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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 March 31, 1999.
[ ] 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
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(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
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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: 763,620
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Transitional Small Business Disclosure Format (Check one): Yes ; No X
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<PAGE>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
ITEM 1. Unaudited Financial Statements
Page
----
Consolidated Statements of Financial Position as
of March 31, 1999 and December 31, 1998......................... 2
Consolidated Statements of Income and Comprehensive Income
For the Three Months Ended March 31, 1999 and 1998.............. 3
Consolidated Statements of Changes to Stockholder's Equity
For the Three Months Ended March 31, 1999 and 1998.............. 4
Consolidated Statements of Cash Flows
For the Three Months ended March 31, 1999 and 1998.............. 5
Notes to Consolidated Financial Statements...................... 6 - 7
ITEM 2. Management's Discussion and Analysis of Financial Condition..... 8 - 13
PART II. OTHER INFORMATION:
ITEM 6. Exhibits and Reports on Form 8-K................................ 14
1
<PAGE>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
Consolidated Statements of Financial Position,
March 31, 1999 and December 31, 1998
<TABLE>
<CAPTION>
1999 1998
(Unaudited) (Audited)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and due from banks................................................. $2,536,892 $2,615,466
Interest bearing deposits............................................... 9,839,064 5,610,125
Investment securities, available for sale (Note 3)...................... 33,680,554 30,251,442
Investment securities, held to maturity
(fair value 1999, $15,031,000; 1998, $16,677,000)..................... 14,893,663 16,454,603
Loans, net of unearned interest......................................... 92,096,633 90,499,161
Less: allowance for loan losses......................................... 1,012,520 940,150
-----------------------------
Loans - net...................................................... 91,084,113 89,559,011
Bank premises and equipment - net....................................... 3,097,716 3,135,784
Other real estate....................................................... 87,798 107,789
Accrued interest and other assets....................................... 2,378,482 2,080,598
Intangible assets....................................................... 141,229 138,384
-----------------------------
TOTAL ASSETS.......................................................... $157,739,511 $149,953,202
=============================
LIABILITIES:
Domestic deposits:
Non-interest bearing deposits......................................... $20,953,457 $20,710,241
Interest bearing deposits............................................. 13,513,839 109,181,088
-----------------------------
Total deposits...................................................... 134,467,296 129,891,329
Other borrowed funds.................................................... 7,074,718 4,471,214
Accrued interest and other liabilities.................................. 937,813 823,343
-----------------------------
Total liabilities................................................... 142,479,827 135,185,886
-----------------------------
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, 760,957
and 751,558 shares issued and outstanding in 1999 and 1998 (Note 4)... 3,804,785 3,757,790
Additional paid-in capital.............................................. 828,565 731,661
Retained earnings....................................................... 10,512,406 10,017,937
Accumulated other comprehensive income.................................. 114,000 260,000
-----------------------------
Total.................................................................... 15,259,756 14,767,388
Treasury stock, 6 shares in 1999 and 1998 at cost..................... (72) (72)
-----------------------------
Total stockholders' equity.......................................... 15,259,684 14,767,316
-----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................... $157,739,511 $149,953,202
=============================
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
Consolidated Statements of Income and Comprehensive Income (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest Income:
Interest and fees on loans.............................................. $1,941,038 $1,745,116
Interest and dividends
on investment securities.............................................. 681,214 589,094
Interest on deposits in banks........................................... 56,942 24,424
---------------------------
Total interest income........................................... 2,679,194 2,358,634
---------------------------
Interest Expense:
Interest on deposits.................................................... 1,126,831 1,014,738
Interest on borrowed funds.............................................. 63,712 23,866
---------------------------
Total interest expense.......................................... 1,190,543 1,038,604
---------------------------
Net interest income............................................... 1,488,651 1,320,030
Provision for loan losses........................................... 90,000 75,000
---------------------------
Net interest income after provision for loan losses............... 1,398,651 1,245,030
---------------------------
Other Income:
Service charges and other income........................................ 201,284 189,202
Gain (loss) on sale of securities.......................................
