HANOVER BANCORP, INC.
33 Carlisle Street
Hanover, Pennsylvania 17331
March 26, 1999
To Our Shareholders:
On behalf of the Board of Directors and management, I cordially invite you
to attend the 1999 Annual Meeting of Shareholders of Hanover Bancorp, Inc.,
the holding company for Bank of Hanover and Trust Co. The annual meeting
will be held at the Hanover Country Club, Lincolnway East, R.D. 1,
Abbottstown, Pennsylvania, on Tuesday, April 27, 1999, at 9:30 a.m., E.S.T.
Notice of the annual meeting, a proxy statement, a proxy, an annual
meeting reservation form and the 1998 Annual Report of Hanover Bancorp,
Inc. are enclosed with this letter. 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 shareholders as to the affairs of the Corporation and its banking
subsidiary. Following the presentation, we will respond to questions on
any returned question cards. Such cards are included with this 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 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 for your convenience. If you attend
the meeting and wish to vote in person, but have already returned a proxy,
you must give written notice to the Secretary of the Corporation so that
your proxy will be replaced by any ballot that you submit at the meeting.
Very truly yours,
/s/Terrence L. Hormel
Terrence L. Hormel
Chairman of the Board
1
<PAGE>
HANOVER BANCORP, INC.
33 Carlisle Street
Hanover, PA 17331
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TIME 9:30 a.m. E.S.T., on Tuesday, April 27, 1999
PLACE Hanover Country Club
Lincolnway East R.D. 1
Abbottstown, PA 17301
ITEMS OF BUSINESS 1. The election of 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. The transaction of such other business as may
properly come before the annual meeting and any
adjournment or postponement thereof.
RECORD DATE Shareholders of record at the close of
business on February 28, 1999 are entitled to vote
at the meeting.
ANNUAL REPORT A copy of the Corporation's annual report
for the fiscal year ended December 31, 1998 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 Thomas J. Paholsky,
Secretary, 33 Carlisle Street, Hanover, Pennsylvania
17331, telephone (717) 637-2201.
PROXY VOTING It is important that your shares are represented at
this meeting regardless of the number of shares that
you own. PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY. A postage paid envelope is provided
for your convenience. 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.
March 26, 1999 By Order of the Board of Directors,
/s/Thomas J. Paholsky
Thomas J. Paholsky
Secretary
2
<PAGE>
HANOVER BANCORP, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 27, 1999
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") of proxies to be voted at the annual meeting of shareholders
of the Corporation to be held on Tuesday, April 27, 1999, at 9:30 a.m.,
E.S.T., 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 are first being
sent to shareholders of the Corporation on or about March 26, 1999, to
shareholders of record as of February 28, 1999. 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
Shareholders of common stock may vote shares in person or by proxy.
Shareholders are entitled to one vote per share and do not have cumulative
voting rights in the election of directors.
If the enclosed proxy is properly executed and returned, the shares
represented by it will be voted in accordance with the directions specified.
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, the shares represented by proxies at such
meeting will be voted in the sole discretion of the proxyholders.
Proxies are being solicited by and on behalf of the Board of Directors
of the Corporation. 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 paid by the Corporation.
Directors, officers and employees of the Corporation or the Bank may, with no
additional compensation, use the telephone and other means of communication to
request that shareholders 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.
Revocability of Proxy
If the enclosed proxy is properly executed and returned, it
nevertheless may be revoked at any time prior to its exercise by the following
methods: (1) giving written notice of revocation to Thomas J. Paholsky,
Secretary, Hanover Bancorp, Inc., 33 Carlisle Street, Hanover, Pennsylvania
17331, (2) executing a later-dated proxy and giving written notice thereof to
the Secretary of the Corporation, or (3) voting in person at the annual
meeting after giving written notice to the Secretary of the Corporation.
3
<PAGE>
Voting Securities and Record Date
The close of business on February 28, 1999, 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
9,000,000 shares of common stock, par value $.83 per share and 2,000,000
shares of preferred stock, par value $2.50 per share. At the close of
business on February 28, 1999, the Corporation had outstanding 3,941,375
shares of common stock and no shares of preferred stock. On all matters,
common stockholders are 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 for director receiving the highest number of
votes will be elected.
