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 June 30, 2000.
[ ] 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: 799,609
-------
Transitional Small Business Disclosure Format (Check one): Yes ; No X
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GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
ITEM 1. Unaudited Financial Statements
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Page
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Consolidated Statements of Financial Position as
of June 30, 2000 and December 31, 1999...................................................................2
Consolidated Statements of Income and Comprehensive Income For the
Three and Six Months Ended June 30, 2000 and 1999........................................................3
Consolidated Statements of Changes to Stockholder's Equity For the Six Months
Ended June 30, 2000 and 1999.............................................................................4
Consolidated Statements of Cash Flows For the Six Months ended
June 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
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1
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GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
Consolidated Statements of Financial Position, June 30, 2000 and December 31, 1999
2000 1999
(Unaudited) (Audited)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and due from banks....................................................... $ 2,747,667 $ 4,353,347
Interest bearing deposits..................................................... 7,474,150 2,526,347
Investment securities, available for sale (Note 3)............................ 44,086,758 41,417,763
Investment securities, held to maturity
(fair value 2000, $15,290,000; 1999, $12,481,000)........................... 15,545,383 13,217,040
Loans, net of unearned interest............................................... 103,295,423 102,317,290
Less: allowance for loan losses.............................................. 1,108,585 1,092,170
-----------------------------
Loans - net............................................................ 102,186,838 101,225,120
Bank premises and equipment - net............................................. 2,928,893 2,899,382
Other real estate............................................................. 331,561 231,601
Accrued interest and other assets............................................. 4,576,324 3,341,951
Intangible assets............................................................. 110,520 119,863
-----------------------------
TOTAL ASSETS................................................................ $179,988,094 $169,332,414
=============================
LIABILITIES:
Domestic deposits:
Non-interest bearing deposits............................................... $ 23,782,924 $ 22,179,696
Interest bearing deposits................................................... 121,620,561 118,400,773
-----------------------------
Total deposits............................................................ 145,403,485 140,580,469
Other borrowed funds.......................................................... 16,166,839 11,786,255
Accrued interest and other liabilities........................................ 967,514 1,003,690
-----------------------------
Total liabilities......................................................... 162,537,838 153,370,414
-----------------------------
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 783,809 shares issued and outstanding in 2000 and 1999 (Note 4)......... 3,998,050 3,919,045
Additional paid-in capital.................................................... 1,916,355 1,516,874
Retained earnings............................................................. 12,548,875 11,675,129
Accumulated other comprehensive income........................................ (1,013,000) (1,149,000)
-----------------------------
Total.......................................................................... 17,450,280 15,962,048
Treasury stock, 1 and 2 shares in 2000 and 1999, respectively, at cost..... (24) (48)
-----------------------------
Total stockholders' equity................................................ 17,450,256 15,962,000
-----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................... $179,988,094 $169,332,414
=============================
</TABLE>
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 Six months ended
June 30 June 30
2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans ................................ $ 2,221,280 $ 1,981,022 $ 4,377,793 $ 3,922,060
Interest and dividends
on investment securities ................................ 846,618 782,400 1,696,766 1,463,614
Interest on deposits in banks ............................. 32,510 54,060 38,605 111,002
----------- ----------- ----------- -----------
Total interest income ............................. 3,100,408 2,817,482 6,113,164 5,496,676
----------- ----------- ----------- -----------
Interest Expense:
Interest on deposits ...................................... 1,282,685 1,137,091 2,506,535 2,263,922
Interest on borrowed funds ................................ 160,624 107,012 326,513 170,724
----------- ----------- ----------- -----------
Total interest expense ............................ 1,443,309 1,244,103 2,833,048 2,434,646
----------- ----------- ----------- -----------
Net interest income ................................. 1,657,099 1,573,379 3,280,116 3,062,030
Provision for loan losses ............................. 20,000 60,000 40,000 150,000
----------- ----------- ----------- -----------
Net interest income after provision for
loan losses ....................................... 1,637,099 1,513,379 3,240,116 2,912,030
----------- ----------- ----------- -----------
Other Income:
Service charges and other income .......................... 279,155 264,415 545,460 465,699
Gain (loss) on sale of securities ......................... 8,394 8,394
Gain (loss) on sale of other real estate .................. (14,959) 23,005 (15,959) 28,984
----------- ----------- ----------- -----------
Total other income ................................ 264,196 295,814 529,501 503,077
----------- ----------- ----------- -----------
Other Expenses:
Salaries and employee benefits ............................ 516,765 498,120 1,044,287 988,830
