UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C 20549 FORM 10-Q X		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 		EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1999 OR 		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES	EXCHANGE ACT OF 1934 For the transition period from....................................... to............................................. Commission File No. 33-8743 ORANGE NATIONAL BANCORP (Exact Name of Registrant as Specified in Charter) 								 1201 East Katella Avenue 								 Orange, California 92867 				 		California		 	 (714) 771-4000		 	33-0190684 (State of Incorporation) (Address and Telephone Number	 (I.R.S. Employer 	 							 of Principal Executive Offices) Identification No.) 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 (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 The Registrant had 2,000,171 shares of common stock outstanding as of April 28, 1999. ORANGE NATIONAL BANCORP QUARTERLY REPORT ON FORM 10-Q MARCH 31, 1999 TABLE OF CONTENTS PART I	.	FINANCIAL STATEMENTS Item 1.	Financial statements 			Consolidated Balance Sheets as of March 31, 1999 (unaudited) 		 	and December 31, 1998							 3 			Consolidated Statements of Earnings for the 		 	Three Months Ended March 31, 1999 and 1998 (unaudited)				 4 			Consolidated Statements of Comprehensive Income for the 			 Three Months Ended March 31, 1999 and 1998 (unaudited)				 5 			Consolidated Statements of Stockholders' Equity for the 			Three Months Ended March 31, 1999 and 1998 (unaudited)				 6 			Consolidated Statements of Cash Flows for the 			Three Months Ended March 31, 1999 and 1998 (unaudited)				 7 			Notes to Consolidated Financial Statements					 8 Item 2.	Management's Discussion and Analysis 			of Financial Condition and Results of Operations					 9 Item 3.	Quantitative and Qualitative Disclosures About Market Risk				 19 PART II.	OTHER INFORMATION Item 1.	Legal Proceedings						 	20 Item 2.	Changes in Securities							 20 Item 3.	Defaults Upon Senior Securities						 20 Item 4.	Submissions of Matters to a Vote of Security Holders					 20 Item 5.	Other Information							 20 Item 6.	Exhibits and Reports on Form 8-K						 20 SIGNATURES					 	21 ORANGE NATIONAL BANCORP CONSOLIDATED BALANCE SHEETS March 31, 1999 (unaudited) and December 31, 1998 									 	Mar 31	 Dec 31 										1999 	1998 								 	 (unaudited) (audited) (dollars in thousands) Assets Cash and cash equivalents	 			$ 54,986 	$ 74,931 Securities 	Held-to-maturity securities (fair value of $15,933 in 1999	and $17,691 in 1998) 			 	15,901 	17,640 	Available-for-sale securities 	 		 	52,270 	40,649 Loans, net of allowance for credit losses of $1,596 in 1999	and $1,524 in 1998 	 		143,112 	140,140 Premises and equipment, net			 	5,503 	5,438 Other real estate owned, net 	 	 		94 	- Accrued interest receivable	 		 	1,099 	1,212 Cash value of life insurance 	 		 	5,071 	5,021 Other assets		 	 			 1,018	 831 										$279,054 	$285,862 Liabilities 	 	 	 	 Deposits				 	 	 	 $252,960 	$260,334 Accrued interest payable and other liabilities 			 1,939	 1,805 			Total liabilities			 	254,899 	262,139 Commitments and Contingencies		 		- 	- Stockholders' Equity 	Common stock, no par value or stated value; 		authorized 20,000,000 shares; issued and 		outstanding 2,000,171 in 1999 and 1,996,788 in 1998	 		8,081 	8,036 	Retained earnings 			 	16,170 	15,718 	Unrealized (loss) on available-for-sale securities, net	 		 (96)	 (31) 			Total stockholders' equity 	 			 24,155 	 23,723 										$279,054	 $285,862 <FN> See Notes to Consolidated Financial Statements. </FN> ORANGE NATIONAL BANCORP CONSOLIDATED STATEMENTS OF EARNINGS Three Months Ended March 31, 1999 and 1998 (unaudited) 										 1999	 1998 								 			(in thousands, except per share data) Interest Income 	Loans					 		$3,297 	 $3,345 	Securities	 					910	 245 	Federal funds sold 				 457	 569 			Total interest income 			 	4,664 	4,159 Interest Expense, deposits 				 1,033	 881 			Net interest income 			 	3,631 	3,278 Provision for Credit Losses				 70 - 			Net interest income after provision for credit losses 		 	3,561 	3,278 Other Income					 	706	 871 Other Expenses				 	3,031	 3,093 			Earnings before income taxes		 		 1,236 	 1,056 Provision for Income Taxes 				 484	 396 			Net earnings	 		 	$ 752	 $ 660 Basic earnings per share			 	$ 0.38 	$ 0.33 Weighted average number of common shares outstanding (in thousands)				 1,999	 1,976 Diluted earnings per share		 		 $ 0.37	 $ 0.32 Weighted average number of common shares outstanding and diluted potential common shares (in thousands)			 2,040 	 2,043 <FN> See Notes to Consolidated Financial Statements. </FN> ORANGE NATIONAL BANCORP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Three Months Ended March 31, 1999 and 1998 (unaudited) 										 1999	 1998 									 (dollars in thousands) Net earnings					 	$752 	$660 Other comprehensive income: 	Unrealized gains (losses) on available-for-sale securities		 	(120) 	(1) 	Reclassification adjustment for losses included in net earnings	 	- 	- 	Reclassification adjustment for losses included in net earnings 	for securities transferred				 8	 8 			Other comprehensive income (loss) before income taxes	 	(112) 	7 	Provision for income taxes				 47	 (3) 			Other comprehensive income (loss)				 (65)	 4 			Comprehensive income 			 	$687 	$664 <FN> See Notes to Consolidated Financial Statements. </FN> ORANGE NATIONAL BANCORP CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Three Months Ended March 31, 1999 and 1998 (unaudited) 										Accumulated ted 										Other 										Comprehensive 							 	 Common Stock	 Retained 	Income 							 Shares 	Amount 	Earnings (Loss)	 Total 							 (in thousands, except per share data) Balance, December 31, 1997 	1,970 	$7,864	 $13,778 	$(56) 	$21,586 Net earnings 			- 	- 	660 	- 	660 Cash dividend paid ($.35 per share) 	- 	- 	(692) 	- 	(692) Exercise of stock options 	18 	106 	- 	- 	106 Other comprehensive income 	 - 	 - 	 - 	 4	 4 Balance, March 31, 1998 	1,988 	$7,970 	$13,746 	$(52) 	$21,664 Balance, December 31, 1998 	1,997 	