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, 1998.
                                       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 number 0-13599


                            GRANGE NATIONAL BANC CORP.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


          PENNSYLVANIA                                  23-2314065
   -----------------------------                    -------------------
  (State or other jurisdiction of                    (I.R.S. Employer
   Incorporation or organization)                   Identification No.)


   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(b) 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) of 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 Registrant 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, 1998 were
$10,902,000.

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of March 25 was $31,470,250. As of March 25, 1999, the
Registrant had 760,957 shares of Common Stock outstanding.


<PAGE>


                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the 1998 Annual Report to Shareholders are incorporated herein
by reference in response to Part II hereof, and the definitive Proxy Statement
relating to the 1999 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
and insurance sales. The Bank has its principal banking office in Laceyville,
Pennsylvania. It also presently has four branch offices in Wyoming County,
Pennsylvania, two branch offices in Susquehanna County, Pennsylvania, three
branch offices office in Luzerne County, Pennsylvania and one branch office in
Bradford County, Pennsylvania. The Bank has four 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, 1998, the Company, on a consolidated basis, had total
assets of $149,953,000, total deposits of $129,891,000, and total shareholder's
equity of $14,767,000.

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, 1998, the Bank had total assets of $149,645,000, total
deposits of $129,902,000 and total shareholders' equity of $14,399,000. 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 ten 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'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 1997 and 1998.
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 72% of the Bank's
loan portfolio at December 31, 1997 and 69% at December 31, 1997. 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 40%
to 42% of the Bank's total average interest earning assets. At December 31, 1998
mortgage loans were approximately 42% 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.


                                       3

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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, M & T Bank, headquartered in
Syracuse New York, PNC, headquartered in Pittsburgh, Pennsylvania, Pioneer Bank,
headquartered in Carbondale, Pennsylvania, Peoples National Bank, headquartered
in Hallstead, Pennsylvania, L A Bank, headquartered in Lake Ariel, Pennsylvania,
Citizens and Northern, headquartered in Wellsboro, 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 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 


                                       4

<PAGE>


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 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 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.


                                       5

<PAGE>


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.

     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 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


                                       6

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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 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.


                                       7

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     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 $17,000 in 1999.

     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.

               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


                                       8

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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 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.


                                       9

<PAGE>


     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 of 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, 1998, the Company had a total of 85 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 five 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, at 198 E. Tioga St., Tunkhannock,
Pennsylvania, on Main Street in Little Meadows, Pennsylvania, and at 400 Main
Street, Towanda, Pennsylvania. 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, and at the Pine Mall in Wilkes-Barre, 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


                                       10

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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.

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

None


                                       11

<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, 1998.

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, 1998.

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, 1998.

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,
1998.

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

     None


                                       12

<PAGE>


                                    PART III

Item 10: Directors and Executive Officers of the Registrant

     Incorporated by reference from the Company's Proxy Statement relating to
the 1999 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 1999 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 1999 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 1999 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, 1998,
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, 1998 and 1997

     Consolidated Statements of Income -
         Years ended December 31, 1998, 1997 and 1996

     Consolidated Statements of Cash Flows Years ended December 31, 1998,
         1997 and 1996

     Consolidated Statements of Shareholders' Equity Years ended December 31,
         1998, 1997 and 1996

     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     Employment Contract with Thomas A. McCullough dated March 25, 1998,
          filed herein as Exhibit 10.3.

*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, 1998.


                                       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, 1998 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, 1998 in not deemed "filed" with the Securities and Exchange
Commission for any purpose.

     Certain portions of the Company's 1999 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, 1999                         /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      3/25/99
----------------------------------          -----------------------------------
Robert C. Wheeler          (Date)           John W. Purtell             (Date)
Chairman of the Board                       Vice-Chairman and Director
Director


/s/ Sally A. Steele        3/25/99          /s/ Brian R. Ace            3/25/99
----------------------------------          -----------------------------------
Sally A. Steele            (Date)           Brian R. Ace                (Date)
Secretary and Director                      Director


/s/ Thomas C. Burns        3/25/99          /s/ R. Levi Tyler           3/25/99
----------------------------------          -----------------------------------
Thomas C. Burns            (Date)           R. Levi Tyler               (Date)
Director                                    Director