Occupancy expense ......................................... 106,843 107,623 214,075 212,973
Equipment expense ......................................... 97,837 88,603 187,537 166,012
Other operating expense ................................... 293,158 297,426 626,296 549,541
----------- ----------- ----------- -----------
Total other expenses .............................. 1,014,603 991,772 2,072,195 1,917,356
----------- ----------- ----------- -----------
Income before income taxes .................................. 886,692 817,421 1,697,422 1,497,751
Provision for income taxes .................................. 206,000 227,000 398,000 412,861
----------- ----------- ----------- -----------
Net income .................................................. $ 680,692 $ 590,421 $ 1,299,422 $ 1,084,890
----------- ----------- ----------- -----------
Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gain (loss) arising during period ... $ 256,000 $ (808,000) $ 136,000 $ (694,000)
----------- ----------- ----------- -----------
Comprehensive income ........................................ $ 936,692 $ (217,579) $ 1,435,422 $ 390,890
=========== =========== =========== ===========
Earnings per share (Note 4) ................................. $ 0.77 $ 0.69 $ 1.49 $ 1.27
=========== =========== =========== ===========
Weighted average common shares .............................. 868,412 855,486 870,384 853,965
</TABLE>
See Notes to Consolidate Financial Statements
3
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GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
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<CAPTION>
For the Six Months Ended June 30, 2000 1999
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<S> <C> <C>
STOCKHOLDERS' EQUITY, January 1............................................... $15,962,000 $14,767,316
COMMON STOCK, $5.00 PAR VALUE
Options exercised............................................................... 21,890 64,310
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............................................................... 45,312 129,319
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...................................................................... 1,299,422 1,084,890
ACCUMULATED OTHER COMPREHENSIVE INCOME
Other comprehensive income (loss), net of tax................................... 136,000 (954,000)
----------- -----------
TREASURY STOCK
Reissuance of common stock
(1 share in 2000 and 1999, at cost) 24 24
STOCKHOLDERS' EQUITY, June 30................................................... $17,450,256 $15,076,859
=========== ===========
</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 Six Months Ended June 30, 2000 1999
------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ........................................................... $ 1,299,422 $ 1,084,890
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ...................................... 154,500 154,500
Provision for loan losses .......................................... 40,000 150,000
Increase (decrease) in deferred income taxes ....................... 83,000 (486,000)
Changes in operating assets and liabilities:
Increase (decrease) in accrued interest income and other assets ..... (2,321,029) (242,073)
Increase (decrease) in accrued interest expense and other liabilities (36,176) (77,293)
------------ ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES ............................................... (780,283) 584,024
------------ ------------
INVESTING ACTIVITIES:
Purchase bank premises and equipment ................................. (184,011) (60,638)
Decrease (increase) in other real estate ............................. (99,960) (140,010)
Purchase of securities "available for sale" .......................... (5,574,716) (11,099,470)
Decrease (increase) in mortgage-backed securities "available for sale" 608,652 (6,297,172)
Sales of securities "available for sale" ............................. 0 2,340,722
Redemptions of securities "available for sale" ....................... 3,446,069 529,164
Purchase of securities "held to maturity" ............................ (2,440,490) (2,560,779)
Redemptions of securities "held to maturity" ......................... 4,703 3,769,487
Decrease (increase) in mortgage-backed securities
"held to maturity" ................................................. 107,444 350,122
Net Increase in loans to customers ................................... (1,001,719) (1,405,291)
Net Increase (decrease) in interest bearing deposits in banks ........ (4,947,803) 2,910,215
------------ ------------
NET CASH USED IN
INVESTING ACTIVITIES ............................................... (10,081,831) (11,663,650)
------------ ------------
FINANCING ACTIVITIES:
Increase in deposits before interest credited ........................ 2,623,172 3,835,896
Increase (decrease) in borrowed funds ................................ 4,380,584 5,432,466
Interest credited to deposits ........................................ 2,199,844 2,031,827
Cash in lieu of fractional shares .................................... (14,392) (15,000)
Proceeds of sale of treasury stock ................................... 24 24
Issuance of common stock ............................................. 67,202 193,629
------------ ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES ............................................... 9,256,434 11,478,842
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ..................................................... (1,605,680) 399,216
CASH AND CASH EQUIVALENTS, January 1 .................................. 4,353,347 2,615,466
------------ ------------
CASH AND CASH EQUIVALENTS, June 30 .................................... $ 2,747,667 $ 3,014,682
============ ============
SUPPLEMENTARY SCHEDULE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest ............................................................ $ 501,414 $ 479,077
Income taxes ........................................................ $ 526,000 $ 460,000
Non-cash investing and financing activities:
Unrealized gains (losses) on securities ............................. $ 136,000 $ (954,000)
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 (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.