Gain (loss) on sale of other real estate................................ 5,979
---------------------------
Total other income.............................................. 207,263 189,202
---------------------------
Other Expenses:
Salaries and employee benefits.......................................... 490,710 431,290
Occupancy expense....................................................... 105,350 89,921
Equipment expense....................................................... 77,409 75,437
Other operating expense................................................. 252,115 233,614
---------------------------
Total other expenses............................................ 925,584 830,262
---------------------------
Income before income taxes................................................ 680,330 603,970
Provision for income taxes................................................ 185,861 190,000
---------------------------
Net income................................................................ $494,469 $413,970
---------------------------
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gain (loss) arising during period................. ($146,000) $3,500
---------------------------
Other comprehensive income.............................................. ($146,000) $3,500
Comprehensive income...................................................... $348,469 $417,470
===========================
Earnings per share (Note 4)............................................... $0.58 $0.50
===========================
Weighted average common shares............................................ 850,605 825,508
</TABLE>
See Notes to Consolidate Financial Statements
4
<PAGE>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
STOCKHOLDERS' EQUITY, January 1........................................... $14,767,316 $12,637,804
COMMON STOCK, $5.00 PAR VALUE
Options exercised......................................................... 46,995
ADDITIONAL PAID-IN CAPITAL
Options exercised......................................................... 96,904
RETAINED EARNINGS
Net income................................................................ 494,469 413,970
ACCUMULATED OTHER COMPREHENSIVE INCOME
Other comprehensive income, net of tax.................................... (146,000) 3,500
----------------------------
STOCKHOLDERS' EQUITY, March 31............................................ $15,259,684 $13,055,274
============================
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 1999 1998
- ------------------------------------ ---------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.................................................................. $ 494,469 $413,970
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............................................. 77,250 73,107
Provision for loan losses................................................. 90,000 75,000
Increase (decrease) in deferred income taxes.............................. (71,000) (5,000)
Changes in operating assets and liabilities:
Increase (decrease) in accrued interest income and other assets............ (171,729) 22,503
Increase in accrued interest expense and other liabilities................. 56,470 83,049
---------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................................. 475,460 662,629
---------------------------
INVESTING ACTIVITIES:
Purchase bank premises and equipment........................................ (39,182) (33,542)
Decrease (increase) in other real estate.................................... 19,991 (86,738)
Purchase of securities "available for sale"................................. (3,983,608) (473,612)
Decrease (increase) in mortgage-backed securities "available for sale"...... (164,101) 200,848
Redemptions of securities "available for sale".............................. 572,597 528,571
Purchase of securities "held to maturity"................................... (1,010,495)
Redemptions of securities "held to maturity"................................ 2,313,928 2,359,314
Decrease (increase) in mortgage-backed securities "held to maturity"........ 257,506 17,986
Increase in loans to customers.............................................. (1,615,102) (2,282,010)
Increase in deposits in banks............................................... (4,228,938) (4,866,583)
---------------------------
NET CASH USED IN INVESTING ACTIVITIES...................................... (7,877,404) (4,635,766)
---------------------------
FINANCING ACTIVITIES:
Increase in deposits before interest credited............................... 3,721,794 3,828,323
Increase (decrease) in borrowed funds....................................... 2,603,504 (1,040,342)
Interest credited to deposits............................................... 854,173 796,819
Issuance of common stock.................................................... 143,899
---------------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES...................................................... 7,323,370 3,584,800
---------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS............................................................ (78,574) (388,337)
CASH AND CASH EQUIVALENTS, January 1......................................... 2,615,466 2,514,202
---------------------------
CASH AND CASH EQUIVALENTS, March 31.......................................... $2,536,892 $2,125,865
===========================
SUPPLEMENTARY SCHEDULE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest................................................................... $237,908 $215,702
Income taxes............................................................... $108,000 $75,000
Non-cash investing and financing activities:
Unrealized gains (losses) on securities.................................... ($146,000) $59,000
</TABLE>
5
<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
6
<PAGE>
aggregate number of shares which may be issued upon exercise of the options
under the plan is 42,483. Options are exercisable up to one-third in the
second year after the date of 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.
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 12,843 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 2,142 shares of
common stock were automatically granted to each non-employee Director under
this plan expiring April 1, 2004.
