SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-13599
Omega Financial Corporation
(Exact name of registrant as
specified in its charter)
Pennsylvania 25-1420888
(State or other jurisdiction (IRS Employer Identification
or Number)
incorporation of organization)
366 Walker Drive
State College, Pennsylvania 16801
(Address of principal (Zip Code)
executive offices)
Registrant's Telephone Number,
Including Area Code: (814) 231-7680
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 twelve months (or for such shorter period that the
registrant was requested to file such reports), and (2) has
been subject to such filing requirements for the past ninety
days. Yes X No
-- -- ----
The number of shares outstanding of each of the Registrant's classes
of common stock as of August 1, 1995:
Common Stock, $5.00 par value - 6,029,423 shares
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PART I.Financial Information
Item 1. Financial Statements
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
JUNE 30, DEC 31,
ASSETS 1995 1994
Cash and due from banks............................... $37,373 $42,151
Interest bearing deposits with other financial 1,901 4,182
institutions..........................................
Federal funds sold.................................... 2,450 350
Investment securities held to maturity
(market value-$193,655 and $195,107, respectively). 195,253 202,212
Investment securities available for sale.............. 24,413 25,610
Total loans........................................... 665,092 648,711
Less: Unearned discount............................. (730) (778)
Allowance for loan losses................. (11,237) (11,057)
Net loans............................................. 653,125 636,876
Premises and equipment, net........................... 16,692 16,520
Other assets.......................................... 12,184 12,052
TOTAL ASSETS.......................................... $943,391 $939,953
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing................................ $116,248 $118,439
Interest bearing.................................... 693,259 683,297
Total deposits........................................ 809,507 801,736
Short-term borrowings................................. 5,101 11,868
Other liabilities..................................... 7,535 7,204
ESOP debt............................................. 4,447 4,518
Long-term debt........................................ 700 1,050
Other interest bearing liabilities.................... 485 468
TOTAL LIABILITIES..................................... 827,775 826,844
Preferred stock, par value $5.00 per share:
Authorized - 5,000,000 shares;
Issued and outstanding -
219,781 shares Series A Convertible .............. 5,000 5,000
Unearned compensation related to ESOP debt............ (4,447) (4,518)
Common stock, par value $5.00 per share:
Authorized - 25,000,000 shares;
Issued -
6,017,227 shares at June 30, 1995;
5,985,735 shares at December 31, 1994
Outstanding -
5,907,308 shares at June 30, 1995;
5,985,735 shares at December 31, 1994............. 30,086 29,929
Capital surplus....................................... 4,630 4,211
Retained earnings..................................... 81,727 77,263
Cost of common stock in treasury:
109,919 shares at June 30, 1995................... (2,878) -
Net unrealized gain on securities available for sale.. 1,498 1,224
TOTAL SHAREHOLDERS' EQUITY............................ 115,616 113,109
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............ $943,391 $939,953
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Three Months Six Months
Ended Ended
June 30, June 30,
1995 1994 1995 1994
INTEREST INCOME:
Interest and fees on loans............ $14,771 $12,947 $28,831 $25,724
Interest and dividends on investment 2,746 2,933 5,628 5,916
securities............................
