U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the quarterly period ended September 30, 1997.


[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934


Commission file number 0-13664

                            GRANGE NATIONAL BANC CORP

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


                   198 E. Tioga St., Tunkhannock, Pennsylvania
                    (Address of principal executive offices)

                                 (717) 836-2100
              (Registrant's telephone number, including area code)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter periods that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes _X_ No __


                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date: 359,975


Transitional Small Business Disclosure Format (Check one): Yes ___ ; No _X_


<PAGE>




                    GRANGE NATIONAL BANC CORP. AND SUBSIDIARY

PART I. FINANCIAL INFORMATION

ITEM 1. Unaudited Financial Statements
<TABLE>
<CAPTION>


                                                                                                              Page

<S>                                                                                                           <C>
         Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996..........................   2

         Consolidated Statements of Income For the Three and Nine Months
         Ended September 30, 1997 and 1996...................................................................   3

         Consolidated Statements of Changes to Stockholder's Equity For the Nine Months
         Ended September 30, 1997 and 1996...................................................................   4

         Consolidated Statements of Cash Flows For the Nine Months ended
         September 30, 1997 and 1996.........................................................................   5

         Notes to Consolidated Financial Statements..........................................................  6-7

ITEM 2. Management's Discussion and Analysis of Financial Condition.......................................... 8-12


PART II. OTHER INFORMATION:

ITEM 6. Exhibits and Reports on Form 8-K....................................................................    13

</TABLE>
     
<PAGE>


                    GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
      CONSOLIDATED BALANCE SHEETS, SEPTEMBER 30, 1997 AND DECEMBER 31, 1996

<TABLE>
<CAPTION>
                                                                       1997               1996
                                                                    (UNAUDITED)         (AUDITED)
                                                                  -------------       ------------
<S>                                                               <C>                 <C>
ASSETS:          
  Cash and due from banks ..................................      $   2,484,363       $   2,566,232
  Investment securities, held to maturity (fair
    value 1997, $26,782,000; 1996, $22,182,000) ............         26,770,885          22,269,823
  Investment securities, available for sale (Note 3) .......         12,109,996          11,732,690
  Interest bearing deposits ................................          5,410,353           1,974,642
  Loans, net of unearned interest ..........................         73,738,179          62,033,046
  Less:  allowance for loan losses .........................            707,904             622,821
                                                                  -------------       -------------
         Loans - net .......................................         73,030,275          61,410,225
  Bank premises and equipment - net ........................          2,958,773           2,680,580
  Premium on deposits ......................................            144,716             157,485
  Other real estate ........................................            156,750                   0
  Accrued interest and other assets ........................          1,485,070           1,407,712
                                                                  -------------       -------------
    TOTAL ASSETS ...........................................      $ 124,551,181       $ 104,199,389
                                                                  =============       =============
LIABILITIES:
  Domestic deposits:
    Non-interest bearing deposits ..........................      $  18,799,562       $  12,206,738
    Interest bearing deposits ..............................         91,869,295          78,848,660
                                                                  -------------       -------------
      Total deposits .......................................        110,668,857          91,055,398

  Other borrowed funds .....................................          1,109,118           1,613,160
  Accrued interest and other liabilities ...................            588,436             590,973
                                                                  -------------       -------------
      Total liabilities ....................................        112,366,411          93,259,531
                                                                  -------------       -------------
STOCKHOLDERS' EQUITY:
  Preferred stock authorized 1,000,000 shares of $5 par;
    None issued
  Common stock authorized 5,000,000 shares of
    $5 par value; 369,975 and 355,291 shares issued and
    outstanding in 1997 and 1996, respectively (Note 4) ....          1,799,875           1,776,455
  Additional paid-in capital ...............................          1,915,628           1,767,949
  Retained earnings ........................................          8,429,859           7,392,890
  Unrealized holding gains (losses) on investment securities
    (net of deferred income taxes) .........................             39,600               3,000
                                                                  -------------       -------------
      Total ................................................         12,184,962          10,940,294

  Treasury stock, 8 and 20 shares,
    respectively, at cost ..................................               (192)               (436)
                                                                  -------------       -------------
      Total stockholders' equity ...........................         12,184,770          10,939,858
                                                                  -------------       -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................      $ 124,551,181       $ 104,199,389
                                                                  =============       =============

