UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended December 31, 1996
                                       or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from _____________________to_________________________
Commission File No. 0-13599

                           Grange National Banc Corp.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Pennsylvania                                         23-2314065
-------------------------------                          ----------------------
(State or other jurisdiction of                              (IRS Employer
 incorporation or organization)                          Identification Number)

198 E. Tioga St., Tunkhannock, Pennsylvania                      18657
-------------------------------------------                      -----
 (Address of principal executive offices)                      (Zip Code)

Registrant's telephone number, including area code: (717) 836-2100
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $5.00                               356,320
-----------------------------                     -----------------------------
    (Title of class)                              (Number of Shares outstanding
                                                       as of March 26, 1997)

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) if the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K, [X]

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of March 26, 1997 was $12,589,542.


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                                     PART I

Item 1: BUSINESS

Investment Considerations

     In analyzing whether to make or to continue an investment, investors should
consider, among other factors, the following:

     Economic Conditions and Related Uncertainties. Commercial banking is
affected, directly and indirectly, by local, domestic, and international
economic and political conditions, and by governmental monetary and fiscal
policies. Conditions such as inflation, recession, unemployment, volatile
interest rates, tight money supply, real estate values, international conflicts
and other factors beyond the Company's control, may adversely affect the
potential profitability of the Company. Any future rises in interest rates,
while increasing the income yield on the Company's earning assets, may adversely
affect loan demand and the cost of funds and, consequently, the profitability of
the Company. Any future decreases in interest rates may adversely affect the
Company's profitability because such decreases may reduce the amounts which the
Company may earn on its assets. Economic downturns could result in the
delinquency of outstanding loans. Management does not expect any one factor to
affect the Company's results of operations. However, a continued downtrend in
several areas, including real estate, construction and consumer spending, could
have an adverse impact on the Company's ability to remain profitable.

     Federal and State Government Regulation. The operations of the Company and
the Bank are heavily regulated and will be affected by present and future
legislation and by the policies established from time to time by various federal
and state regulatory authorities. In particular, the monetary policies of the
Federal Reserve Board have had a significant effect on the operating results of
banks in the past, and are expected to continue to do so in the future. Among
the instruments of monetary policy used by the Federal Reserve Board to
implement its objectives are changes in the discount rate charged on bank
borrowings and changes in the reserve requirements on bank deposits. It is not
possible to predict what changes, if any, will be made to the monetary policies
of the Federal Reserve Board or to existing federal and state legislation or the
effect that such changes may have on the future business and earnings prospects
of the Company.

     During the past several years, significant legislative attention has been
focused on the regulation and deregulation of the financial services industry.
Non-bank financial institutions, such as securities brokerage firms, insurance
companies and money market funds, have been permitted to engage in activities
which compete directly with traditional bank business.

     Competition. The Company faces strong competition from many other banks,
savings institutions and other financial institutions which have branch offices
or otherwise operate in the Company's market area, as well as many other
companies now offering a range of financial services. Most of these competitors
have substantially greater financial resources than the Company including a
larger capital base which allows them to attract customers seeking larger loans
than the Bank is able to make.

     Allowance for Loan Losses. The Company has established an allowance for
loan losses which management believes to be adequate to offset potential losses
on the Company's existing loans. However,

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there is no precise method of predicting loan losses. There can be no assurances
that any future declines in real estate market conditions, general economic
conditions or changes in regulatory policies will not require the Company to
increase its allowance for loan losses.

     Dividends. The Board of Directors initiated a shareholder stock dividend
plan in November 1995. Under this plan stockholders are granted additional
shares in the corporation based on the number of shares which could be purchased
at the declared dividend rate. Shareholders who desire cash instead of new
shares are given the option of surrendering these shares to the corporation in
exchange for a cash payment at the rate of the declared dividend. This dividend
policy will be reviewed periodically in light of future needs of the Company. No
assurance can be given that shareholders will be able to surrender shares in
exchange for cash in the future.

     Market for Common Stock. There is no established trading market for the
Company's Common Stock and there has been only limited trading in the Common
Stock. It is not expected that a regular and active market for the Common Stock
will develop in the foreseeable future. Investors in the shares of Common Stock
must, therefore, be prepared to assume the risk of their investment for an
indefinite period of time.

     "Anti-Takeover" and "Anti-Greenmail" Provisions. The Articles of the
Company presently contain certain provisions which may be deemed to be
"anti-takeover" and "anti-greenmail" in nature in that such provisions may
deter, discourage or make more difficult the assumption of control of the
Company by another corporation or person through a tender offer, merger, proxy
contest or similar transaction or series of transactions. Copies of the
Company's Articles of Incorporation are on file with the Securities and Exchange
Commission and the Pennsylvania Department of State.

