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, 2000.
OR
[ ] 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 23-23140625
------------------------------ -----------------------------------
(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)
(570) 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: 799,609
-------
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
Page
Consolidated Statements of Financial Position as
of September 30, 2000 and December 31, 1999............................2
Consolidated Statements of Income and Comprehensive Income For the
Three and Nine Months Ended September 30, 2000 and 1999................3
Consolidated Statements of Changes to Stockholder?s Equity For the
Nine Months Ended September 30, 2000 and 1999..........................4
Consolidated Statements of Cash Flows For the Nine Months ended
September 30, 2000 and 1999............................................5
Notes to Consolidated Financial Statements.........................6 - 7
ITEM 2. Management's Discussion and Analysis of Financial Condition..8 - 14
PART II. OTHER INFORMATION:
ITEM 6. Exhibits and Reports on Form 8-K.................................15
1
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GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
==============================================================================
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION,
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
------------------------------------------------------------------------------
2000 1999
(UNAUDITED) (AUDITED)
------------------------------------------------------------------------------
ASSETS:
Cash and due from banks $ 2,679,631 $ 4,353,347
Interest bearing deposits 4,375,998 2,526,347
Investment securities, available for sale (Note 3) 43,978,988 41,417,763
Investment securities, held to maturity
(fair value 2000, $15,335,000; 1999,
$12,481,000) 15,411,330 13,217,040
Loans, net of unearned interest 110,497,437 102,317,290
Less: allowance for loan losses 1,130,605 1,092,170
------------ ------------
Loans - net 109,366,832 101,225,120
Bank premises and equipment - net 2,893,034 2,899,382
Other real estate 326,560 231,601
Accrued interest and other assets 4,644,620 3,341,951
Intangible assets 105,848 119,863
------------ ------------
TOTAL ASSETS 183,782,841 169,332,414
============ ============
LIABILITIES:
Domestic deposits:
Non-interest bearing deposits 25,901,854 22,179,696
Interest bearing deposits 126,749,772 118,400,773
------------ ------------
Total deposits 152,651,626 140,580,469
Other borrowed funds 11,585,047 11,786,255
Accrued interest and other liabilities 1,060,016 1,003,690
------------ ------------
TOTAL LIABILITIES 165,296,689 153,370,414
------------ ------------
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; 799,610 and 783,807 issued
and outstanding in 2000 and 1999,
respectively (Note 4) 3,998,050 3,919,045
Additional paid-in capital 1,916,355 1,516,874
Retained earnings 13,171,771 11,675,129
Accumulated other comprehensive income (600,000) (1,149,000)
------------ ------------
TOTAL 18,486,176 15,962,048
Treasury stock, 1 share in 2000 and
2 shares in 1999 at cost (24) (48)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 18,486,152 15,962,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $183,782,841 $169,332,414
============ ============
See Notes to Consolidated Financial Statements
2
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<TABLE>
<CAPTION>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
============================================================================================
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (UNAUDITED)
--------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
2000 1999 2000 1999
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $2,321,328 $2,077,728 $6,699,121 $5,999,788
Interest and dividends on
investment securities 887,416 825,181 2,584,182 2,288,795
Interest on deposits in banks 32,518 9,777 71,123 120,779
-------------------------------------------------
TOTAL INTEREST INCOME 3,241,262 2,912,686 9,354,426 8,409,362
-------------------------------------------------
INTEREST EXPENSE:
Interest on deposits 1,392,834 1,144,851 3,899,369 3,408,773
Interest on borrowed funds 184,527 147,209 511,040 317,933
-------------------------------------------------
TOTAL INTEREST EXPENSE 1,577,361 1,292,060 4,410,409 3,726,706
-------------------------------------------------
NET INTEREST INCOME 1,663,901 1,620,626 4,944,017 4,682,656
Provision for loan losses 30,000 20,000 70,000 170,000
-------------------------------------------------
NET INTEREST INCOME
AFTER PROVISION FOR LOAN LOSSES 1,633,901 1,600,626 4,874,017 4,512,656
-------------------------------------------------
OTHER INCOME:
Service charges and other income 276,344 254,837 821,804 720,536
Gain (loss) on sale of securities (27,076) (18,682)
Gain (loss) on sale of other real estate (4,999) (400) (20,958) 28,584
-------------------------------------------------
TOTAL OTHER INCOME 271,345 227,361 800,846 730,438
-------------------------------------------------
OTHER EXPENSES:
Salaries and employee benefits 538,939 507,354 1,583,226 1,496,184
Occupancy expense 137,605 128,518 351,680 341,491
Equipment expense 97,888 72,665 285,425 238,677
Other operating expense 322,918 318,622 949,214 868,163
