Exhibit 99.1

Photo: Deb Takes

Dear Shareholders:

It is my privilege to report Harleysville National Corporation’s (HNC) earnings and key corporate highlights for the third quarter, 2006. Many of you may know me as President and CEO of Harleysville National Bank (HNB), a part of HNC’s executive management team and a member of HNB and HNC’s Boards of Directors. Recently, I was appointed interim President and CEO of the Corporation by the HNC Board, in addition to my responsibilities with the Bank. Our management team is working diligently to move your company forward.

Third quarter 2006 diluted and basic earnings per share were $.27 compared to $.34 and $.35, respectively, for the third quarter of 2005. Net income for the third quarter of 2006 was $7.9 million compared to $10.2 million during the same period in 2005. For the nine months ended September 30, 2006, diluted and basic earnings per share were $.89 and $.90, as compared to $.98 and $1.00, respectively in the comparable period of 2005. Net income for the nine-month period ended September 30, 2006, was $26.1 million compared to $29.0 million during the same nine months of 2005. Continued net interest margin compression has made maintaining historical rates of earnings growth challenging, but we are encouraged by our growth in total deposits and noninterest income. Year over year, wealth management income has more than doubled while total deposits increased 11.9%, albeit most being in higher cost deposits.

Our immediate efforts are being directed toward improving income by executing our strategic initiative of increasing the commercial loan portfolio, especially variable rate loans. Competition for commercial customers is particularly fierce, yet we are ever mindful of maintaining our strong credit quality. We have made steady progress with other strategic initiatives including market expansion and our corporate campus construction project.

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Since breaking ground on our corporate campus construction project in April, our new building has rapidly taken shape. Our expanded operations center will increase efficiency by consolidating several departments whose employees are currently dispersed at multiple locations. We anticipate moving into our new campus early next year.

Through our market evaluation process, we identified further expansion into Bucks County as a priority. Previously announced plans to build a new location in Warminster are underway with an anticipated spring 2007 opening. We are happy to report that we also located a site in Warrington and will construct a branch at the intersection of Titus and Easton Roads (Route 611). We project a late 2007 opening.

In July, we entered into an agreement with First National Community Bank to sell our Honesdale branch. The sale will allow us to focus on market expansion and help provide the resources required to support strategic initiatives. We expect the sale of our single Wayne County branch to close in the fourth quarter. It is anticipated that we will record a profit of approximately $.23 per share, diluted, net of tax*. Branch personnel have been offered similar positions with First National Community Bank and our teams are working together to ensure a smooth transition.

Thank you for your continued support of Harleysville National Corporation. As we move forward, we will remain focused on improving performance, implementing key strategic initiatives and working hard to deliver value to you, our loyal shareholders.

Sincerely,

/s/ Deb Takes    

Deb Takes

President and CEO

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Harleysville National Corporation
Condensed Consolidated Balance Sheets (unaudited)
(Dollars in thousands)
		September 30, 2006		September 30, 2005
Assets
Cash and due from banks	$	62,909	$	62,133
Federal funds sold and securities purchased
under agreements to resell		176,500		71,000
Interest-bearing deposits in banks		3,463		6,915
Investment securities available for sale		863,357		837,405
Investment securities held to maturity		58,894		62,940
(fair value $59,301 and $63,560)
Net loans		2,012,970		1,922,661
Net assets in foreclosure		87		469
Bank-owned life insurance		61,126		58,735
Other assets		123,697		97,880
Total assets	$	3,363,003	$	3,120,138
Liabilities and Shareholders' Equity
Noninterest-bearing deposits	$	326,851	$	335,614
Interest-bearing deposits		2,301,395		2,013,945
Borrowed funds		405,822		450,495
Other liabilities		42,330		44,457
Shareholders' equity		286,605		275,627
Total liabilities and shareholders' equity	$	3,363,003	$	3,120,138

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Condensed Consolidated Statements of Income(unaudited)
(Dollars in thousands, except per share data)		Nine Months Ended September 30,						Three Months Ended September 30,
Income and Expense		2006			2005			2006			2005
Interest income	$	132,280		$	110,731		$	45,961		$	38,570
Interest expense		68,919			45,470			25,347			16,826
Net interest income		63,361			65,261			20,614			21,744
Provision for loan losses		3,000			2,050			900			650
Net interest income after provision for loan losses		60,361			63,211			19,714			21,094
Noninterest income		27,239			22,425			8,286			7,730
Noninterest expense		52,460			47,709			17,560			15,313
Income before income taxes		35,140			37,927			10,440			13,511
Income tax expense		8,997			8,910			2,533			3,349
Net income	$	26,143		$	29,017		$	7,907		$	10,162
Financial Highlights
Net Income Per Share - Basic	$	0.90		$	1.00		$	0.27		$	0.35
Net Income Per Share - Diluted	$	0.89		$	0.98		$	0.27		$	0.34
Cash Dividends Per Share	$	0.55		$	0.50		$	0.19		$	0.17
Weighted Average Shares - Basic		28,940,119			28,921,613			29,011,903			28,897,869
Weighted Average Shares - Diluted		29,373,646			29,541,486			29,384,310			29,479,228
Return On Average Assets		1.09	%		1.29	%		0.96	%		1.32	%
Return On Average Equity		12.52	%		14.22	%		11.10	%		14.64	%

This report may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.  Actual results and trends could differ materially from those set forth in such statements due to various factors.  Such factors include the possibility that increased demand or prices for the Company's financial services and products may not occur, changing economic and competitive conditions, technological developments, and other risks and uncertainties, including those detailed in the Company's filings with the Securities and Exchange Commission.

*The statement relating to anticipated per share profit during the fourth quarter of 2006 is a forward-looking statement within the meaning of the Private Securities Litigation Reform Act of 1995. Whether or not the per share profit resulting from the transaction results as anticipated is subject to a variety of factors, including but not limited to consummation of the sale agreement and deposit attrition and legal, settlement and integration expenses greater than expected.

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