Other interest income................. 244 169 343 284
TOTAL INTEREST INCOME................. 17,761 16,049 34,802 31,924
INTEREST EXPENSE:
Interest on deposits.................. 6,993 5,752 13,415 11,504
Interest on short-term borrowings..... 22 26 146 57
Interest on long-term debt and
other interest bearing liabilities.. 13 15 25 30
TOTAL INTEREST EXPENSE................ 7,028 5,793 13,586 11,591
NET INTEREST INCOME................... 10,733 10,256 21,216 20,333
Provision for loan losses............. 248 137 348 399
INCOME FROM CREDIT ACTIVITIES......... 10,485 10,119 20,868 19,934
OTHER INCOME:
Service fees.......................... 1,243 1,137 2,450 2,473
Trust fees............................ 689 462 1,182 997
Gain on sale of loans................. 9 14 9 14
Investment securities gains and losses,
net:
Debt instruments.................... 4 1
Equity instruments.................. 340 436 409 529
TOTAL OTHER INCOME.................... 2,285 2,049 4,051 4,013
OTHER EXPENSE:
Salaries and employee benefits........ 4,004 3,952 7,984 7,810
Net occupancy expense................. 530 482 1,090 1,075
Equipment expense..................... 431 494 865 1,004
Data processing service............... 362 397 724 836
FDIC insurance premiums............... 452 468 904 936
Other................................. 1,943 2,057 3,898 3,848
TOTAL OTHER EXPENSE................... 7,722 7,850 15,465 15,509
Income before taxes................... 5,048 4,318 9,454 8,438
Income tax expense.................... 1,514 1,149 2,785 2,238
NET INCOME............................ $3,534 $3,169 $6,669 $6,200
NET INCOME PER COMMON SHARE:
Primary............................. $0.57 $0.54 $1.08 $1.01
Fully diluted....................... $0.56 $0.52 $1.05 $0.98
WEIGHTED AVERAGE SHARES AND
EQUIVALENTS:
Primary............................ 5,995 6,020 6,023 6,015
Fully diluted...................... 6,226 6,250 6,254 6,245
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
SIX MONTHS
ENDED
JUNE 30,
1995 1994
Cash flows from operating activities:
Net income.............................................. $6,669 $6,200
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 1,359 1,051
Provision for loan losses............................. 348 399
Gain on sale of investment securities................. (410) (529)
Gain on sale of fixed assets and other property owned. (7) (173)
Gain on sale of loans................................. (9) (14)
Increase in tax asset................................. (12) (283)
Decrease (increase) in interest receivable and other (387) 385
assets .............................................
Increase (decrease) in interest payable............... 187 1,088)
Decrease in taxes payable............................ 71 30
Amortization of deferred net loan costs (fees)........ (181) (176)
Deferral of net loan fees (costs)..................... 514 41
Increase (decrease) in accounts payable and accrued 149 (877)
expenses ...........................................
Total adjustments................................... 1,622 (1,234)
Net cash provided by operating activities................. 8,291 4,966
Cash flows from investing activities:
Proceeds from the sale or maturity of:
Interest bearing deposits with other financial 3,177 565
institutions .......................................
Investment securities available for sale - sales and 4,467 12,530
maturities .........................................
Investment securities held to maturity - maturities.. 26,381 25,459
Purchase of:
Interest bearing deposits with other financial (896) (160)
institutions .......................................
Investment securities held to maturity................ (19,884) (20,486)
Investment securities available for sale.............. (2,449) (12,786)
Decrease (increase) in loans............................ (18,202) 1,283
Gross proceeds from sale of loans....................... 1,281 1,225
Capital expenditures.................................... (1,030) (869)
Sale of fixed assets and other property owned........... 22 993
Increase in federal funds sold.......................... (2,100) (5,019)
Net cash provided by (used in) investing activities....... (9,233) 2,735
Cash flows from financing activities:
Increase in deposits.................................... 7,771 2,450
Decrease in short-term borrowings, net.................. (6,767) (5,169)
Principal payment on long-term debt..................... (350)
Net change in other interest bearing liabilities........ 17 9
Dividends paid.......................................... (2,279) (2,102)
Tax benefit from preferred stock dividend and stock 74 77
option activity ....................................
Issuance of common stock................................ 576 282
Issuance, acquisition and sale of treasury stock, net... (2,878) 38
Net cash used in financing activities..................... (3,836) (4,415)
Net increase (decrease) in cash and due from banks........ $ (4,778) $3,286
Cash and due from banks at beginning of period............ $42,151 $34,292
Cash and due from banks at end of period.................. 37,373 37,578
Net increase (decrease) in cash and due from banks........ $ (4,778) $3,286
Interest paid............................................. $13,399 $12,679
Income taxes paid......................................... 2,717 2,400
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX AND THREE MONTHS ENDED JUNE 30, 1995 AND 1994
A. Basis of Presentation:
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments, including
normal recurring accruals considered necessary for a fair presentation,
have been included. Operating results for the six months ended June 30,
1995, are not necessarily indicative of the results that may be experienced
for the year ending December 31, 1995 or any other interim period. For
further information, refer to the Consolidated Financial Statements and
Footnotes included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994.