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
6
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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 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 June 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 June 30, 2000 totaled $681,000 which is a
15% increase over the $590,000 reported for the same period in 1999. Net
interest income for the three months ending June 30, 2000 increased by $84,000
to $1,657,000 compared to $1,573,000 for the same period in 1999. This
constitutes an increase of 5% over the previous year. Interest income for this
period increased by $283,000 or 10% compared to 1999, and interest expense
increased as well by $199,000 or 16% compared to 1999.
The increase in interest income has been principally from interest and fees on
loans which increased $240,000 or 12% compared to the same period last year.
Interest income from investment securities increased by $65,000 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 7.75% at the end of June 1999 to 9.50% at the end of June 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 has declined due to
the rise in interest rates. 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 decreased by $21,000 from
$54,000 to $33,000 due to lower balances.
The increase in interest expense is due to the increase in interest bearing
deposits and other borrowed funds during the second quarter of 2000 as compared
to the second quarter of 1999. The average total sources to fund earning assets
increased by $14,230,000, from $151,297,000 to $165,527,000 in 2000, while the
interest expense increased by $200,000 from $1,244,000 to $1,444,000. The
corresponding average interest rate on liabilities funding assets increased from
3.29% in 1999 to 3.49% 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 second quarter was steady but
below last year's pace having increased only $978,000 since December 31, 1999 to
$103,295,000 at June 30, 2000. Loan demand has increased and is expected to be
strong during the third quarter. Balances of investment securities increased by
$4,997,000 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
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in the interest income from investment securities. Interest bearing deposits at
banks increased by $4,948,000 to $7,474,000 from $2,526,000 due to a few large
municipal time deposits.
The provision for loan loss during the three months ending June 30, 2000 was
$20,000 compared to $60,000 for the same period in 1999. During the first half
of 1999 we were concerned about a large loan defaulting and we boosted the
provision. We did not incur a loss on that loan as we worked it out.
Nonperforming loans remained about the same during the second quarter as they
were in the first quarter. 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 $1,109,000 and
$1,092,000 at June 30, 2000 and December 31, 1999, respectively. This represents
1.07% and 1.01% of total loans, 916% and 975% of non- performing loans, and 245%
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 June 30, 2000 and December 31, 1999.
June 2000 December 1999
(In thousands)
Real estate mortgages $30 $0
Commercial
Installment 6 9
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Total $36 $9
=== ==
Non-accrual loans decreased from $103,000 at December 31, 1999 to $85,000 at
June 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. Other real estate owned increased from $232,000 at December 1999 to
$332,000 at June 1999.
