> <C> <C> <C> <C> <C> <C>
J. Bradley Scovill --- --- 5,100 15,162 $ 18,258 $ 48,346
President and Chief
Executive Officer
<FN>
(1) Options are unexercisable because they have not yet vested under the terms of the Corporation's
Omnibus Stock Plan.
(2) Based on the market price per share as of December 31, 1997 ($22.75) and specific option exercise prices per share.
</TABLE>
9
<PAGE>
Shareholder Return Performance Graph
Set forth below is a line graph comparing the yearly change in the
cumulative total shareholder return on the Corporation's Common Stock
against the cumulative total return of the S & P 500 index and a selected
peer group for the period of five (5) years commencing on January 1, 1993,
and ended December 31, 1997. Shareholder return shown on the graph below
is not necessarily indicative of future performance.
<PERFORMANCE GRAPH OMITTED>
<THE FOLLOWING IS A DESCRIPTION OF THE PERFORMANCE GRAPH IN A TABULAR FORMAT>
<TABLE>
Comparison of Five Year Cumulative Total Return
<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Peer Group Index 100.00 142.84 164.98 180.51 203.84 295.22
Hanover Bancorp, Inc. 100.00 143.63 171.07 178.85 183.60 229.62
S&P 500 Index 100.00 110.02 111.51 153.26 188.36 251.12
<FN>
(1) Peer group information appearing above includes the following companies: ACNB Corp., CNB Financial
Corp., Citizens and Northern Corp., Drovers Bancshares Corp., First West Chester Corp., Franklin
Financial Services Corp., Penn Security Bank and Trust Company, Pennrock Financial Services, Penns
Woods Bancorp, Inc. , and Sterling Financial Corp. Such bank holding companies were originally
selected based on four criteria: total assets between $200 million and $750 million; market
capitalization greater than $25 million; headquarters located in Pennsylvania; and not listed on
NASDAQ national market.
Retirement Benefits
Pension Plan
On January 19, 1996, the Board of Directors authorized an amendment to
curtail the Bank's defined benefit pension plan. Under the curtailment,
pension benefits were frozen as of March 31, 1996, as further explained
below. On September 16, 1996, approximately two-thirds of the plan's
accumulated benefit obligation was settled via the purchase of annuity
contracts. The remainder of the plan will be administered in frozen status
until such time as management deems termination and final settlement
appropriate.
The plan provides an annual benefit equal to 1% of the employee's
average pay for each year of service (basic portion) plus 0.65% of his or
her average pay in excess of the social security integration level for each
year of service up to a maximum of 35 years (excess portion), paid in equal
monthly installments. These computations were performed as of the March
31, 1996 curtailment date and the individual vested pension benefits were
frozen at that time. As such, average pay represents the employee's
average pay during his or her five years of employment prior to the
curtailment date. The social security integration level is defined in the
Plan so as to be an estimate of the average social security maximum taxable
wage base during the employee's working lifetime. The following table
illustrates this benefit structure.
</TABLE>
<TABLE>
<CAPTION>
Final Average Pay Annual Pension Upon Retirement
5 Years of Employment at Age 65 (in 1996)
Prior to Curtailment Years of Service Indicated
5 Years 15 Years 25 Years 35 Years
<S> <C> <C> <C> <C>
$20,000 $ 1,000 $ 3,000 $ 5,000 $ 7,000
40,000 2,404 7,211 12,019 16,826
80,000 5,704 17,111 28,519 39,926
100,000 7,354 22,061 36,769 51,476
120,000 9,004 27,011 45,019 63,026
140,000 10,654 31,961 53,269 74,576
160,000 11,479 34,436 57,394 80,351
</TABLE>
10
<PAGE>
In general, benefits which were vested as of the curtailment date are
payable upon a participant's retirement, disability or death.
While in frozen status, the funding policy of the Bank will be to make
contributions as necessary to meet the minimum funding requirements set
forth in the Employee Retirement Income Security Act of 1974. Individual
costs to fund accumulated pension benefits are calculated on an estimated
basis since the Employee Pension Plan's funding method uses aggregate
amounts, which are averaged over all funded participants.