</TABLE>


                 See Notes to Consolidated Financial Statements
                                        3
<PAGE>


                    GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
                  CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>

                                                                           Three Months                   Nine Months
                                                                              Ended                           Ended
                                                                           September 30                   September 30
                                                                       1997           1996             1997           1996
                                                                   -----------     -----------     -----------    -----------
<S>                                                                <C>             <C>             <C>            <C> 
Interest Income:       
  Interest and fees on loans ...................................   $ 1,696,598     $ 1,375,784     $ 4,705,511    $ 3,966,801
  Interest and dividends
    on investment securities ...................................       531,152         549,065       1,573,465      1,583,617
  Interest on deposits in banks ................................        70,706          25,694         149,937         96,583
                                                                   -----------     -----------     -----------    -----------
          Total interest income ................................     2,298,456       1,950,543       6,428,913      5,647,001
                                                                   -----------     -----------     -----------    -----------
Interest Expense:
  Interest on deposits .........................................       979,508         803,516       2,730,210      2,378,821
  Interest on borrowed funds ...................................         8,574           9,541          26,973         32,090
                                                                   -----------     -----------     -----------    -----------
          Total interest expense ...............................       988,082         813,057       2,757,183      2,410,911
                                                                   -----------     -----------     -----------    -----------
        Net interest income ....................................     1,310,374       1,137,486       3,671,730      3,236,090
      Provision for loan losses ................................        55,000          35,000         115,000         65,000
                                                                   -----------     -----------     -----------    -----------
        Net interest income after
          provision for loan losses ............................     1,255,374       1,102,486       3,556,730      3,171,090
                                                                   -----------     -----------     -----------    -----------
Other Income:
  Service charges and other income .............................       165,296         134,307         465,449        389,025
  Gain (loss) on sale of securities ............................        23,118                          23,118
  Gain (loss) on sale of other real estate .....................                        (2,261)                       (25,062)
                                                                   -----------     -----------     -----------    -----------
          Total other income ...................................       188,414         132,046         488,567        363,963
                                                                   -----------     -----------     -----------    -----------
Other Expenses:
  Salaries and employee benefits ...............................       415,280         340,175       1,184,138        992,506
  Occupancy expense ............................................        98,908          80,135         256,587        180,342
  Equipment expense ............................................        64,409          57,031         183,231        163,107
  Other operating expense ......................................       219,711         193,302         693,579        539,021
                                                                   -----------     -----------     -----------    -----------
          Total other expenses .................................       798,308         670,643       2,317,535      1,874,976
                                                                   -----------     -----------     -----------    -----------

Income before income taxes .....................................       645,480         563,889       1,727,762      1,660,077
Provision for income taxes .....................................       209,000         166,000         541,000        506,000
                                                                   -----------     -----------     -----------    -----------
Net income .....................................................   $   436,480     $   397,889     $ 1,186,762    $ 1,154,077
                                                                   ===========     ===========     ===========    ===========
Earnings per share (Note 4) ....................................   $      1.14     $      1.13     $      3.14    $      3.28
                                                                   ===========     ===========     ===========    ===========
Weighted average common shares .................................       381,296         352,001         377,961        352,001

</TABLE>

                 See Notes to Consolidated Financial Statements

                                       4

<PAGE>

                    GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

<TABLE>
<CAPTION>
                                                                     1997             1996
                                                                     ----             ----

<S>                                                             <C>              <C>         
STOCKHOLDERS' EQUITY, January 1 ............................    $ 10,939,858     $  9,522,267

COMMON STOCK, $5.00 PAR VALUE
Options exercised ..........................................           6,860
Stock dividend $0.42 and $0.34 per share in 1997 and 1996,
     plus cash in lieu of fractional shares ................          16,560           16,235
ADDITIONAL PAID-IN CAPITAL
Options exercised ..........................................          25,135
Stock dividend $0.42 and $0.34 per share in 1997 and 1996,
     plus cash in lieu of fractional shares ................         122,544           94,163
RETAINED EARNINGS
Stock dividend $0.42 and $0.34 per share in 1997 and 1996,
     plus cash in lieu of fractional shares ................        (139,104)        (110,398)
Cash paid in lieu of fractional shares due to stock dividend         (10,689)          (8,178)

