U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-13664
GRANGE NATIONAL BANC CORP
PENNSYLVANIA 23-2314065
----------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
198 E. Tioga St., Tunkhannock, Pennsylvania
-------------------------------------------
(Address of principal executive offices)
(717) 836-2100
----------------------------------
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter periods that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date: 740,917
Transitional Small Business Disclosure Format (Check one): Yes ____ ; No X
<PAGE>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
ITEM 1. Unaudited Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Statements of Financial Position as
of September 30, 1998 and December 31, 1997.....................................................2
Consolidated Statements of Income and Comprehensive Income For the
Three and Nine Months Ended September 30, 1998 and 1997.........................................3
Consolidated Statements of Changes to Stockholder's Equity For the Nine Months
Ended September 30, 1998 and 1997...............................................................4
Consolidated Statements of Cash Flows For the Nine Months ended
September 30, 1998 and 1997.....................................................................5
Notes to Consolidated Financial Statements..................................................6 - 7
ITEM 2. Management's Discussion and Analysis of Financial Condition..........................8 - 12
PART II. OTHER INFORMATION:
ITEM 6. Exhibits and Reports on Form 8-K.........................................................13
</TABLE>
<PAGE>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
Consolidated Statements of Financial Position,
September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
1998 1997
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
ASSETS:
Cash and due from banks .................................. $ 2,093,164 $ 2,514,202
Interest bearing deposits ................................ 4,572,219 2,417,987
Investment securities, available for sale (Note 3) ....... 25,338,977 13,001,723
Investment securities, held to maturity (fair
value 1998, $18,781,000; 1997, $25,316,000) ............ 18,410,982 25,205,836
Loans, net of unearned interest .......................... 86,665,142 76,995,428
Less: allowance for loan losses ......................... 885,910 767,475
------------- -------------
Loans - net ....................................... 85,779,232 76,227,953
Bank premises and equipment - net ........................ 3,058,433 3,028,098
Other real estate ........................................ 135,040 149,795
Accrued interest and other assets ........................ 1,995,024 1,730,580
Premium on deposits ...................................... 127,690 140,460
------------- -------------
TOTAL ASSETS ........................................... $ 141,510,761 $ 124,416,634
============= =============
LIABILITIES:
Domestic deposits:
Non-interest bearing deposits .......................... $ 20,787,377 $ 14,675,828
Interest bearing deposits .............................. 102,908,471 94,112,851
------------- -------------
Total deposits ....................................... 123,695,848 108,788,679
Other borrowed funds ..................................... 2,655,524 2,279,294
Accrued interest and other liabilities ................... 860,986 710,857
------------- -------------
Total liabilities .................................... 127,212,358 111,778,830
============= =============
STOCKHOLDERS' EQUITY:
Preferred stock authorized 1,000,000 shares of $5 par;
None issued
Common stock authorized 5,000,000 shares of
$5 par value; 738,617 and 363,305 shares issued and
outstanding in 1998 and 1997 (Note 4) .................. 3,693,085 1,816,525
Additional paid-in capital ............................... 451,223 2,052,158
Retained earnings ........................................ 9,766,867 8,685,313
Accumulated other comprehensive income ................... 387,300 84,000
------------- -------------
Total ................................................ 14,298,475 12,637,996
Treasury stock, 6 and 16 shares in 1998 and 1997 at cost (72) (192)
------------- -------------
Total stockholders' equity ........................... 14,298,403 12,637,804
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................. $ 141,510,761 $ 124,416,634
============= =============
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30 September 30
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans ............................ $ 1,913,515 $ 1,696,598 $ 5,513,102 $ 4,705,511
Interest and dividends
on investment securities ............................ 612,357 531,152 1,749,462 1,573,465
Interest on deposits in banks ......................... 62,891 70,706 142,077 149,937
----------- ----------- ----------- -----------
Total interest income ......................... 2,588,763 2,298,456 7,404,641 6,428,913
----------- ----------- ----------- -----------
Interest Expense:
Interest on deposits .................................. 1,121,849 979,508 3,216,155 2,730,210
Interest on borrowed funds ............................ 32,934 8,574 67,890 26,973
----------- ----------- ----------- -----------