The covered compensation of Mr. J. Bradley Scovill, President and
Chief Executive Officer of the Corporation and the Bank was $93,263, which
represents his average salary over the five years of his employment with
the Corporation and the Bank prior to the curtailment date. Mr.Scovill had
four years of credited service under the plan as of the curtailment date.
401(k) Plan
Effective January 1, 1985, Bank of Hanover made available to eligible
employees a 401(k) Plan (the "Plan") designed to give employees a source of
financial security and an investment opportunity. The Plan is intended to
comply with the requirements of Section 401(k) of the Internal Revenue Code
and is subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). The Plan is administered by the Bank's Trust Department
which also acts as the Trustee of the Plan.
All employees of the Corporation and its subsidiary who have completed
at least one year of employment as defined in the Plan and are 21 years of
age are eligible to participate in the Plan. In each pay period a
participant may elect to defer up to 15 percent of base salary/wages and to
have that amount contributed to the Plan by the Bank on the participant's
behalf, up to the maximum allowable contribution as established by the
Internal Revenue Service. In addition, contributions made on behalf of
"highly compensated" employees may be further restricted as provided for in
the Internal Revenue Code (Code). The total amount of a participant's
contributions for a given month is allocated to the Plan according to its
terms. Except as may be restricted by the Code, a matching contribution is
made by the Bank equal to 50 percent of the participant's contributions for
such month, up to four percent of the participant's base salary/wages.
Beginning in 1996, the Plan was amended to provide for discretionary
contributions by the Bank to all eligible employees. All funds are held in
trust and are invested by the Trustee in accordance with the participant's
directions within the scope of alternative investments available under the
Plan. All elective, matching and discretionary contributions are 100
percent vested upon placement into the Plan.
Personal after-tax voluntary contributions made prior to January 1,
1988, may be withdrawn at any time upon the required notice. Participants
may no longer make personal after-tax contributions to the Plan. Amounts
contributed to the Plan on the participant's behalf, as set forth in the
preceding paragraph, may be withdrawn only in the event of financial
hardship; however, any such withdrawal may not include any earnings on pre-
tax contributions credited to the participant's account after December 31,
1988. Upon termination of employment or upon attaining the age of 59 1/2,
a participant's entire interest in the Plan becomes payable. A participant
may receive a lump sum distribution or may, in certain circumstances, elect
to defer or receive installment payments.
Employer matching contributions and a discretionary contribution made
to all employees of the Corporation and the Bank during 1997 totaled
$205,000.
11
<PAGE>
Severance Agreement
On March 22, 1995, the Corporation, the Bank and J. Bradley Scovill,
President and Chief Executive Officer of the Corporation and the Bank,
entered into a severance agreement which is triggered upon a change of
control of the Corporation and the Bank (the "Agreement"). The Agreement
provides that in the event that within one year following a change of
control of the Corporation and/or the Bank (as defined in the Agreement),
Mr. Scovill is discharged other than for cause (as defined in the
Agreement), or Mr. Scovill resigns from the successor to the Corporation
and/or the Bank for good reason (as defined in the Agreement), he will
receive, monthly, an amount equal to one-twelfth of his base annual salary
that is being paid to him on January 1st of the year in which the change of
control shall occur for a period of 18 months from the date of his discharge
(for reasons other than for cause) or resignation (for good reason). This 18
month period is the severance benefit period. In addition, Mr. Scovill will
receive, during the severance benefit period, medical, health, accident and
disability insurance and a survivor's income benefit in form, substance and
amount which, is in each case, substantially equivalent to that provided to
him before the commencement of the severance benefit period.
Under the terms of the Agreement, Mr. Scovill will be required to
mitigate the amount of any payment or benefit provided him as described
above by seeking employment in a substantially similar position,
and the successor to the Corporation and the Bank will be entitled
to setoff against the amount of any payment or benefit provided to Mr.
Scovill, pursuant to the Agreement, by any amounts earned by Mr. Scovill in
other employment during the severance benefit period.