Net income .................................................       1,186,762        1,154,077

UNREALIZED HOLDING GAINS AND LOSSES
Unrealized holding gains (losses) on investment

  securities, net of deferred tax effects ..................          36,600         (109,778)

TREASURY STOCK
Reissuance of common stock (12 shares and 3 shares
  in 1997 and 1996, respectively) ..........................             244               50
                                                                ------------     ------------
STOCKHOLDERS' EQUITY, September 30 .........................    $ 12,184,770     $ 10,558,438
                                                                ============     ============

</TABLE>
                 See Notes to Consolidated Financial Statements

                                       5

<PAGE>


                    GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>

FOR THE NINE MONTHS ENDED SEPTEMBER 30,                                                  1997             1996
                                                                                         ----             ----
<S>                                                                                 <C>              <C>
OPERATING ACTIVITIES:         
 Net income .....................................................................   $  1,186,762     $  1,154,077
 Adjustments to reconcile net income to net cash
  provided by operating activities:
   Depreciation and amortization ................................................        178,769          140,758
   Provision for loan losses ....................................................        115,000           65,000
   Increase (decrease) in deferred income taxes .................................         19,000          (57,123)
 Changes in operating assets and liabilities:
  Decrease in accrued interest income and other assets ..........................        (91,358)        (193,817)
  Increase (decrease) in accrued interest expense and other liabilities .........         (7,537)          13,600
                                                                                    ------------     ------------
  NET CASH PROVIDED BY
   OPERATING ACTIVITIES .........................................................      1,400,636        1,122,495
                                                                                    ------------     ------------
INVESTING ACTIVITIES:
 Purchase bank premises and equipment ...........................................       (444,193)        (309,602)
 Decrease (increase) in other real estate .......................................       (156,750)          69,618
 Purchase of securities "available for sale" ....................................     (2,359,362)      (4,155,304)
 Increase in mortgage-backed securities "available for sale" ....................     (3,731,563)
 Sales of securities "available for sale" .......................................      3,755,046
 Redemptions of securities "available for sale" .................................      1,995,173        2,871,501
 Purchase of securities "held to maturity" ......................................     (7,456,335)      (6,660,973)
 Redemptions of securities "held to maturity" ...................................      4,714,278        4,873,223
 Increase in mortgage-backed securities "held to maturity" ......................     (1,759,005)        (778,779)
 Increase in loans to customers .................................................    (11,735,050)      (6,502,044)
 Increase in deposits in banks ..................................................     (3,435,711)        (878,293)
 Premium paid on core deposits ..................................................                        (164,579)
                                                                                    ------------     ------------
  NET CASH USED IN
   INVESTING ACTIVITIES .........................................................    (20,613,472)     (11,635,232)
                                                                                    ------------     ------------
FINANCING ACTIVITIES:
 Increase in deposits before interest credited ..................................     17,100,056        7,255,032
 Increase (decrease) in borrowed funds ..........................................       (504,042)       1,487,393
 Interest credited to deposits ..................................................      2,513,403        1,833,276
 Cash dividends paid ............................................................        (10,689)          (8,178)
 Decrease in treasury stock .....................................................            244               50
 Issuance of common stock .......................................................         31,995
                                                                                    ------------     ------------
  NET CASH PROVIDED BY
   FINANCING ACTIVITIES .........................................................     19,130,967       10,567,573
                                                                                    ------------     ------------
NET INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS ...............................................................        (81,869)          54,836
                                                                                    ------------     ------------
CASH AND CASH EQUIVALENTS, January 1 ............................................      2,566,232        1,793,476
                                                                                    ------------     ------------
CASH AND CASH EQUIVALENTS, September 30 .........................................   $  2,484,363     $  1,848,312
                                                                                    ============     ============

SUPPLEMENTARY SCHEDULE OF CASH FLOW INFORMATION:
 Cash paid during the year for:
  Interest ......................................................................   $    690,535     $    600,664
  Income taxes ..................................................................   $    346,553     $    474,000
 Non-cash investing activities:
  Unrealized gains (losses) on securities .......................................   $     59,000     ($   169,000)
  Stock dividend ................................................................        139,104          110,398