Investments in securities increased $4,997,000 or 9% from December 31, 1999 to
June 30, 2000. The average rate earned on available for sale, held to maturity
and deposits in banks were 6.48%, 6.08% and 6.65% for the three months ended
June 30, 2000, as compared to 6.27%, 6.35% and 5.28% for the three months ended
June 30, 1999. As of June 30, 2000, the amortized value of the Bank's
investments classified as held to maturity exceeded their fair value by
$256,000, and the amortized value of investments classified as available for
sale exceeded their fair value by $1,541,000. This is reflected as an decrease
in the Bank's equity of approximately $1,013,000, net of deferred tax effects.
9
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Higher interest rates at June 30, 2000 account for the greater unrealized losses
on the available for sale securities reflected on the balance sheet. Rates
appear to have leveled off and may even decline slightly during last half of
2000. This will increase the value of our securities classified as available for
sale. As we extend the length of the securities we purchase, 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. 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 June 30, 2000 have
increased by $19,000 or 4% from $498,000 to $517,000 and occupancy expense
remained virtually unchanged from 1999. Equipment expense increased $9,000 or
10% from $89,000 to $98,000, while other operating expenses decreased $4,000 or
1% from $297,000 to $293,000.
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 June 30, 2000 and December 31,
1999.
<TABLE>
<CAPTION>
(In thousands, except ratios) 2000 1999
----------------------------- -------- -------
<S> <C> <C>
Tier I capital:
Shareholders' equity.................................. $ 18,352 $16,911
Tier II capital:
Loan loss reserve..................................... 1,193 1,136
-------- -------
Total Qualifying Capital................................... $ 19,545 $18,047
======== =======
Risk-adjusted assets (including off balance sheet items)............ $107,598 $99,658
10
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Tier I Capital Ratio (4.00% required)............................... 17.06% 16.97%
Total Capital Ratio (8.00% required)................................ 18.16% 18.11%
Tier I Leverage Ratio............................................... 10.60% 10.55%
</TABLE>
Year 2000 Impact
The final dates for possible "Year 2000" concerns were February 29, 2000 (Leap
Day) and March 31, 2000 (the end of the first quarter). We did not have any
computer hardware or software problems with either of these dates, nor were we
impacted by any possible problems with any vendors, suppliers or correspondent
banks. The year end change over was also pleasantly uneventful.
11
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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
JUNE 30, 2000 JUNE 30, 1999
--------------------------------------------------------------------------------
(1) Interest Average (1) Interest Average
Average Income/ Interest Average Income/ Interest
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
----------------------------------------------------------------------------------------------------------------------
INTEREST EARNING ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Loans:
Mortgages ................... $ 59,538 $ 1,254 8.42% $ 45,391 $ 971 8.56%
Consumer .................... 11,031 258 9.36 10,233 233 9.11
Commercial .................. 34,552 756 8.75 36,313 804 8.86
-------- -------- -------- --------
Total loans ............... 105,121 2,268 8.63 91,937 2,008 8.74
-------- -------- -------- --------
Securities available for sale:
U.S. Treasury securities .... 2,740 43 6.28 5,258 76 5.78
U.S. government agencies .... 27,303 426 6.24 23,645 335 5.67
Municipal bonds ............. 12,639 219 6.93 10,674 200 7.49
Other securities ............ 1,258 24 7.63 816 22 10.78
-------- -------- -------- --------
Total available for sale 43,940 712 6.48 40,393 633 6.27
-------- -------- -------- --------
Securities held to maturity:
U.S. government agencies .... 5,020 80 6.37 7,476 115 6.15
Municipal bonds ............. 2,414 34 5.63 2,903 52 7.17
Other securities ............ 7,048 106 6.02 4,496 69 6.14
-------- -------- -------- --------
Total held to maturity .... 14,482 220 6.08 14,875 236 6.35