The accompanying Consolidated Financial Statements include Omega Financial
Corporation (Omega), a bank holding company, and the combined results of
its wholly-owned banking and non-banking subsidiaries.
B. Accounting Changes
Accounting by Creditors for Impairment of a Loan - Statement of Financial
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Accounting Standards No. 114 as amended by SFAS No. 118
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Omega adopted FAS114 "Accounting by Creditors for Impairment of a Loan", as
amended by FAS118, as of January 1, 1995. This statement addresses the
accounting by creditors for impairment of certain loans. There was no
material effect on the Corporation's financial condition or results of
operation upon adoption of this pronouncement.
Accounting for Certain Investments in Debt and Equity Securities-Statement
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of Financial Accounting Standards No. 115
-----------------------------------------
On January 1, 1994, Omega adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". As a result of this adoption, Omega has segmented its
investment securities into two categories: those held to maturity and
those available for sale. This statement requires that the unrealized net
gain (loss), net of tax, for securities classified as available for sale be
reflected as a component of shareholders' equity, and the carrying value of
these securities be reflected at fair market value.
The effect of adoption resulted in an increase to shareholders' equity of
$2,061,000 on January 1, 1994.
Debt securities are acquired with the intent to maintain them in the
portfolio until maturity, and except as noted below, are carried at
amortized cost. Omega does not engage in trading activity, however
management considers, for liquidity purposes, a portion of the portfolio to
be designated as available for sale. Therefore, certain debt securities
have been specifically categorized as such. Additionally, all marketable
equity securities are classified as "available for sale". A table
detailing the breakout of investment categories can be found in the
accompanying Investment Securities section of the Management Discussion and
Analysis .
Statement of Financial Accounting Standards No. 112 - Employers' Accounting
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for Post-employment Benefits
----------------------------
Omega provides certain post-employment benefits to its employees. The
Company has adopted SFAS No. 112 as of January 1, 1994 and the impact was
not material to the Company's financial statements.
C. Commitments and Contingent Liabilities:
In the ordinary course of business, Omega and its subsidiaries make
commitments to extend credit to their customers. At June 30, 1995 and
December 31, 1994 standby letters of credit issued and outstanding amounted
to $16,109,000 and $10,327,000, respectively. These letters of credit are
not reflected in the accompanying financial statements. Management does
not anticipate any significant losses as a result of these transactions.
At June 30, 1995, the Corporation had $ 98,892,000 outstanding in unused
lines of credit commitments extended to its customers. Of this amount, $
25,878,000, or 26.2%, are commitments to consumers for home equity lines of
credit and credit card limits. The remainder, $ 73,014,000, are commercial
commitments.
In 1994, the Corporation entered into a five year agreement to obtain data
processing services from an outside service bureau. The agreement provides
for termination penalties if it is canceled prior to the end of the
commitment period by the Corporation.
D. Earnings Per Share Data:
Primary earnings per share is computed based on the weighted average number
of shares and common stock equivalents outstanding during each period.
Primary earnings per share is computed by dividing net earnings after
preferred stock dividends by the weighted average number of shares and
dilutive common stock equivalents outstanding. The outstanding preferred
stock is not a common stock equivalent. On a fully-diluted basis, both
earnings and shares outstanding are adjusted to assume the conversion of
convertible preferred stock from the date of issue.