$8,036 	$15,718 	$(31) 	$23,723 Net earnings	 		- 	- 	752 	- 	752 Cash dividend paid ($.15 per share) 	- 	- 	(300) 	- 	(300) Exercise of stock options 	3 	45 	- 	- 	45 Other comprehensive income 	 - 	 - 	 - 	 (65)	 (65) Balance, March 31, 1999 	2,000 	$8,081 	$16,170 	$(96) 	$24,155 <FN> See Notes to Consolidated Financial Statements. </FN> ORANGE NATIONAL BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, 1999 and 1998 (unaudited) 										 1999	 1998 							 		 (dollars in thousands) Cash Flows from Operating Activities 	Net earnings			 		 $ 752 	$ 660 	Adjustments to reconcile net earnings to net cash 		provided by operating activities: 		Depreciation and amortization 			 	154 	 114 		Provision for credit losses 				 70 	- 		(Gain) on sale of loans 				 (50) 	 (174) 		Proceeds from loan sales 			 	1,033	 2,571 		Origination of loans held for sale 			 	(983) 	(2,397) 		(Increase) decrease in other assets 			 	(14) 	 28 		Gain on cash value of life insurance			 	(60) 	(59) 		Increase in other liabilities 				 140	 141 			Net cash provided by operating activities 			 1,042	 884 Cash Flows from Investing Activities 	Proceeds from maturities of held-to-maturity securities 			1,739 	 1,386 	Proceeds from maturities of available-for-sale securities	 		9,303 	3,001 	Purchases of available-for-sale securities			 	(21,045) 	- 	Net increase in loans made to customers 		 		(3,137) 	(7,188) 	Proceeds from sale of other real estate owned	 		- 	126 	Purchases of bank premises and equipment 			 (218) 	 (459) 			Net cash (used in) investing activities 	 	 	(13,358)	 (3,134) Cash Flows from Financing Activities 	Net (decrease) in deposits 			 	(7,374) 	(1,964) 	Proceeds from exercise of stock options			 	45 	106 	Dividends paid				 (300) 	 (692) 			Net cash (used in) financing activities 	 	 	(7,629) 	(2,550) 			(Decrease) in cash and cash equivalents 		 	(19,945)	 (4,800) Cash and cash equivalents at beginning of period			 74,931 	 81,147 Cash and cash equivalents at end of period				 $54,986 	$76,347 Supplemental Cash Flow Information 	Cash payments for: 		Interest					 	$1,048 	$875 		Income taxes		 		$ - 	$150 	Non-cash investing activities: 		Loans to finance the sale of other real estate owned			$ - 	$ - 		Loans foreclosed on by the Company			 	$ 94 	$ - <FN> See Notes to Consolidated Financial Statements. </FN> ORANGE NATIONAL BANCORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1.	Basis of Presentation 		The consolidated financial statements include the accounts of Orange National Bancorp ("Company") and its wholly-owned subsidiary, Orange National Bank ("Bank"). 		The consolidated balance sheet (unaudited) as of March 31, 1999, and the related consolidated statements (unaudited) of earnings, comprehensive income, stockholders' equity and cash flows for the three months ended March 31, 1999 and 1998, have been prepared in accordance with generally accepted accounting principles and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary have been made to present fairly the financial position, results of operations and cash flows as of and for the three months ended March 31, 1999. 		Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's December 31, 1998, annual report on Form 10-K. The operating results for the three months ended March 31, 1999, are not necessarily indicative of the operating results for all of 1999. Note 2.	Other income and expense 		Other income for the three months ended March 31 consisted of the following: 										 1999	 1998 										 (dollars in thousands) 	Service charges on deposit accounts			 	$363 	$384 	Fees for other customer services 			 	194 	199 	Gain on sale of loans 		 		50 	174 	Increase in cash value of life insurance				 60	 59 	Other								 39	 55 										$706 	$871 		Other expense for the three months ended March 31 consisted of the following: 	Salaries, wages and employee benefits 			 	$1,526 	$1,520 	Occupancy expense 			 	315	 345 	Data processing expense			 	249 	230 	Furniture and equipment expense 			 	196 	172 	Promotion expense 				 128 	185 	Legal and professional services 				 196 	233 	Stationery and supplies 			 	51 	68 	Telephone and postage 			 	115 	126 	Other real estate owned 			 	- 	6 	Other			 					 255	 208 										$3,031 	$3,093 ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 				RESULTS OF OPERATIONS Forward Looking Statements 		Certain statements in this filing, including without limitation statements containing the words "believes," "anticipates," "intends," "expects," "proforma," and words of similar import, constitute forward- looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other, the following: general economic conditions in the Company's market areas; variances in interest rates; changes in or amendments to regulatory authorities' capital requirements or other regulations applicable to the Company; increased competition for loans and deposits; and other factors referred to elsewhere in this filing. Given these uncertainties, shareholders are cautioned not to place undue reliance on forward-looking statements. The Company disclaims any obligation to update such factors which are not considered to be material or to publicly announce the result of any revisions to any of the forward-looking statements included herein which are not considered to be material to reflect future events or developments. Results of Operations 		Total interest income was $4.7 million in the three months ended March 31, 1999, an increase of $0.5 million or 12.1% from the $4.2 million in three months ended March 31, 1998. The average interest- earning assets were $241.3 million in the first quarter of 1999, an increase of $44.9 million, or 22.9% from the $196.4 million in the first quarter of 1998. The average yield was 7.7% in the first quarter of 1999, a decrease of 0.8% from the 8.5% in the first quarter of 1998. The increase in interest income in the first quarter of 1999 resulted from a higher level of interest-earning assets in spite of slightly lower interest rates. 		