     Stock Not an Insured Deposit. Investments in the shares of Common Stock of
the Company are not deposits insured against loss by the FDIC or any other
entity.

General

     The Company is a Pennsylvania business corporation which is registered as a
bank holding company under the Bank Holding Company Act of 1956, as amended (the
"Holding Company Act"). The Company was incorporated on October 2, 1984 for the
purpose of acquiring The Grange National Bank of Wyoming County (the "Bank") and
thereby enabling the Bank to operate within a bank holding company structure.
The Company became an active bank holding company on April 30, 1985 when it
acquired the Bank. The Bank is a wholly-owned subsidiary of the Company.

     The Company's principal activities consist of owning and supervising the
Bank, which engages in a full service commercial and consumer banking and trust
business. The Bank has its principal banking office in Laceyville, Pennsylvania.
It also presently has three branch offices in Wyoming County, Pennsylvania, one
branch office in Susquehanna County, Pennsylvania and one branch office in
Luzerne County, Pennsylvania. The Bank has one automated teller machine ("ATM"),
located on route 29 south of Tunkhannock at the Wal-Mart store in Eaton
Township, Wyoming County, Pennsylvania. The Company, through the Bank, derives
substantially all of its income from the furnishing of banking and
banking-related services.

     The Company is a legal entity separate and distinct from the Bank. The
rights of the Company, and thus the rights of the Company's creditors and
shareholders, to participate in the distribution of the

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assets or earnings of the Bank, are necessarily subject to the prior claims of
creditors of the Bank, except to the extent that claims of the Company itself as
a creditor may be recognized. Such claims on the Bank by creditors other than
the Company include obligations in respect of federal funds purchased and
certain other borrowings, as well as deposit liabilities.

     The Company directs the policies and coordinates the financial resources of
the Bank. The Company provides and performs various technical, advisory and
auditing services for the Bank, coordinates the Bank's general policies and
activities, and participates in the Bank's major business decisions.

     As of December 31, 1995, the Company, on a consolidated basis, had total
assets of $91,622,000, total deposits of $79,866,000, and total shareholder's
equity of $9,522,000.

Grange National Bank

     The Bank was incorporated under the laws of the United States of America as
a national bank in 1907 under its present name. Since that time, the Bank has
operated as a banking institution doing business at several locations in
Wyoming, Susquehanna and Luzerne Counties, Pennsylvania. The Bank is a member of
the Federal Reserve System.

     As of December 31, 1996, the Bank had total assets of $103,966,000, total
deposits of $91,056,000 and total shareholders' equity of $10,706,000. Its
deposits are insured by the Bank Insurance Fund ("BIF") maintained by the
Federal Deposit Insurance Corporation (the "FDIC") to the maximum extent
permitted by law.

     The Bank engages in a full service commercial and consumer banking and
trust business. The Bank, with its main office at Main and Bee Streets,
Laceyville, Pennsylvania, also provides services to its customers through its
branch network of eight full service banks, which include drive-in facilities
and bank-by-mail services. The bank's six full service offices are located in
Wyoming, Susquehanna, Bradford and Luzerne Counties, Pennsylvania. The Bank also
has a free standing ATM located on route 29 south of Tunkhannock at the Wal-Mart
store in Eaton Township, Wyoming County.

     The Bank's services include accepting time, demand and savings deposits,
including NOW accounts, regular savings accounts, money market accounts, fixed
rate certificates of deposit and club accounts. Its services also include making
secured and unsecured commercial and consumer loans, financing commercial
transactions either directly or through regional industrial development
corporations or the Small Business Administration, making construction and
mortgage loans and the renting of safe deposit facilities. Additional services
include making residential mortgage loans, small business loans, new car and
truck loans and student loans and providing discount brokerage services. The
Bank's business loans include seasonal credit, collateral loans and term loans.

     In September 1992, the Comptroller of the Currency approved the Bank's
application for the establishment of a Trust Department. In July of 1993, the
Bank began to exercise trust powers. The Bank has appointed a trust officer and
retained the services of an attorney with estate planning experience to
administer the services provided by the Trust Department. The Bank has
recognized only minimal income from the Trust Department during 1995 and 1996.
Management does not expect the department to generate net income for the next
several years.

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<PAGE>


     The Bank has a relatively stable deposit base and no material amount of
deposits is obtained from a single depositor or group of depositors (including
Federal, state and local governments). The Bank has not experienced any seasonal
fluctuations in the amount of its deposits.

     No significant portion of the Bank's loans are concentrated within any one
business industry. Real estate loans however accounted for 62% of the Bank's
loan portfolio at December 31, 1996 and 66% at December 31, 1995. Management
believes this concentration is not serious in its rural agricultural location
where commercial loan demand is minimal. Recognizing the potential adverse
affect these loans could place on interest margins, the Bank has an adjustable
rate mortgage which adjusts annually, as well as continuing to offer a three
year adjustable mortgage. The Bank also continues to offer fixed rate mortgages
for twenty years, but now offers a ten year fixed rate at 1/2% under the twenty
year rate. For the past three years, average mortgage loan balances have
approximated 37% to 40% of the Bank's total average interest earning assets. At
December 31, 1996 mortgage loans were approximately 40% of total interest
earning assets.