Computations of Per Share Earnings
(In thousands, except per share amounts)
(Unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
1995 1994 1995 1994
PRIMARY EARNINGS PER SHARE
Net income............................... $3,534 $3,169 $6,669 $6,200
Dividend requirements for preferred stock,
net of tax benefits.................... (72) (71) (144) (142)
Net earnings applicable to common stock.. 3,462 3,098 6,525 6,058
Shares and equivalents outstanding:
Weighted average number of common
shares outstanding..................... 5,935 5,952 5,964 5,945
Common stock equivalents - options....... 60 68 59 70
Weighted average of common shares
outstanding and equivalents............ 5,995 6,020 6,023 6,015
Primary earnings per common share........ $0.57 $0.52 $1.08 $1.01
FULLY DILUTED EARNINGS PER SHARE
Net income............................... $3,534 $3,169 $6,669 $6,200
Additional cash contribution required to
service debt on assumed conversion of
preferred stock (tax effected)......... (47) (47) (93) (94)
Net earnings applicable to common stock.. 3,487 3,122 6,576 6,106
Shares and equivalents outstanding:
Weighted average number of common
shares outstanding..................... 5,935 5,952 5,964 5,945
Common stock equivalents - options....... 60 67 59 69
Assumed conversion of preferred stock
outstanding and equivalents............ 231 231 231 231
Weighted average of common shares
outstanding and equivalents............ 6,226 6,250 6,254 6,245
Fully diluted earnings per common share.. $0.56 $0.50 $1.05 $0.98
F. Acquisitions
On January 11, 1995, Omega entered into an Agreement and Plan of
Reorganization with Montour Bank ("Montour"), a bank incorporated under the
Pennsylvania Banking Code of 1965. This merger has been approved by the
Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation and the Department of Banking of the Commonwealth of
Pennsylvania, as well as the stockholders of Montour, and was consummated
on July 31, 1995.
The transaction was accounted for under the purchase method. For each share
of Montour, shareholders received, at their election and subject to certain
adjustments, one-half share of Omega common stock or $12.00 in cash, or a
combination of stock and cash, with 43.1% of the total outstanding shares
being converted to cash. Warrant holders received $2.00 per warrant. The
acquisition was $5.670 million in the aggregate, with 119,007 shares of
Omega stock issued and $2,516 million paid in cash to Montour shareholders.
Montour's assets at June 30, 1995 were $42.080 million.
G. Defined Benefit Plan
During 1994, management developed a plan to terminate its defined benefit
plan and transfer the plan's assets and obligations at the settlement date
to a defined contribution plan. In anticipation of the execution of
management's plan, Omega froze the accrual of benefits under the Omega
defined benefit plan effective April 15, 1994. Management expects to
complete the termination of the defined benefit plan in 1995. In completing
the settlement of the defined benefit plan and the transferring of assets
and obligations to a defined contribution plan, the shortfall, if any,
between the then fair value of plan assets and the final settlement amount
of plan obligations will be charged against earnings. However, management
does not believe the net impact of the termination of Omega's defined
benefit plan will have a material effect on Omega's financial position or
results of operations.
H. Investment Considerations
In analyzing whether to make, or to continue, an investment in Omega,
investors should consider, among other factors, certain investment
considerations more particularly described in "Item 1: Business -
Investment Considerations" in the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, a copy of which can be obtained from
David N. Thiel, Senior Vice President, Omega Financial Corporation, 366
Walker Drive, State College, Pennsylvania 16801.
OMEGA FINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
1. Comparison of the Six and Three Months Ended June 30, 1995 and 1994
Operations
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A. Six months ended June 30, 1995 and 1994
For the first six months of 1995, income before taxes increased by
$1,016,000, or 12.0%, compared to the same period in 1994. A $934,000, or
4.7% increase in the corporation's income from credit activities was a
significant factor in this achievement.
Non-interest income increased $38,000, or 0.9%, while non-interest expense
decreased by $44,000, or 0.2%, resulting in an $82,000 decrease in net
operating expense for the period.
The tax provision for the first six months of 1995 increased by $547,000,
or 24.4% when compared to the first six months of 1994. The effective tax
rate rose to 29.5% in 1995 from 26.5% in 1994, as a consequence of a
continued reduction in tax-exempt income resulting from a smaller
percentage of tax-exempt investments to total assets in 1995 than in 1994.
