UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year end December 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ____________to____________
COMMISSION FILE NUMBER 0-12524
BANK OF HANOVER AND TRUST COMPANY
CASH OR DEFERRED PROFIT-SHARING PLAN
25 Carlisle Street
Hanover, PA 17331
(Full title of the Plan and the address of the Plan)
HANOVER BANCORP, INC
33 Carlisle Street
Hanover, PA 17331
(Name of issuer of the securities held pursuant to the Plan
and the address of its principal executive office)
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
administrators of the Bank of Hanover and Trust Company Cash or Deferred
Profit-Sharing Plan have duly caused this annual report to be signed by the
undersigned thereunto duly authorized.
Bank of Hanover and Trust Company
Cash or Deferred Profit-Sharing Plan
Date: June 28,2000 Thomas J. Paholsky
/s/ Thomas J. Paholsky
Executive Vice President
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
1 Audited financial statements for Bank of Hanover and Trust
Company Cash or Deferred Profit-Sharing Plan
2 Consent of Independent Public Accountants
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EXHIBIT 1
AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL
SCHEDULE
Bank of Hanover and Trust Company Cash or
Deferred Profit-Sharing Plan
Years ended December 31, 1999 and 1998
with Report of Independent Auditors
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Bank of Hanover and Trust Company Cash or Deferred Profit-Sharing Plan
Audited Financial Statements and Supplemental Schedule
Years ended December 31, 1999 and 1998
Contents
Report of Independent Auditors 6
Audited Financial Statements
Statements of Net Assets Available for Benefits 7
Statements of Changes in Net Assets Available for Benefits 8
Notes to Financial Statements 9
Supplemental Schedule
Schedule H, Line 4i-Schedule of Assets Held For Investment Purposes at
End of Year 15
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Report of Independent Auditors
Executive Committee
Bank of Hanover and Trust Company Cash or Deferred Profit-Sharing Plan
We have audited the accompanying statements of net assets available for benefits
of the Bank of Hanover and Trust Company Cash or Deferred Profit-Sharing Plan as
of December 31, 1999 and 1998, and the related statements of changes in net
assets available for benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1999 and 1998, and the changes in its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
held for investment purposes at end of year as of December 31, 1999, is
presented for the purpose of additional analysis and is not a required part of
the financial statements but is supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. This supplemental schedule
is the responsibility of the Plan's management. The supplemental schedule has
been subjected to the auditing procedures applied in our audit of the financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
Harrisburg, Pennsylvania
June 8, 2000
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<TABLE>
Bank of Hanover and Trust Company Cash or Deferred Profit-Sharing Plan
Statements of Net Assets Available for Benefits
<CAPTION>
December 31,
1999 1998
<S> <C> <C>
Assets
Investments 4,502,032 3,674,456
Employer contribution receivable 91,489 90,845
Accrued investment income 26,797 702
Net assets available for benefits 4,620,318 3,766,003
<FN>
See accompanying notes.
</TABLE>
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<TABLE>
Bank of Hanover and Trust Company Cash or Deferred Profit-Sharing Plan
Statements of Changes in Net Assets Available for Benefits
<CAPTION>
Year ended December 31
1999 1998
<S> <C> <C>
Additions
Employee contributions $292,675 $ 281,187
Employee rollovers-from previous employers' plans 63,537 322,355
Employer matching contributions 121,578 119,941
Employer profit sharing contributions 91,489 90,845
Investment income 130,459 127,520
Total additions 699,738 941,848
Deductions
Employee withdrawals 252,763 197,071
Total deductions 252,763 197,071
Net realized and unrealized appreciation in fair value
of investments
407,340 402,303
Net increase 854,315 1,147,080
Net assets available for benefits at beginning of year 3,766,003 2,618,923
Net assets available for benefits at end of year $4,620,318 $3,766,003
<FN>
See accompanying notes.
</TABLE>
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Bank of Hanover and Trust Company Cash or Deferred Profit-Sharing Plan
Notes to Financial Statements
December 31, 1999
1. Significant Accounting Policies
Basis of Accounting
The accounting records of the Bank of Hanover and Trust Company Cash or
Deferred Profit-Sharing Plan (the Plan) are maintained on the accrual basis of
accounting.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value. The shares of the registered
investment companies are valued at quoted market prices, which represent the
net asset values of shares held by the Plan at year-end. The shares of Hanover
Bancorp, Inc. common stock are valued at quoted market prices as of the last
business day of the Plan year.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Plan Expenses
Administrative expenses of approximately $26,000 were paid from the Plan assets
in 1999. These expenses have been netted against investment income on the
accompanying statement of changes in net assets available for benefits. In 1998,
all general and administrative expenses were paid by the Bank of Hanover and
Trust Company (the Company).