Principal Owners of the Corporation's Stock
As of February 28, 1999, the following shareholder of record is known
by the Board of Directors to be the beneficial owner of more than five percent
(5%) of the Corporation's outstanding common stock:
<TABLE>
<CAPTION>
Name of Individual Amount and Nature of Percent
or Identity of Group Beneficial Ownership of Class
<S> <C> <C>
Bank of Hanover and Trust Co. 434,770 11.03%
25 Carlisle Street
Hanover, PA 17331
</TABLE>
4
<PAGE>
Stock Ownership by the Corporation's
Directors, Nominees and Principal Officers
The following table sets forth information as of February 28, 1999,
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.
<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. 159,670 4.05%
Michael D. Bross 10,108 (4) .26%
S. Forry Eisenhart, Jr. 17,943 (5) .46%
Bertram F. Elsner 8,533 (6) .22%
J. Daniel Frock 23,282 (7) .59%
Gordon A. Haaland, PhD 1,070 (8) .03%
Stewart E. Hartman, Jr. 393 .01%
Terrence L. Hormel 23,257 (9) .59%
Earl F. Noel, Jr. 10,117 (10) .26%
J. Bradley Scovill 13,606 (11) .35%
Charles W. Test 16,499 (12) .42%
All directors and principal
officers of the Corporation
as a group (18 persons) 287,571 7.30%
<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, 1999.
(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 5,054 shares of which Mr. Bross shares voting power with his
wife, Nancy J. Bross.
(5) Includes 6,280 shares for which Mr. Eisenhart is trustee of accounts
for: his father, S. Forry Eisenhart, Sr. (4,065 shares),
and for each of his three children (772 shares each).
(6) Includes 462 shares of which Mr. Elsner shares voting power with his
wife, Joyce C. Elsner.
(7) Includes 21,945 shares of which Mr. Frock shares voting power with
his wife, Joanne K. Frock.
(8) Dr. Haaland shares voting power with his wife, Carol E. Haaland.
(9) Includes 3,596 shares held by Mr. Hormel's wife, Monna B. Hormel.
(10) Includes 8,661 shares of which Mr. Noel shares voting power with his
wife, Charmian E. Noel.
(11) Includes 3,812 shares of which Mr. Scovill shares voting power with
his wife, Joanne M. Scovill.
(12) Includes 429 shares held by Mr. Test's wife, Ingeborg G. Test.
</TABLE>
5
<PAGE>
Election of Directors
The by-laws of the Corporation provide for the Board of Directors to
manage the Corporation's business. Article III, Section 1 of the by-laws
provides that the number of directors not be less than five (5) nor more than
twenty-five (25) and that the members of the Board hold office for three years
and until their successors are duly elected and qualified. The Board
determines the number of directors to 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 (2) in any one year, provided that the directors serve for a term to
expire in accordance with the by-laws. Every director shall be a shareholder
of the Corporation and shall own, either outright, as tenant by the entirety
with their spouse, or beneficially, one hundred (100) 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
obtains 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,
even if 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 eleven
(11) 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 and certain information concerning the nominees for election and the
other directors whose terms continue following the annual meeting are shown
below. Following the annual meeting, the Board will consist of eleven (11)
members. The proxyholders will vote "FOR" the nominees listed. If any
nominee becomes unavailable for election (which is not expected), the
proxyholders 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.
Current Directors Whose Term Expires in 1999 and
Nominees for Director Whose Term Expires in 2002
MICHAEL D. BROSS, age 45, 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
Corporation and the Bank since May 1987. He is a member of the Bank's
Building Committee. He is serving or has served on the Bank's Loan Committee
during the past year.
THOMAS M. BROSS, Jr., age 77, 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 Corporation since August 1983 and the Bank since
1973. He served as Vice Chairman of the Board of Directors of the Corporation
and the Bank from 1983 to 1997. He is serving or has served on the Bank's
Loan Committee during the past year.
EARL F. NOEL, Jr., age 53, 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 Corporation and the Bank since
September 1995. He is a member of the Bank's Finance, and Investment
Services Committees. He is or has served on the Bank's Loan Committee during
the past year.
6
<PAGE>
J. BRADLEY SCOVILL, age 39, has been a 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 the
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 and Secretary/Treasurer of
Keystone Distribution Center, a public warehousing and distribution company.