Interest income on loans was $3.3 million in both the three months ended March 31, 1999 and 1998. This resulted although the average size of the loan portfolio increased and long-term interest rates decreased during the first quarter of 1999 as compared to the first quarter of 1998. The average loan portfolio was $142.3 million in the first quarter of 1999, an increase of $4.8 million or 3.5% from the $137.5 million in the first quarter of 1998. The yield on the loan portfolio was 9.3% in first quarter of 1999, a decrease of 0.4% from the 9.7% in the first quarter of 1998. The increase in the average size of the loan portfolio resulted from increased loan fundings throughout 1998 and into the first quarter of 1999. The yield on loans moves with changes in the prime rate as approximately 65% of the loan portfolio are based on variable rates. 		Interest income on securities was $0.9 million in the three months ended March 31, 1999, an increase of $0.7 million or 271.4% from the $0.2 million in the three months ended March 31, 1998. The increase in interest income on securities in the first quarter of 1999 resulted from the sharp increase in the average size of the investment securities portfolio. The average balance of securities was $59.3 million in the first quarter of 1999, an increase of $42.4 million or 251.2% from the $16.9 million in the first quarter of 1998. The yield on securities was 6.1% in the first quarter of 1999, an increase of 0.3% from the 5.8% in the first quarter of 1998. The increase in the size and yield of the investment securities portfolio resulted from the purchase of several higher yielding bonds throughout the latter half of 1998 and into the first quarter of 1999. 		Interest income on federal funds sold was $0.5 million in the three months ended March 31, 1999, a decrease of $0.1 million or 19.7% from the $0.6 million in the three months ended March 31, 1998. The decrease in interest income on federal funds sold resulted from a decrease in the average size of federal funds sold and a lower yield in the first quarter of 1999. The average balance of federal funds sold was $39.8 million in the first quarter of 1999, a decrease of $2.2 million or 5.4% from the $42.0 million in the first quarter of 1998. The yield on federal funds sold was 4.6% in the first quarter of 1999, a decrease of 0.8% from the 5.4% in the first quarter of 1998. The decrease in the federal funds sold resulted from excess funds being invested in investment securities throughout the latter half of 1998 and into the first quarter of 1999. 		Interest expense was $1.0 million in the three months ended March 31, 1999, an increase of $0.1 million or 17.3% from the $0.9 million in the three months ended March 31, 1998. The increase in interest expense resulted from a larger average interest-bearing deposit base and a slight increase in deposit rates. The average interest-bearing deposits were $155.0 million in the first quarter of 1999, an increase of $29.7 million or 23.7% from the $125.3 million in the first quarter of 1998. The average rate paid on interest-bearing deposits was 2.7% in the first quarter of 1999, a decrease of 0.1% from the 2.8% in the first quarter of 1998. The increase in the deposit base reflects an increase in the overall prosperity of the customer base. 		The provision for credit losses was $70,000 for the three months ended March 31, 1999. A provision for credit losses was not deemed necessary in the three months ended March 31, 1998. The increased provision for credit losses in the first quarter of 1999 from the first quarter of 1998 reflects a larger loan portfolio with a higher quality resulting from an improved local economy in Orange County. The Company continued to experience recoveries in the first quarter of 1999 on amounts previously charged-off. These recoveries offset the need for additional provision. Management believes that the current allowance for credit losses is adequate to provide for potential losses in the portfolio. The current local economic outlook for the remainder of 1999 is promising. However, an assurance cannot be made as to its realization and, accordingly, future provisions for credit losses cannot be estimated at this time. While management is optimistic about the future, the effects of current economic conditions on the collectibility of loans cannot be predicted with absolute certainty and its effects on future profitability cannot be determined. 		Other income was $0.7 million in the three months ended March 31, 1999, a decrease of $0.2 million or 19.0% from the $0.9 million in the three months ended March 31, 1998. The decrease in other income in the first quarter of 1999 resulted from decreased gains on lower sales volume of SBA loans as compared to the first quarter of 1998. The gain on sale of SBA loans was $0.1 million in the first quarter of 1999, a decrease of $0.1 million from the $0.2 million in the first quarter of 1998. 		Other expenses were $3.0 million in the three months ended March 31, 1999, a decrease of $0.1 million or 2.0% from the $3.1 million in the three months ended March 31, 1998. The decrease in other expense in the first quarter of 1999 resulted from lower promotional and professional costs incurred. 		Provision for income taxes was $0.5 million in the three months ended March 31, 1999, an increase of $0.1 million or 22.2% from the $0.4 million in the three months ended March 31, 1998. The increase results from higher pretax earnings in the first quarter of 1999 as compared to the first quarter of 1998. 		Net earnings were $752,000 in the three months ended March 31, 1999, an increase of $92,000 or 13.9% from the $660,000 in the three months ended March 31, 1998. Financial Condition 		The Company experienced a slight decrease in assets during the three months ended March 31, 1999. Total assets were $279.1 million as of March 31, 1999, a decrease of $6.8 million or 2.4% from the $285.9 million as of December 31, 1998. 		