Total interest expense ........................ 1,154,783 988,082 3,284,045 2,757,183
----------- ----------- ----------- -----------
Net interest income ............................. 1,433,980 1,310,374 4,120,596 3,671,730
Provision for loan losses ......................... 75,000 55,000 200,000 115,000
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses ..................... 1,358,980 1,255,374 3,920,596 3,556,730
----------- ----------- ----------- -----------
Other Income:
Service charges and other income ...................... 200,792 165,296 584,477 465,449
Gain (loss) on sale of securities ..................... 23,118 23,118
Gain (loss) on sale of other real estate .............. (24,961)
----------- ----------- ----------- -----------
Total other income ............................ 200,792 188,414 559,516 488,567
----------- ----------- ----------- -----------
Other Expenses:
Salaries and employee benefits ........................ 468,679 415,280 1,346,330 1,184,138
Occupancy expense ..................................... 117,283 98,908 288,566 256,587
Equipment expense ..................................... 73,789 64,409 214,379 183,231
Other operating expense ............................... 259,816 219,711 762,062 693,579
----------- ----------- ----------- -----------
Total other expenses .......................... 919,567 798,308 2,611,337 2,317,535
----------- ----------- ----------- -----------
Income before income taxes .............................. 640,205 645,480 1,868,775 1,727,762
Provision for income taxes .............................. 177,000 209,000 561,000 541,000
----------- ----------- ----------- -----------
Net income .............................................. $ 463,205 $ 436,480 $ 1,307,775 $ 1,186,762
----------- ----------- ----------- -----------
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gain (loss) arising during period $ 279,800 $ 48,500 $ 303,300 $ 36,600
----------- ----------- ----------- -----------
Other comprehensive income ............................ $ 279,800 $ 48,500 $ 303,300 $ 36,600
Comprehensive income .................................... $ 743,005 $ 484,980 $ 1,611,075 $ 1,223,362
=========== =========== =========== ===========
Earnings per share (Note 4) ............................. $ 0.56 $ 0.57 $ 1.61 $ 1.57
=========== =========== =========== ===========
Weighted average common shares .......................... 824,880 762,592 810,743 755,922
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
STOCKHOLDERS' EQUITY, January 1 ............................ $ 12,637,804 $ 10,939,858
COMMON STOCK, $5.00 PAR VALUE
Options exercised .......................................... 18,455 6,860
Stock dividend $0.62 and $0.42 per share in 1998 and 1997,
plus cash in lieu of fractional shares ................ 16,865 16,560
Stock split ................................................ 1,841,240
ADDITIONAL PAID-IN CAPITAL
Options exercised .......................................... 48,044 25,135
Stock dividend $0.62 and $0.42 per share in 1998 and 1997,
plus cash in lieu of fractional shares ................ 192,261 122,544
Stock split ................................................ (1,841,240)
RETAINED EARNINGS
Stock dividend $0.62 and $0.42 per share in 1998 and 1997,
plus cash in lieu of fractional shares ................ (209,126) (139,104)
Cash paid in lieu of fractional shares due to
stock dividend ........................................ (17,095) (10,689)
Net income ................................................. 1,307,775 1,186,762
ACCUMULATED OTHER COMPREHENSIVE INCOME
Other comprehensive income, net of tax ..................... 303,300 36,600
TREASURY STOCK
Reissuance of common stock (5 and 3 shares in 1998
and 1997, respectively, at cost) ...................... 120 244
------------ ------------
STOCKHOLDERS' EQUITY, September 30 ......................... $ 14,298,403 $ 12,184,770
============ ============
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ................................................ $ 1,307,775 $ 1,186,762
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ........................... 206,550 178,769
Provision for loan losses ............................... 200,000 115,000
Decrease in deferred income taxes ....................... 69,500 19,000
Changes in operating assets and liabilities:
Increase (decrease) in accrued interest income
and other assets ...................................... (207,674) (91,358)
Increase in accrued interest expense and other liabilities 36,629 (7,537)
------------ ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES .................................... 1,612,780 1,400,636
------------ ------------
INVESTING ACTIVITIES:
Purchase bank premises and equipment ...................... (236,885) (444,193)
Increase in other real estate ............................. 14,755 (156,750)
Purchase of securities "available for sale" ............... (11,962,275) (2,359,362)
Decrease (increase) in mortgage-backed securities
"available for sale" .................................. (1,149,132) (3,731,563)
Sales of securities "available for sale" .................. 3,755,046
Redemptions of securities "available for sale" ............ 1,129,464 1,995,173