-------------------------------------------------
TOTAL OTHER EXPENSES 1,097,350 1,027,159 3,169,545 2,944,515
-------------------------------------------------
INCOME BEFORE INCOME TAXES 807,896 800,828 2,505,318 2,298,579
Provision for income taxes 188,000 186,139 583,000 599,000
-------------------------------------------------
NET INCOME $619,896 $614,689 $1,922,318 $1,699,579
-------------------------------------------------
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized gains on securities:
Unrealized holding gain (loss)
arising during period $413,000 ($312,000) $549,00 ($1,266,000)
-------------------------------------------------
COMPREHENSIVE INCOME $1,032,896 $302,689 $2,471,318 $433,579
=================================================
EARNINGS PER SHARE (NOTE 4) $0.71 $0.73 $2.21 $1.98
=================================================
WEIGHTED AVERAGE COMMON SHARES 871,042 845,962 870,603 859,291
</TABLE>
See Notes to Consolidated Financial Statements
3
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<TABLE>
<CAPTION>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
===========================================================================================
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
-------------------------------------------------------------------------------------------
2000 1999
-------------------------------------------------------------------------------------------
<S> <C> <C>
STOCKHOLDERS' EQUITY, JANUARY 1 $15,962,000 $14,767,316
COMMON STOCK, $5.00 PAR VALUE
Options exercised 21,890 76,630
Stock dividend $0.54 and $0.47 per share in 2000 and 1999,
plus cash in lieu of fractional shares 57,115 36,625
ADDITIONAL PAID-IN CAPITAL
Options exercised 45,312 145,546
Stock dividend $0.54 and $0.47 per share in 2000 and 1999,
plus cash in lieu of fractional shares 354,113 307,650
RETAINED EARNINGS
Stock dividend $0.54 and $0.47 per share in 2000 and 1999,
plus cash in lieu of fractional shares (411,228) (344,275)
Cash paid in lieu of fractional shares due to stock dividend (14,392) (15,000)
Net income 1,922,318 1,699,579
ACCUMULATED OTHER COMPREHENSIVE INCOME
Other comprehensive income, net of tax 549,000 (1,266,000)
TREASURY STOCK
Reissuance of common stock (1 share in 2000 and 1999, at cost) 24 24
-------------------------
STOCKHOLDERS' EQUITY, SEPTEMBER 30 $18,486,152 $15,408,095
=========================
</TABLE>
See Notes to Consolidated Financial Statements
4
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<TABLE>
<CAPTION>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
==================================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $1,922,318 $1,699,579
Adjustments to reconcile net income to net cash by operating
activities:
Depreciation and amortization 234,750 233,750
Provision for loan losses 70,000 170,000
Increase (decrease) in deferred income taxes 255,410 (646,000)
Changes in operating assets and liabilities:
Increase (decrease) in accrued interest income and
other assets (1,544,063) (324,880)
Increase (decrease) in accrued interest expense and
other liabilities 56,326 36,726
-------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 994,741 1,169,175
-------------------------
INVESTING ACTIVITIES:
Purchase bank premises and equipment (228,402) (70,202)
Decrease (increase) in other real estate (94,960) (123,812)
Purchase of securities "available for sale" (5,770,627) (11,099,470)
Decrease (increase) in mortgage-backed securities
"available for sale" 1,034,233 (6,071,956)
Sales of securities "available for sale" 0 2,903,735
Redemptions of securities "available for sale" 2,724,169 1,098,278
Purchase of securities "held to maturity" (2,440,490) (2,560,779)
Redemptions of securities "held to maturity" 103,745 5,818,382
Decrease (increase) in mortgage-backed securities
"held to maturity" 142,455 423,776
Net Increase in loans to customers (8,211,712) (9,884,735)
Net Increase (decrease) in interest bearing
deposits in banks (1,849,651) 3,232,194
-------------------------
NET CASH USED IN INVESTING ACTIVITIES (14,591,240) (16,334,589)
-------------------------
FINANCING ACTIVITIES:
Increase in deposits before interest credited 8,517,262 5,768,140
Increase (decrease) in borrowed funds (201,208) 6,090,954
Interest credited to deposits 3,553,895 3,134,013
Cash in lieu of fractional shares (14,392) (15,000)
Proceeds of sale of treasury stock 24 24
Issuance of common stock 67,202 222,176
-------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 11,922,783 15,200,307
-------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,673,716) 34,893
CASH AND CASH EQUIVALENTS, JANUARY 1 4,353,347 2,615,466
-------------------------
CASH AND CASH EQUIVALENTS, SEPTEMBER 30 $2,679,631 $2,650,359
=========================
SUPPLEMENTARY SCHEDULE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $1,239,403 $747,456
Income taxes $586,000 $646,139
Non-cash investing and financing activities:
Unrealized gains (losses) on securities $549,000 ($1,266,000)
Stock dividend 411,228 344,275
</TABLE>
See Notes to Consolidated Financial Statements
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 at Laceyville (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. In 1996 the Bank changed its
name to "Grange National Bank". 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.