</TABLE>

                 See Notes to Consolidated Financial Statements

                                       6

<PAGE>

                    GRANGE NATIONAL BANC CORP. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BUSINESS COMBINATION AND PRINCIPLES OF COMBINATION:

         Grange National Banc Corp. (Company) was organized and incorporated
         under the laws of the Commonwealth of Pennsylvania on October 2, 1984,
         for the purpose of becoming a bank holding company. On April 30, 1985
         the Company acquired the Grange National Bank of Wyoming County (Bank)
         pursuant to a plan of reorganization and merger. The Bank became a
         wholly owned subsidiary of the Company, and each outstanding share of
         Bank common stock was converted into one share of Company common stock.
         The accompanying consolidated financial statements include the accounts
         of the Company and its wholly owned subsidiary (Bank) with the
         reorganization accounted for as a pooling of interests.

2.  BASIS OF PRESENTATION:

         The accompanying unaudited consolidated financial statements have been
         prepared in conformity with the accounting principles and practices
         reflected in the annual financial statements, and reflect all
         adjustments which are normal and recurring and, in the opinion of
         management, necessary for a fair presentation of the results of
         operations for the interim periods. The results of operations reported
         in interim financial statements are not necessarily indicative of
         results to be expected for the year.

3.  CHANGE IN ACCOUNTING PRINCIPLE:

         In May 1993 the Financial Accounting Standards Board issued Statement
         of Financial Accounting Standards No. 115 "Accounting for Certain
         Investments in Debt and Equity Securities" ("SFAS No. 115"), which the
         Company adopted as of January 1, 1994. SFAS No. 115 requires the
         Company to classify each debt and equity security in one of three
         categories: held to maturity, available for sale or trading.
         Investments classified as held to maturity are reflected at amortized
         cost. Investments classified as either available for sale or trading
         securities are reflected at fair market value. Unrealized gains or
         losses on available for sale securities are excluded from earnings and
         reflected, net of income taxes, in a separate component of
         stockholders' equity until realized. All equity and U.S. Treasury
         securities are classified as "available for sale", as well as certain
         mortgage-backed securities and certain municipal securities. All other
         securities are classified as "held to maturity". Securities are
         designated as either "available for sale" or as "held to maturity" at
         the time of purchase. Upon implementation on January 1, 1994, fair
         market value of available for sale securities exceeded amortized cost
         by $70,000. At September 30, 1997 estimated fair market value exceeded
         amortized cost by approximately $59,000, and at September 30, 1996
         amortized cost exceeded fair market value by approximately $69,000.



<PAGE>



4.  STOCK OPTIONS:

         In January 1994, the Board adopted an Employee Stock Option Plan in
         which common stock options may be granted to all officers and key
         employees of the Company. The aggregate number of shares which may be
         issued upon exercise of the options under the plan is 20,000. Options
         are exercisable up to one-third in the second year after the date of
         grant, up to two-thirds in the third year after the date of grant and
         up to 100% in the fourth year after the date of grant, with options
         expiring at the end of ten years after the date of grant. Options were
         granted at various times during 1994, at prices ranging from $24.00 to
         $26.25 per share.

         The Board of Directors also adopted a Stock Option Plan for
         non-employee Directors which will be available to all non-employee
         members of the Board of Directors. The aggregate number of shares which
         may be issued upon exercise of the options under the Director's plan is
         20,000 shares and are exercisable in part from time to time beginning
         one year after the date of grant and expiring ten years thereafter. The
         Plan provides for adjustments to the number of options to compensate
         for stock dividends and splits. Accordingly all effected figures have
         been adjusted to reflect stock dividends. Effective April 1, 1994 and
         1997, options to purchase 1,029 shares of common stock, at $23.32 and
         $42.00, per share, respectively, were automatically granted to each
         non-employee Director under this plan expiring April 1, 2004. Of these
         options, 1,029 have been exercised.