Reclassification
Certain amounts in the 1998 financial statements have been reclassified to
conform to the 1999 presentation.
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<PAGE>
Bank of Hanover and Trust Company Cash or Deferred Profit-Sharing Plan
Notes to Financial Statements (continued)
2. Description of the Plan
The Plan is a defined contribution plan, which covers substantially all
employees of the Company. Under the Plan, participants are permitted to defer
generally the lesser of 15% of annual compensation from the Company or the
maximum amount allowable under current IRS regulations. The Company has agreed
to contribute 50% of the first 8% of base compensation that the participant
contributes to the Plan and may make discretionary, profit sharing contributions
to all eligible employees.
In accordance with the Plan, participants may direct employer and employee
contributions in any of twelve investment options. These investments include
Vanguard US Growth Fund, Vanguard International Growth Fund, Vanguard Fixed
Income GNMA Fund, Vanguard Life Strategy Growth Portfolio, Vanguard Life
Strategy Conservative Growth Portfolio, Vanguard Life Strategy Moderate Growth
Portfolio, Vanguard Index 500 Fund, Vanguard Prime Cap Fund, Vanguard Life
Income Fund, Baron Asset Fund, Temporary Money Market Fund and Hanover Bancorp,
Inc. common stock. Contributions may be allocated between the investment
options in multiples of 5%. On each biweekly pay date, contributions are
allocated to the investment funds according to the participant's specifications.
Participants have the opportunity to change their investment options at any
time.
Participant Accounts
Each participant's account is credited with the participant's voluntary
contribution, their portion of the Company's matching and profit sharing
contributions and actual earnings on investments from the investment options
selected by the participant. The benefit to which a participant is entitled is
that which can be provided from the participant's account. The participant's
interest in deferred salary contributions, qualified matching contributions,
employer profit sharing contributions, and rollover contributions is, at all
times, fully vested and nonforfeitable.
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Bank of Hanover and Trust Company Cash or Deferred Profit-Sharing Plan
Notes to Financial Statements (continued)
2. Description of the Plan (continued)
Eligibility
All full time employees of the Company who have completed 1,000 hours of service
and attained age 21 may participate in the Plan. Employees must complete at
least 501 hours annually to receive an employer contribution.
Benefit Payments
Benefit payments are restricted to retirement, early retirement, termination of
employment, death, or disability.
Plan Termination
The Company reserves the right by action of its Board of Directors to change,
modify, or terminate the Plan, in part or in its entirety, at any time. If the
Plan is terminated, the value of the participant's account shall be distributed
to the affected participant as a lump sum distribution.
The foregoing description of the Plan provides only general information. For a
more complete description of the Plan's provisions, participants should refer to
the Bank of Hanover and Trust Company Cash or Deferred Profit-Sharing Plan
Summary Description, which may be obtained from the plan administrator.
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Bank of Hanover and Trust Company Cash or Deferred Profit-Sharing Plan
Notes to Financial Statements (continued)
3. Investments
Under the Cash or Deferred Profit-Sharing Plan and Trust Agreements, the Bank of
Hanover and Trust Company serves as trustee for the Plan's assets.
The Plan's investments (including investments bought, sold, as well as held
during the year) appreciated in fair value as determined by quoted market
prices by $407,340 and $402,303 during 1999 and 1998, respectively, as follows:
<TABLE>
<CAPTION>
Year ended December 31
1999 1998
<S> <C> <C>
Registered investment companies 480,711 422,993
Hanover Bancorp, Inc. common stock (73,371) (20,690)
Total 407,340 402,303
</TABLE>
<TABLE>
Investments that represent 5% or more of fair value of the Plan's net assets are
as follows:
<CAPTION>
December 31
1999 1998
<S> <C> <C>
Vanguard US Growth Fund $755,092 $750,374
Vanguard Life Strategy Growth Portfolio 540,191 415,506
Vanguard Life Moderate Growth Portfolio 568,874 515,190
Vanguard Index 500 Fund 845,193 596,123
Vanguard Prime Cap Fund 500,104 309,975
Hanover Bancorp, Inc. common stock 529,192 550,289
</TABLE>
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Bank of Hanover and Trust Company Cash or Deferred Profit-Sharing Plan
Notes to Financial Statements (continued)
4. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated December 11, 1997, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code (the "Code") and, therefore, the related trust is
exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Plan Administrator
believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore, believes that the Plan is qualified
and the related trust is tax exempt.