Purchase of securities "held to maturity" ................. (1,496,875) (7,456,335)
Redemptions of securities "held to maturity" .............. 8,035,056 4,714,278
Decrease (increase) in mortgage-backed securities
"held to maturity" .................................... 363,616 (1,759,005)
Increase in loans to customers ............................ (9,751,279) (11,735,050)
Increase in deposits in banks ............................. (2,154,232) (3,435,711)
------------ ------------
NET CASH USED IN
INVESTING ACTIVITIES .................................... (17,366,741) (20,613,472)
------------ ------------
FINANCING ACTIVITIES:
Increase in deposits before interest credited ............. 11,909,459 17,100,056
Increase in borrowed funds ................................ 376,230 (504,042)
Interest credited to deposits ............................. 2,997,710 2,513,403
Cash dividends paid ....................................... (17,095) (10,689)
Decrease in treasury stock ................................ 120 244
Issuance of common stock .................................. 66,499 31,995
------------ ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES .................................... 15,332,923 19,130,967
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS .......................................... (421,038) (81,869)
CASH AND CASH EQUIVALENTS, January 1 ....................... 2,514,202 2,566,232
------------ ------------
CASH AND CASH EQUIVALENTS, September 30 .................... $ 2,093,164 $ 2,484,363
============ ============
SUPPLEMENTARY SCHEDULE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest ................................................. $ 263,304 $ 690,535
Income taxes ............................................. $ 569,000 $ 346,553
Non-cash investing activities:
Unrealized gains (losses) on securities .................. $ 303,300 $ 59,000
Stock dividend ........................................... 209,126 139,104
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BUSINESS COMBINATION AND PRINCIPLES OF COMBINATION:
Grange National Banc Corp. (Company) was organized and incorporated under
the laws of the Commonwealth of Pennsylvania on October 2, 1984, for the
purpose of becoming a bank holding company. On April 30, 1985 the Company
acquired the Grange National Bank of Wyoming County (Bank) pursuant to a
plan of reorganization and merger. The Bank became a wholly owned
subsidiary of the Company, and each outstanding share of Bank common stock
was converted into one share of Company common stock. The accompanying
consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary (Bank) with the reorganization accounted for as
a pooling of interests.
2. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements have been
prepared in conformity with the accounting principles and practices
reflected in the annual financial statements, and reflect all adjustments
which are normal and recurring and, in the opinion of management, necessary
for a fair presentation of the results of operations for the interim
periods. The results of operations reported in interim financial statements
are not necessarily indicative of results to be expected for the year.
3. COMPREHENSIVE INCOME:
In 1997, the Financial Accounting Standards Board issued statement No. 130
- "Reporting Comprehensive Income," which is effective for years beginning
after December 15, 1997. This statement establishes standards for reporting
and display of comprehensive income and its components in a full set of
general-purpose financial statements. The purpose of reporting
comprehensive income is to report a measure of all changes in equity that
result from recognized transactions and other economic events of the period
other than transactions with owners in their capacity as owners. Prior to
the issuance of this statement, some of those changes in equity were
displayed in a statement that reports the results of operations, while
others were included directly in a statement of financial position. The
1997 financial statements have been restated where applicable to reflect
the adoption of SFAS No. 130.
4. STOCK OPTIONS:
In January 1994, the Board adopted an Employee Stock Option Plan in which
common stock options may be granted to all officers and key employees of
the Company. The aggregate number of shares which may be issued upon
exercise of the options under the plan is 20,000. Options are exercisable
up to one-third in the second year after the date of
7
<PAGE>
grant, up to two-thirds in the third year after the date of grant and up to
100% in the fourth year after the date of grant, with options expiring at
the end of ten years after the date of grant. Options have been granted at
various times since 1994, at prices ranging from $12.00 to $33.25 per
share.
The Board of Directors also adopted a Stock Option Plan for non-employee
Directors which will be available to all non-employee members of the Board
of Directors. The aggregate number of shares which may be issued upon
exercise of the options under the Director's plan is 40,000 shares and are
exercisable in part from time to time beginning one year after the date of
grant and expiring ten years thereafter. The Plan provides for adjustments
to the number of options to compensate for stock dividends and splits.