Additionally, Omega's federal tax rate has risen to 35% in 1995, as
compared to 34% in 1994.
B. Three months ended June 30, 1995 and 1994
The second quarter's income before income taxes increased $730,000, or
16.9%, when compared to the same period in 1994. A $366,000 increase in
income from credit activities contributed about half of the increase, while
improvements in non-interest-related categories contributed the remaining
increase.
Other income increased $236,000 while other expense decreased $128,000, for
an increased net contribution of $364,000.
After the income tax provision (which increased by $365,000, or 31.8%
compared to the same period in 1994) was deducted from earnings, net income
22
shows an improvement of $365,000, or 11.5%, over the second quarter of
1994. Effective tax rate for the second quarter of 1995 increased to 30.0%
from 26.6% in the second quarter of 1994 as levels of tax exempt
investments have fallen slightly, and Omega's tax rate has increased.
Following are selected key ratios for the period:
Three Months Ended Six Months Ended
June 30 June 30
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1995 1994 1995 1994
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Return on average assets (annualized)... 1.51% 1.35% 1.43% 1.33%
Return on average equity (annualized)... 12.28 11.71 11.61 11.70
Dividend payout ratio (common).......... 30.08 30.07 31.20 30.71
Average equity to average assets........ 12.31 11.54 12.35 11.35
Net Interest Income
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A. Six months ended June 30, 1995 and 1994
Omega's net interest income for the first six months of 1995 improved by
$883,000, or 4.3%. Although average earning assets decreased by $3,691,000,
average loans increased by $20,887,000, and yielded 8.88% in 1995, as
compared to 8.19% in 1994. The increase in loans was funded by maturities
of investment securities, whose average balances decreased by $20,598,000.
Average deposits have decreased by $15,486,000, or 1.9%, resulting in a
higher percentage of funding through non-interest bearing sources. The
result is a net interest spread of 4.84% through June of 1995, improved by
22 basis points from the same period in 1994, when the spread was 4.62%. On
a fully tax equivalent basis, net interest margin is 5.01% through June of
1995 as compared to 4.83% in 1994. Of the $883,000 increase in net interest
income, $264,000 is a result of volume changes and $619,000 is a result of
rate differences.
B. Three months ended June 30, 1995 and 1994
Although average earning assets have remained essentially flat at
$883,986,000, net interest income for the second quarter of 1995 increased
by $477,000, or 4.7%, as compared to the second quarter of 1994. Tax
equivalent net interest margin increased by 16 basis points to 5.02%.
Average interest bearing deposits have decreased by $11.8 million in the
second quarter of 1995 as compared to the second quarter of 1994 while
average loans increased by $24.9 million. This loan growth was funded by
proceeds from investment security maturities, short term borrowed funds and
non-interest bearing sources. This loan growth occurred in a rising rate
environment (with prime climbing to 9.00% in June of 1995 as compared to
7.25% in June of 1994). All these factors have positively affected the net
interest margin.
Following are key net interest margin ratios (annualized):
Three Months Six Months
Ended Ended
June 30, June 30,
1995 1994 1995 1994
Yield on average earning assets....... 8.05% 7.25% 7.96% 7.27%
Yield to fund earning assets.......... 3.19 2.62 3.12 2.65
Net interest margin................... 4.86 4.65 4.84 4.62
Net interest margin - tax equivalent.. 5.02 4.86 5.01 4.83
At June 30, 1995, Omega had $420,307,000 of earning assets scheduled to
reprice over the next twelve months as compared to $397,454,000 in interest
bearing liabilities. This means that if rates rose by 100 basis points on
July 1, Omega's net interest income over a one year period would increase
by $1,500,000, or 3.2%, assuming that the volumes do not grow and the mix
of the balance sheet does not change. Conversely, a reduction in rates
would have a negative impact of a similar magnitude.