/s/ W. Kenneth Price       3/25/99          /s/ Edward A. Coach         3/25/99
----------------------------------          -----------------------------------
W. Kenneth Price           (Date)           Edward A. Coach             (Date)
Director                                    Director


/s/ Thomas A. McCullough   3/25/99          /s/ Philip O. Farr          3/25/99
----------------------------------          -----------------------------------
Thomas A. McCullough       (Date)           Philip O. Farr              (Date)
President and Director                      Comptroller
Chief Executive Officer                     Chief Accounting Officer
Chief Financial Officer


                                       17

<PAGE>


                           GRANGE NATIONAL BANC CORP.
                              Main and Bee Streets
                         Laceyville, Pennsylvania 18623


Dear Shareholders:

       The Annual Meeting of Shareholders of Grange National Banc Corp. will be
held at 10:00 a.m. on May 7, 1999 at the Pink Apple Restaurant, 651 SR 6W,
Tunkhannock, Pennsylvania.

       The items to be voted on at this meeting are listed in the attached proxy
statement.

       Enclosed is a form of proxy for your use. We urge you to vote by signing
the proxy, even though you plan to attend the meeting, and mailing it to us in
the accompanying stamped envelope. Be sure it is signed exactly as the name or
names appear on the proxy.

       A copy of our Annual Report for 1998 is enclosed.

                                            Sincerely yours,




                                            Robert C. Wheeler
                                            Chairman of the Board

April 5, 1999


Enclosures


<PAGE>


                           GRANGE NATIONAL BANC CORP.
                              Main and Bee Streets
                         Laceyville, Pennsylvania 18623


                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                             to be held May 7, 1999


TO OUR SHAREHOLDERS;

       Notice is hereby given that the annual meeting of shareholders of GRANGE
NATIONAL BANC CORP. ("Company") will be held on May 7, 1999 at 10 a.m.
(prevailing time), at the Pink Apple Restaurant, 651 SR 6 W, Tunkhannock,
Pennsylvania 18657, for the following purposes:

     1.   To elect three Class 2 Directors named herein to serve for a
          three-year term as Directors of the Company, as more fully described
          in the accompanying Proxy Statement;

     2.   To transact such other business as may properly come before this
          meeting or any postponement or adjournment thereof.

       The Board of Directors has fixed April 1, 1999 as the record date for the
determination of shareholders entitled to vote at the annual meeting. Only
shareholders of record at the close of business on that date will be entitled to
notice of, and to vote at, the annual meeting.

       If the annual meeting is adjourned for one or more periods aggregating at
least 15 days because of the absence of a quorum, those shareholders entitled to
vote who attend the reconvened annual meeting, if less than a quorum as
determined under applicable law, shall nevertheless constitute a quorum for the
purpose of acting upon any matter set forth in this Notice of Annual Meeting.

       YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED TO SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY. A SELF-ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE; NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.


April 5, 1999                          By Order of the Board of Directors,


                                       Robert C. Wheeler, Chairman of the Board


<PAGE>


                           GRANGE NATIONAL BANC CORP.
                              Main and Bee Streets
                         Laceyville, Pennsylvania 18623

                                 PROXY STATEMENT

       The accompanying proxy is solicited by and on behalf of the Board of
Directors of Grange National Banc Corp. ("Company") for use at the annual
meeting ("Annual Meeting") of shareholders to be held on May 7, 1999 at 10:00
a.m. (prevailing time) at the Pink Apple Restaurant, 651 SR 6 W, Tunkhannock,
Pennsylvania 18657 and at any postponement or adjournment thereof. The
approximate date on which this Proxy Statement and the accompanying form of
proxy will first be sent or given to shareholders is April 7, 1999.

       Sending in a signed proxy will not affect the shareholders' right to
attend the meeting and vote in person since the proxy is revocable. Any
shareholder giving a proxy has the power to revoke it by, among other methods,
giving written notice to the Secretary of the Company at any time before the
proxy is exercised.