     The Bank has no deposits or loans directly with foreign entities, and has a
minimal amount of deposits made by persons working in foreign countries. The
Bank's assets are not invested in foreign securities, Eurodollars or foreign
loans.

Competition

     All phases of the Bank's business are highly competitive. The Bank's market
area is the primary trade area of portions of Wyoming, Bradford, Susquehanna and
Luzerne Counties, Pennsylvania with concentration in the Wyoming County area.
The Bank competes with local commercial banks as well as other commercial banks
with branches in the Bank's market area. The Bank considers its major
competition to be Mellon Bank, headquartered in Pittsburgh, Pennsylvania, First
Union Bank, headquartered in Charlotte, North Carolina, Peoples State Bank,
headquartered in Wyalusing, Pennsylvania, Community Bank and Trust,
headquartered in Forest City, Pennsylvania, Franklin First Saving Bank,
headquartered in Wilkes-Barre, Pennsylvania, PNC, headquartered in Pittsburgh,
Pennsylvania, Corestates Bank, headquartered in Philadelphia, Pioneer Bank,
headquartered in Carbondale, Pennsylvania, First Valley Bank, headquartered in
Bethlehem, Pennsylvania and Northern Central Bank, headquartered in
Williamsport, Pennsylvania.

     The Bank, along with other commercial banks, competes with respect to its
lending activities as well as in attracting demand deposits, with savings banks,
savings and loan associations, insurance companies, regulated small loan
companies, credit unions and the issuers of commercial paper and other
securities, such as shares of money market funds. The Bank also competes with
insurance companies, investment counseling firms, mutual funds and other
business firms and individuals in the corporate trust and investment management
services. Many of the Bank's competitors have financial resources larger than
the Bank's.

     The Bank is generally competitive with all competing financial institutions
in its service areas with respect to interest rates paid on time and savings
deposits, service charges on deposit accounts and interest rates charged on
loans.

Supervision and Regulation

     Bank holding companies and banks are extensively regulated under both
federal and state law.

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To the extent that the following information describes statutory provisions, it
is qualified in its entirety by reference to the particular statutory and
regulatory provisions. Any change in applicable laws or regulations may have a
material effect on the business and prospects of the Company and the Bank.

The Company

     The Company is registered as a "bank holding company" under the Holding
Company Act, and it, therefore, is subject to regulation by the Board of
Governors of the Federal Reserve Board (the "Federal Reserve Board").

     Under the Holding Company Act, the Company is required to secure the prior
approval of the Federal Reserve Board before it can merge or consolidate with
any other bank holding company or acquire all or substantially all of the assets
of any bank that is not already majority owned by it, if after such acquisition,
it would directly or indirectly own or control more than 5% of the voting shares
of such bank. The Holding Company Act also prohibits the acquisition, directly
or indirectly, by the Company of any voting shares of, or interests in, or all
or substantially all of the assets of, any bank located outside the Commonwealth
of Pennsylvania unless such acquisition is specifically authorized by the laws
of the state in which such bank is located.

     The Company is prohibited under the Holding Company Act from engaging in,
or acquiring direct or indirect control of more than 5% of the voting shares of
any company engaged in, non-banking activities unless the Federal Reserve Board,
by order or regulation, has found such activities to be closely related to
banking or managing or controlling banks as to be a proper incident thereto. In
making such determination, the Federal Reserve Board considers whether the
performance of these activities by a bank holding company can reasonably be
expected to produce benefits to the public which outweigh possible adverse
effects. The Federal Board has by regulation determined that certain activities
are closely related to banking within the meaning of the Holding Company Act.
These activities include, among other, operating a mortgage, finance, credit
card or factoring company; performing certain data processing operations;
providing investment and financial advice; acting as insurance agent or
underwriter for certain types of credit-related insurance; leasing personal
property on a full-payout, non-operating basis; and certain stock brokerage and
investment advisory services.

     Under the Holding Company Act, the Company is required to file periodic
reports and other information concerning its operations with, and is subject to
examination by, the Federal Reserve Board. In addition, under the Pennsylvania
Banking Code of 1965, as amended (the "Banking Code"), the Pennsylvania
Department of Banking has the authority to examine the books, records and
affairs of any Pennsylvania bank holding company or to require any documentation
deemed necessary to insure compliance with the Banking Code.