Other Income and Expense
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A.. Six months ended June 30, 1995 and 1994
Other income increased by $38,000 for the first six months of 1995 when
compared to the same period last year. Service fees varied by only $23,000,
or 0.9%, but trust fees increased in 1995 by $185,000, or 18.6% over 1994.
This increase is due to a large estate settlement at one of the
Corporations' banks in May of 1995. Offsetting this increase, was a
reduction of net investment security gains of $119,000.
As a percentage of average assets, other income, net of security gains and
losses, annualized was .78% for the first six months of 1995 as compared to
.74% in 1994.
Other expenses were $44,000, or 0.3% lower for the first six months of 1995
than for the same period in 1994. Salaries and employee benefits were
increased by only 2.2% while equipment and data processing service expenses
were reduced by a total of $251,000, or 13.6%. These results were achieved
through an effort to minimize these types of costs through bundled fees,
streamlined operations, and consolidation of functions since the merger in
the first quarter of 1994 which nearly doubled Omega's asset size. FDIC
premiums have dropped slightly in response to lower levels of deposits.
As a percentage of average assets, annualized expenses for the six month
period ending June 30, 1995 was 3.33% as compared to 3.32% for the same
period in 1994.
B. Three months ended June 30, 1995 and 1994
Other income increased $236,000, or 11.5% for the second quarter of 1995 as
compared to the same period in 1994. Service fee income in 1995 outpaced
that in 1994 by $106,000, or 9.3%, while trust fee income increased by
$227,000, or 49.1%. Net gains from the sale of investment securities
dropped by $92,000 in 1995.
As a percentage of average assets, other income net of security gains and
losses annualized was .83% for the second quarter of 1995 as compared to
.69% in 1994.
Other expenses were $128,000, or 1.6% lower for the second quarter of 1995
than for the same period in 1994. Salaries and employee benefits were
$52,000, or 1.3% higher in 1995 as in 1994. Occupancy expense has
increased by 10.0%, while equipment expense decreased by 12.7%. Expense
related to data processing service has been reduced by 8.8% as a result of
a renegotiated contract in mid-1994. FDIC insurance premiums have dropped
by 3.4% as a result of lower deposit levels. Other non-interest expenses
have decreased by 5.5%, or $114,000.
As a percentage of average assets, annualized expenses for the quarter
ended June 30, 1995 were 3.30% and for the same period in 1994 were 3.35%.
2. Investment Securities
Management of the investment portfolio entails evaluation and realignment
of the size and mix of the portfolio in order to balance various
characteristics of the balance sheet, including asset quality, liquidity,
yield relationships, maturity and tax planning. The following schedule
describes characteristics of the investment portfolio as of June 30, 1995
and December 31, 1994.
Securities Classified as Available for Sale
Gross Gross Estimated
Amortized Unrealized Unrealized Market
June 30, 1995 Cost Gains Losses Value
U.S. Treasury securities
and obligations of other
U.S. Government agencies $18,287 $59 $(17) $18,329
and corporations ...........
Obligations of state and 233 - (34) 199
political subdivisions .....
Equity securities .......... 3,612 2,335 (62) 5,885
Total ...................... $22,132 $2,394 $(113) $24,413
Securities Classified as Held to Maturity
Gross Gross Estimated
Amortized Unrealized Unrealized Market
June 30, 1995 Cost Gains Losses Value
U.S. Treasury securities
and obligations of other
U.S. Government agencies
and corporations............ $73,022 $107 $(945) $71,184
Obligations of state and 51,736 368 (578) 51,526
political subdivisions .....
Corporate securities ....... 28,162 86 (320) 27,928
Mortgage backed 38,404 197 (513) 38,088
securities .................
Equity securities (non- 3,929 - - 3,929
marketable) ................
Total ...................... $195,253 $758 $(2,356) $193,655
Securities Classified as Available for Sale
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1994 Cost Gains Losses Value
U.S. Treasury securities
and obligations of other
U.S.government agencies and $19,314 $ - $(326) $18,988
corporations ..............