       The expense of the proxy solicitation will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited in person or by
telephone, telegraph or teletype by directors, officers or employees of the
Company and its bank subsidiary, Grange National Bank ("Bank") without
additional compensation. Upon request by record holders of the Company's Common
Stock, par value $5.00 per share ("Common Stock"), who are brokers, dealers,
banks or voting trustees, or their nominees, the Company is required to pay the
reasonable expenses incurred by such record holders for mailing proxy material
and annual shareholder reports to any beneficial owners of Common Stock.

       A form of proxy is enclosed. If properly executed and received in time
for voting, and not revoked, the enclosed proxy will be voted as indicated in
accordance with the instructions thereon. If no directions to the contrary are
indicated, the persons named in the enclosed proxy will vote all shares of the
Company's Common Stock for election of all nominees for Class 2 Directors
hereinafter named.

       The enclosed confers discretionary authority to vote with respect to any
and all of the following matters that may come before the meeting: (i) matters
which the Company does not know that are presented at the meeting; (ii) approval
of the minutes of a prior meeting of shareholders, if such approval does not
amount to ratification of the action taken at the meeting; (iii) the election of
any person to any office for which a bona fide nominee is unable to serve or for
good cause will not serve; (iv) any proposal omitted from this Proxy Statement
and form of proxy pursuant to Rules 14a-8 or 14a-9 under the Securities Exchange
Act of 1934, as amended; and (v) matters incident to the conduct of the meeting.
In connection with such matters, the persons named in the enclosed form of proxy
will vote in accordance with their best judgment.

       The Company is not aware of any matters which will be brought before the
Annual Meeting (other than procedural matters) which are not referred to in the
enclosed notice of the Annual Meeting.

       The Board of Directors has fixed April 1, 1999 as the record date
("Record Date") for the determination of shareholders entitled to vote at the
Annual Meeting. Only shareholders of record on the Record Date are entitled to
notice of, and to vote at, the Annual Meeting.

       The Company had 760,957 shares of Common Stock outstanding on the Record
Date. The presence, in person or by proxy, of shareholders entitled to cast a
majority of the votes which all shareholders are entitled to cast on a
particular matter constitutes a quorum for the purpose of considering such
matter. All shares of the Company's Common Stock present in person or
represented by proxy and entitled to vote at the Annual Meeting, no matter how
they are voted or whether the abstain from voting will be counted in


<PAGE>


determining the presence of a quorum. If the Annual Meeting is adjourned because
of the absence of a quorum, those shareholders entitled to vote who attended the
adjourned meeting, although constituting less than a quorum as provided herein,
shall nevertheless constitute a quorum for the purpose of electing of directors.
If the Annual Meeting is adjourned for one or more periods aggregating at least
15 days because of the absence of a quorum, those shareholders are entitled to
vote who attend the reconvened Annual Meeting, if less than a quorum as
determined under applicable law, shall nevertheless constitute a quorum for the
purpose of acting upon any matter set forth in the Notice of Annual Meeting.
Each share of Common Stock outstanding is entitled to one vote on each matter
which may be brought before the Annual Meeting except for certain restrictions
(hereinafter summarized).

       The election of directors will be determined by a plurality vote and the
three nominees receiving the most "for" votes will be elected.

       Under the Pennsylvania Business Corporation Law, an abstention,
withholding of authority to vote or broker non-vote will not have the same legal
effect as an "against" vote and will not be counted in determining whether the
proposal has received the required shareholder vote.

       Article 8 of the Company's Amended and Restated Articles of
Incorporation, as amended, restricts the rights of a Person (as hereafter
defined) to cast (or execute written consents with respect to) more than 10% of
the total votes which all shareholders are entitled to cast at a meeting, unless
authorized to do so by the Board of Directors and subject to such conditions as
the Board of Directors may impose. The term "Person" includes not only
individuals and entities, but also groups of individuals and entities who act
together for the purpose of acquiring, holding, disposing of or voting Common
Stock.

       The casting of votes by a Person as a proxy holder for other shareholders
is not counted in computing the 10% limitation to the extent that the proxies so
voted were revocable and were secured from other shareholders who are not
members of a group which included such Person. Giving a revocable proxy to a
Person does not in itself cause the shareholder giving the proxy to be a member
of a group which includes such Person. Article 8 provides that the determination
by the Board of Directors of the existence or membership of a group, and of a
number of votes any Person or each member of a group is entitled to cast, is
final and conclusive absent clear and convincing evidence of bad faith.