     The Company is under the jurisdiction of the Securities and Exchange
Commission and various state securities commissions for matters relating to the
offering and sale of its securities, and is subject to the Securities and
Exchange Commission's rules and regulations relating to periodic reporting,
reporting to shareholders, proxy solicitation and insider trading.

     The Company, as an affiliate of the Bank within the meaning of the Bank
within the meaning of the Federal Reserve Act, is subject to certain
restrictions under the Federal Reserve Act regarding extensions to it by the
Bank, investments in the stock or other securities of the Company by the Bank
and the use of the stock or other securities of the Company as collateral for
loans by the Bank to any

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borrower. Further, under the Federal Reserve Act and the Federal Reserve Board
regulations, a bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with any extension of
credit or provision of credit or provisions of property or services. These
so-called "anti-tie-in provisions" generally provide that a bank may not extend
credit, lease or sell property, or furnish any service, or fix or vary the
consideration for any of the foregoing to a customer on the condition or
requirement that the customer provide some additional credit, property or
service to the bank, to the bank's holding company or to any other subsidiary of
the bank's holding company or on the condition or requirement that the customer
not obtain other credit, property or service from a competitor of the bank, the
bank's holding company or any subsidiary of the bank's holding company.

     Pennsylvania law allows bank holding companies located in other states and
the District of Columbia to acquire Pennsylvania banks and bank holding
companies, but only if the state in which the acquiror is located grants
reciprocal acquisition rights to Pennsylvania bank holding companies. All
interstate acquisitions involving Pennsylvania banks or bank holding companies
require the prior approval of the Pennsylvania Department of Banking.

The Bank

     The Bank, as a national bank, is subject to the National Bank Act. The Bank
is also subject to the supervision of, and is regularly examined by the Office
of the Comptroller of the Currency of the United States (the "OCC") and is
required to furnish quarterly reports to the OCC. The approval of the OCC is
required for the establishment of additional branch offices by any national
bank, subject to applicable state law restrictions. Under current Pennsylvania
law, banking institutions located in Pennsylvania, such as the Bank, may
establish branches within any county in the Commonwealth, subject to the prior
approval of the OCC. Present law forbids branching across state lines.

     As a national bank, the Bank is a member of the FDIC and a member of the
Federal Reserve System and, therefore, is subject to additional regulation by
these agencies. Some of the aspects of the lending and deposit business of the
Bank which are regulated by these agencies include personal lending, mortgage
lending and reserve requirements. The operations of the Bank are also subject to
numerous Federal, state and local laws and regulations which set forth specific
restrictions and procedural requirements with respect to interest rates on
loans, the extension of credit, credit, credit practices, the disclosure of
credit terms and discrimination in credit transactions.

     The Bank is subject to certain limitations on the amount of cash dividends
that it can pay. See "PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY".

     As a consequence of the current increased regulation of commercial banking
and bank holding company activities in the United States, the costs of doing
business of the Bank and the Company may be expected to increase due to
increased FDIC insurance assessments and the increased costs and expenses
associated with complying with this increased regulation.

Effect of Governmental Policy

     One of the most significant factors affecting the Bank's earnings is the
difference between the interest rates paid by the Bank on its deposits and its
borrowings and the interest rates earned by the Bank on loans to its customers
and securities owned by the Bank. The yields of its assets and the rates paid on
its liabilities are sensitive to changes in prevailing rates of interest. Thus,
the earnings and growth of

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the Bank will be influenced by general economic conditions, the monetary and
fiscal policies of the federal government, and the policies of regulatory
agencies, particularly the Federal Reserve Board, which implements national
monetary policy. An important function of the Federal Reserve System is to
regulate the money supply and credit conditions in order to mitigate
recessionary and inflationary pressures. Among the techniques used to implement
these objectives are open market operations in U.S. Government securities and
changes in reserve requirements of banks and in the discount rate on bank
borrowings. These techniques influence overall growth and distribution of
credit, bank loans, investments and deposits, and may also affect interest rates
charged on loans or paid on deposits. The nature and impact of any future
changes in monetary policies cannot be predicted.

     From time to time, legislation has been enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities, or affecting the competitive balance between banks and other
financial institutions. Legislative proposals which could affect the Company and
the banking business in general have been proposed and may be introduced before
the United States Congress and other governmental bodies. These proposals may
alter the Company's structure, regulation, disclosure, and reporting
requirements. In addition, various banking regulatory agencies frequently
propose rules and regulations to implement and enforce existing legislation. It
cannot be predicted whether or in what form any such legislation or regulations
will be enacted or the extent to which the business of the Company would be
affected thereby.