Obligations of state and 269 - (52) 217
political subdivisions ....
Equity securities ......... 4,150 2,333 (78) 6,405
Total ..................... $23,733 $2,333 $(456) $25,610
Securities Classified as Held to Maturity
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1994 Cost Gains Losses Value
U.S. Treasury securities
and obligations of other
U.S. government agencies and $79,736 $ 25 $(3,297) $76,464
corporations ..............
Obligations of state and 54,788 287 (1,404) 53,671
political subdivisions ....
Corporate securities ...... 34,138 29 (1,181) 32,986
Mortgage backed securities 29,503 9 (1,573) 27,939
Equity securities (non- 4,047 4,047
marketable) ...............
Total ..................... $202,212 $350 $(7,455) $195,107
Total investment securities as a percentage of total assets at June 30,
1995 and December 31, 1994 were 23.3% and 24.2%, respectively. Securities
maturing or repriceable in one year or less comprised 37.2% of the total
investment securities of $219,666,000 as of June 30, 1995, as compared to
37.9% of total investment securities of $227,822,000 as of December 31,
1994. There was $35,000 in investments in instruments of foreign countries
on June 30, 1995.
3. Interest Bearing Deposits with Other Financial Institutions
As of June 30, 1995, Omega had $1,901,000 in interest bearing deposits with
other financial institutions. There were no investments in instruments
issued by U.S. branches of banks of foreign countries or deposits in banks
of foreign countries included in the June 30, 1995 balance.
4. Loans
Net loans for the first six months increased 2.6% to $653,125,000. This
increase in volumes is a continuation of the loan demand experienced in the
latter part of 1994, particularly in the commercial loan category.
Additionally, Omega is now originating long term fixed rate mortgage loans
to maintain internally rather than selling them in the secondary market.
Changes in the allowance for loan losses for the six months ended June 30,
1995 and 1994 were as follows (in thousands):
1995 1994
-------- --------
Balance at January 1............ $11,057 $11,168
Charge-offs..................... (289) (464)
Recoveries...................... 121 146
-------- --------
Net charge-offs............. (168) (318)
Provision for loan losses....... 348 399
-------- --------
Balance at June 30.............. $11,237 $11,249
======== ========
The allowance for loan losses is considered adequate by management to cover
possible uncollectible loans. Management is also of the opinion that the
level of loan loss provision is adequate to maintain the allowance at an
acceptable level. The allowance for loan losses at June 30, 1995 and 1994
represented 1.69% and 1.78%, respectively, of the total loans outstanding,
net of unearned interest.
Non-performing Loans
--------------------
(In thousands)
June 30, Dec 31,
1995 1994
------- --------
Non-accrual loans............................. $1,289 $1,596
Accruing loans past due 90 days or more....... 1,822 1,317
Restructured loans............................ - - 44
------ --------
Total non-performing loans.................... $3,111 $2,957
====== ========
Non-performing loans as percent of allowance.. 27.7% 26.7%
5. Deposits and Other Sources of Funds
Deposits provide the primary source of funding for loans and investment
securities. During the six month period ended June 30, 1995, total
deposits increased by $7,771,000 or 1.0%, with interest bearing funds
increasing $10.0 million and non-interest bearing deposits decreasing by
$2.2 million.
6. Regulatory Capital Compliance
Risk-based capital standards are issued by bank regulatory authorities in
the United States. These capital standards relate a banking company's
capital to the risk profile of its assets and provide the basis for which
all banking companies and banks are evaluated in terms of capital adequacy.
The risk-based capital standards require all banks to have Tier 1 capital
of at least 4% and total capital, including Tier 1 capital of at least 8%
of risk-adjusted assets. Tier 1 capital includes common stockholders'
equity and qualifying perpetual preferred stock together with related
surpluses and retained earnings. Total capital is comprised of Tier 1
capital, limited life preferred stock, qualifying debt instruments, and the
reserves for possible loan losses. Banking regulators have also issued
leverage ratio requirements. The leverage ratio requirement is measured as
the ratio of Tier 1 capital to adjusted average assets. The table below
provides a comparison of Omega's and its bank subsidiaries risk-based
capital ratios and leverage ratio to the minimum regulatory requirements
for the periods indicated.