       In the event of a violation of Article 8 and in addition to other
remedies afforded the Company, the judges of election cannot count votes cast in
violation of Article 8 and the Company or its nominees have an option to acquire
from the violator shares of Common Stock in excess of the 10% limit at prices
which would in certain situations be lower than the current market price of such
shares.

       The foregoing is a brief summary of Article 8 and is qualified and
amplified in all respects by the exact provisions of the Amended and Restated
Articles of Incorporation, as amended, a copy of which can be obtained in the
same manner as the Company's Annual Report on Form 10-KSB for 1998. See "ANNUAL
REPORT TO SHAREHOLDERS AND FORM 10-KSB".

                      SECURITY OWNERSHIP OF MANAGEMENT AND
                            CERTAIN BENEFICIAL OWNERS

       The following table sets forth, as of April 1, 1999, the beneficial
ownership of the Company's Common Stock by each director and nominee for
director of the Company, by each executive officer named in the Summary
Compensation Table, and by the directors, nominees for directors and executive
officers of the Company as a group. To the Company's knowledge, there is no
other person who beneficially owned 5%


                                       -2-

<PAGE>


or more of the Company's outstanding Common Stock as of April 1, 1999. Unless
otherwise specified, all persons listed below have sole voting and investment
power with respect to their shares.

                                         Amount of Common
     Name of Individual or              Stock Beneficially           Percent of
       Identity of Group                     Owned (a)                Class(a)
-------------------------------------------------------------------------------
Brian R. Ace                                 12,616(b)                  1.66%
Thomas C. Burns                              14,820(b)                  1.95%
Edward A. Coach                               2,473(c)                  0.33%
Thomas A. McCullough                         35,956(d)                  4.94%
W. Kenneth Price                             20,200(b)(e)               2.66%
John W. Purtell                              51,777(b)                  6.82%
     Box 70
     LeRaysville, PA  18829
Sally A. Steele                              12,499(b)                  1.65%
R. Levi Tyler                                19,914(b)                  2.62%
Robert C. Wheeler                            12,446(b)                  1.71%

Directors, Nominees, and Executive          218,481(f)                 25.66%
Officers as a Group (11 persons)

----------
(a)  The securities "beneficially owned" by an individual are determined as of
     the Record Date in accordance with the definition of "beneficial ownership"
     set forth in the regulations of the Securities and Exchange Commission.
     Accordingly, they may include securities owned by or for, among others, the
     spouse and minor children of the individual and any other relative who has
     the same home as such individual, as well as other securities as to which
     the individual has or shares voting or investment power or has the right to
     acquire within 60 days after the Record Date. Beneficial ownership may be
     disclaimed as to certain of the securities.

(b)  Includes 7,956 shares which may be acquired within 60 days upon the
     exercise of options granted under the Company's Non-Employee Director Stock
     Option Plan and the Company's Incentive Stock Option and Nonstatutory Stock
     Option Plan.

(c)  Includes 2,061 shares which may be acquired within 60 days upon the
     exercise of options granted under the Company's Non-Employee Director Stock
     Option Plan.

(d)  Includes 546 shares held by Mr. McCullough as a custodian for his children,
     216 shares owned jointly with other relatives, 1082 shares held in street
     name and 23,040 shares which may be acquired within 60 days upon the
     exercise of options granted under the Company's Employee Stock Option Plan.


(e)  Includes 1626 shares owned individually by Mr. Price's spouse.

(f)  Includes 101,458 shares which may be acquired within 60 days upon exercise
     of options.


                                       -3-

<PAGE>


                              ELECTION OF DIRECTORS

     As permitted under Pennsylvania law, the Articles of Incorporation of the
Company provide for staggering the terms of office of the Company's directors by
dividing the Board of Directors into three classes, with members of each class
serving three-year terms. The Company's Articles of Incorporation further
provide that the Board of Directors shall consist of not fewer than five nor
more than 25 directors, with the exact number fixed by the Board of Directors.
The Board of Directors currently consists of nine members.