-------- -------- -------- --------
Deposits in banks ............ 1,984 33 6.65 4,092 54 5.28
-------- -------- -------- --------
TOTAL ................... $165,527 3,233 7.81 $151,297 2,931 7.75
======== ======== ======== ========
INTEREST BEARING LIABILITIES:
Deposits:
NOW and super-NOW ........... $ 17,503 102 2.33 $ 17,421 86 1.97
Savings and money market .... 31,931 196 2.46 32,055 196 2.45
Certificates of deposit ..... 71,316 982 5.51 65,086 853 5.24
Other time deposits ......... 200 3 6.00 200 2 4.00
-------- -------- -------- --------
Total deposits ............ 120,950 1,283 4.24 114,762 1,137 3.96
Other borrowed funds ......... 10,334 161 6.23 9,086 107 4.71
-------- -------- -------- --------
TOTAL ................... 131,284 1,444 4.40 123,848 1,244 4.02
Non-interest bearing
funds, net (2) ............... 34,243 27,449
-------- -------- -------- --------
TOTAL SOURCES TO FUND
EARNING ASSETS ................ $165,527 1,444 3.49 $151,297 1,244 3.29
======== -------- ======== --------
NET INTEREST/YIELD ............ $ 1,789 4.32% $ 1,687 4.46%
======== ========
</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>
<TABLE>
<CAPTION>
GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
======================================================================================================================
AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND RATES
----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
--------------------------------------------------------------------------------
(1) Interest Average (1) Interest Average
Average Income/ Interest Average Income/ Interest
(Dollars in thousands) Balance Expense Rate Balance Expense Rate
----------------------------------------------------------------------------------------------------------------------
INTEREST EARNING ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Loans:
Mortgages ................... $ 59,161 $ 2,476 8.37% $ 46,166 $ 1,959 8.49%
Consumer .................... 11,027 516 9.36 9,770 477 9.76
Commercial .................. 33,930 1,487 8.77 35,909 1,540 8.58
-------- -------- -------- --------
Total loans ............... 104,118 4,479 8.60 91,845 3,976 8.66
-------- -------- -------- --------
Securities available for sale:
U.S. Treasury securities .... 3,796 115 6.06 5,325 155 5.82
U.S. government agencies .... 26,359 817 6.20 19,536 590 6.04
Municipal bonds ............. 12,639 439 6.95 9,562 340 7.11
Other securities ............ 1,284 66 0.28 739 22 5.95
-------- -------- -------- --------
Total available for sale 44,078 1,437 6.52 35,162 1,107 6.30
-------- -------- -------- --------
Securities held to maturity:
U.S. government agencies .... 5,009 161 6.43 8,849 288 6.51
Municipal bonds ............. 2,414 76 6.30 3,462 103 5.95
Other securities ............ 6,416 198 6.17 3,790 116 6.12
-------- -------- -------- --------
Total held to maturity .... 13,839 435 6.29 16,101 507 6.30
-------- -------- -------- --------
Deposits in banks ............ 1,181 39 6.60 2,671 111 8.31
-------- -------- -------- --------
TOTAL ................... $163,216 6,390 7.83 $145,779 5,701 7.82
======== -------- ======== --------
INTEREST BEARING LIABILITIES:
Deposits:
NOW and super-NOW ........... $ 16,534 182 2.20 $ 16,394 163 1.99
Savings and money market .... 31,081 380 2.45 31,427 388 2.47
Certificates of deposit ..... 71,351 1,939 5.44 65,334 1,709 5.23
Other time deposits ......... 200 6 6.00 200 4 4.00
-------- -------- -------- --------
Total deposits ............ 119,166 2,507 4.21 113,355 2,264 3.99
Other borrowed funds ......... 12,251 327 5.34 7,398 171 4.62
-------- -------- -------- --------
TOTAL ................... 131,417 2,834 4.31 120,753 2,435 4.03
Non-interest bearing
funds, net (2) ............... 31,799 25,026
-------- -------- -------- --------
TOTAL SOURCES TO FUND
EARNING ASSETS ................ $163,216 2,834 3.47 $145,779 2,435 3.34
======== -------- ======== --------
NET INTEREST/YIELD ............ $ 3,556 4.36% $ 3,266 4.48%
======== ========
</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 August 10, 2000 /s/ Thomas A. McCullough
--------------- ------------------------------
Thomas A. McCullough
President
Chief Executive Officer
Date August 10, 2000 /s/ Philip O. Farr
--------------- ------------------------------
Philip O. Farr
Chief Accounting Officer
Chief Financial Officer
14