Minimum
June 30, December 31, Regulatory
Omega Financial Corp. 1995 1994 Requirements
--------------------- ---- ---- ------------
Risk based capital ratios:
Tier 1 ...................... 17.31% 17.55% 4.00%
Total capital ............... 18.57 18.80 8.00
Leverage ratio ............... 11.87 11.76 3.00
Omega Bank, N.A.
----------------
Risk based capital ratios:
Tier 1 ...................... 15.80% 15.65% 4.00%
Total capital ............... 17.05 16.90 8.00
Leverage ratio ............... 11.16 10.71 3.00
Hollidaysburg Trust Company
---------------------------
Risk based capital ratios:
Tier 1 ...................... 14.53% 14.55% 4.00%
Total capital ............... 15.79 15.80 8.00
Leverage ratio ............... 10.47 10.12 3.00
Penn Central National Bank
--------------------------
Risk based capital ratios:
Tier 1 ...................... 19.39% 19.48% 4.00%
Total capital ............... 20.66 20.73 8.00
Leverage ratio ............... 11.22 11.37 3.00
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"), the FDIC has issued a rule which sets the capital level
for each of the five capital categories established in FDICIA. As required
by FDICIA, the regulations specify the levels at which an insured
institution would be considered "well capitalized", "adequately
capitalized", "undercapitalized", "significantly undercapitalized", or
critically undercapitalized". At June 30, 1995, Omega and each of its
banking subsidiaries met the regulatory definition of a "well capitalized"
financial institution, i.e., a leverage ratio exceeding 5%, and Tier 1
capital exceeding 6%, and total capital exceeding 10%.
PART II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Debt
None
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of Omega was held on April 25, 1995. At
the Annual Meeting, the shareholders elected a class of directors for a
term of three years, as described below.
Name For Withhold Broker Non-
Authority Vote
George R. Lovette 4,187,950 62,676
Albert N. Masood 4,190,340 80,000
Robert N. Oliver 4,195,989 52,246
Stanton R. Sheetz 4,205,421 61,253
Robert A. Szeyller 4,209,101 60,270
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 Financial Data Schedule
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.
OMEGA FINANCIAL
CORPORATION
(Registrant)
By:
Date David B. Lee
Chairman and
Chief Executive Officer
Date JoAnn N. McMinn
Senior Vice President
and
Controller
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Omega
Financial second quarter 1995 10-Q and is qualified in its entirety by reference
to such 10-Q.
</LEGEND>
<CIK> 0000705671
<NAME> OMEGA FINANCIAL CORP
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 37,373
<INT-BEARING-DEPOSITS> 1,901
<FED-FUNDS-SOLD> 2,450
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 24,413
<INVESTMENTS-CARRYING> 195,253
<INVESTMENTS-MARKET> 193,655
<LOANS> 664,362
<ALLOWANCE> 11,237
<TOTAL-ASSETS> 943,391
<DEPOSITS> 809,507
<SHORT-TERM> 5,101
<LIABILITIES-OTHER> 7,535
<LONG-TERM> 700
<COMMON> 115,063
0
553
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 943,391
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<INTEREST-INVEST> 5,628
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<INTEREST-DEPOSIT> 13,415
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<INTEREST-INCOME-NET> 21,216
<LOAN-LOSSES> 348
<SECURITIES-GAINS> 410
<EXPENSE-OTHER> 15,465
<INCOME-PRETAX> 9,454
<INCOME-PRE-EXTRAORDINARY> 9,454
<EXTRAORDINARY> 0
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<NET-INCOME> 6,669
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.05
<YIELD-ACTUAL> 5.01
<LOANS-NON> 1,289
<LOANS-PAST> 1,822
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