5. Transactions with Parties-in-Interest
The Plan's assets include 35,576 shares and 32,369 shares of Hanover Bancorp,
Inc., the parent company of the Bank of Hanover and Trust Co., common stock as
of December 31, 1999 and 1998, respectively.
During 1999 and 1998, the Plan received $15,153 and $12,770, respectively, in
common stock dividends from Hanover Bancorp, Inc.
6. Differences Between Financial Statements and Form 5500
<TABLE>
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
<CAPTION>
December 31,
1999 1998
<S> <C> <C>
Net assets available for benefits per the
financial statements $4,620,318 $3,766,003
Amounts allocated to withdrawn participants (1,020) -
Net assets available for benefits per the
Form 5500 $4,619,298 $3,766,003
</TABLE>
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Bank of Hanover and Trust Company Cash or Deferred Profit-Sharing Plan
Notes to Financial Statements (continued)
6. Differences Between Financial Statements and Form 5500 (continued)
<TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
<CAPTION>
Year ended December 31
1999 1998
<S> <C> <C>
Benefits paid to participants per the financial $ 252,763 $ 197,071
statements
Add: Amounts allocated on Form 5500 to
withdrawn participants at end of year 1,020 -
Benefits paid to participants per the Form 5500 $ 253,783 $ 197,701
<FN>
Amounts allocated to withdrawn participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
year-end but not yet paid.
</TABLE>
7. Subsequent Event
On January 25, 2000, Hanover Bancorp, Inc. entered into an agreement to merge
with Sterling Financial Corporation (Sterling).
Under the terms of the agreement, Hanover Bancorp, Inc. shareholders will
receive .93 shares of Sterling Financial Corporation common stock for each share
of Hanover Bancorp, Inc. common stock in a tax-free exchange. The Bank of
Hanover and Trust Co. will operate as a subsidiary of Sterling after the merger
is completed.
As of the date of the report, the Company has not made any decision regarding
the impact of the merger on the Plan.
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Supplemental Schedule
<TABLE>
Bank of Hanover and Trust Company Cash or Deferred Profit-Sharing Plan
EIN: 23-0670980 Plan #002
Schedule H, Line 4i-Schedule of Assets Held for Investment Purposes at End of Year
December 31, 1999
<CAPTION>
Description of Investment,
Including Maturity Date,
Identity of Issue, Borrower, Rate of Current
Lessor or Similar Party Interest, Par or Maturity Value Cost Value
<S> <C> <C> <C>
Vanguard US Growth Fund 17,346 shares $ 506,619 $ 755,092
Vanguard International
Growth Fund 4,773 shares 85,178 107,351
Vanguard Fixed Income
GNMA Fund 10,559 shares 109,142 104,106
Vanguard Life Strategy
Growth Portfolio 25,231 shares 446,664 540,191
Vanguard Life Strategy
Conservative Growth
Portfolio 13,823 shares 197,159 208,726
Vanguard Life Moderate
Growth Portfolio 31,291 shares 498,605 568,874
Vanguard Index 500 Fund 6,245 shares 658,502 845,193
Vanguard Prime Cap Fund 8,057 shares 370,964 500,104
Vanguard Life Income Fund 2,653 shares 34,506 34,007
Baron Asset Fund 2,672 shares 133,156 157,030
*Hanover Bancorp, Inc.
common stock 35,576 shares 532,458 529,192
Temporary Money Market
Fund 152,166 shares 152,166 152,166
$3,725,119 $4,502,032
<FN>
* Party in interest
</TABLE>
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EXHIBIT 2
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-73796) pertaining to the Cash or Deferred Profit-Sharing Plan
of the Bank of Hanover and Trust Company of our report dated June 8, 2000, with
respect to the financial statements and supplemental schedule of the Bank of
Hanover and Trust Company Cash or Deferred Profit-Sharing Plan included in this
Annual Report (Form 11-K) for the year ended December 31, 1999.
/s/ Ernst & Young LLP
Harrisburg, Pennsylvania
June 26, 2000
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