Total interest-earning assets were $252.2 million as of March 31, 1999, a decrease of $3.5 million or 1.8% from the $255.7 million as of December 31, 1998. The decrease resulted from an outflow of federal funds sold for deposit withdrawals. The Company purchased investment securities due to favorable interest rate conditions. The Company also continues to focus its efforts on originating quality loans. 		The investment securities portfolio was $68.2 million as of March 31, 1999, an increase of $9.9 million or 17.0% from the $58.3 million as of December 31, 1998. The increase in the first quarter of 1999 resulted from the continued purchasing of investment securities that began during the second quarter of 1998. The Company believes securities are the best available investment after its liquidity needs are met through cash, cash due from banks and federal funds sold. The market values decreased slightly in the first quarter of 1999 resulting from a slight increase in short-term and long-term interest rates. 		The loan portfolio was $144.7 million as of March 31, 1999, an increase of $3.0 million or 2.2% from the $141.7 million as of December 31, 1998. The increase in the first quarter of 1999 resulted from increased loan demand, primarily SBA lending on commercial real estate. The quality of the loan portfolio continues to improve resulting from a healthier Orange County economy. 		Total deposits were $253.0 million as of March 31, 1999, a decrease of $7.3 million or 2.8% from the $260.3 million as of December 31, 1998. The decrease in deposits in the first quarter of 1999 reflects a historical cycle of slightly lower first quarter balances maintained by large depositors. Liquidity 		The Company maintains substantial liquid and other short-term assets to meet the funding of loan demand, deposit withdrawals and maturities, and operating costs. The Company currently meets its funding needs from its deposit base, and cash flow from operations, loan sales, maturities of investment securities and loan principal reductions. 		The loan-to-deposit ratio was 56.6% and 53.8% as of March 31, 1999 and December 31, 1998, respectively. The increase in this ratio resulted from the increase in loans and the decrease in the deposit base. The ratio of liquid assets (cash, cash due from banks, federal funds sold, and investment securities with maturities of one year or less) to demand deposits was 29.9% and 39.1% as of March 31, 1999 and December 31, 1998, respectively. The decrease of the liquid asset ratio resulted from a larger decrease in liquid assets, primarily to fund the purchase of investment securities, than the decrease in demand deposits. 		The Company has a relatively stable and significant base of core deposits. Thus, the Company has not used brokered deposits and avoids using other wholesale, highly rate-sensitive, short-term funds. 	Other funding sources available to the Company include reduction of its federal funds sold, sale of its available for sale securities, increasing deposits, and borrowing from its established credit resources. The Company may borrow funds under securities sold with agreements to repurchase such securities that have not been pledged. The Company had unpledged securities of $61.4 million as of March 31, 1999. Liquidity can also be obtained through federal funds purchased from correspondent banks and/or direct borrowings from the Federal Reserve Bank. The Company has a Federal Funds borrowing line of $10.0 million. The Company has a borrowing capacity of $14.5 million with the FHLB. 		Management believes the Bank has sufficient liquidity to meet its loan commitments, deposit withdrawals and operating costs. Investment Securities Portfolio 		There are no securities from a single issuer, other than securities of the U.S. Government, Agencies and corporations, whose aggregate market value is greater than 10% of stockholders' equity. The Bank does not invest in derivative financial instruments. The Bank purchases mortgage-backed securities of investment grade only. The following schedule presents the Bank's investment securities portfolio: 									 March 31, 1999	 December 31, 1998 										Amortized 	Market 	Amortized 	Market 				 						 Cost	 Value	 Cost	 Value 											(dollars in thousands) Held-to-maturity Mortgage-backed securities			 	$15,901	 $15,933 	$17,640	 $17,691 Available-for-sale U.S. Government Agency Securities			$25,050	 $25,031 	$14,503 	$14,512 Mortgage-backed securities		 		26,426 	26,318 	25,241 	25,226 Other		 							 921 	 921	 911 	 911 										$52,397 	$52,270 	$40,655 	$40,649 Total		 							$68,298 	$68,203 	$58,295 	$58,340 Loan Portfolio 		A major part of the Bank's objective is serving the credit needs of customers in Orange County and surrounding areas. Credit decisions are based upon the judgement of the Bank's lending personnel and Loan Committee. The legal lending limit to each customer is restricted to a percentage of the Bank's total capital, the exact percentage depends on the nature of the particular loan and the collateral involved. Credit risk is inherent to any loan portfolio and it is the management of this risk, which defines the quality of the portfolio. The Bank has a policy to obtain collateral for loans under most circumstances. The Bank has a highly diversified portfolio, a solid underwriting process, a loan review program and an active loan service function which management believes serves to minimize the possibility of material loss in the loan portfolio. 		The three general areas in which the Bank has directed virtually all of its lending activities are (a) real estate loans, (b) commercial loans, and (c) loans to individuals. These three categories accounted for 65.3%, 26.9%, and 7.7%, respectively, of the Bank's loan portfolio as of March 31, 1999. The Bank's commercial loans are primarily funded to small- and medium-sized businesses for terms ranging from 30 days to 5 years. Consumer installment loans are for a maximum term of 48 months on unsecured loans and for a term of the depreciable life of tangible property used as collateral on secured loans. Commercial real estate loans are originated for terms of up to 25 years. 		Variable interest rate loans comprise 65% of the loan portfolio as of March 31, 1999. 		