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, 1997
                          -----------------
                                       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
                         -----------------------------
                                (Title of class)


     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-B 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-KSB or any amendment to
this Form 10-KSB. [ ]

     The Registrant's revenues for the year ending December 31, 1997 were
$9,475,000.

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of March 26 was $18,661,452. As of March 26, 1998, the
Registrant had 363,300 shares of Common Stock outstanding.

<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the 1997 Annual Report to Shareholders are incorporated herein
by reference in response to Part II hereof, and the definitive Proxy Statement
relating to the 1998 Annual Meeting of Shareholders is incorporated by reference
in response to Part III hereof.

     Transitional Small Business Disclosure Format: [ ] Yes [X] No

                                     PART I

Item 1: BUSINESS

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 (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, two
branch offices in Susquehanna County, Pennsylvania, two branch offices in
Luzerne County, Pennsylvania and one branch office in Bradford County,
Pennsylvania. The Bank has three automated teller machines ("ATM"). 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 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, 1997, the Company, on a consolidated basis, had total
assets of $124,417,000, total deposits of $108,789,000, and total shareholder's
equity of $12,638,000.

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

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business at several locations in Wyoming, Susquehanna, Bradford, and Luzerne
Counties, Pennsylvania. The Bank is a member of the Federal Reserve System.

     As of December 31, 1997, the Bank had total assets of $124,125,000, total
deposits of $108,794,000 and total shareholders' equity of $12,301,000. 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 nine full service banks, which include drive-in facilities and
bank-by-mail services. The bank's 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.
Life insurance, accident and health insurance and annuities are available
through Grange National Insurance Agency, a wholly owned subsidiary of the Bank.

     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 1996 and 1997.
Management does not expect the department to generate net income for the next
several years.

     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 69% of the Bank's
loan portfolio at December 31, 1997 and 62% at December 31, 1996. 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, and 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 42% of the Bank's total average interest earning assets. At December 31, 1997
mortgage loans were approximately 41% of total interest earning assets.


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     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, Peoples National Bank, headquartered
in Hallstead, 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. 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

                                        4

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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 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

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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.

     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 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

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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" is 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 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

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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 $14,000 in 1998.

     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. 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.

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     FDICIA also provides that the federal regulators may take certain
discretionary actions with respect to any institution that is undercapitalized,
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.

Interstate Banking

     The "Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994"
(the "Interstate Act"), among other things, permitted bank holding companies to
acquire banks in any state one year after enactment. Effective June 1, 1997, a
bank may merge with a bank in another state so long as both states have not
opted out of interstate branching between the date of enactment and May 31,
1997. States were permitted to enact laws opting out of interstate branching
before June 1, 1997, subject to certain conditions. States were also permitted
to enact laws permitting interstate merger transactions before June 1, 1997 and
host states were permitted to impose conditions on a branch resulting from an
interstate merger transaction that occurs before June 1, 1997, if the conditions
did

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not discriminate against out-of-state banks, were not preempted by Federal law
and did not apply or require performance after May 31, 1997. Pennsylvania
enacted laws opting in immediately to interstate merger and interstate branching
transactions. Interstate acquisitions and mergers would both be subject, in
general, to certain concentration limits and state entry rules relating to the
age of the bank.

     Under the Interstate Act, the responsible federal regulatory agency is
permitted to approve the acquisition of a branch of an insured bank by an
out-of-state bank or bank holding company without the acquisition of the entire
bank or the establishment of a "de novo" branch only if the law of the state in
which the branch is located permits out-of-state banks to acquire a branch of a
bank without acquiring the bank or permits out-of-state banks to establish "de
novo" branches. Pennsylvania passed such a law.

     On July 3, 1997, the President signed into law an amendment to the
Interstate Act which provides in general that branches of state-chartered banks
that operate in other states will be covered by the laws of the chartering
state, rather than the host state.

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, 1997, the Company had a total of 77 full and 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

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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
tenants.

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.

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

None


                                       11

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                                     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, 1997.

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, 1997.

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, 1997.

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,
1997.

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

     None


                                       12

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                                    PART III

Item 10: Directors and Executive Officers of the Registrant

     Incorporated by reference from the Company's Proxy Statement relating to
the 1998 Annual Meeting of Shareholders filed pursuant to General Instruction
E(3) to Form 10-KSB.

Item 11: Executive Compensation

     Incorporated by reference from the Company's Proxy Statement relating to
the 1998 Annual Meeting of Shareholders filed pursuant to General Instruction
E(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 1998 Annual Meeting of Shareholders filed pursuant to General Instruction
E(3) to Form 10-KSB.

Item 13: Certain Relationships and Related Transactions

     Incorporated by reference from the Company's Proxy Statement relating to
the 1998 Annual Meeting of Shareholders filed pursuant to General Instruction
E(3) to Form 10-KSB.

                                       13

<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, 1997,
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, 1997 and 1996

     Consolidated Statements of Income -
              Years ended December 31, 1997, 1996 and 1995

     Consolidated Statements of Cash Flows -
              Years ended December 31, 1997, 1996 and 1995

     Consolidated Statements of Shareholders' Equity -
              Years ended December 31, 1997, 1996 and 1995

     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.

                                    Exhibits
                                    --------

          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).

                                       14

<PAGE>

          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).

          *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 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).

          13.1      Annual Report to Shareholders for the year ended December
                    31, 1997 (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).

          * Management contract or compensatory plan or arrangement

     (b) Reports on Form 8-K.

          No reports on Form 8-K were filed during the fourth quarter of the
year ended December 31, 1997.

                                       15

<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, 1997 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, 1997 in not deemed "filed" with the Securities and Exchange
Commission for any purpose.

     Certain portions of the Company's 1998 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.

                                       16

<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 25, 1998                                  /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  3/25/98
---------------------------------                    --------------------------
Robert C. Wheeler      (Date)                        John W. Purtell     (Date)
Chairman of the Board                                Vice-Chairman and Director
Director


/s/ Sally A. Steele  3/25/98                         /s/ Brian R. Ace  3/25/98
---------------------------------                    --------------------------
Sally A. Steele        (Date)                        Brian R. Ace        (Date)
Secretary and Director                               Director


/s/ Thomas C. Burns  3/25/98                         /s/ R. Levi Tyler  3/25/98
---------------------------------                    --------------------------
Thomas C. Burns        (Date)                        R. Levi Tyler       (Date)
Director                                             Director


/s/ W. Kenneth Price  3/25/98                        /s/ Edward A. Coach 3/25/98
---------------------------------                    ---------------------------
W. Kenneth Price       (Date)                        Edward A. Coach     (Date)
Director                                             Director


/s/ Thomas A. McCullough  3/25/98                    /s/ Philip O. Farr 3/25/98
---------------------------------                    --------------------------
Thomas A. McCullough  (Date)                         Philip O. Farr      (Date)
President and Director                               Comptroller
Chief Executive Officer                              Chief Accounting Officer
Chief Financial Officer

                                       17

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