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 Chairman of the Board of Trustees at Hanover Hospital and a Trustee at
Hanover Healthcorp, Inc. and is past Chairman of the York County Industrial
Development Corporation. Mr. Hormel has served as the Chairman of the Board
of Directors of the Corporation since 1991 and the Bank since 1990. Mr.
Hormel has served as a Director of the Corporation since August 1983 and the
Bank since 1981. He is Chairman of the Bank's Executive, 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.
CHARLES W. TEST, age 72, 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 Corporation since 1983
and the Bank since 1973. He is Chairman of the Bank's Building Committee
and a member of the Bank's Audit and Compliance Committee. He is serving or
has served on the Bank's Loan Committee during the past year.
S. FORRY EISENHART, Jr., age 49, is President and Chief Executive
Officer of Eisenhart Wallcoverings Company and Eisenhart Corp., a
wallcoverings manufacturer and distributor headquartered in Hanover,
Pennsylvania. Mr. Eisenhart has served as a Director of the Corporation and
Bank since August 1993. He is Chairman of the Bank's Investment Services
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.
Directors to Continue in Office Until 2001
BERTRAM F. ELSNER, age 62, 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 Vice Chairman of
the Board of Directors of the Corporation and the Bank since 1998. He has
served as Director of the Corporation and the Bank 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 59, 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 Corporation and the Bank since
December 1985. Mr. Frock is a member of the Bank's Audit and Compliance, and
Investment Services Committees. He is serving or has served on the Bank's
Loan Committee during the past year.
GORDON A. HAALAND, PhD, age 58, is the President of Gettysburg College.
He previously served on the Board of First New Hampshire Bancorp in New
Hampshire for five years. Dr. Haaland has served as a Director of the
Corporation and Bank since December 1997. He is a member of the Bank's
Finance, and Investment Services Committees. He is serving or has served on
the Bank's Loan Committee during the past year.
7
<PAGE>
STEWART E. HARTMAN, Jr., age 67, is President of Rutter's Farm Stores
and Corporate Officer of Rutter's Corporations. Rutter's Farm Stores
operates 53 convenience stores in Pennsylvania and Maryland. Mr. Hartman was
named as a Director of the Corporation and Bank in October 1998. 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.
Board of Directors and Committees
The Corporation's Board met nine (9) times in 1998. The Board of
Directors of the Bank met twelve (12) times in 1998. During 1998, 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 maintains the following standing
committees: Executive, Audit and Compliance, Investment Services, Finance, and
Building. The Bank also has 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 of the
Bank's committees.
The Bank's Audit and Compliance Committee met four (4) times during
1998 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, J.D. Frock, S.E. Hartman, Jr. 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 $24,250 during 1998. Aggregate fees paid to all
directors in 1998 were $147,400.
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 of which the Bank 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 1998 costs associated with the deferred compensation and split dollar
agreements were $73,080.
8
<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 Board
delegates to these executive officers the necessary authority to operate and
manage the Corporation's resources to achieve the Board's stewardship and
fiduciary goals.
Compensation of executive officers, including the Chief Executive
Officer, is an essential aspect of the Board's governance responsibilities.
The Boards' Executive Committee implements the Corporation's Executive
Compensation Policy. This policy provides and maintains a salary and benefit
program that rewards executive officers for service to the Corporation at a
level sufficient to attract and retain in each position the appropriate
quality individual.
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 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 or her "value added" to the
Corporation. This "value added" is comprised of 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 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 by corporate employees of targeted annual corporate financial
objectives. Incentive pools exist for all staff and officers as a component
of base salary. A Black Scholes valuation model is utilized for option
awards. Specific awards are determined to recognize the value of individual
contributions during the year.
In 1998, the Corporation awarded both short- and long-term incentives.
Short-term incentives consisted of cash payments. Long-term incentives
consisted of stock option awards. A total of 30,193 options were awarded, of
which 8,133 stock options were granted to Mr. Scovill, the Chief Executive
Officer of the Corporation and the Bank. The Board of Directors based this
award on the program parameters and its subjective assessment.
The Compensation Committee does not deem Section 162(m) of the Internal
Revenue Code to be applicable to the Corporation at this time. The committee
will monitor the future application of Section 162(m) to the compensation paid
to its executive officers and in the event that this section becomes
applicable, the committee intends to amend the Corporation's compensation
plans to preserve the deductibility of the compensation payable under such
plans.