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 117,818 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 April
30, 1999 options for 80,996 shares of Common Stock having an exercise price
of $32.50 were outstanding (17,042 options did not vest and lapsed) and
17,780 shares were available for future option grants under the Plan. Of
the 100,038 shares of Common Stock outstanding for options, 77,803 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. Pursuant to Section 422 of the
Internal Revenue Code, shareholder approval is required for the incentive
stock options to qualify for favorable tax treatment. Exercise prices of
options granted under all plans are current prices at time of grant.
PREFERRED STOCK:
The Company authorized 1,000,000 of preferred stock at $5 par value. At
December 31, 1998 and March 31, 1999, no shares were issued nor
outstanding.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION:
Net income for the three months ending March 31, 1999 totaled $494,000 which is
a 19% increase over the $414,000 reported for the same period in 1998. Net
interest income for the three months ending March 31, 1999 increased by $169,000
to $1,489,000 compared to $1,320,000 for the same period in 1998. This
constitutes an increase of 13% over the previous year. Interest income for this
period increased by $320,000 or 14% compared to 1998, and interest expense
increased as well by $152,000 or 15% compared to 1998.
The increase in interest income has been principally from interest on loans
which increased $196,000 or 11% compared to the same period last year. Interest
income from investment securities increased by $92,000 or 16% compared to the
same period last year. Interest rates on loans have decrease steadily since
March of 1998. Although the New York prime rate has not changed since March of
1998, competitive pressures have reduced the Bank's spread to the prime on new
loans. 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 increased by $33,000 from $24,000 to $57,000 due to higher
balances.
The increase in interest expense is due to the increase in interest bearing
deposits during the first quarter of 1999 as compared to the first quarter of
1998. The average total sources to fund earning assets increased by $27,498,000,
from $115,326,000 to $142,824,000 in 1999, while the average interest rate
decreased from 3.60% to 3.34%, respectively.
The increase in deposits continues to provide funds for loans and liquidity.
Loan demand during the first quarter was somewhat mild as loans increased
$1,598,000 or 2% from $90,499,000 at December 31, 1998 to $92,097,000 at March
31, 1999. Loan demand appears to be picking up as the second quarter begins.
Balances of investment securities increased during the first quarter by
$1,958,000 or 4% since December 31, 1998. Interest bearing deposits at banks
increased by $4,229,000 to $9,839,000 from $5,610,000 due to deposits flowing in
and bonds being called or maturing. Management is purchasing mortgage backed
pools and municipal bonds with the funds.
The provision for loan loss during the three months ending March 31, 1999 was
$90,000 compared to $75,000 for the same period in 1998, 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 $1,013,000 and $940,000 at March 31, 1999 and
December 31, 1998, respectively. This represents 1.10% and 1.04% of total loans,
259% and 437% of non-performing loans, and 209% and 291% 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 independent loan review officer on a continuing basis. This
information is closely reviewed by
8
<PAGE>
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 March 31, 1999
and December 31, 1998.
March 1998 December 1997
---------- -------------
(In thousands)
Real estate mortgages................. $ 0 $ 1
Commercial
Installment........................... 23 9
--- ---
Total........... $23 $10
=== ===
Non-accrual loans increased from $205,000 at December 31, 1998 to $373,000 at
March 31, 1999. 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 $6,167,000 or 12%
from December 31, 1998 to March 31, 1999. The average rate earned on available
for sale, held to maturity and deposits in banks were 6.27%, 6.64% and 5.57% for
the three months ended March 31, 1999, as compared to 6.38%, 7.24% and 5.56% for
the three months ended March 31, 1998. As of March 31, 1999, the amortized value
of the Bank's investments classified as held to maturity exceeded their fair
value by $137,000, and the amortized value of investments classified as
available for sale exceeded their fair value by $186,000. This is reflected as
an increase in the Bank's equity of approximately $114,000, net of deferred tax
effects.
Slightly higher interest rates at March 31, 1999 account for the lower
unrealized gain on the available for sale securities reflected on the balance
sheet. Rates are expected to gradually rise during 1999. This will result in a
slight impact on 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 is purchasing
moderate to long maturities, generally eight to twelve years for fixed rate
securities. The Bank has a plan in place to sell certain securities depending
upon how fast interest rates should rise. This will limit losses in the
investment portfolio, and enable the Bank to take advantage of the higher rates.
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
risk.
The addition of employees for the Pine Mall office, Trust Department and back
office, along with annual raises attributed to the increase in salary expense.