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 42,843.
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
6
<PAGE>
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 44,443 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 2,222 shares of common stock were automatically
granted to each non-employee Director under this plan expiring April
1, 2004. On April 1, 2000, options to purchase 1,087 shares were
granted to each non-employee Director, as the final installment of
options under this stock option plan.
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
122,218 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, 2000 options for 85,785
shares of Common Stock having various exercise prices were
outstanding, 17,064 shares have been exercised, and 19,369 shares
were available for future option grants under the Plan. Of the
102,849 shares of Common Stock outstanding for options, 76,179 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, 1999 and September 30, 2000, no shares were issued
nor outstanding.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION:
Net income for the three months ending September 30, 2000 totaled $620,000
which is a 1% increase over the $615,000 reported for the same period in
1999. Net interest income for the three months ending September 30, 2000
increased by $43,000 to $1,664,000 compared to $1,621,000 for the same
period in 1999. This constitutes an increase of 3% over the previous year.
Interest income for this period increased by $328,000 or 11% compared to
1999, and interest expense increased as well by $285,000 or 22% compared to
1999.
The increase in interest income has been principally from interest and fees
on loans which increased $243,000 or 12% compared to the same period last
year. Interest income from investment securities increased by $62,000 or 8%
compared to the same period last year. The Federal Reserve began raising
interest rates in the middle of 1999, and we have raised our loan rates some
but intense competition has kept us from raising them as much as the Federal
Reserve has. This also increased the cost of our deposits. The New York
prime rate has gone from 8.25% at the end of September 1999 to 9.50% at the
end of September 2000, but our spread to prime on new loans has narrowed.
Since we increased our purchases of longer term municipal bonds and
mortgage-backed bonds last year, to increase the yield of the bond
portfolio, the market value of those bonds declined due to the rise in
interest rates. However during the third quarter, interest rates on bonds
have eased and the value of the bond portfolio has recovered significantly,
but still is at an overall loss. The municipal bonds currently being
purchased, mostly have maturities of between eight and ten years, and are
classified as "available for sale". Interest on deposits in banks increased
by $23,000 from $10,000 to $33,000 due primarily to higher balances.
The increase in interest expense is due to both the rate and volume of
interest bearing deposits and other borrowed funds during the third quarter
of 2000 as compared to the third quarter of 1999. The average total sources
to fund earning assets increased by $15,284,000, from $150,495,000 to
$165,779,000 in 2000, while the interest expense increased by $160,000 from
$1,284,000 to $1,576,000. The corresponding average interest rate on
liabilities funding assets increased from 3.34% in 1999 to 3.72% in 2000.
Deposits continue to provide funds for loans and liquidity, but seem to have
leveled off; a trend most banks are experiencing this year. The bank
purchased a small grocery store office from Pioneer American Bank N.A in
June, bringing in deposits of $1,500,000. Loan demand during the third
quarter picked up from the first and second quarters and showed an increase
of $8,180,000 since December 31, 1999 to $110,497,000 at September 30, 2000.
Loan demand continues to be strong during the fourth quarter. Balances of
investment securities increased by $4,755,000 or 8% since December 31, 1999.
Management has borrowed $2,500,000 from the Federal Home Loan Bank (FHLB) in
term advances, during 2000, and used the funds to purchase corporate bonds.
The bank will have a guaranteed interest spread until the call dates on the
FHLB term advances, at which time the bank can payback the advances if the
FHLB adjusts the rates or pay the new rates. Management will plan for
sufficient liquidity to pay the advances when it expects the FHLB will
change the rates. This arbitrage accounts for part of the increase in the
interest income from investment securities. Interest bearing deposits at
banks increased by $1,850,000 to $4,376,000 from $2,526,000 due to a
8
<PAGE>
few large municipal time deposits.