Accordingly all effected figures have been adjusted to reflect stock
dividends. April 1, 1994 and 1997, options to purchase 2,121 shares of
common stock, at $11.32 and $20.38, per share, respectively, were
automatically granted to each non-employee Director under this plan
expiring April 1, 2004. Of these options, 2,058 have been exercised.
The Board of Directors adopted an additional Stock Option Plan (the "Plan")
in November 1995 covering the employees and directors. The Plan authorizes
the grant of options to purchase not more than 115,611 shares of Common
Stock under the Plan. Options granted under the Plan are intended to be
either incentive stock options or nonstatutory stock options. As of October
30, 1998 options for 97,114 shares of Common Stock having an exercise price
of $15.46 were outstanding (3,494 options did not vest and lapsed) and
18,497 shares were available for future option grants under the Plan. Of
the 97,114 shares of Common Stock outstanding for options, 71,659 shares of
Common Stock were issued as incentive stock options. The remaining shares
outstanding for options were granted to each non-employee director equally
as nonstatutory stock options.
PREFERRED STOCK:
The Company authorized 1,000,000 shares of preferred stock at $5 par value.
At December 31, 1997 and September 30, 1998, no shares were issued nor
outstanding.
5. STOCK SPLIT:
The Board of Directors declared a 2 for 1 stock split of the Company's
common stock, effective July 31, 1998. All per share data has been adjusted
to reflect the stock split.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION:
Net income for the three months ending September 30, 1998 totaled $463,000 which
is a 6% increase over the $436,000 reported for the same period in 1997. Net
interest income for the three months ending September 30, 1998 increased by
$124,000 to $1,434,000 compared to $1,310,000 for the same period in 1997. This
constitutes an increase of 9% over the previous year. Interest income for this
period increased by $290,000 or 13% compared to 1997, and interest expense
increased as well by $167,000 or 17% compared to 1997.
The increase in interest income has been principally from interest on loans
which increased $217,000 or 13% compared to the same period last year. Interest
income from investment securities increased by $81,000 or 15% compared to the
same period last year. Interest rates on loans have trended steadily down since
September of 1997. Although the New York prime rate did not change from March of
1997 until the end of September 1998, competitive pressures reduced the Bank's
spread to the prime on new loans. The New York Prime dropped .25% on September
30 and another .25% on October 16, 1998, reflecting reductions by the Federal
Reserve in the discount rate. Management has increased its purchases of longer
term municipal bonds and purchased some mortgage-backed bonds to increase the
yield of the bond portfolio. The municipal bonds currently being purchased,
mostly have maturities of between eight and ten years, and are classified as
"available for sale". If interest rates increase significantly these bonds could
be sold. Interest on deposits in banks decreased by $8,000 from $71,000 to
$63,000 due to lower balances and lower interest rates.
The increase in interest expense is due to the increase in interest bearing
deposits during the third quarter of 1998 as compared to the third quarter of
1997. The average total sources to fund earning assets increased by $18,809,000,
from $112,073,000 to $130,882,000 in 1998, while the average interest rate
decreased slightly from 3.53% to 3.51%, respectively.
The increase in deposits continues to provide funds for loans and liquidity.
Loan demand during the third quarter was brisk as loans increased $9,670,000 or
13% from $76,995,000 at December 31, 1997 to $86,665,000 at September 30, 1998.
Loan demand is expected to level off, but remain steady during the fourth
quarter. Balances of investment securities increased by $5,542,000 or 15% since
December 31, 1997. Interest bearing deposits at banks increased by $2,154,000 to
$4,572,000 from $2,418,000 due to deposits flowing in and redemptions of bonds.
Steady loan demand and slowing deposit growth during the fourth quarter should
consume most of these deposits.