     At the Annual Meeting, the shareholders will elect three Class 2 Directors
to serve for a term of three years and until their successors are elected and
qualified.

     The Board of Directors has designated the persons listed below to be
nominees for election as Class 2 Directors. The nominees are being nominated to
serve until the end of their terms and until their successors are elected and
qualified. The Company has no reason to believe that any of the nominees will be
unavailable for election; however, should any nominee become unavailable for any
reason, the Board of Directors may designate a substitute nominee. The proxy
agents intend (unless authority has been withheld) to vote for the election of
the Company's nominees.

     A vote in favor of the three Class 2 directors nominated by the Board of
Directors will also be deemed to be a vote in favor of having three Class 1
directors.

     The Bylaws of the Company require that nominations for Directors to be
elected at an annual meeting of shareholders, except those made by management of
the Company, must be submitted to the Secretary of the Company in writing not
later than the close of business on the 20th day immediately preceding the date
of the meeting. Such notification shall contain the following information to the
extent known to the notifying shareholder: (a) name and address of each proposed
nominee; (b) the principal occupation of each proposed nominee; (c) the total
number of shares of capital stock of the Company that will be voted for each
proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of capital stock of the Company owned
by the notifying shareholder. Nominations not made in accordance herewith may,
in such officer's discretion, be disregarded by the presiding officer of the
meeting, and upon the presiding officer's instruction, the vote talliers may
disregard all votes cast for each nominee. In the event the same person is
nominated by more than one shareholder, the nomination shall be honored, and all
shares of capital stock of the Company shall be counted if at least one
nomination for that person complies with this provision.

     The Company's Bylaws provide that every Director must be a shareholder of
the Company and must own in the Director's name the number of shares (if any)
required by law in order to qualify as such Director.


                                       -4-

<PAGE>


Information as to Directors and Nominees

     The following table contains certain information with respect to the
nominees for Class 2 Directors.

<TABLE>
<CAPTION>

                                                                              Year First Elected
                                                                                 or Appointed
                                        Principal Occupation                    Director of the
Name/Age as of Record Date               During Last 5 Years                    Company or Bank
------------------------------------------------------------------------------------------------
<S>                                   <C>                                            <C>
Thomas C. Burns, Age 64               Retired; Dentist                               1972

John W. Purtell, Age 69               President, S.F. Williams Inc.,                 1969
                                      automobile dealership.

Brian R. Ace, Age 44                  Owner of Laceyville Hardware Store             1992
</TABLE>

     The following table contains certain information with respect to Class 3
Directors whose terms of office expire in 2000.

<TABLE>
<CAPTION>

                                                                              Year First Elected
                                                                                 or Appointed
                                        Principal Occupation                    Director of the
Name/Age as of Record Date               During Last 5 Years                    Company or Bank
------------------------------------------------------------------------------------------------
<S>                                   <C>                                            <C>
Robert C. Wheeler, Age 70             Retired; Chief Executive Officer of            1988
                                      the Bank and the Company until 1990

Thomas A. McCullough, Age 52          President and Chief Executive Officer          1990
                                      of the Bank and the Company since 1991;
                                      previously Vice President of the Bank
                                      and the Company

Edward A. Coach, Age 50               Certified Public Accountant                    1997
</TABLE>

     The following table contains certain information with respect to the
nominees for Class 1 Directors whose term expires in the year 2001.

<TABLE>
<CAPTION>

                                                                              Year First Elected
                                                                                 or Appointed
                                        Principal Occupation                    Director of the
Name/Age as of Record Date               During Last 5 Years                    Company or Bank
------------------------------------------------------------------------------------------------
<S>                                   <C>                                            <C>
W. Kenneth Price, Age 59                   Co-owner of Ken Mar
                                           Home Furnishings                          1992

R. Levi Tyler, Age 66                      Dairy Farmer                              1979

Sally A. Steele, Age 42                    Attorney                                  1991
</TABLE>


                                                        -5-

<PAGE>


Board of Directors, Committees and Attendance at Meetings

     During 1998, there were 15 meetings of the Board of Directors of the
Company and 23 meetings of the Board of Directors of the Bank. All Directors
attended more than 75% of the meetings of the Board of Directors and all
Committee members attended more than 75% of their meetings.