     On June 21, 1993 legislation referred to as "Truth in Savings" became
effective and is codified for banks in the Federal Reserve Bank's Regulation DD.
"Truth in Savings" in intended to encourage comparative shopping for deposit
products by consumers. Regulation DD applies to all consumer accounts and other
qualifying accounts. Regulation DD regulates computation of interest,
advertising content, notice of change of terms, and requirements of information
to be disclosed when opening an account and in periodic statements. "Truth in
Savings" has been compared to "Truth in Lending" regulations, both for what the
legislation says it is trying to accomplish, and for the compliance burden and
resulting costs for Banks and consumers.

Federal Deposit Insurance Corporation Improvement Act of 1991

     On December 19, 1991, the President signed into law the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"). Among other things,
FDICIA provides increased funding for the Bank Insurance Fund ("BIF") and
provides for expanded regulation of depository institution and their affiliates,
including bank holding companies.

     The BIF funding and reserve restoration provisions could result in
significant increases in the assessment rate on deposits of BIF institutions
(such as the Bank) over the next 15 years. Under current law, as amended by
FDICIA, the insurance assessment paid by the BIF-insured institutions shall be
as specified in a schedule required to be issued by the FDIC that would specify,
at semi-annual intervals, target reserve ratios designed to increase the reserve
ratio to 1.25% of estimated insured deposits (or such higher ratio as the FDIC
may determine in accordance with statute in 15 years. Beginning with the first
semi-annual period of calendar year 1993 and for each subsequent semi-annual
period, banks will pay semi-annual assessments under a transitional risk-based
assessment system which became effective on November 2, 1992. Under this system,
banks will pay a semi-annual assessment at a rate which is based upon the
assessment risk classification assigned to the bank by the FDIC. In determining
the risk classification, the FDIC will assign each bank to one of three capital
groups and within each capital group to one of three supervisory subgroups.
Depending upon the assessment risk classification assigned to

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a bank, the semi-annual assessments to be paid by banks beginning in 1996 will
range from 0.00% of an institution's average assessment base for banks assigned
to the highest capital group and highest supervisory subgroup to 0.27% for banks
assigned to the lowest capital group and lowest supervisory subgroup. Banks will
be notified of their assessment risk classification by the first day of the
month preceding each semi-annual period.

     FDICIA further provides authority for special assessments against insured
deposits and for the development of a general risk-based deposit insurance
assessment system under which the premium levels of BIF institutions will vary
in relation to their perceived risk profiles.

     FDICIA requires each federal banking agency, including the FRB and OCC, to
revise its risk-based capital standards prior to June 1993, to ensure that
those standards take adequate account of interest rate risk, concentration of
credit risk and risks of non-traditional activities, as well as reflect the
actual performance and expected risk of loss on multi-family mortgages.

     Effective December 1992, FDICIA provides the federal banking agencies with
broad powers to take corrective action to resolve problems of insured depository
institutions. The extent of these powers depends upon whether the institutions
in question are "well capitalized", "adequately capitalized, "undercapitalized",
"significantly undercapitalized", or "critically undercapitalized".

     The Deposit Insurance Funds Act of 1996 (DIFA) passed by Congress and
signed by the President, mandates banks to help pay the cost of the bonds issued
by the "Financing Corporation" (FICO), which were used to finance the savings
and loan bailout. The current annual cost to all Bank Insurance Fund (BIF)
Members is 1.296 cents per $100 of deposits. Members of the Savings Association
Insurance Fund (SAIF) are required to pay 6.48 cents per $100 of deposits. This
assessment is expected to cost the Bank approximately $12,000 in 1997.

     The FDIC has issued a rule which sets the capital level for each of the
five capital categories established in FDICIA. Under the rule a bank is deemed
to be "well capitalized" if the bank has a total risk-based capital ratio of 10%
or greater, has a Tier 1 risk-based capital ratio of 6% or greater, has a
leverage ratio of 5% or greater, and is not subject to any order or final
capital directive by the FDIC to meet and maintain a specific capital level for
any capital measure. A bank is deemed "adequately capitalized" if the bank has a
total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital
ratio of 4% or greater and a leverage capital ratio of 4% or greater (or 3% or
greater for the most highly rated banks), and does not meet the definition of a
"well capitalized" bank. A bank that has total risk-based capital, Tier 1
risk-based capital and leverage capital that is less than 8%, 4% and 4%,
respectively, is deemed "undercapitalized". Under the regulation, "significantly
undercapitalized" banks are those with total risk-based capital, Tier 1
risk-based capital and leverage capital that is less than 5%, 3% and 3%,
respectively. Finally, "critically undercapitalized" banks are defined as those
banks which have a ratio of tangible equity to total assets that is equal to or
less than 2%. A depository institution may be deemed to be in a capitalization
category that is lower than is indicated by its actual capital position if it
receives an unsatisfactory examination rating.

     FDICIA provides that an insured depository institution may not pay
management fees to any person, including any holding company, having control of
the institution if, after making the payment, the institution would be within
any three of the undercapitalized categories, nor may an institution, except
under certain circumstances and with prior regulatory approval, make any capital
distribution if, after making the distribution, the institution would be within
any three of the undercapitalized categories.