The provision for loan loss during the three months ending September 30, 1998
was $75,000 compared to $50,000 for the same period in 1997, as management tries
to keep the allowance for loan losses in line with the size of the loan
portfolio. The allowance for loan losses was $886,000 and $767,000 at September
30, 1998 and December 31, 1997, respectively. This represents 1.02% and 1.00% of
total loans, 199% and 171% of non-performing loans, and 152% and 128% of
non-performing assets, respectively. Management performs a quarterly analysis of
the Bank's potential loan losses on a "worst case" basis. A loan review process
is performed by an
9
<PAGE>
independent loan review officer on a continuing basis. This information is
closely reviewed by the Board of Directors and used to evaluate the adequacy of
the loan loss reserve in order to provide coverage for identifiable losses,
provide coverage for unexpected losses, and to keep the size of the reserves in
proportion to the growing size of the loan portfolio. The following sets forth
loans past due 90 days or more on which interest has continued to be accrued for
September 30, 1998 and December 31, 1997.
September 1998 December 1997
(In thousands)
Real estate mortgages $224 $311
Commercial 20 1
Installment
---- ----
Total $244 $312
==== ====
Non-accrual loans increased from $136,000 at December 31, 1997 to $202,000 at
September 30, 1998. The overall quality remains very good, and management
expects non-performing assets to remain at substantially the same levels as a
proportion of loans.
Investments in securities and deposits in banks increased by $7,696,000 or 19%
from December 31, 1997 to September 30, 1998. The average rate earned on
available for sale, held to maturity and deposits in banks were 6.31%, 6.46% and
5.67% for the three months ended September 30, 1998, as compared to 5.98%, 6.45%
and 5.82% for the three months ended September 30, 1997. As of September 30,
1998, the amortized value of the Bank's investments classified as held to
maturity exceeded their fair value by $370,000, and the fair value of
investments classified as available for sale exceeded their amortized value by
$591,000. This is reflected as an increase in the Bank's equity of approximately
$387,000, net of deferred tax effects.
Lower interest rates at September 30, 1998 account for the unrealized gain on
the available for sale securities reflected on the balance sheet. Rates are
expected to continue their slow but steady decline. This will result in moderate
increases of the fair value of securities available for sale. As the Bank
extends the length of the securities it purchases, interest rate changes will
have greater impact on the fair value of those securities. This interest rate
risk is offset by higher yields on the securities. The Bank continues to
purchase short to moderate maturities, generally eight to ten years for fixed
rate securities.
Management continues to purchase only high quality investments to minimize
credit risk to the value of the Bank's investments. There have been no adverse
credit valuations on any of the investments. Although investment opportunities
exist which will produce higher yields, they generally contain higher credit or
interest rate risk.
The addition of loan, insurance agency, back office employees and the opening of
the bank's tenth office at the Pine Mall in Wilkes-Barre, along with annual
raises, attributed to the increase in salary expense. This accounts for the 1998
increase in salary, occupancy, and equipment expenses. Salaries and employee
benefits have increased by $53,000 or 13% from $415,000 to $468,000, occupancy
expense increased $18,000 or 18% from $99,000 to $117,000 and
10
<PAGE>
equipment expense increased $10,000 or 16% from $64,000 to $74,000, and other
operating expenses increased $40,000 or 18% from $220,000 to $260,000, for the
three months ended September 30, 1998 as compared to the same period for 1997.
Management performs an interest rate and liquidity analysis on a monthly basis
to monitor the Bank's interest rate sensitivity gap and liquidity needs. These
reports are reviewed by the Board of Directors and used to formulate ways to
improve the Bank's interest rate gap. The Bank continues to place great emphasis
on adjustable rate loan products, such as variable rate home equity loans and
annually adjustable mortgage loans as well as adjustable rate and short term
investments, in order to minimize interest rate risk.
Since 1991 the Comptroller of the currency has required all national banks to
meet certain "Risk Based Capital" standards. These standards weight certain
assets based on the risk of the asset, and also includes certain off-balance
sheet items. The table below sets forth the Bank's Tier 1 and Tier 2 capital,
risk adjusted assets (including off-balance sheet items) and the Bank's
risk-based capital ratios under the guidelines, for September 30, 1998 and
December 31, 1997.