The Bank had standby letters of credit of $0.5 million and commitments to extend credit of $24.3 million as of March 31, 1999. The Bank presently has sufficient liquidity to fund all loan commitments. 		A loan is impaired when it is probable the creditor will be unable to collect all contractual principal and interest payments due in accordance with terms of the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. The amount of impairment, if any, and any subsequent changes are included in the allowance for credit losses. Loan Portfolio Composition 		The composition of the Bank's loan portfolio (all domestic) is presented in the following table: 												Mar 31	 Dec 31 												 1999	 1998 											 	(dollars in thousands) Dollars Real estate 	Commercial						 	$ 89,660 	$ 86,049 	Construction						 	5,512 	5,074 Commercial and industrial					 	39,129 	40,217 Loans to individuals					 	11,178	 11,180 Other		 									 201	 241 Total			 								145,680 	142,761 Unearned net loan fees and premiums				 	(972) 	(1,097) Allowance for credit losses						 (1,596)	 (1,524) Total, net							 		$143,112	 $140,140 Percentages Real estate 	Commercial							 61.5% 	60.3% 	Construction						 	3.8 	3.6 Commercial and industrial				 		26.9 	28.2 Loans to individuals					 	7.7 	7.8 Other				 							 0.1	 0.1 Total									 		100.0% 	100.0% Credit Risk Management 		The Bank manages its loan portfolio through a process designed to assure acceptable quality of loans entering the portfolio and to bring any potential losses or potential defaults in existing loans to the attention of the appropriate management personnel. Each lending officer has primary responsibility to conduct credit and documentation reviews of the loans for which he is assigned. The Bank's Senior Vice President and Senior Credit Officer are responsible for general supervision of the loan portfolio and adherence by the loan officers to the loan policies of the Bank. The Bank currently engages an outside consulting firm to periodically review the loan portfolio to provide suggested risk rating of selected loans. Bank management reviews the suggested ratings along with all other available information to properly monitor the loan portfolio, including all loan evaluations made during periodic examinations by the OCC. 		In accordance with the Bank's loan policies, management presents a written report to the Bank's Board of Directors at its monthly meeting. The Directors review the delinquency report listing of all loans 30 days or more past due and the watch list report including loans having increased credit risk, both delinquency and other factors, over the rest of the portfolio. Additionally, the Directors review a monthly report including all loans originated during the prior month. 		The Bank maintains an allowance for credit losses to provide for potential losses in the loan portfolio. Additions to the allowance for credit losses are either charged to operations in the form of a provision for possible credit losses, or recovered from loan previously charged-off. All loans that are judged to be uncollectible are charged against the allowance. The allowance for credit losses is maintained at a level determined by management to be adequate, based on the performance of loans in the Bank's portfolio, evaluation of collateral for such loans, the prospects or worth of the prospective borrowers or guarantors, and such other factors which, in the Bank's judgement, deserve consideration in the estimation of possible losses. The allowance for credit losses is established and maintained after analyzing loans identified by management with certain unfavorable features affixing a risk of loss attributable to each loan. An inherent risk of loss in accordance with industry standards and economic conditions is then allocated to specific loan pools and to the remainder of the portfolio on an aggregate basis. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic or other conditions. In addition, the OCC periodically reviews the Company's allowance for credit losses as an integral part of their normal recurring examination process, and may require the Company to make additions to the allowance based on their judgment about information available to them at the time of their examinations. 		The following table presents loans on nonaccrual status or contractually past due 90 days or more as to interest or principal payments and still accruing interest: 												Mar 31	 Dec 31 												 1999	 1998 											 	(dollars in thousands) Loans on nonaccrual status					 	$1,827 	$1,631 Loans past due 90 days or more and still accruing interest						 39	 76 Total		 									$1,866	 $1,707 		Loans are generally placed on nonaccrual status when principal or interest payments are past due 90 days or more. Certain loans are placed on nonaccrual status earlier if there is reasonable doubt as to the collectibility of interest or principal. Loans that are in the renewal process, have sufficient collateral, or are in the process of collection continue to accrue interest. 		Had the loans on nonaccrual status paid according to their original terms, the gross interest income to date on such loans would have been approximately $857,000. 		Management does not have knowledge of any additional loans not disclosed in this section as nonaccrual, past due, or troubled debt restructuring that may be potential problem loans. The Bank has no loans to foreign borrowers. The collateral value of certain nonaccrual loans are large enough that management believes all principal and interest will be collected on those loans and therefore do not meet the definition of impaired. A loan is impaired when it is probable the creditor will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. Impaired loans are valued primarily at the fair value of the underlying collateral. 		There were no loan concentrations to individual borrowers exceeding 10% of the total loan portfolio and no other interest-bearing assets that would be required to be in the paragraphs above, if such assets were classified as loans as of March 31, 1999 and December 31, 1998. 		