The provision for loan loss during the three months ending September 30,
2000 was $30,000 compared to $20,000 for the same period in 1999.
Nonperforming loans increased during the third quarter due to employee
turnover in the Bank's collection department . We now have new personnel in
place and nonperforming loans have begun to decrease. We believe the
allowance for loan losses is about where it should be, and expect to only
need to put in enough to maintain the allowance at about 1% of loans. The
allowance for loan losses was $1,131,000 and $1,092,000 at September 30,
2000 and December 31, 1999, respectively. This represents 1.02% and 1.01%
of total loans, 257% and 975% of non-performing loans, and 147% and 317% 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 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, 2000 and December 31, 1999.
September 2000 December 1999
-------------- -------------
Real estate mortgages 255
Commercial 11
Credit cards and related plans 8
Installment 6 9
------------------------------------
Total 280 9
====================================
Non-accrual loans increased from $103,000 at December 31, 1999 to $160,000
at September 30, 2000. The overall quality remains very good, and
management expects non-performing assets to remain at substantially the same
levels as a proportion of loans. Ot her real estate owned increased from
$232,000 at December 1999 to $327,000 at September 2000.
Investments in securities increased $4,755,000 or 9% from December 31, 1999
to September 30, 2000. The average rate earned on available for sale, held
to maturity and deposits in banks were 6.51%, 6.30% and 6.65% for the three
months ended September 30, 2000, as compared to 6.63%, 6.59% and 6.50% for
the three months ended September 30, 1999. As of September 30, 2000, the
amortized value of the Bank's investments classified as held to maturity
exceeded their fair value by $76,000, and the amortized value of
investments classified as available for sale exceeded their fair value by
$916,000. This is reflected as a decrease in the Bank's equity of
approximately $600,000, net of deferred tax effects.
A leveling off and a slight decline in some interest rates at September 30,
2000 account for the reduction of unrealized losses on the available for
sale securities reflected on the balance sheet. As rates stabilize or
decline slightly during the last quarter of 2000, the value of our
securities classified as available for sale will increase. As we extend the
length of the securities we purchase, interest rate
9
<PAGE>
changes will have greater impact on the fair value of those securities.
This interest rate risk is offset by higher yields on the securities. We
are purchasing moderate to long maturities, generally eight to twelve years
for fixed rate securities. We have 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 us to take advantage of
the higher rates.
We are still purchasing only high quality investments to minimize credit
risk to the value of our investments. There have been no adverse credit
valuations on any of our investments. Although investment opportunities
exist which will produce higher yields, they generally contain higher
credit risk.
Salaries and employee benefits for the three months ended September 30, 2000
have increased by $32,000 or 6% from $507,000 to $539,000 and occupancy
expense increased $9,000 or 7% from $129,000 to $138,000. Equipment expense
increased $25,000 or 10% from $73,000 to $98,000, while other operating
expenses increased $4,000 or 1% from $319,000 to $323,000.
Monthly we perform an interest rate and liquidity analysis 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. We place a 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,
2000 and December 31, 1999.
2000 1999
---- ----
(In thousands, except ratios)
Tier I capital: $18,980 $16,911
Tier II capital: 1,196 1,092
----------------------------
Total Qualifying Capital 20,176 18,003
============================
Risk-adjusted assets
(including off balance sheet items) $111,644 $99,658
Tier I Capital Ratio (4.00% required) 17.00% 16.97%
Total Capital Ratio (8.00% required) 18.07% 18.11%
Tier I Leverage Ratio 10.51% 10.55%
YEAR 2000 IMPACT
The Company did not have any computer hardware or software problems related
to any year 2000 date issues, nor were we impacted by any possible problems
with any vendors, suppliers or correspondent banks.