     The Board has an Audit Committee consisting of Brian Ace, W. Kenneth Price,
Edward Coach and Robert C. Wheeler, which was formed in January 1994. Prior to
the formation of the Audit Committee, its function was performed by the Board of
Directors as a whole. The purpose of the Audit Committee is to review all
recommendations made by the Company's independent public accountants with
respect to the accounting methods used and the system of internal controls
followed by the Company and to advise the Board of Directors with respect
thereto. The Audit Committee met once during 1998.

     The Company has a Compensation Committee consisting of Sally A. Steele,
John W. Purtell, W. Kenneth Price, Thomas C. Burns and Thomas A. McCullough. The
Compensation Committee makes recommendations to the Board with respect to the
compensation of the officers and key employees, with the exception of Mr.
McCullough whose compensation is determined by the Board of Directors as a
whole. The Compensation Committee met one time during 1998.

     The Company has a Nomination Committee for nomination of new directors,
consisting of W. Kenneth Price, Sally A. Steele and Robert C. Wheeler. The
Nominating Committee did not meet during 1998.

Board of Directors Fees

     Members of the Board of Directors were compensated at the rate of $275.00
per meeting attended in 1998 and will be paid $300.00 per meeting attended in
1999. Nonemployee Trust Committee members were paid $100 per meeting in 1998 and
will be paid $100 per meeting in 1999.

Directors Stock Options

     The Company has a Non-Employee Director Stock Option Plan pursuant to which
each Director of the Company on April 1, 1994 received an option to purchase
2,142 shares of Common Stock, another option on April 1, 1997 to purchase an
additional 2,142 shares of Common Stock, and pursuant to which each Director is
entitled on April 1, 2000 to receive an additional option to purchase 2,142
shares of Common Stock or such lower number as then available divided by the
number of persons eligible to receive options. In addition, each Non-Employee
Director received in 1996 a grant of an option to purchase 3,673 shares of
Common Stock under the Company's Incentive Stock Option and Nonstatutory Stock
Option Plan which was approved at the 1996 Annual Meeting of shareholders.

Directors Deferred Income (DDI) Plan

     Directors are given the option of deferring their fees or accepting a cash
payment. A non-qualified Directors Deferred Income (DDI) Plan has been
implemented for those Directors who wish to participate in the Plan. Under the
provisions of the DDI Plan, each Director is provided with the opportunity to
defer all or a portion of his fees earned as a Director in return for a future
payment by the Company to the Director of deferred fees plus interest. Under the
provisions of the DDI Plan, the Company and each participating Director executes
an agreement whereby the Director agrees to defer all or a portion of his fees
for a five-year period. The agreement provides each participating Director with
a deferred income payout (payable for a ten-year period) beginning at age 65 (or
at the end of the five-year deferral period if the Director is age 60 or older
at the beginning of the five-year deferral period). The agreement also provides
each participating Director with a pre-payout death benefit, payable to the
Director's named beneficiary for a ten-year period, should a participating
Director die prior to the beginning of the deferred income payout. The DDI
agreement


                                       -6-

<PAGE>


may be amended by mutual written consent of both the Director and the Company,
and the Company, upon written consent of the Director (or his beneficiary, if
applicable) may accelerate payment of benefits in a lump-sum present-value
payment. The DDI Plan is an unfunded plan, although the Company has the right to
acquire investments to informally and indirectly provide funding for the future
payments under the plan.

Directors' Performance Adjusted Plan

     The Board of Directors has designed and implemented a Directors'
Performance Adjusted Plan which is designed to provide certain compensation to
members of the Board of Directors. The plan establishes certain annual target
goals of Return on Assets ("ROA") for the Bank and increases compensation to
participating Directors based on the level of ROA reached by the Bank during the
year. Target levels on ROA will be determined by the Board of Directors on an
annual basis. Under the plan directors are eligible to receive annual fees
ranging from $125 to $1,350 per director. For the Bank's performance in 1998,
each Director received $904.92 under this plan.