The following table presents loans outstanding, the activity of the allowance for credit losses, and pertinent ratios during the three months ended and as of March 31: 												 1999	 1998 											 	(dollars in thousands) Average gross loans						 $143,307 	$138,391 Total gross loans at end of period						 $145,680 	$140,925 Allowance for credit losses: Balance, beginning of period					 	$1,524 	$1,581 Charge-offs	 							(2) 	(40) Recoveries									 4 	 12 Net (charge-offs) recoveries					 	2 	(28) Provisions charged to operations						 70	 - Balance, end of period					 	$1,596 	$1,553 Net (charge-offs) recoveries during the period to average gross loans outstanding during year			 		0.01% 	(0.02%) 		Included in the Bank's allocation of its allowance for credit losses are specific reserves on certain identified loans and general reserves for unknown potential losses. Management classifies loans through its internal loan review system that is supplemented by an independent third party reviewer and review of loans from its regulators. None of these classifications indicate trends or uncertainties, which will materially impact future operating results, liquidity, or capital resources. The allowance provides for the potential adverse effects of current economic conditions. However, the full effects of the economy on the loan portfolio cannot be predicted with any certainty. Any loans which management doubts the ability of borrowers to comply with loan repayment terms are provided for in the allowance. Summary of Deposits 		Deposits are currently the Bank's sole source of funds. The Bank can obtain additional funds when needed to meet occasional declines in deposits or other short-term liquidity needs, through the overnight purchase of federal funds. However, the Bank does not currently use these sources of funds. Generally, the Bank has funds in excess of its needs for deposit withdrawals and other short-term liquidity. The Bank sells such excess funds as federal funds sold to other financial institutions. 		The Bank's deposits are attracted primarily from individuals and commercial enterprises. The Bank also attracts some deposits from municipalities and other government agencies. The Bank does not have foreign deposits, brokered deposits or variable rate fixed-term deposits. The Bank does not expect to obtain future deposits through the use of brokered deposits. The Bank had noninterest-bearing demand deposits of $94.3 million, interest-bearing NOW and money market deposit accounts of $113.2 million, time deposits of $33.1 million, and savings accounts of $12.4 million as of March 31, 1999. 		The Company had interest-bearing deposits of 62.7% and 61.7% of total deposits as of March 31, 1999 and December 31, 1998, respectively. While the Bank does not experience material repeated seasonal fluctuations in deposit levels, the Bank's relative growth in deposits and loans may be affected by seasonal and economic changes, which, in turn, may impact liquidity. Management believes it has sufficient liquidity to meet loan commitments and deposit demands. 		The following table presents the Bank's average balances of deposits, as a percentage of average total deposits and average interest paid by category for the three months ended March 31 and for the year ended December 31: 										MMDA	 		 Total 				 					Demand 	and NOW	 Savings	 Time 	 Deposits 											(dollars in thousands) March 31, 1999 Average balance			 	$90,374 	$109,125 	$12,731 	$33,180 	$245,410 Percent of total		 		36.8% 	44.5%	 5.2%	 13.5% 	100.0% Average interest rate paid	 		0.0% 	2.2% 	2.0% 	4.4% 	1.7% December 31, 1998 Average balance 				$84,499 	$103,142 	$12,186 	$28,088 	$227,915 Percent of total	 			37.1% 	45.3% 	5.3% 	12.3% 	100.0% Average interest rate paid	 		0.0%	 2.4% 	2.0% 	5.0% 	1.8% Capital Management 		Capital management requires that sufficient capital be maintained for anticipated growth and to provide depositors assurance that their funds are on deposit with a solvent institution. The Bank is subject to various regulatory capital requirements. The Bank must meet specific capital guidelines that involve certain measurements of the Bank's assets and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification of these assets and certain off-balance sheet items are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Tier 1 capital for the Bank under the regulations is defined as stockholders' equity before any unrealized gains or losses on its available-for-sale debt securities portfolio. Total capital is defined as Tier 1 capital plus the allowance for credit losses, subject to certain limitations. The table below presents the Bank's actual capital ratios, the minimum capital required for adequacy purposes and to be categorized as "well capitalized" for the capital ratios of total risk-based, Tier 1 risk- based and Tier 1 leverage. The Bank's capital ratios exceeded the "well capitalized" threshold prescribed in the rules of its principal federal regulator as of March 31, 1999. To Be Well 											 Capitalized Under 									 For Capital	 Prompt Corrective 								Actual	 Adequacy Purposes	Action Provisions 								Amount	 Ratio Amount 	Ratio 	Amount 	Ratio 									 	(dollars in thousands) March 31, 1999 Total capital (to risk-weighted assets)	 $25,017	 13.9% 	$14,400 	8.0% $18,000 	10.0% Tier 1 capital (to risk-weighted assets) 	23,421 	13.0% 	7,200 	4.0% 	10,800 	6.0% Tier 1 capital (to average assets) 		23,421 	8.7% 	11,186 	4.0% 	13,983 	5.0% December 31, 1998 Total capital (to risk-weighted assets) 	$24,484 	13.7% 	$14,314 	8.0% 	$17,893 	10.0% Tier 1 capital (to risk-weighted assets)	 22,960 	12.8% 	7,157 	4.0% 	10,736 	6.0% Tier 1 capital (to average assets)	 	22,960 	8.4% 	10,942 	4.0% 	13,678 	5.0% 		Management believes that the Bank is properly and adequately capitalized, as evidenced by these ratios as of March 31, 1999. The most recent notification from the Office of the Comptroller of the Currency categorized the Bank as "well capitalized" as of June 30, 1997 under the regulatory framework for prompt corrective action. Off-Balance Sheet Analysis 		The contractual amounts associated with certain financial transactions are not recorded as assets or liabilities on the balance sheet. Off-balance sheet treatment is generally considered appropriate either where exchange of the underlying asset or liability has not occurred or is not assured, or where contractual amounts are used solely to determine cash flows to be exchanged. 	