         The Board of Directors adopted an additional Stock Option Plan (the
         "Plan") in November 1995 covering the employees and directors. The Plan
         authorizes the grant of options to purchase not more than 56,105 shares
         of Common Stock under the Plan. Options granted under the Plan are
         intended to be either incentive stock options or nonstatutory stock
         options. As of April 30, 1997 options for 56,105 shares of Common Stock
         having an exercise price of $31.86 were outstanding (1,747 options did
         not vest and lapsed) and 6,702 shares were available for future option
         grants under the Plan. Of the 49,403 shares of Common Stock outstanding
         for options, 37,050 shares of Common Stock were issued as incentive
         stock options. The remaining shares outstanding for options were
         granted to each non-employee director equally as nonstatutory stock
         options.

         PREFERRED STOCK:

         The Company authorized 1,000,000 of preferred stock at $5 par value. At
         December 31, 1996 and June 30, 1997, no shares were issued nor
         outstanding.



<PAGE>



MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION:

Net income for the three months ending September 30, 1997 increased by $38,000,
or 10% to $436,000, compared to $386,000 reported for the same period in 1996.
Net interest income for the three months ending September 30, 1997 increased by
$173,000 to $1,310,000 compared to $1,137,000 for the same period in 1996. This
constitutes an increase of 15% over the previous year. Interest income for this
period increased by $348,000 or 18% compared to 1996, and interest expense
increased as well by $175,000 or 22% compared to 1996.

The increase in interest income has been principally from interest on loans
which increased $321,000 or 23% compared to the same period last year. Interest
income from investment securities decreased by $18,000 or 3% compared to the
same period last year. Interest rates on loans have been fairly stable during
the year. At the end of March the New York Prime Rate increased by 25 basis
points in response to the Federal Reserve's action increasing the interest rate
at the discount window by 25 basis points. This increased the bank's interest
rate spread during the second and third quarters because many commercial and
consumer loans adjust with the New York Prime Rate. Interest on deposits in
banks increased by $45,000 from $26,000 to $71,000 due to higher balances and
higher rates.

The increase in interest expense is due to the increase in interest bearing
deposits during the third quarter of 1997 as compared to the third quarter of
1996. The average total sources to fund earning assets increased by $17,261,000,
from $94,812,000 to $112,073,000 in 1997, while th average interest rate
increased from 4.30% to 4.17%, respectively.

The increase in deposits continues to provide funds for loans and liquidity.
Loan demand let up during the third quarter as compared to the second quarter.
Loans increased $11,621,000 or 19% from $61,410,000 in at December 31, 1996 to
$73,030,000 at September 30, 1997. Loan demand is soft as the fourth quarter
begins. Balances of investment securities increased during the third quarter,
with an increase $4,878,000 since December 31, 1996. Interest bearing deposits
at banks increased by $3,435,000 to $5,410,000 from $1,975,000 due to deposits
flowing in and management investing the funds selectively because of low rates
on securities.

The provision for loan loss during the three months ending September 30, 1997
was $55,000 compared to $35,000 for the same period in 1996, as management tries
to keep the allowance for loan losses in line with the size of the loan
portfolio. The allowance for loan losses was $708,000 and $623,000 at September
30, 1997 and December 31, 1996, respectively. This represents 0.96% and 1.00% of
total loans, 219% and 192% of non-performing loans, respectively, and 147% and
192% of non-performing assets. Management performs a quarterly analysis of the
Bank's potential loan losses on a "worst case" basis. A loan review process is
performed by an independent loan review officer on a continuing basis. This
information is closely reviewed by the Board of Directors and used to evaluate
the adequacy of the loan loss reserve in order to provide coverage for
identifiable losses, provide coverage for unexpected losses, and to keep the
size of the reserves in proportion to the growing size of the loan portfolio.



<PAGE>



The following sets forth loans past due 90 days or more on which interest has
continued to be accrued for September 30, 1997 and December 31, 1996.

                                            September 1997        December 1996
                                                     (In thousands)
           Real estate mortgages               $165                    $67
           Commercial                            53                     11
           Installment                            1
                                               ----                    ---
                           Total               $219                    $78
                                                ===                    ===


Non-accrual loans decreased from $247,000 at December 31, 1996 to $105,000 at
September 1997. The overall quality remains very good, and management expects
non-performing assets to remain at substantially the same levels as a proportion
of loans. Other real estate owned increased to $157,000 with the acquisition of
three properties during the year. Managements does not expect to liquidate the
properties before the end of the year.