Executive Compensation

     The following table sets forth all cash compensation paid by the Company
and the Bank for services rendered in all capacities to the Company and the Bank
during the fiscal years ended December 31, 1998, 1997 and 1996 to the President
and Chief Executive Officer of the Company and the Bank, the only executive
officer of the Company and the Bank whose salary and bonus exceeded $100,000
during the fiscal year ended December 31, 1998.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                     Long Term
                                          Annual Compensation       Compensation
                                       -------------------------    ------------
                                                                     Securities
     Name and                                                        Underlying       All Other
Principal Position          Year       Salary          Bonus          Options        Compensation
-------------------------------------------------------------------------------------------------
<S>                         <C>        <C>          <C>                  <C>           <C>
Thomas A. McCullough,       1998       $90,000      $33,442(1)           0             $18,538(4)
   President and Chief      1997       $79,070      $31,977(2)           0             $17,535(4)
   Executive Officer        1996       $74,948      $36,368(3)           0             $15,844
</TABLE>

----------
(1)  Represents bonus earned for 1998.

(2)  Represents bonus earned for 1997.

(3)  Represents bonus earned for 1996.

(4)  Includes $7,535 contributed to Mr. McCullough's 401(k) retirement plan
     which is a benefit available to all employees as described in the
     Retirement Plan below. Also includes $1,549 which was the Bank's 25%
     matching contribution to the Retirement Plan. This figure also includes
     $2,741 representing a portion of the premium on a split-dollar life
     insurance policy on Mr. McCullough's life. The Bank pays the annual premium
     until Mr. McCullough's normal retirement. Upon termination or payment of a
     claim, the premiums paid by the Bank will be refunded to the Bank and Mr.
     McCullough or his family will receive the excess amount. Mr. McCullough
     also participates in the non-qualified Directors Deferred Income (DDI) Plan
     described above which is available to all Directors who wish to defer all
     or a portion of their Directors fees. During 1998 Mr. McCullough elected to
     defer $6,712 in Directors fees.


                                       -7-

<PAGE>


               AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                          AND FY-END OPTIONS/SAR VALUES

<TABLE>
<CAPTION>

        (a)                      (b)              (c)                    (d)                        (e)
                                                                 Number of Securities
                                                                      Underlying           Value of Unexercised
                                                                      Unexercised              In-the-Money
                                                                    Options/SARs at           Options/SARs at
                                Shares                                 FY-End(#)                 FY-End($)
                              Acquired on                            Exercisable/              Exercisable/
       Name                   Exercise(#)     Value Realized         Unexercisable             Unexercisable
--------------------------------------------------------------------------------------------------------------
<S>                              <C>              <C>                <C>                     <C>
Thomas A. McCullough             3000             $83,040            16,508/7,373            $553,878/$237,337
</TABLE>


Retirement Plan

     On November 22, 1995 the Board of Directors approved the implementation of
an Employee Stock Ownership Plan with 401(k) Provisions ("KSOP"), which replaced
the Simplified Employee Pension Plan ("SEP") which was the retirement plan
previously utilized by the Bank. The KSOP, which is a type of stock bonus plan,
is a plan of deferred compensation in which Company contributions are used to
provide participating employees with stock in Grange National Banc Corp. The
KSOP also provides that participants may make contributions to the Plan on a
before-tax basis, pursuant to provisions found under Section 401(k) of the
Internal Revenue Code. Participants may elect to defer up to 15% of their
compensation up to a maximum of $9,240. During 1998 the Company provided a
matching contribution of 25% of employee contributions up to 6% of total
compensation. The Company contributed $16,848 as matching contributions to
employee deferrals during 1998. The Company also made an optional contribution
to the plan of $77,820 during 1998 which represents 6% of gross salaries.

     The Company maintains a plan providing supplemental income for certain
executive officers, including Thomas A. McCullough. The plan provides for the
payment of a fixed annual benefit commencing at age 62, or later at the election
of the Board of Directors and officer. As required by generally accepted
accounting principles, the Company recognized an expense of $23,165 in 1998 and
will recognize an expense of $25,366 in 1999 in connection with Mr. McCullough's
benefit.