The following directors served as members of the Compensation
Committee: T.L. Hormel, Chairman, S. F. Eisenhart, Jr., B. F. Elsner, and J.
B. 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.
9
<PAGE>
EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
AWARDS PAYOUTS
NAME AND OTHER ANNUAL RESTRICTED ALL OTHER
PRINCIPAL COMPEN- STOCK OPTIONS/ LTIP COMPEN-
POSITION YEAR SALARY ($) BONUS ($) SATION ($) AWARDS ($) SAR'S (#) (1) PAYOUTS ($) SATION ($)(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Bradley Scovill, 1998 161,866 12,000 4,899 --- 8,133 --- 8,202
President and 1997 134,829 --- 4,447 --- 6,133 --- 7,479
Chief Executive 1996 127,180 --- 2,915 --- 7,040 --- 7,204
Officer
<FN>
(1) The number of options are adjusted for a 4-for-3 stock split
effective June 1, 1998
(2) Consists of Bank of Hanover's contribution to the Hanover Bancorp,
Inc. 401(k) Plan.
</TABLE>
Option Grants and Fiscal Year End Values
The following table shows all grants in 1998 of stock options to the
executive officer named in the summary compensation table above. All grants
were made under the Corporation's Omnibus Stock Plan.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential
Realizable Value at
Assumed Annual
Appreciation
Individual Grants for Option Term
% of
Number of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees or Base
Granted in Fiscal Price Expiration
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
J. Bradley Scovill, 6,133 (1) 20.31% 17.06 01-01-08 60,700 146,700
President and Chief 2,000 (2) 6.62% 17.38 12-31-08 21,900 55,400
Executive Officer
<FN>
(1) Options were issued on January 1, 1998 under the Omnibus Stock Plan
and will become exercisable on January 1, 2001 with no partial vesting
prior to January 1, 2001. All options must be exercised within ten years
of the grant date or they expire.
(2) Options were issued on December 31, 1998 under the Omnibus Stock Plan
and will become exercisable on December 31, 2001 with no partial vesting
prior to December 31, 2001. All options must be exercised within ten years
of the grant date or they expire.
</TABLE>
10
<PAGE>
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.
<TABLE>
<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 --- --- 13,842 21,306 43,574 33,538
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, 1998 ($17.38)
and specific option exercise prices per share.
</TABLE>
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 representative indices and a selected peer
group for the period of five (5) years commencing on January 1, 1994, and
ended December 31, 1998. Shareholder return shown on the graph is not
necessarily indicative of future performance.
<TABLE>
Comparison of Five Year Cumulative Total Return
<CAPTION>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Hanover Bancorp, Inc. 100.00 119.17 118.69 121.70 152.05 158.10
Peer Group Index (1) 100.00 115.65 126.65 143.03 205.86 271.86
NASDAQ Bank Index (2) 100.00 104.56 151.42 191.02 312.48 275.70
Russell 2000 Index (3) 100.00 96.82 122.19 140.23 169.00 163.18
S&P 500 Index 100.00 99.26 139.31 171.21 228.26 293.36
<FN>
(1) Peer group information 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.
(2) An additional broad-based index of bank common stocks traded on the
NASDAQ National Market System.
(3) A more relevant index encompassing a broader composition of small cap
stocks than the S & P 500 Index.
</TABLE>
11
<PAGE>
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 and vested as of March 31, 1996. On September
16, 1996, approximately two thirds of the plan's accumulated benefit
obligation was settled via the purchase of annuity contracts. The retirement
plan was terminated as of July 24, 1998 and all benefit obligations were
settled through the distribution of plan assets by December 31, 1998.
401(k) Plan
Effective January 1, 1985, the Bank made available a 401(k) Plan to
eligible employees. The plan was 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. The
plan is administered by the Bank's Investment Services Group which also acts
as the trustee of the plan.
All employees of the Corporation and the Bank 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% 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. 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
Internal Revenue Code, a matching contribution is made by the Bank equal to
50% of the participant's contributions for such month, up to 4% 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 investment alternatives
available under the plan. All elective, matching and discretionary
contributions are 100% 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 described above, 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 1998 totaled $212,000.
12
<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 provides that if Mr. Scovill is
discharged other than for cause, or Mr. Scovill resigns from the successor to
the Corporation and/or the Bank for good reason within one year following a
change of control of the Corporation and/or the Bank (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 occurs. These monthly payments will continue 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. These benefits will be equivalent in form,
substance and amount 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, under
the terms of the agreement, by any amounts earned by Mr. Scovill in other
employment during the severance benefit period.