Investments in securities and deposits in banks increased by $8,314,000 or 23%
from December 31, 1996 to September 30, 1997. The average rate earned on
available for sale, held to maturity and deposits in banks were 5.98%, 6.45% and
5.82% for the three months ended September 30, 1997, as compared to 6.03%, 6.58%
and 5.34% for the three months ended September 30, 1996. The amortized value of
the Bank's investments classified as held to maturity exceeded their fair value
by $50,000, and the fair value of investments classified as available for sale
exceeded their amortized value by $58,000. This is reflected as an increase in
the Bank's equity of approximately $40,000, net of deferred tax effects.

Slowly declining interest rates at during the summer account for the unrealized
gain on the available for sale securities reflected on the balance sheet. Rates
are expected to change from day to day, but remain fairly level. This will
result in minimal impact on the fair value of securities available for sale. As
the Bank extends the length of the securities it purchases, interest rate
changes will have greater impact on the fair value of those securities. This
interest rate risk is offset by higher yields on the securities. The Bank
continues to purchase fairly short maturities, generally five to eight years for
fixed rate securities.

Management continues to purchase only high quality investments to minimize
credit risk to the value of the Bank's investments. There have been no adverse
credit valuations on any of the investments. Although investment opportunities
exist which will produce higher yields, they generally contain higher credit or
interest rate risk.

The Bank experienced substantial increased operating expenses associated with
the addition of two new offices and a computer conversion. The Towanda office
opened in November 1996, the Back Mountain office opened in February 1997 and
the computer conversion occurred in January 1997. The Back Mountain office is
leased over a term of 15 years, and renewable at that time, for $70,000 per
year. Salaries and employee benefits have increased by $75,000 or 22% from


<PAGE>



$340,000 to $415,000, occupancy expense increased $19,000 or 23% from $80,000 to
$99,000, equipment expense increased $7,000 or 12% from $57,000 to $64,000, and
other operating expenses increased $27,000 or 14% from $193,000 to $220,000, for
the three months ended September 30, 1997 as compared to the same period for
1996.

Management performs an interest rate and liquidity analysis on a monthly basis
to monitor the Bank's interest rate sensitivity gap and liquidity needs. These
reports are reviewed by the Board of Directors and used to formulate ways to
improve the Bank's interest rate gap. The Bank continues to place great emphasis
on adjustable rate loan products, such as variable rate home equity loans and
annually adjustable mortgage loans as well as adjustable rate and short term
investments, in order to minimize interest rate risk.

Since 1991 the Comptroller of the currency has required all national banks to
meet certain "Risk Based Capital" standards. These standards weight certain
assets based on the risk of the asset, and also includes certain off-balance
sheet items. The table below sets forth the Bank's Tier 1 and Tier 2 capital,
risk adjusted assets (including off-balance sheet items) and the Bank's
risk-based capital ratios under the guidelines, for September 30, 1997 and
December 31, 1996.

         (In thousands, except ratios)                       1997        1996
         Tier I capital:
              Shareholders' equity .....................    $11,999     $10,780
         Tier II capital:
              Loan loss reserve ........................        708         623
                                                            -------     -------
         Total Qualifying Capital ......................    $12,707     $11,403
                                                            =======     =======
Risk-adjusted assets (including off balance sheet items)    $73,981     $61,371

Tier I Capital Ratio (4.00% required) ..................      16.47%      17.57%
Total Capital Ratio (8.00% required) ...................      17.18%      18.58%