<TABLE>
<CAPTION>
(In thousands, except ratios) 1998 1997
<S> <C> <C>
Tier I capital:
Shareholders' equity........................................... $13,783 $12,414
Tier II capital:
Loan loss reserve............................................... 886 767
------- -------
Total Qualifying Capital............................................. $14,669 $13,181
======= =======
Risk-adjusted assets (including off balance sheet items).................. $89,558 $76,937
Tier I Capital Ratio (4.00% required)..................................... 15.97% 16.14%
Total Capital Ratio (8.00% required)...................................... 16.38% 17.13%
</TABLE>
11
<PAGE>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND RATES
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
(1) Interest Average (1) Interest Average
Average Income/ Interest Average Income/ Interest
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans:
Mortgages ................... $ 46,253 $ 990 8.56% $ 39,371 $ 908 9.23%
Installment ................. 4,629 117 10.11 5,684 144 10.13
Commercial .................. 33,876 828 9.78 26,764 662 9.89
-------- -------- -------- --------
Total loans ............... 84,758 1,935 9.13 71,819 1,714 9.55
-------- -------- -------- --------
Securities available for sale:
U.S. Treasury securities .... 7,000 103 5.89 8,366 126 6.02
U.S. government agencies .... 8,274 131 6.33 1,640 26 6.34
Municipal bonds ............. 5,992 105 7.01 828 15 7.25
Other securities ............ 654 7 4.28 462 2 1.73
-------- -------- -------- --------
Total available for sale 21,920 346 6.31 11,296 169 5.98
-------- -------- -------- --------
Securities held to maturity:
U.S. government agencies .... 14,356 228 6.35 18,993 306 6.44
Municipal bonds ............. 3,083 53 6.88 4,157 67 6.45
Other securities ............ 2,317 38 6.56 927 15 6.47
-------- -------- -------- --------
Total held to maturity .... 19,756 319 6.46 24,077 388 6.45
Deposits in banks ............ 4,448 63 5.67 4,881 71 5.82
-------- -------- -------- --------
TOTAL ................... $130,882 2,663 8.14 $112,073 2,342 8.36
======== -------- ======== --------
INTEREST BEARING LIABILITIES:
Deposits:
NOW and super-NOW ........... $ 13,382 76 2.27 $ 11,810 68 2.30
Savings and money market .... 29,896 202 2.70 26,858 185 2.76
Certificates of deposit ..... 60,450 833 5.51 52,228 723 5.54
Other time deposits ......... 200 3 6.00 200 3 6.00
-------- -------- -------- --------
Total deposits ............ 103,928 1,114 4.29 91,096 979 4.30
Other borrowed funds ......... 2,787 33 4.74 724 9 4.97
-------- -------- -------- --------
TOTAL ................... 106,715 1,147 4.30 91,820 988 4.30
Non-interest bearing
funds, net (2) ............... 24,167 20,253
-------- --------
TOTAL SOURCES TO FUND
EARNING ASSETS ................ $130,882 1,147 3.51 $112,073 988 3.53
======== -------- ======== --------
NET INTEREST/YIELD ............ $ 1,516 4.63% $ 1,354 4.83%
======== ========
</TABLE>
(1) Average balances are daily averages.
(2) Demand deposits, stockholders's equity and other non-interest bearing
liabilities less non-interest earning assets.
Non-accrual loans are reflected in the loan balances, but contributing no
interest income.
NOTE - Tax exempt interest income has been converted to a tax equivalent basis
at the U.S. federal income tax rate of 34%.