Costs associated with the Pine Mall
9
<PAGE>
Office also attributed to the increased occupancy expense. Salaries and employee
benefits have increased by $60,000 or 14% from $431,000 to $491,000 and
occupancy expense increased $15,000 or 17% from $90,000 to $105,000. Equipment
expense increased $2,000 or 3% from $75,000 to $77,000, and other operating
expenses increased $18,000 or 8% from $234,000 to $252,000.
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 March 31, 1999 and December
31, 1998.
(In thousands, except ratios) 1999 1998
------- -------
Tier I capital:
Shareholders' equity............................. $15,005 $14,369
Tier II capital:
Loan loss reserve................................ 1,012 940
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Total Qualifying Capital............................ $16,017 $13,181
======= =======
Risk-adjusted assets (including off balance sheet items). $101,731 $95,881
Tier I Capital Ratio (4.00% required).................... 15.00% 15.40%
Total Capital Ratio (8.00% required)..................... 15.74% 15.97%
Year 2000 Impact
The Bank has a Year 2000 policy addressing the "Year 2000" Issue concerning
computers and equipment using computer chips and their ability to recognize and
process information based on dates in the year 2000 and beyond. If the computer
chips do not recognize the dates in the Year 2000 accurately, certain problems
may result, particularly those concerning calculations based on dates.
Inaccuracies in interest accruals, payment and due dates or other unanticipated
results such as computer shut downs or crashes may occur if the computers or
equipment with computer chips can not properly recognize dates after December
31, 1999. The Bank's policy requires testing of all "mission critical" systems
to determine if they will operate correctly in the year 2000. The Bank's policy
also requires it to test systems (hardware and software) used to interface with
other systems, as well as to determine the Year 2000 readiness of systems of its
partners which provide mission critical services to the Bank.
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<PAGE>
The Bank's policy addresses five major components: (1) Awareness; (2)
Assessment; (3) Renovation; (4) Validation and Testing; and (5) Implementation.
The Bank has completed the first three phases, and tested all mission critical
systems. Test results of all mission critical systems except one have been
validated. The final system's test results are being reviewed currently and
should be complete by the end of May 1999.
The Bank is developing contingency plans in the event vendors of mission
critical systems fail to be Year 2000 ready in time, or unexpected problems
occur. At this time the Bank can not estimate the cost, if any, that might be
required to implement such contingency plans.
The Bank anticipates that its total Year 2000 related costs will not exceed
$30,000. This estimate is based on current information and includes costs for
review and testing by third parties. The estimate may change as the Bank
progresses with its Year 2000 program and obtains additional information with
and conducts further testing with third parties. Lost interest income may be the
Bank's largest Year 2000 expense, as it builds its cash holdings in anticipation
of customer demand. The Bank has not yet determined how much cash it will need
to meet the demand. At this time, no significant problems have arisen concerning
Year 2000 issues.
The Office of the Comptroller of the Currency, which is the bank's primary
regulator, has been conducting Year 2000 compliance examinations. The failure to
implement an adequate Year 2000 program can be identified as an unsafe and
unsound banking practice. The OCC has established an examination procedure which
contains three categories of ratings: "Satisfactory", "Needs Improvement", and
"Unsatisfactory". Banks that receive a Year 2000 rating of Unsatisfactory may be
subject to formal enforcement action, supervisory agreements, cease and desist
orders, civil money penalties, or the appointment of a conservator. In addition,
the OCC will be taking into account Year 2000 compliance programs when reviewing
applications and may deny an application based on Year 2000 related issues.
Failure of the Bank to adequately prepare for Year 2000 issues could negatively
impact the Bank's operations, including the impositions of restrictions on its
operations by the OCC.
Although the Bank has no reason to believe that it will suffer systems
disruptions due to the Year 2000 issue, and is confident that it will not, there
can be no assurance that partial or total systems interruptions or the costs
necessary to update hardware and software would not have a material adverse
effect on the Bank's business, financial condition, results of operations, and
business prospects.