<PAGE>



                    GRANGE NATIONAL BANC CORP. AND SUBSIDIARY
              AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND RATES


<TABLE>
<CAPTION>

                                             THREE MONTHS ENDED                       THREE MONTHS ENDED
                                             SEPTEMBER 30, 1997                       SEPTEMBER 30, 1996
                                     -----------------------------------      ---------------------------------
                                       (1)        Interest       Average        (1)        Interest     Average
                                     Average      Income/       Interest      Average      Income/     Interest
  (Dollars in thousands)             Balance      Expense         Rate        Balance      Expense       Rate
                                    --------      -------       --------     --------      --------    --------
<S>                                 <C>         <C>               <C>        <C>          <C>           <C>
INTEREST EARNING ASSETS:
  Loans:  
  Mortgages ....................    $ 39,371    $    908          9.23%      $ 32,884     $    791        9.62% 
  Installment ..................       5,684         144         10.13          5,009          124        9.90
  Commercial ...................      26,764         662          9.89         19,100          473        9.91
                                    --------    --------                     --------     --------
  Total loans ..................      71,819       1,714          9.55         56,993        1,388        9.74
                                    --------    --------                     --------     --------
  Securities available for sale:                                            
  U.S. Treasury securities .....       8,366         126          6.02         11,454          168        5.87
  U.S. government agencies .....       1,640          26          6.34      
  Municipal bonds ..............         828          15          7.25      
  Other securities                       462           2          1.73            417           11       10.55
                                    --------    --------                     --------     --------
  Total available for sale .....      11,296         169          5.98         11,871          179        6.03
                                    --------    --------                     --------     --------
  Securities held to maturity:                                              
  U.S. government agencies .....      18,993         306          6.44         19,354          315        6.51
  Municipal bonds ..............       4,157          67          6.45          4,257           71        6.67
  Other securities .............         927          15          6.47            389            9        9.25
                                    --------    --------                     --------     --------
  Total held to maturity .......      24,077         388          6.45         24,000          395        6.58
                                    --------    --------                     --------     --------
  Deposits in banks ............       4,881          71          5.82          1,948           26        5.34
                                    --------    --------                     --------     --------
  TOTAL ........................    $112,073       2,342          8.36       $ 94.812        1,988        8.39
                                    ========    --------                     ========     -------- 
INTEREST BEARING LIABILITIES:                                               
  Deposits:                                                                 
  NOW and super-NOW ............    $ 11,810          68          2.30       $  8,630           43        1.99
  Savings and money market .....      26,858         185          2.76         24,930          172        2.76
  Certificates of deposit ......      52,228         723          5.54         43,366          585        5.40
  Other time deposits ..........         200           3          6.00            200            4        8.00
                                    --------    --------                     --------     --------
  Total deposits ...............      91,096         979          4.30         77,126          804        4.17
  Other borrowed funds .........         724           9          4.97            918            9        3.92
                                    --------    --------                     --------     --------
TOTAL ..........................      91,820         988          4.30         78,044          813        4.17
                                                                            
  Non-interest bearing                                                      
  funds, net (2) ...............      20,253                                   16,768                    
                                    --------    --------                     --------     --------
TOTAL SOURCES TO FUND                                                       
  EARNING ASSETS ...............    $112,073         988          3.53       $ 94,812          813        3.43
                                    ========    --------                     ========     --------        
  NET INTEREST/YIELD ...........                $  1,354          4.83%                   $  1,175        4.96%
                                                ========                                  ========
</TABLE>


(1) Average balances are daily averages.
(2) Demand deposits, stockholders's equity and other non-interest bearing
liabilities less non-interest earning assets.
Non-accrual hens are reflected in the loan balances, but contributing no
interest income.
NOTE - Tax exempt interest income has been converted to a tax equivalent basis
at the U.S. federal income tax rate of 34%.

                 See Notes to Consolidated Financial Statements


<PAGE>

                    GRANGE NATIONAL BANC CORP. AND SUBSIDIARY

               AVERAGE BALANCES, INTEREST INCOME/EXPENSE AND RATES

<TABLE>
<CAPTION>


                                             NINE MONTHS ENDED                             NINE MONTHS ENDED
                                            SEPTEMBER 30, 1997                             SEPTEMBER 30, 1996
                                       --------------------------------------------------------------------------------
                                             (1)         Interest       Average        (1)        Interest     Average
                                            Average      Income/       Interest      Average      Income/      Interest
(Dollars in thousands)                      Balance      Expense         Rate        Balance      Expense        Rate
-----------------------------------------------------------------------------------------------------------------------
<S>                                         <C>         <C>              <C>         <C>          <C>             <C>
INTEREST EARNING ASSETS:
 Loans:  
  Mortgages ............................    $ 37,647    $  2,553         9.04%       $ 31,651     $  2,286        9.63%
  Installment ..........................       5,360         413        10.27           4,853          359        9.86
  Commercial ...........................      24,430       1,786         9.75          17,490        1,342       10.23
                                            --------    --------                     --------     --------
    Total loans ........................      67,437       4,752         9.40          53,994        3,987        9.85
                                            --------    --------                     --------     --------
 Securities available for sale:                                                     
  U.S. Treasury securities .............      10,597         479         6.03          11,351          492        5.78
  U.S. government agencies .............         545          26         6.36       
  Municipal bonds ......................         281          15         7.12       
  Other securities .....................         445          17         5.09             383           16        5.57
                                            --------    --------                     --------     --------
      Total available for sale .........      11,868         537         6.03          11,734          508        5.77
                                            --------    --------                     --------     --------
                                                                                    