13
<PAGE>
Officers of the Corporation
<TABLE>
<CAPTION>
Age Director or Number Shares
Employee as of Officer Employee Beneficially
Name March 26, 1999 Position Since Since Owned
<S> <C> <C> <C> <C> <C>
Terrence L. Hormel 49 Chairman of the Board 1989 1983 23,257
Bertram F. Elsner 62 Vice Chairman 1998 1985 8,533
J. Bradley Scovill 39 President and 1991 1991 13,606
Chief Executive Officer
Thomas J. Paholsky 37 Treasurer/Secretary 1996 1996 1,036
</TABLE>
Principal Officers of the Bank
<TABLE>
<CAPTION>
Age Director or Number Shares
as of Officer Employee Beneficially
Name March 26, 1999 Position Since Since Owned
<S> <C> <C> <C> <C> <C>
Terrence L. Hormel 49 Chairman of the Board 1989 1981 23,257
Bertram F. Elsner 62 Vice Chairman 1998 1985 8,533
J. Bradley Scovill 39 President and Chief 1991 1991 13,606
Executive Officer
Chad M. Clabaugh 37 Executive Vice President 1991 1981 33
Sales Group
Thomas J. Paholsky 37 Executive Vice President 1996 1996 1,036
Finance and Technology Group
Jeffrey K. Dice 50 Senior Vice President 1986 1982 849
Credit Services
Jacquelyn A. Lebow 41 Senior Vice President 1993 1993 259
Director of Marketing
Jeffrey J. Zunic 35 Senior Vice President 1998 1998 133
Trust/Investment Services
Candy A. Sneeringer 28 Vice President 1998 1989 150
Director of Human Resources
John T. Weber 41 Vice President 1998 1989 633
Internal Auditor
</TABLE>
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 Chief Executive Officer of the Bank has been furnished with
a company automobile and a membership to a local country club. This officer
pays all charges attributed to his personal use of these items.
14
<PAGE>
The Corporation and the Bank have engaged in, and expect to continue to
engage in, transactions in the ordinary course of business with 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 1998 to officers and directors of the Corporation and the
Bank was $4,037,490. The aggregate amount of indebtedness outstanding as of
the latest practicable date, January 31, 1999, to the above described group
was $4,109,826, approximately 11.04% 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 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. Officers, directors, and greater than ten percent (10%)
shareholders are required by SEC regulation to furnish the Corporation with
copies of all filed Section 16(a) forms.
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, 1998, through December 31, 1998, its officers and directors were in
compliance with all Section 16(a) filing requirements applicable to them, with
the exception of Director Hartman 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.
No proceedings are 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.
2000 Shareholders Proposals
Proposals of security holder to be presented at the 2000 Annual Meeting
must be received by the Chairman of the Board, 33 Carlisle Street, Hanover,
Pennsylvania 17331, by November 20, 1999, for inclusion in the Corporation's
proxy statement and proxy related to the meeting.
Annual Report
A copy of the Corporation's 1998 Annual Report is enclosed with this
proxy statement.
15
<PAGE>
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, the proxyholders will vote on such matters using 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, 1999.
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
annual report and Form 10-K for its fiscal year ended December 31, 1998,
including the financial statements and the attached schedules, required to be
filed with the Securities and Exchange Commission pursuant to rule 13a-1 under
the Securities Exchange Act of 1934, may be obtained, without charge, from
Thomas J. Paholsky, Secretary, Hanover Bancorp, Inc., 33 Carlisle Street,
Hanover, Pennsylvania 17331.
16
<PAGE>
HANOVER BANCORP, INC.
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 27, 1999
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 27, 1999, at 9:30 a.m., E.S.T., and at any adjournment or
postponement thereof as follows:
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)
17
<PAGE>
HANOVER BANCORP, INC. PROXY
1. Election of Directors: Michael D. Bross, Thomas M. Bross, Jr., Earl F.
Noel, Jr., and J. Bradley Scovill 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)
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 ABOVE.
Dated:___________________________ , 1999
_____________________________________
(Seal)
_____________________________________
Signature(s) (Seal)
Number of Shares Held of
Record on February 28, 1999:__________
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.
(see other side)
18