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Institutions that are classified "undercapitalized" are subject to the following
mandatory supervisory actions: increased monitoring by the institution's federal
regulator; a requirement to submit a capital restoration plan; a restriction on
growth of the institution's total assets; and a limitation on the institution's
ability to make any acquisitions, open any new branch offices or engage in any
new line of business with out approval of the institution's federal regulator.
Institutions that are classified "significantly undercapitalized" are subject to
the mandatory supervisory actions applicable to "undercapitalized" institutions
and are required to restrict the payment of bonuses and raises to senior
executive officers of the institution. With certain exceptions, "critically
undercapitalized" institutions are required to be placed in conservatorship or
receivership within 90 days.

     FDICIA also provides that the federal regulators may take certain
discretionary actions with respect to any institution that is under capitalized,
if it is determined the action is necessary to resolve the problems of the
institution, at the least possible cost to the deposit insurance fund. These
discretionary supervisory actions include: placing limits on asset growth and
restrictions on activities; requiring the institution to issue additional
capital stock (which may include voting stock) or be acquired; placing
restrictions on transactions with affiliates; restricting the interest rates the
institution may pay on deposits; ordering a new election for the institution's
board of directors; requiring that certain senior executive officers or
directors be dismissed; prohibiting the payment of principal or interest on
subordinate debt; prohibiting the holding company from making capital
distributions without prior regulatory approval; and requiring the holding
company to divest the institution or any other affiliate. If the insured
depository institution is "undercapitalized", the parent bank holding company is
required to guarantee that the institution will comply with any capital
restoration plan submitted to and approved by the appropriate federal banking
agency in an amount equal to the lesser of (i) 5% of the institution's total
assets at the time the institution became undercapitalized, or (ii) the amount
which is necessary (or would have been necessary) to bring the institution into
compliance with all applicable capital standards as of the time the institution
fails to comply with the capital restoration plan. FDICIA also amends current
law with respect to acceptance of brokered deposits by insured depository
institutions to permit only a "well capitalized" depository institution to
accept brokered deposits without regulatory approval.

     FDICIA contains a number of consumer banking provisions, including
disclosure requirements and substantive contractual limitations with respect to
deposit accounts. FDICIA also requires annual examination of all insured
depository institutions by the appropriate federal banking agency with some
exceptions for small, well-capitalized institutions and state-chartered
institutions examined by state regulators. The federal banking agencies are
required to set compensation standards for insured depository institutions that
would prohibit excessive compensation, fees or benefits to officers, directors,
employees and principal shareholders. FDICIA also expands the range of merger,
purchase and assumption, and deposit transfer transactions involving banks and
savings associations that are exempt from payment of exit and entry fees for
transfers of deposits between the BIF and the Savings Association Insurance
Fund.

     The foregoing necessarily is a summary and general description of certain
provisions of FDICIA and does not purport to be complete. Many of the provisions
of FDICIA will be implemented through the adoption of regulations by various
federal banking agencies. Moreover, many of the significant provisions of the
legislation have not yet become effective. As of the date hereof, the Company is
continuing to study the legislation and the regulations relating to the
legislation but cannot yet assess its impact on the Company or the Bank.

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National Monetary Policy

     In addition to being affected by general economic conditions, the earnings
and growth of the Bank and, therefore, the earnings and growth of the Company,
are affected by the policies of regulatory authorities, including the OCC, the
Federal Reserve Board and the FDIC. An important function of the Federal Reserve
Board is to regulate the money supply, credit conditions and interest rates.
Among the instruments used to implement these objectives are open market in
United States Government securities, setting the discount rate and changes in
reserve requirements against bank deposits. These instruments are used in
varying combinations to influence overall growth and distribution of credit,
bank loans, investments and deposits, and their use may also affect interest
rates charged on loans or paid on deposits.

     The monetary policies and regulations of the Federal Reserve Board have had
a significant effect on operating results of commercial banks in the past and
are expected to continue to do so in the future. The effects of such policies
upon the future business, earnings and growth of the Company and the Bank cannot
be predicted.

Employees

     As of December 31, 1996, the Company had a total of 50 full-time and 13
part-time employees. The Company provides a variety of employment benefits and
considers its relationship with its employees to be good.