Officers of the Corporation
<TABLE>
<CAPTION>
Number Shares
Employee Employee Beneficially
Name Age Position Since Since Owned
<S> <C> <C> <C> <C> <C>
Terrence L. Hormel 49 Chairman of the Board 1990 1981 16,978
John S. Hollinger, Jr. 55 Vice Chairman 1998 1978 8,712
J. Bradley Scovill 38 President and 1996 1991 8,000
Chief Executive Officer
Thomas J. Paholsky 36 Treasurer 1996 1996 231
Gerald M.Warner 63 Secretary
/Assistant Treasurer 1991 1961 1,737
</TABLE>
12
<PAGE>
Principal Officers of the Bank
<TABLE>
<CAPTION>
Number Shares
Employee Employee Beneficially
Name Age Position Since Since Owned
<S> <C> <C> <C> <C> <C>
Terrence L. Hormel 49 Chairman of the Board 1991 1981 16,978
John S. Hollinger, Jr. 55 Vice Chairman 1998 1978 8,712
J. Bradley Scovill 38 President and Chief 1994 1991 8,000
Executive Officer
Chad M. Clabaugh 36 Executive Vice President 1996 1981 274
Sales Group
William J. Callaghan 38 Senior Vice President 1997 1997 ---
Operations
Jeffrey K. Dice 49 Senior Vice President 1986 1982 ---
Credit Services
Jacquelyn A. Lebow 40 Senior Vice President 1993 1993 128
Director of Marketing
Thomas J. Paholsky 36 Senior Vice President 1996 1996 231
Chief Financial Officer
James A. Smiley 45 Senior Vice President 1997 1997 612
Trust/Investment Services
Gerald M. Warner 63 Vice President
Comptroller 1984 1961 1,737
Cashier/Secretary 1991
Carol M. Wuenschel 44 Senior Vice President 1994 1994 242
Director of Human Resources
</TABLE>
13
<PAGE>
Certain Transactions
It is not within the policies or practices of the Corporation or of
the Bank to provide personal benefits to principal officers or directors
(except as a measure of reasonable compensation for services). There are no
"fringe benefits" paid or payable to any such person that are not available
generally to all other salaried employees. To facilitate the performance of
his duties, the President and CEO of the Bank has been furnished with a
company automobile and membership to a local country club. This officer
pays all charges attributed to his personal use thereof.
The Corporation and the Bank have engaged in, and expect to continue to
engage in, transactions in the ordinary course of business with many of its
directors and officers and their associates on the same terms, including
interest rates and collateral on loans, as those prevailing at the time for
comparable transactions with others. These transactions do not involve more
than the normal risk of collection, nor do they present other unfavorable
features.
The largest aggregate amount of indebtedness outstanding at any time
during fiscal year 1997 to officers and directors of the Corporation and
the Bank was $2,853,269. The aggregate amount of indebtedness outstanding
as of the latest practicable date, January 31, 1998, to the above described
group was $2,739,605 approximately 8.00 percent of the total equity capital
of the Corporation.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Corporation's officers and directors, and persons who own more
than ten percent (10%) of the registered class of the Corporation's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Officers, directors, and
greater than ten percent (10%) shareholders are required by SEC regulation
to furnish the Corporation with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such Forms received by it,
or on written representation from reporting persons that no Forms 5 were
required for those persons, the Corporation believes that during the period
January 1, 1997 through December 31, 1997, its officers and directors were
in compliance with all Section 16 filing requirements applicable to them,
with the exception of Director Eisenhart for whom the activity for one
month was reported late on a Form 5.
Legal Proceedings
The nature of the Corporation's and the Bank's business generates a
certain amount of litigation involving matters arising in the ordinary
course of business. However, in the opinion of management of the
Corporation and the Bank, there are no proceedings pending to which the
Corporation and/or the Bank are a party or to which its property is subject
which, if determined adversely to the Corporation and the Bank, would be
material in relation to the Corporation's and the Bank's undivided profits
or financial condition, nor are there any proceedings pending other than
ordinary routine litigation incidental to the business of the Corporation
and the Bank. In addition, no material proceedings are pending or are
known to be threatened or contemplated against the Corporation and the Bank
by government authorities or others.