11
<PAGE>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
Average Balances, Interest Income/Expense and Rates
<TABLE>
<CAPTION>
Three months ended, March 31, 1999 March 31, 1998
- ------------------- --------------------------------- ---------------------------------
(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............................ $46,950 $ 988 8.42% $ 43,157 $ 952 8.82%
Installment.......................... 3,440 90 10.47 5,058 134 10.60
Commercial........................... 41,752 890 8.53 29,283 672 9.18
-------------------- -------------------
Total loans........................ 92,142 1,968 8.54 77,498 1,758 9.07
-------------------- -------------------
Securities available for sale:
U.S. Treasury securities............. 5,392 79 5.86 6,545 99 6.05
U.S. government agencies............. 15,755 255 6.47 3,598 58 6.45
Municipal bonds...................... 8,446 140 6.63 2,232 42 7.53
Other securities..................... 662 533 7 5.25
-------------------- -------------------
Total available for sale......... 30,255 474 6.27 12,908 206 6.38
-------------------- -------------------
Securities held to maturity:
U.S. government agencies............. 10,246 173 6.75 17,662 320 7.25
Municipal bonds...................... 3,015 51 6.77 4,039 65 6.44
Other securities..................... 3,074 47 6.12 2,120 35 6.60
-------------------- -------------------
Total held to maturity............. 16,335 271 6.64 23,821 420 7.05
-------------------- -------------------
Deposits in banks..................... 4,092 57 5.57 1,726 24 5.56
-------------------- -------------------
TOTAL................................ $142,824 2,770 7.76 $115,953 2,408 8.31
========------------ ========-----------
INTEREST BEARING LIABILITIES:
Deposits:
NOW and super-NOW.................... $ 15,349 77 2.01 $ 11,185 58 2.07
Savings and money market............. 30,791 192 2.49 26,554 179 2.70
Certificates of deposit.............. 64,794 856 5.28 56,126 775 5.52
Other time deposits.................. 200 2 4.00 200 3 6.00
-------------------- -------------------
Total deposits..................... 111,134 1,127 4.06 94,065 1,015 4.32
Other borrowed funds.................. 5,688 64 4.50 1,564 24 6.14
-------------------- -------------------
TOTAL............................ 116,822 1,191 4.08 95,629 1,039 4.35
Non-interest bearing funds, net (2).... 26,002 20,324
-------------------- -------------------
TOTAL SOURCES TO FUND EARNING ASSETS... $142,824 1,191 3.34 $115,953 1,039 3.58
========------------ ========-----------
NET INTEREST/YIELD..................... $1,579 4.42% $1,369 4.72%
====== ======
</TABLE>
- ----------
(1) Average balances are daily averages. (2) Demand deposits, stockholders'
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 rare of 34%.
See Notes to Consolidated Financial Statements
12
<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 May 14, 1999 /s/ Thomas A. McCullough
------------ ---------------------------------
Thomas A. McCullough
President
Chief Executive Officer
Chief Financial Officer
Date May 14, 1999 /s/ Philip O. Farr
------------ ---------------------------------
Philip O. Farr
Chief Accounting Officer
13
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from our
March 31, 1999 10-QSB and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 0
<INT-BEARING-DEPOSITS> 9,839
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 33,681
<INVESTMENTS-CARRYING> 14,894
<INVESTMENTS-MARKET> 15,031
<LOANS> 92,097
<ALLOWANCE> 1,013
<TOTAL-ASSETS> 157,740
<DEPOSITS> 134,467
<SHORT-TERM> 2,075
<LIABILITIES-OTHER> 938
<LONG-TERM> 5,000
0
0
<COMMON> 4,633
<OTHER-SE> 10,628
<TOTAL-LIABILITIES-AND-EQUITY> 149,953
<INTEREST-LOAN> 1,941
<INTEREST-INVEST> 681
<INTEREST-OTHER> 57
<INTEREST-TOTAL> 2,679
<INTEREST-DEPOSIT> 1,127
<INTEREST-EXPENSE> 1,191
<INTEREST-INCOME-NET> 1,489
<LOAN-LOSSES> 90
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 926
<INCOME-PRETAX> 680
<INCOME-PRE-EXTRAORDINARY> 680
<EXTRAORDINARY> 0
<CHANGES> (114)
<NET-INCOME> 348
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
<YIELD-ACTUAL> 4.42
<LOANS-NON> 373
<LOANS-PAST> 23
<LOANS-TROUBLED> 109
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 940
<CHARGE-OFFS> 20
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 1,012
<ALLOWANCE-DOMESTIC> 1,012
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