Item 2: Properties

     The Company's main executive offices and financial operations center, which
also serve as a branch bank, are located at 198 E. Tioga Street, Tunkhannock,
Pennsylvania, which the Company owns. The Bank's main banking office is located
at Main and Bee Streets in the borough of Laceyville, Wyoming County,
Pennsylvania, which building is owned by the Company. In addition, the Company
owns four additional properties where its other branches are located, at Route
267, Lawton, Pennsylvania, at the corner of U.S. Route 6 and Bridge Street, in
the Borough of Meshoppen, Pennsylvania, at the intersection of U.S. Routes 309
and 29 in Monroe Township, Pennsylvania, and on Main Street in Little Meadows,
Pennsylvania. In 1996, the Bank purchased a former bank branch building, in
Towanda, from Northern Central Bank and began operating a branch office there in
November. The Bank has an operating lease with PNC to rent a former First
Eastern Bank office as a branch office in Edwardsville, Pennsylvania, and a
lease agreement a branch office in a shopping plaza in Trucksville, Luzerne
County. During 1993 the Company purchased a property along U.S. Route 309 in
Dallas Township for a branch office. The Company intends to place this parcel on
the market for sale, as the Trucksville site is near this parcel and is a
superior location for a branch office. The Company purchased a property in
Laceyville, near the Bank's main office, to be used for additional operations of
the Bank, and to rent to tennants.

Item 3: Legal Proceedings

     The nature of the Company's business generates a certain amount of
litigation involving matters arising in the ordinary course of business.
However, in the opinion of the management of the Company, there are no
proceedings pending to which the Company is a party or to which its property is
subject, which, if determined adversely to the Company, would be material in
relation to the Company's shareholders' equity or financial condition.

                                       11

<PAGE>


Item 4: Submission of Matters to a Vote of Security Holders

None


                                       12

<PAGE>


                                     PART II

Item 5: Market for the Registrant's Common Stock and Related Stockholder Matters

     Incorporated by reference from the section entitled "Common Stock Market
Price, Book Value and Dividends" in the Company's Annual Report to Shareholders
for the year ended December 31, 1996.

Item 6: Selected Financial Data

     Incorporated by reference from the section entitled "Selected Financial
Data" in the Company's Annual Report to shareholders for the year ended December
31, 1996.

Item 7: Management's Discussion and Analysis of Financial Condition and Results
        of Operations

     Incorporated by reference from the sections entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Company's Annual Report to Shareholders for the year ended December 31, 1996.

Item 8: Financial Statements and Supplementary Data

     Incorporated by reference from the Company's Consolidated Financial
Statements and Notes to Consolidated Financial Statements thereto included in
the Company's Annual Report to Shareholders for the year ended December 31,
1996.

Item 9: Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure

     None

                                       13

<PAGE>


                                    PART III

Item 10: Directors and Executive Officers of the Registrant

     Incorporated by reference from the Company's Proxy Statement relating to
the 1997 Annual Meeting of Shareholders filed pursuant to General Instruction
G(3) to Form 10-KSB.

Item 11: Executive Compensation

     Incorporated by reference from the Company's Proxy Statement relating to
the 1997 Annual Meeting of Shareholders filed pursuant to General Instruction
G(3) to Form 10-KSB.

Item 12: Security Ownership of Certain Beneficial Owners and Management

     Incorporated by reference from the Company's Proxy Statement relating to
the 1997 Annual Meeting of Shareholders filed pursuant to General Instruction
G(3) to Form 10-KSB.

Item 13: Certain Relationships and Related Transactions

     Incorporated by reference from the Company's Proxy Statement relating to
the 1997 Annual Meeting of Shareholders filed pursuant to General Instruction
G(3) to Form 10-KSB.

                                       14

<PAGE>


                                     PART IV

Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K

         (a) Documents filed as part of this report:

             (1) Financial Statements. The following consolidated financial
statements and the notes thereto of the Company, which are included in the
Company's Annual Report to Shareholders for the year ended December 31, 1996,
and the report of independent public accountants which is also included in such
Annual Report, are incorporated herein by reference in to Item 8 of this Report:

         Consolidated Balance Sheets -
             December 31, 1996 and 1995

         Consolidated Statements of Income -
             Years ended December 31, 1996, 1995 and 1994

         Consolidated Statements of Cash Flows -
             Years ended December 31, 1996, 1995 and 1994

         Consolidated Statements of Shareholders' Equity -
             Years ended December 31, 1996, 1995 and 1994

         Notes to Consolidated Financial Statements

         Report of Independent Certified Public Accountants

             (2) Financial Statement Schedules.  Financial statement schedules
are omitted because they are not applicable or the required information is shown
in the financial statements or notes thereto.

             (3) Management Contracts and Compensatory Plans, Contracts or
Arrangements

     Set forth below is a list of (i) any management contract or compensatory
plan, contract or arrangement, including but not limited to plans relating to
options, warrants or rights, pension, retirement or deferred compensation or
bonus, incentive or profit-sharing, or if such plan is not set forth in any
formal document, a written description thereof, in which any director or any
executive officer named in the Summary Compensation Table in the Company's Proxy
Statement relating to the 1997 Annual Meeting of Shareholders participates, and
(ii) any other management contracts or any other compensatory plan, contract or
arrangement in which any other executive officer of the registrant participates
except those immaterial in amount or significance:

     Number                                      Title
     ------                                      -----

      10.1      Employee Stock Option Plan (Filed as Exhibit 10.1 to Grange
                National Banc Corp.'s Registration Statement on Form SB-2
                (Registration No. 33-76838) filed with the Commission on
                March 24, 1994).