See Notes to Consolidated Financial Statements
12
<PAGE>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND RATES
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
-------------------------------------- ---------------------------------------
(1) Interest Average (1) Interest Average
Average Income/ Interest Average Income/ Interest
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
------- ------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans:
Mortgages ................... $ 44,762 $ 2,940 8.76% $ 37,647 $ 2,553 9.04%
Installment ................. 5,245 382 9.71 5,360 413 10.27
Commercial .................. 31,194 2,242 9.58 24,430 1,786 9.75
-------- -------- -------- --------
Total loans ............... 81,201 5,564 9.14 67,437 4,752 9.40
-------- -------- -------- --------
Securities available for sale:
U.S. Treasury securities .... 7,059 315 5.95 10,597 479 6.03
U.S. government agencies .... 5,551 265 6.37 545 26 6.36
Municipal bonds ............. 3,867 203 7.00 281 15 7.12
Other securities ............ 619 26 5.60 445 17 5.09
-------- -------- -------- --------
Total available for sale 17,096 809 6.31 11,868 537 6.03
-------- -------- -------- --------
Securities held to maturity:
U.S. government agencies .... 16,165 782 6.45 18,187 879 6.44
Municipal bonds ............. 3,529 177 6.69 4,032 207 6.85
Other securities ............ 2,242 110 6.54 515 25 6.47
-------- -------- -------- --------
Total held to maturity .... 21,936 1,069 6.50 22,734 1,111 6.52
-------- -------- -------- --------
Deposits in banks ............ 3,351 142 5.65 3,425 150 5.84
-------- -------- -------- --------
TOTAL ................... $123,584 7,584 8.18 $105,464 6,550 8.28
======== -------- ======== --------
INTEREST BEARING LIABILITIES:
Deposits:
NOW and super-NOW ........... $ 12,094 194 2.14 $ 10,494 169 2.15
Savings and money market .... 28,635 582 2.71 25,968 533 2.74
Certificates of deposit ..... 58,226 2,424 5.55 49,242 2,020 5.47
Other time deposits ......... 200 8 5.33 200 8 5.33
-------- -------- -------- --------
Total deposits ............ 99,155 3,208 4.31 85,904 2,730 4.24
Other borrowed funds ......... 1,898 68 4.78 773 27 4.66
-------- -------- -------- --------
TOTAL ................... 101,053 3,276 4.32 86,677 2,757 4.24
Non-interest bearing
funds, net (2) ............... 22,531 18,787
-------- -------- -------- --------
TOTAL SOURCES TO FUND
EARNING ASSETS ................ $123,584 3,276 3.53 $105,464 2,757 3.49
======== -------- ======== --------
NET INTEREST/YIELD ............ $ 4,308 4.65% $ 3,793 4.80%
======== ========
</TABLE>
(1) Average balances are daily averages.
(2) Demand deposits, stockholders's equity and other non-interest bearing
liabilities less non-interest earning assets.
Non-accrual loans are reflected in the loan balances, but contributing no
interest income.
NOTE - Tax exempt interest income has been converted to a tax equivalent basis
at the U.S. federal income tax rate of 34%.
See Notes to Consolidated Financial Statements
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
(ii) Statement re: computation of earnings per share:
Primary earnings per share is computed by dividing net income
by the weighted average number of shares of common stock and
common stock equivalents outstanding during the quarter. Stock
options are considered common stock equivalents and are
included in the computation of the number of shares
outstanding using the treasury stock method. The number of
shares used to calculate earnings per share for the periods
presented are as indicated in each period.
During the current fiscal quarter, there have been no events of a nature
required to be filed on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GRANGE NATIONAL BANC CORP.
(Registrant)
Date November 14, 1998 /s/ Thomas A. McCullough
-------------------------------- ----------------------
Thomas A. McCullough
President
Chief Executive Officer
Chief Financial Officer
Date November 14, 1998 /s/ Philip O. Farr
--------------------------------- ----------------------
Philip O. Farr
Chief Accounting Officer
14
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OUR
SEPTEMBER 30, 1998 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
(In thousands)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,093
<INT-BEARING-DEPOSITS> 4,572
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 25,339
<INVESTMENTS-CARRYING> 18,411
<INVESTMENTS-MARKET> 18,781
<LOANS> 86,665
<ALLOWANCE> 886
<TOTAL-ASSETS> 141,511
<DEPOSITS> 123,696
<SHORT-TERM> 1,656
<LIABILITIES-OTHER> 861
<LONG-TERM> 1,000
0
0
<COMMON> 4,144
<OTHER-SE> 10,154
<TOTAL-LIABILITIES-AND-EQUITY> 141,511
<INTEREST-LOAN> 1,914
<INTEREST-INVEST> 612
<INTEREST-OTHER> 63
<INTEREST-TOTAL> 2,589
<INTEREST-DEPOSIT> 1,122
<INTEREST-EXPENSE> 1,155
<INTEREST-INCOME-NET> 1,434
<LOAN-LOSSES> 75
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 920
<INCOME-PRETAX> 640
<INCOME-PRE-EXTRAORDINARY> 640
<EXTRAORDINARY> 0
<CHANGES> 280
<NET-INCOME> 743
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.56
<YIELD-ACTUAL> 4.63
<LOANS-NON> 202
<LOANS-PAST> 244
<LOANS-TROUBLED> 110
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 767
<CHARGE-OFFS> 86
<RECOVERIES> 5
<ALLOWANCE-CLOSE> 886
<ALLOWANCE-DOMESTIC> 886
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