The Company's off- balance sheet financial instruments consist of commitments to extend credit and standby letters of credit. A majority of these commitments are written with variable interest rates. Impact of Inflation and Changing Prices 		The financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution's performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the price of goods and services. In the current interest rate environment, the liquidity and the maturity structure of the Company's assets and liabilities are critical to the maintenance of acceptable performance levels. Year 2000 Issue 		The "Year 2000 issue" results from the fact that many computer programs use only two digits to represent a year, such as "98" to represent "1998," which means that in the Year 2000 such programs could incorrectly treat the Year 2000 as the year 1900. This issue has grown in importance as the use of computers and microchips has become more pervasive throughout the economy, and interdependencies between systems have multiplied. The issue must be recognized as a business problem, rather than simply a computer problem, because of the way its effects could ripple through the economy. The Year 2000 issue could materially and adversely affect the Company either directly or indirectly. This could happen if any of its critical computer systems or equipment containing embedded logic fail, if the local infrastructure (electric power, phone system, or water system) fails, if its significant vendors are adversely impacted, or if its borrowers or depositors are adversely impacted by their internal systems or those of their customers or suppliers. Failure of the Company to complete testing and renovation of its critical systems on a timely basis could have a material adverse effect on the Company's financial condition and results of operations, as could Year 2000 problems faced by others with whom the Company does business. 		Federal banking regulators have responsibility for supervision and examination of banks to determine whether each institution has an effective plan for identifying, renovating, testing and implementing solutions for Year 2000 processing and coordinating Year 2000 processing capabilities with its customers, vendors and payment system partners. Bank examiners are also required to assess the soundness of a bank's internal controls and to identify whether further corrective action may be necessary to assure an appropriate level of attention to Year 2000 processing capabilities. 		The Company has a written plan to address its risks associated with the impact of the Year 2000. The plan directs the Company's Year 2000 compliance efforts under the framework of a five-step program mandated by the Federal Financial Institutions Examination Council ("FFIEC"). The FFIEC's five-step program consists of five phases: awareness, assessment, renovation, validation and implementation. In the awareness phase, which the Company has completed, the Year 2000 problem is defined and executive level support for the necessary resources to prepare the Company for Year 2000 compliance is obtained. In the assessment phase, which the Company has also completed, the size and complexity of the problem and details of the effort necessary to address the Year 2000 issues are assessed. Although the awareness and assessment phases are completed, the Company continues to evaluate new issues as they arise. In the renovation phase, which the Company has substantially completed, the required incremental changes to hardware and software components are installed. In the validation phase, which the Company has also substantially completed the initial phase, the hardware and software components are tested. In the implementation phase, changes to hardware and components are brought on line and re- testing of such changes are completed. The implementation phase is currently 80% complete, with an expected completion in April 1999. 		The Company is using both internal and external resources to identify, correct or reprogram, and test its systems for Year 2000 compliance. The Company has identified 25 vendor or software applications which management believes are material to its operations. Based on information received from its vendors and testing results, the Company believes that substantially all material applications of its operations are Year 2000 compliant as of March 31, 1999. The Company has not identified any material applications that the Company does not believe are fully Year 2000 compliant as of March 31, 1999. 		The Company is also making efforts to ensure that its customers, particularly its significant customers, are aware of the Year 2000 problem. The Company has either sent Year 2000 correspondence to, or met personally with its significant deposit and loan customers. A customer of the Company is deemed significant if the customer possesses either of the following characteristics: (1) total indebtedness to the Company of $500,000 or more, or (2) an average ledger deposit balance greater than $500,000. 		The Company has amended its credit authorization documentation to include consideration of the Year 2000 problem. The Company assesses its significant customer's Year 2000 readiness and assigns the customer an assessment of "low," "medium" or "high" risk. Risk evaluation of the Company's significant customers was completed in September 1998. The Company evaluates any depositor or lending customer determined to have a high or medium risk on an ongoing basis. Currently, 2% of loan customers are considered high risk and are being monitored closely for progress. Substantially all deposit customers are either low risk or compliant, the exception being those loan customers considered high risk. 		