Employment Agreement

     The Company entered into an Employment Agreement on March 25, 1998 with
Thomas A. McCullough, the President and Chief Executive Officer of the Company
and the Bank. The Agreement provides for an initial term of three years expiring
in March, 2001, but the term will be extended automatically for one additional
year on each anniversary date of the date of commencement of the initial term,
unless either the Company or Mr. McCullough gives contrary written notice to the
other before such anniversary date. Under the Agreement, Mr. McCullough will
receive a base annual salary as determined by the Board of Directors (but not
less than $90,000), an annual bonus in the discretion of the Board, director's
fees, the use of an automobile, and other employee benefits under the Company's
benefit plans. If Mr. McCullough's employment is terminated by the Company or
him due to Permanent Disability (as defined), by the Company without Cause (as
defined), or by Mr. McCullough by reason of Constructive Discharge (as defined),
Mr. McCullough shall be entitled to receive his base salary (except that any
payments shall be offset by any amounts paid to him under the Company's
disability program) and shall be entitled to group medical and other insurance
benefits until the end of the term of employment. If Mr. McCullough's employment
is terminated by the Company for Cause or by him for reasons other than
Constructive Discharge or Permanent Disability, he shall receive no payment
under the Agreement. In the event of the


                                       -8-

<PAGE>


termination of Mr. McCullough's employment after a Change in Control (as
defined) of the Company, he shall be entitled to receive an amount equal to
three times the average aggregate annual salary, bonus and director's fees paid
to him by the Company during the three calendar years preceding the taxable year
in which the date of termination occurred, and he shall be entitled to continued
medical and other insurance coverage for the three-year period following the
termination. Mr. McCullough shall continue to receive the benefit of the
split-dollar insurance agreement and the executive supplemental income plan
described above. The Agreement also provides for the non-disclosure by Mr.
McCullough of confidential information of the Company and contains his agreement
not to compete with the Company during the term of employment or any severance
period.

Other Transactions

     The Bank has had and expects to have in the future, loan and other banking
transactions in the ordinary course of business with many of its Directors,
executive officers and their associates. All extensions of credit to such
persons have been made in the ordinary course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons, and in the opinion of the
management of the Bank, do not involve more than a normal risk of collectibility
or present other unfavorable features.

Certain Filings

     Section 16(a) of the Securities Exchange Act requires the Company's
directors, executive officers and persons who own more than 10% of a registered
class of the Company's equity securities, to file with the SEC initial reports
of beneficial ownership and reports as to changes in beneficial ownership. Such
persons are required to provide the Company with copies of all Section 16(a)
forms they file. Based solely on the review of the copies of such reports
furnished to the Company and representations that no other reports were
required, the Company notes that during 1998, directors and executive officers
filed untimely reports on transactions as follows: Thomas C. Burns, one report
regarding one transaction.

                         INDEPENDENT PUBLIC ACCOUNTANTS

     The accounting firm of Daniel Kenia, P.C. acted as the Company's
independent accountant for the fiscal year ended December 31, 1998. A
representative of Daniel Kenia, P.C. is expected to be present at the Annual
Meeting and to have the opportunity to make a statement, if he desires to do so,
and is expected to be available to respond to appropriate questions.

                              SHAREHOLDER PROPOSALS

     Shareholder proposals regarding the 2000 Annual Meeting must be submitted
to the Company by December 1, 1999.

                                  ANNUAL REPORT

     This Proxy Statement is accompanied by the Annual Report to Shareholders of
the Company for the year ended December 31, 1998.


                                       -9-

<PAGE>


     EACH PERSON SOLICITED HEREUNDER CAN OBTAIN A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 REQUIRED TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WITHOUT CHARGE, EXCEPT FOR
EXHIBITS TO THE REPORT, BY SENDING A WRITTEN REQUEST THEREFOR TO:

     Sally A. Steele, Secretary
     Grange National Banc Corp.
     Main and Bee Streets
     P.O. Box 56
     Laceyville, Pennsylvania 18623

                                            By Order of the Board of Directors


                                            Sally A. Steele, Secretary


                                      -10-