1999 Shareholders Proposals
Proposals of security holders intended to be presented at the 1999
Annual Meeting must be received by the Chairman of the Board, 33 Carlisle
Street, Hanover, Pennsylvania 17331, by November 30, 1998, for inclusion in
the Corporation's Proxy Statement and Proxy form related to the Meeting.
14
<PAGE>
Annual Report
A copy of the Corporation's Annual Report is enclosed with this Proxy
Statement.
Other Matters
The Board knows of no other matters to be presented for consideration
at the Annual Meeting other than those described in the accompanying Notice
of Annual Meeting of Shareholders. If any other matters shall properly
come before the Meeting, it is the intention of the persons named in the
accompanying Proxy to vote on such matters in accordance with their best
judgment.
Independent Certified Public Accountants
Ernst & Young LLP, Certified Public Accountants of Harrisburg,
Pennsylvania, has been retained as the Corporation's principal accountants
for the year ending December 31, 1998.
A representative of Ernst & Young LLP will be present at the Annual
Shareholders Meeting and will be available to respond to appropriate
questions.
ADDITIONAL INFORMATION
UPON WRITTEN REQUEST OF ANY SHAREHOLDER, A COPY OF THE CORPORATION'S
FORM 10-K FOR ITS FISCAL YEAR ENDED DECEMBER 31, 1997, INCLUDING THE
FINANCIAL STATEMENTS AND THE SCHEDULES ATTACHED THERETO, REQUIRED TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 13a-1
UNDER THE SECURITIES EXCHANGE ACT OF 1934 AS AMENDED, MAY BE OBTAINED,
WITHOUT CHARGE, FROM GERALD M. WARNER, SECRETARY, HANOVER BANCORP, INC., 33
CARLISLE STREET, HANOVER, PENNSYLVANIA 17331.
ANNUAL DISCLOSURE STATEMENT
Notice of availability
Financial information about the Bank is available to our customers,
shareholders and the general public on request.
In accordance with Federal regulations to facilitate more informed decision-
making by depositors and the general public, we will provide an ANNUAL
DISCLOSURE STATEMENT containing financial information for the last two
years. This information will be updated each year as of March 31.
To Obtain A Copy
To obtain a copy of the ANNUAL DISCLOSURE STATEMENT, please contact:
Gerald M. Warner
Secretary
HANOVER BANCORP, INC
33 Carlisle Street
Hanover, Pennsylvania 17331
(717) 637-2201
15
<PAGE>
HANOVER BANCORP, INC.
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 21, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Hanover Bancorp, Inc., Hanover,
Pennsylvania, hereby constitutes and appoints Dorothy Crabbs and John
Stawski and each or any of them, Proxies of the undersigned, with full
power of substitution, to vote all the shares of Hanover Bancorp, Inc. (the
"Corporation") that the undersigned may be entitled to vote at the Annual
Meeting of Shareholders of the Corporation to be held at the Hanover
Country Club, Lincolnway East, R.D. 1, Abbottstown, Pennsylvania 17301, on
Tuesday, April 21, 1998, at 9:30 a.m., prevailing time, and at any
adjournment or postponement thereof as follows:
1. Election of Directors: Bertram F. Elsner, J. Daniel Frock, Dr. Gordon
A. Haaland and John S. Hollinger, Jr. to serve for a three (3) year term.
____ FOR all nominees listed above (except as marked to the contrary below)
____ WITHHOLD AUTHORITY to vote for all nominees listed above
(Instruction: to withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below)
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENT OR
POSTPONEMENT THEREOF. (see other side)
<PAGE>
HANOVER BANCORP, INC.
PROXY
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES LISTED.
Dated:____________________________, 1998
___________________________________
___________________________________
Signature(s)
Number of Shares Held of Record on February 28, 1998: _________
THIS PROXY MUST BE DATED, SIGNED BY THE SHAREHOLDER AND RETURNED PROMPTLY
TO THE CORPORATION IN THE ENCLOSED ENVELOPE. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE. IF
MORE THAN ONE TRUSTEE, ALL SHOULD SIGN. IF STOCK IS HELD JOINTLY, EACH
OWNER SHOULD SIGN.