      10.2      Non-employee Director Stock Option Plan
               (Filed as Exhibit 10.2 to

                                       15

<PAGE>


                Grange National Banc Corp.'s Registration Statement on Form SB-2
                (Registration No. 33-76838) filed with the Commission on
                March 24, 1994).

      10.3      Deferred Compensation Agreement with Thomas A. McCullough Filed
                as Exhibit 10.3 to Grange National Banc Corp.'s Registration
                Statement on Form SB-2 (Registration No. 33-76838) filed with
                the Commission on March 24, 1994).

      10.4      Incentive Stock Option Plan (Filed with the 1996 Proxy Statement
                on April 1, 1996).

Exhibits filed pursuant to Item 601 of Regulation S-K.

     Number                                      Title
     ------                                      -----

      3.1       Amended and Restated Articles of Incorporation of Grange
                National Banc Corp. (Incorporated by reference from Exhibit 3.1
                to Grange National Banc Corp.'s Registration Statement on Form
                SB-2 (Registration No. 33-76838) filed with the Commission on
                March 24, 1994).

      3.2       Bylaws of the Company, as amended (Incorporated by reference
                from Exhibit 3.2 to Grange National Banc Corp.'s Registration
                Statement on Form SB-2 (Registration No. 33-76838) filed with
                the Commission on March 24, 1994).

      4.1       Grange National Banc Corp. Specimen Stock Certificate
                (Incorporated by reference from Exhibit 4.1 to Grange National
                Banc Corp.'s Registration Statement on Form SB-2 (Registration
                No. 33-76838) filed with the Commission on March 24, 1994).

      13.1      Annual Report to Shareholders for the year ended December 31,
                1996 (such report, except for those portions expressly
                incorporated by reference in this Annual Report on Form 10-K, is
                furnished for the information of the Commission and is not to be
                deemed filed as part of this Report).

      21.1      Subsidiaries of the Company (incorporated by reference from
                exhibit 21.1 to Grange National Banc Corp.'s Registration
                Statement on Form SB-2 (Registration Statement No. 33-76838)
                filed with the Commission on March 24, 1994).

         (b)  Reports on Form 8-K.

     No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1996.

                                       16

<PAGE>


                       DOCUMENTS INCORPORATED BY REFERENCE

                 (Specific sections incorporated are identified
                         under applicable items herein)

     Certain portions of the Company's Annual Report to Shareholders for the
year ended December 31, 1996 are incorporated by reference in Parts II and IV of
this Report.

     With the exception of the information incorporated by reference in Parts II
and IV of this Report, the Company's Annual Report to Shareholders for the year
ended December 31, 1996 in not deemed "filed" with the Securities and Exchange
Commission for any purpose.

     Certain portions of the Company's Proxy Statement filed in connection with
its Annual Meeting of Shareholders are incorporated by reference in Part II of
this Report.

     Other documents incorporated by reference are listed in the Exhibit Index.

                                       17

<PAGE>


     Pursuant to the requirements of Section 13 or 15(d) 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: March 26, 1997                        /s/ Robert C. Wheeler
      --------------                        -----------------------------------
                                            Robert C. Wheeler
                                            (Chairman of the Board)


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


/s/ Robert C. Wheeler      3/26/97          /s/ John W. Purtell         3/26/97
----------------------------------          -----------------------------------
Robert C. Wheeler           (Date)          John W. Purtell              (Date)
Chairman of the Board                       Vice-Chairman and Director
Director


/s/ Sally A. Steele        3/26/97          /s/ Brian R. Ace            3/26/97
----------------------------------          -----------------------------------
Sally A. Steele             (Date)          Brian R. Ace                 (Date)
Secretary and Director                      Director


/s/ Thomas C. Burns        3/26/97          /s/ R. Levi Tyler           3/26/97
----------------------------------          -----------------------------------
Thomas C. Burns             (Date)          R. Levi Tyler                (Date)
Director                                    Director


/s/ W. Kenneth Price       3/26/97          /s/ Philip O. Farr          3/26/97
----------------------------------          -----------------------------------
W. Kenneth Price            (Date)          Philip O. Farr               (Date)
Director                                    Comptroller
                                            Chief Accounting Officer


/s/ Thomas A. McCullough   3/26/97
----------------------------------
Thomas A. McCullough        (Date)
President and Director
Chief Executive Officer
Chief Financial Officer

                                       18