10
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<TABLE>
<CAPTION>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
================================================================================================================
AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND RATES
----------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
(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 $59,736 $1,284 8.60% $56,073 $1,188 8.47%
Consumer 11,303 302 10.69 10,433 276 10.58
Commercial 37,122 846 9.12 31,514 661 8.39
-------------------- --------------------
Total loans 108,161 2,432 8.99 98,020 2,125 8.67
-------------------- --------------------
Securities available for sale:
U.S. Treasury securities 2,740 40 5.84 5,258 68 5.17
U.S. government agencies 27,303 438 6.42 23,645 369 6.24
Municipal bonds 12,651 222 7.02 10,674 215 8.06
Other securities 1,258 2 0.64 816 18 8.82
-------------------- --------------------
Total available for sale 43,952 702 6.39 40,393 670 6.63
-------------------- --------------------
Securities held to maturity:
U.S. government agencies 5,020 78 6.22 7,476 122 6.53
Municipal bonds 2,346 41 6.99 2,903 48 6.61
Other securities 8,217 157 7.64 4,496 75 6.67
-------------------- --------------------
Total held to maturity 15,583 276 7.08 14,875 245 6.59
-------------------- --------------------
Deposits in banks 1,984 33 6.65 615 10 6.50
-------------------- --------------------
TOTAL $169,680 3,443 8.12 $153,903 3,050 7.93
==================== ====================
INTEREST BEARING LIABILITIES:
Deposits:
NOW and super-NOW $16,906 101 2.39 $17,421 79 1.81
Savings and money market 31,973 198 2.48 32,055 200 2.50
Certificates of deposit 75,484 1,090 5.78 65,086 855 5.25
Other time deposits 200 3 6.00 200 3 6.00
-------------------- --------------------
Total deposits 124,563 1,392 4.47 114,762 1,137 3.96
Other borrowed funds 11,280 184 6.52 9,086 147 6.47
-------------------- --------------------
TOTAL 135,843 1,576 4.64 123,848 1,284 4.15
Non-interest bearing
funds, net (2) 33,837 30,055
-------------------- --------------------
TOTAL SOURCES TO FUND
EARNING ASSETS $169,680 1,576 3.72 $153,903 1,284 3.34
=========----------- =========-----------
NET INTEREST/YIELD................ $1,867 4.40% $1,766 4.59%
======= =======
</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
11
<PAGE>
<TABLE>
<CAPTION>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
================================================================================================================
AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND RATES
----------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
(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 $59,752 $3,760 8.39% $55,587 $3,535 8.48%
Consumer 11,153 818 9.78 10,220 742 9.68
Commercial 34,532 2,333 9.01 28,114 1,824 8.65
-------------------- ---------------------
Total loans 105,437 6,911 8.74 93,921 6,101 8.66
-------------------- ---------------------
Securities available for sale:
U.S. Treasury securities 3,365 155 6.14 5,300 223 5.61
U.S. government agencies 27,122 1,255 6.17 21,435 959 5.97
Municipal bonds 12,643 661 6.97 10,643 555 6.95
Other securities 1,430 68 6.34 883 40 6.04
-------------------- ---------------------
Total available for sale 44,560 2,139 6.40 38,261 1,777 6.19
-------------------- ---------------------
Securities held to maturity:
U.S. government agencies 4,971 239 6.41 7,910 410 6.91
Municipal bonds 2,391 117 6.52 3,279 151 6.14
Other securities 7,021 355 6.74 4,128 191 6.17
-------------------- ---------------------
Total held to maturity 14,383 711 6.59 15,317 752 6.55
-------------------- ---------------------
Deposits in banks 1,399 71 6.77 2,996 121 5.38
-------------------- ---------------------
TOTAL $165,779 9,832 7.91 $150,495 8,751 7.75
=========----------- =========------------
INTEREST BEARING LIABILITIES:
Deposits:
NOW and super-NOW $16,958 283 2.23 $16,449 242 1.96
Savings and money market 31,383 578 2.46 31,756 588 2.47
Certificates of deposit 72,734 3,029 5.55 65,266 2,564 5.24
Other time deposits 200 9 6.00 200 7 4.67
-------------------- ---------------------
Total deposits 121,275 3,899 4.29 113,671 3,401 3.99
Other borrowed funds 12,463 511 5.47 8,880 318 4.77
-------------------- ---------------------
TOTAL 133,738 4,410 4.40 122,551 3,719 4.05
Non-interest bearing funds,
net (2) 32,041 27,944
-------------------- ---------------------
TOTAL SOURCES TO FUND
EARNING ASSETS $165,779 4,410 3.55 $150,495 3,719 3.29
=========----------- =========------------
NET INTEREST/YIELD $5,422 4.36% $5,032 4.46%
======= =======
</TABLE>
(1) Average balances are daily averages. (2) Demand deposits,
stockholders's equity and other non-interest bearing liabilities less
non-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>
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, 2000 /s/ Thomas A. McCullough
------------------------ --------------------------
Thomas A. McCullough
President
Chief Executive Officer
Date November 14, 2000 /s/ Philip O. Farr
------------------------ --------------------------
Philip O. Farr
Chief Accounting Officer
Chief Financial Officer
13
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