 Securities held to maturity:                                                       
                                                                                    
  U.S. government agencies .............      18,187         879         6.44          18,445          915        6.61
  Municipal bonds ......................       4,032         207         6.85           4,194          206        6.55
  Other securities .....................         515          25         6.47             540           25        6.17
                                            --------    --------                     --------     --------
    Total held to maturity .............      22,734       1,111         6.52          23,179        1,146        6.59
                                            --------    --------                     --------     --------
                                                                                    
 Deposits in banks .....................       3,425         150         5.84           2,430           97        5.32
                                            --------    --------                     --------     --------
      TOTAL ............................    $105,464       6,550         8.28        $ 91,337        5,738        8.38
                                            ========    ========                     ========     ========
INTEREST BEARING LIABILITIES:                                                       
 Deposits:                                                                          
  NOW and super-NOW ....................    $ 10,494         169         2.15        $  8,431          125        1.98
  Savings and money market .............      25,968         533         2.74          23,847          490        2.74
  Certificates of deposit ..............      49,242       2,020         5.47          42,677        1,755        5.48
  Other time deposits ..................         200           8         5.33             200            9        6.00
                                            --------    --------                     --------     --------
    Total deposits .....................      85,904       2,730         4.24          75,155        2,379        4.22
 Other borrowed funds ..................         773          27         4.66             797           32        5.35
                                            --------    --------                     --------     --------
      TOTAL ............................      86,677       2,757         4.24          75,952        2,411        4.23
Non-interest bearing                                                                
 funds, net (2) ........................      18,787                                   15,385                    
                                            --------    --------                     --------     --------
TOTAL SOURCES TO FUND                                                               
EARNING ASSETS .........................    $105,464       2,757         3.49        $ 91,337        2,411        3.52
                                            ========    --------                     ========     --------
NET INTEREST/YIELD .....................                $  3,793         4.80%                    $  3,327        4.86%
                                                        ========                                  ========

</TABLE>

(1) Average balances are daily averages                 

(2) Demand deposits, stockholders's equity and other non-interest bearing
liabilities less non-interest earning assets.

Non-accrual loans are reflected in the loan balances, but contributing no
interest income.

NOTE - Tax exempt interest income has been converted to a tax equivalent basis
at the U.S. federal income tax rate of 34%. 

                 See Notes to Consolidated Financial Statements
<PAGE>


PART II.  OTHER INFORMATION

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

                  Exhibit 27 - Financial Data Schedule

         (b)      Reports on Form 8-K

         (ii)     Statement re: computation of earnings per share:

                  Primary earnings per share is computed by dividing net income
                  by the weighted average number of shares of common stock and
                  common stock equivalents outstanding during the quarter. Stock
                  options are considered common stock equivalents and are
                  included in the computation of the number of shares
                  outstanding using the treasury stock method. The number of
                  shares used to calculate earnings per share for the periods
                  presented are as indicated in each period.

During the current fiscal quarter, there have been no events of a nature
required to be filed on Form 8-K.

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                                     GRANGE NATIONAL BANC CORP.
                                                     (Registrant)


Date    November 14, 1997                             /s/ Thomas A. McCullough
    --------------------------------                 -------------------------
                                                     Thomas A. McCullough
                                                     President
                                                     Chief Executive Officer
                                                     Chief Financial Officer

Date    November 14, 1997                             /s/ Philip O. Farr
    --------------------------------                 -------------------
                                                     Philip O. Farr
                                                     Chief Accounting Officer



<PAGE>