It is impossible to quantify the total potential cost of Year 2000 problems or to determine the Company's worst-case scenario in the event the Company's Year 2000 remediation efforts or the efforts of those with whom it does business are not successful, due to the wide range of possible issues and large number of variables involved. In order to deal with the uncertainty associated with the Year 2000 problem, the Company has developed a contingency plan to address the possibility that efforts to mitigate the Year 2000 risk are not successful either in whole or part. These plans include but are not limited to manual processing of information for critical information technology systems and having increased cash on hand. The contingency plan will be validated, after which the appropriate implementation training will be scheduled. 		The Company incurred and expensed $0.1 million of Year 2000 costs through March 31, 1999. These Year 2000-related costs have been funded from the continuing operations of the Company. These costs were approximately 7% of the Company's information systems budget. The Company currently estimates its costs to complete its Year 2000 compliance at approximately $0.3 million. This estimate includes the cost of purchasing hardware and software licenses, the cost of the time of internal staff and the cost of consultants. Testing is not expected to add significant incremental costs. Current Accounting Developments 		In June 1998, FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes accounting and reporting standards for derivative instruments and hedging activities. SFAS 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The Company does not invest in derivative instruments nor engage in hedging activities. 		Management does not believe the application of the Statement to transactions of the Bank that have been typical in the past will materially affect the Bank's financial position and results of operations. ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Sensitivity 		The Company uses asset liability management on its balance sheet to minimize the exposure of interest rate movements on its net interest income. The principal function of asset liability management is to manage the interest rate risk in the balance sheet by maintaining a proper balance, match and mix between rate-sensitive interest-earning assets and rate-sensitive interest-bearing liabilities. The term "rate-sensitive" refers to those assets and liabilities that are "sensitive" to fluctuations in interest rates. When interest rates fluctuate, earnings may be affected in many ways as the interest rates of assets and liabilities change at different times or by different amounts. 		The Company minimizes its interest rate risk in the balance sheet by emphasizing the origination of variable interest rate loans that have the ability to reprice overnight and maintaining a high balance of federal funds sold to offset the deposits that may potentially reprice overnight. 		A repricing gap is the difference between total interest-earning assets and total interest-bearing liabilities available for repricing during a given time interval. 	A positive repricing gap exists when total interest-earning assets exceed total interest-bearing liabilities within a repricing period and a negative repricing gap exists when total interest-bearing liabilities are in excess of interest-earning assets within a repricing period. 		Generally, a positive repricing gap increases net interest income in a rising rate environment and decreases net interest income in a falling rate environment. A positive repricing gap may increase net interest income in a falling rate environment depending on the amount of the excess repricing gap and extent of the drop in interest rates. A negative repricing gap tends to increase net interest income in a falling rate environment and decrease net interest income in a rising rate environment. The net interest income of the Company will benefit from a rising rate environment based on the positive repricing gap. 		The following table presents the repricing periods for interest- earning assets and interest-bearing liabilities and the related repricing gaps as of March 31, 1999: 												After one 										Due within	 Due within 	but within 	After 										0-3 months	 4-12 months 	five years 	five years 											 (dollars in thousands) Interest-earning assets (1) 	$133,978	 $22,197	 $65,987	 $31,818 Interest-bearing liabilities 149,048	 8,315	 1,374	 - Repricing gap			 			(15,070) 	13,882 	64,613 	31,818 Cumulative repricing gap	 			$(15,070) 	$(1,188) 	$63,425 	$95,243 Cumulative gap as a percent of earning assets 			(5.9)% 	(0.5)% 	25.0% 	37.5% <FN> (1)	Includes collateralized mortgage obligations in the one-year to five-year maturities based on the average expected lives. </FN> 		The Company had $130.0 million of interest-earning assets and $125.7 million of interest-bearing demand and savings deposits as of March 31, 1999 that are able to reprice overnight. 		The estimated effect on net interest income for a 10% decrease from prevailing interest rates over a one-year period would be a decline of approximately $0.9 million. PART II. OTHER INFORMATION ITEM 1.		LEGAL PROCEEDINGS 					None ITEM 2.		CHANGES IN SECURITIES 					None ITEM 3.		DEFAULTS UPON SENIOR SECURITIES 					None ITEM 4.		SUBMISSION OF MATTERS FOR VOTE OF SECURITIES HOLDERS 					None ITEM 5.		OTHER INFORMATION 					None ITEM 6.		EXHIBITS AND REPORTS ON FORM 8-K 					None Signatures 		Pursuant to the requirements of Section 13 or 25(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. 		ORANGE NATIONAL BANCORP By:		/s/ KENNETH J. COSGROVE			Date: 	 APRIL 29, 1999 		 Kenneth J. Cosgrove, President 		 and Chief Executive Officer By:		/s/ ROBERT W. CREIGHTON			Date: 	 APRIL 28, 1999	 		 Robert W. Creighton, Secretary 		 and Chief Financial Officer By:		/s/ JERRO M. OTSUKI				Date: 	 APRIL 28, 1999	 		 Jerro M. Otsuki, Vice President 		 and Controller